United States: FTC And DOJ Antitrust Division Request Comments On Proposed Revisions To Antitrust Guidelines For Licensing IP

After several turbulent years of litigation and policy wrangling, many have asked whether the federal antitrust agencies should rewrite their two-decade old Antitrust Guidelines for the Licensing of Intellectual Property ("Guidelines"). Should they provide clearer guidance regarding thorny questions about licensing standard essential patents (SEPs), patent assertion entities (PAEs), reverse payment settlements, or other matters that have prompted new guidelines from other enforcers around the world? On August 12, the Federal Trade Commission and US Department of Justice's Antitrust Division responded with modest updates to the Guidelines, likely setting themselves up for considerable commentary in the weeks to come.

Modest Changes

The agencies' proposed modifications are generally modest in nature and do not amount to a broad change in their enforcement priorities or approach. The agencies specifically affirmed that the Guidelines continue to be rooted in three basic economic and legal principles: (1) conduct involving IP rights is subject to the same antitrust analysis as conduct involving other types of property, but accounting for the unique characteristics of the property rights; (2) intellectual property does not, in and of itself, create market power; and (3) IP licensing is generally procompetitive because it allows parties to combine complementary units of production and distribution. The draft Guidelines also made several revisions aimed to emphasize that both agencies exercise latitude and flexibility in enforcement matters; most notably, the agencies propose eliminating a sentence that says the "Guidelines must be applied in unforeseeable circumstances."

Noteworthy Changes

Despite the modest nature of the updates, some of the suggested revisions are especially noteworthy, including:

  • The agencies have revised statements of general antitrust principles to reflect the research presented in the FTC's 2011 Evolving IP Marketplace report and recent agency enforcement activity involving SEPs. For instance, the agencies now specifically note that "generally" a competitor does not have a duty to deal, implying there are some circumstances, perhaps with SEPs, in which a competitor may have a duty to deal under its obligation to license SEPs on fair, reasonable, and non-discriminatory (FRAND) terms.
  • In accordance with the Supreme Court's decision in Illinois Tool Works v. Independent Ink,1 the draft Guidelines reinforce that IP rights do not automatically confer market power. In addition, the possession of market power, by itself, does not violate the antitrust laws.
  • The Supreme Court's "sliding scale" approach to the rule of reason in FTC v. Actavis, Inc.2 is included as the framework for evaluating all licenses involving IP. This demonstrates the agencies' belief that the more flexible liability analysis in the Actavis decision extends beyond the confines of its original facts (i.e., reverse payment settlements for infringement litigation between branded and generic pharmaceutical manufacturers) to other IP licensing scenarios. Note, however, that the proposed revisions to the Guidelines do not provide further clarity to the nebulous guidance that the Supreme Court provided in Actavis regarding the application of the rule of reason.
  • The proposed revisions to the Guidelines repeatedly delete references to "Innovation" when discussing "Research and Development Markets." This change may be a response to historical criticism regarding the inability to quantify innovation when defining antitrust markets.
  • Consistent with the Supreme Court's decision in Leegin Creative Leather Products, Inc. v. PSKS,3 resale price maintenance is no longer illegal per se under federal law and instead is analyzed under the rule of reason. The Guidelines note, however, that RPM remains per se unlawful under the antitrust laws of some states.
  • The Guidelines acknowledge the creation of a federal cause of action for the misappropriation of trade secrets, which was established by the Defend Trade Secrets Act of 2016.4

What about SEPs? Reverse Payments? PAEs?

The agencies chose not to address outright a few areas of recent controversy and change in the law. In particular, and despite the express treatment of those topics in recent updates to antitrust/IP guidelines issued by other competition agencies,5 the Guidelines do not speak directly to the treatment of SEPs, so-called reverse payment settlement agreements, or the aggressive enforcement activity of certain PAEs:

  • SEPs are patents that have been formally incorporated into a particular technological standard by a standard-setting organization (SSO). They can present unique antitrust risks because of the collaborative nature of SSOs and the potential for SEP holders to demand excessive royalties after the patent's inclusion in a standard. Many SSOs address this problem by requiring that the patent holder license its SEPs on FRAND terms, and courts have held that failure to license SEPs on FRAND terms can harm competition.6 The FTC and DOJ's proposed Guidelines offer no guidance on the agencies' approach with respect to SEPs, aside from a brief acknowledgement that the agencies may impose "licensing requirements to remedy anticompetitive harm."7
  • As mentioned above, although the draft Guidelines adopted the "sliding scale" approach to the rule of reason under the Supreme Court's Actavis decision, the draft Guidelines fail to mention the express holding of that decision: that reverse payments are not presumptively unlawful but may violate the antitrust laws. Prior to Actavis, reverse payments were common in patent infringement settlements between branded and generic pharmaceutical manufacturers; the branded manufacturers (patentees) would pay the generic manufacturers (would-be infringers) in exchange for a delay in bringing the generic drug to the market for a specified period of time. Questions persist in the courts about how Actavis applies beyond its limited facts, including to non-cash settlements, contemporaneous "side deals," and arrangements involving authorized generics.8
  • Finally, the proposed updates are silent regarding the antitrust implications of PAE enforcement activity. Because PAEs, unlike operating companies, do not sell products that are capable of being countersued by defendants for patent infringement, some have suggested that aggressive PAE activity uniquely distorts competition and thus violates antitrust law. Despite an ongoing multi-year investigative study by the FTC into PAE enforcement activity,9 the proposed updates do not address the issue.

The absence of any explicit mention of these issues is likely to prompt comments from various technology and pharmaceutical companies, as well as other commentators.

Public Comment Is Available Now

Comments in response to the proposed revisions are due by September 26. For more information about the proposed updates, or for assistance in preparing public comments to them, please contact the authors or your Orrick relationship partner.

Footnotes

1 547 U.S. 28 (2006).

2 133 S. Ct. 2223 (2013).

3 551 U.S. 877 (2007).

4 Pub. L. No. 114-153, § 2(a), 130 Stat. 376, 376-80 (codified at 18 U.S.C. § 1836(b)).

5 See Canadian Competition Bureau, "Intellectual Property Enforcement Guidelines" (updated March 31, 2016); Japan Fair Trade Commission, "Guidelines for the Use of Intellectual Property under the Antimonopoly Act" (updated January 21, 2016); China's National Development and Reform Commission, "Anti-Monopoly Guideline on Intellectual Property Abuse" (draft issued for comments December 31, 2015); Korea Fair Trade Commission, "Guidelines for Review of Unreasonable Exercise of Intellectual Property Rights" (effective December 24, 2014).

6 See, e.g., Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 313-14 (3d Cir. 2007); Microsoft Mobile Inc. v. Interdigital, Inc., No. 15-723-RGA, 2016 WL 1464545 (D. Del. April 13, 2016); Research In Motion Ltd. v. Motorola Inc., 644 F. Supp. 2d 788, 793-96 (N.D. Tex. 2008).

7 Proposed Revision, p. 11 n.25.

8 See, e.g.,In re Loestrin 24 Fe Antitrust Litigation, 814 F.3d 538 (1st Cir. 2016); King Drug Co. of Florence, Inc. v. Smithkline Beecham Corp., 791 F.3d 388 (3d Cir. 2015) (petition for certiorari pending, and the Solicitor General was invited to file a brief).

9 FTC, PAE study (study results expected soon).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
20 Sep 2018, Seminar, Tokyo, Japan

Orrick's Total Access Japan Event Series provides entrepreneurs business, tactical, and legal education through complimentary panels and seminars and networking events. The next event will take place on Thursday, September 20 from 6:00 pm to 7:30 pm.

21 Sep 2018, Conference, Florida, United States

Employment partner, Michael Weil will be participating in The Intellectual Property Law Institute’s 2018 Conference.

26 Sep 2018, Conference, New York, United States

Employment Partner, Mandy Perry and Chair of Orrick's Global Employment Law Practice, Mike Delikat will be participating in the Global Business Protections 2018: International Restrictive Covenants and Confidential Information Conference.

Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions