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Aftermarket businesses rest their success on top of someone else’s platform. Until fairly recently, most such businesses clustered in the customization or repair sectors, but software platforms and embedded chips have spread aftermarkets throughout the economy. Today, iPhone apps, Facebook games, universal remote controllers, replacement toner cartridges, and their like all define aftermarkets. From an economic perspective, aftermarket businesses are at the mercy of their platform providers. While some platform providers may prove sympathetic to the needs of their aftermarkets, others may be indifferent, or even antagonistic. What’s worse, platform providers may shift from one posture to another with little advanced notice. The laws governing relationships among platform providers, aftermarket players, and their shared customers are complex, drawing (at a bare minimum) from patent, copyright, antitrust, and contract law. This one-hour course will introduce participants to the basic concepts of aftermarkets, and survey both the state of the law and some open legal questions surrounding survival as an aftermarket player in the modern economy.
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flickr.com/Steve Rhodes
Law and Economicsof Aftermarkets
Dr. Bruce Abramson, Esq.
Introduction:A Cautionary Tale
developed a powerful platform
for social interaction.
flickr.com/Laughing Squid
Zynga developed popular social games running on the Facebook platform.
flickr.com/marcusnelson
Zynga now sells FB
credits and pays the
commission.
flickr.com/Will Norris
POTENTIALLY
You might be
It’s good to own a platform.
You might find comparable
opportunities.
You might be
A free ride doesn’t guarantee a free
lunch.
You might protect yourself
preemptively.
Zynga
It could have
What if Zynga had been publicly
held?
Do analysts in the tech space
consider the possibility of hold
up?
worse
POTENTIALLY
been
Introduction:Can they do that?
Of coursethey can!
flickr.com/dalelane
They havemany tools:
flickr.com/JulianBleecker
flickr.com/Horla Varian
flickr.com/NobMouse
Patents
Copyrights
Contracts
flickr.com/myrrh.ahn
Of coursenot!
It violates:
flickr.com/Jan Charles Linus Ekenstamflickr.com/steakpinball flickr.com/NobMouse
Contracts
Antitrust
Unfair Competition
Welcome to life in
(Or the aftermarketlife, for the dramatic)
the aftermarket!
flickr.com/sally_monster
flickr.com/greebile
What are Aftermarkets?
Examples of AftermarketsClassic Contemporary Hybrid
flickr.com/scottfeldstein flickr.com/Rob Boudon flickr.com/Ev0luti0nary
Razor blades
Independent Jaguar MechanicsIndividual Coffee Servings
Xerox Machine Repair
iPhone App Developers
Facebook Game Developers
Replacement Toner Cartridge Manufacturer
Garage Door
flickr.com/Norma Desmond
Key Issues:Strategic Considerations
Critical Strategic Question:
Do you want your relationship to be implicit or explicit?
And if the latter,when is the best time
to negotiate?
flickr.com/Eleaf
Key Issues:Legal Considerations
The IP sideplatform owners
tends to favor
The antitrust sideaftermarket player
tends to protect
Contracts and licensescan play critical roles in
implementing all such strategies -and in running afoul of their
limits.
flickr.com/mattgrimm
Antitrust: CASE
flickr.com/jcaputo4
The Takeaway:
As a strict matter of antitrust law,
standing in the way of vertical integration.
platform providers may impose somebut not all requirements that eliminateor reduce the scope of their competitors—including those “newly” competitive firms
flickr.com/jackchengflickr.com/mag3737
AT vs. IP:KODAK and XEROX
The Takeaway:
Leveraging your IP rights and/or
longstanding circuit split.
other assets to reduce competition inyour own single-provider aftermarket maybe acceptable. Or it may violate the antitrust laws. Or maybe we have a
flickr.com/carywaynepeterson flickr.com/joe.ross
COPYRIGHT:CHAMBERLAIN AND MDY
The Takeaway:
As a matter of copyright law, it is
and whether it extends to hardware devices
acceptable for at least some platformproviders to exclude aftermarket competition
using simple encryption algorithms.It is unclear how widespread this authority is
using embedded software.
flickr.com/jcaputo4
flickr.com/TaranRampersad
flickr.com/Pewari
No Bots Allowedflickr.com/
balaam
No Pornography
Limitations on revenue Commissions
Contracts:Term of Use
The Takeaway:
Contracts and licenses are mechanismsfor implementing business strategies.
They can cut many ways –and representing the best forum for
negotiating those strategies.
Strategy:Navigating Aftermarkets
flickr.com/PatrickYHC
flickr.com/lessmore2 flickr.com/Eyebee
Anticipate!
Negotiate earlyvs. negotiate
late
Study markets &
statements
Look for cues Existing
competitors
SDKsDeveloper
Relationships
flickr.com/The Rocketeerflickr.com/andercismo flickr.com/digitizedchaos
flickr.com/LuleRRE flickr.com/Eyebee
Trade Secrets
Protecting your own IP
Understanding contracts
& license
Give away razors& sell blades
flickr.com/slayerphoto flickr.com/MyTudut
flickr.com/susanvg flickr.com/Scrunchieface
Strategic negotiations
Partnering
Preferred Relationships
Recognizing the asymmetry in the relationship.
