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.

1. Law and Economics
of Aftermarkets
Dr. Bruce Abramson, Esq.
PC
LAW FIRM EVOLVED
flickr.com/Steve Rhodes

2. Introduction:
A Cautionary Tale

3. developed a powerful
platform for social
interaction.
flickr.com/Laughing Squid

4. Zynga developed
popular social games
running on the
Facebook platform.
flickr.com/marcusnelson

5. Zynga now
sells FB
credits and
pays the
commission
.
flickr.com/Will Norris

7. You might be
Facebook
It’s good to own a
platform.
You might find
comparable
opportunities.

8. You might be
Zynga
A free ride doesn’t
guarantee a free lunch.
You might protect
yourself preemptively.

9. It could have
been worse
What if Zynga had
been publicly held?
Do analysts in the
tech space consider
the possibility of hold
up?

10. Introduction:
Can they do that?

11. Of course
they can!
They have
many tools:
flickr.com/dalelane

12. Patents
Copyright
s
Contracts
flickr.com/JulianBleecker flickr.com/Horla Varian flickr.com/NobMouse

13. Of course
not!
It violates:
flickr.com/myrrh.ahn

14. Antitrust
Unfair
Competition
Contracts
flickr.com/steakpinball flickr.com/Jan Charles Linus Ekenstam flickr.com/NobMouse

15. Welcome to life in
the aftermarket!
(Or the aftermarketlife, for the dramatic)
flickr.com/sally_monster

16. What are Aftermarkets?
flickr.com/greebile

17. Examples of Aftermarkets
Classic Contemporary Hybrid
Razor blades iPhone App Replacement Toner
Developers Cartridge
Independent Manufacturer
Jaguar Mechanics Facebook Game
Developers Garage Door
Individual Coffee
Servings
Xerox Machine
Repair
flickr.com/scottfeldstein flickr.com/Rob Boudon flickr.com/Ev0luti0nary

18. Key Issues:
Strategic Considerations
flickr.com/Norma Desmond

19. 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

20. Key Issues:
Legal Considerations

21. The IP side
tends to favor
platform owners

22. The antitrust side
tends to protect
aftermarket player

23. Contracts and licenses
can play critical roles in
implementing all such strategies -
and in running afoul of their limits.

24. Antitrust:
CASE
flickr.com/mattgrimm

25. The Takeaway:
As a strict matter of antitrust law,
platform providers may impose some
but not all requirements that eliminate
or reduce the scope of their competitors—
including those ―newly‖ competitive firms
standing in the way of vertical integration.
flickr.com/jcaputo4

26. AT vs. IP:
KODAK and XEROX
flickr.com/jackcheng
flickr.com/mag3737

27. The Takeaway:
Leveraging your IP rights and/or
other assets to reduce competition in
your own single-provider aftermarket may
be acceptable. Or it may violate the
antitrust laws. Or maybe we have a
longstanding circuit split.

28. COPYRIGHT:
CHAMBERLAIN AND MDY
flickr.com/carywaynepeterson
flickr.com/joe.ross

29. The Takeaway:
As a matter of copyright law, it is
acceptable for at least some platform
providers to exclude aftermarket competition
using simple encryption algorithms.
It is unclear how widespread this authority is
and whether it extends to hardware devices
using embedded software.
flickr.com/jcaputo4

30. Contracts:
Term of Use
No Bots Allowed No Pornography
flickr.com/Pewari flickr.com/balaam
Limitations on revenue Commissions
flickr.com/TaranRampersad

31. The Takeaway:
Contracts and licenses are mechanisms
for implementing business strategies.
They can cut many ways –
and representing the best forum for
negotiating those strategies.

32. Strategy:
Navigating Aftermarkets

33. Negotiate early
Anticipate! vs. negotiate late
flickr.com/PatrickYHC
Look for cues
Existing
competitors
SDKs
Developer Study markets
Relationships & statements
flickr.com/lessmore2 flickr.com/Eyebee

34. Trade Secrets
Give away razors
& sell blades
flickr.com/The Rocketeer
flickr.com/andercismo flickr.com/digitizedchaos
Protecting Understanding
your own IP contracts &
license
flickr.com/LuleRRE flickr.com/Eyebee

35. Strategic
negotiations Partnering
flickr.com/slayerphoto flickr.com/MyTudut
Recognizing the
Preferred asymmetry in the
Relationships relationship.
flickr.com/susanvg flickr.com/Scrunchieface

36. Thank You
for Your Time.
Bruce.Abramson@rimonlaw.com PC
www.rimonlaw.com LAW FIRM EVOLVED