United States: DOJ And FTC Release Updated Antitrust Guidelines For IP Licensing

On January 13, 2017, the Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC) (collectively, the "Agencies") issued updated Antitrust Guidelines for the Licensing of Intellectual Property ("IP Licensing Guidelines" or "Guidelines").[1] The IP Licensing Guidelines describe the Agencies' approach to assessing the competitive impact of licensing and other activities related to patents, copyrights, trade secrets, and know-how.[2] The January 2017 update is the Agencies' first revision of the IP Licensing Guidelines in more than twenty years since they originally issued them in 1995.[3] The update follows the Agencies' release of a proposed draft for public comment in August 2016.[4]

The updated IP Licensing Guidelines do not reflect a sea change in the Agencies' approach to evaluating IP licensing.[5] In their public statements concerning the update, the Agencies emphasize that "[t]he update is not intended to change [their] enforcement approach with respect to intellectual property licensing nor expand the IP Licensing Guidelines into other topics and areas."[6] Accordingly, the IP Licensing Guidelines retain the "three foundational principles" enumerated in the 1995 version that inform the Agencies' evaluation of IP issues:

  1. for the purpose of antitrust analysis, the Agencies apply the same analysis to conduct involving intellectual property as to conduct involving other forms of property, taking into account the specific characteristics of a particular property right;
  2. the Agencies do not presume that intellectual property creates market power in the antitrust context; and
  3. the Agencies recognize that intellectual property licensing allows firms to combine complementary factors of production and is generally procompetitive. [7]

While these core principles remain, the updated IP Licensing Guidelines do include several substantive changes. The Agencies have explained that the updated Guidelines account for changes in antitrust and IP law since 1995 and incorporate other "relevant enforcement and policy work, including [their] 2010 Horizontal Merger Guidelines,"[8] as well as the Agencies' 2007 and 2011 reports on the intersection of antitrust and IP and numerous business review letters.[9]

Among the notable shifts in policy, the updated IP Licensing Guidelines imply that the Agencies will evaluate impacts involving new technologies over a longer time horizon by omitting the 1995 Guidelines' statement that the Agencies "generally will use the best available information to estimate market acceptance [of a new technology] over a two-year period, beginning with commercial introduction."[10] Further, the updated Guidelines suggest that the Agencies will not always begin their analysis by defining the relevant markets in which competition might be affected,[11] though they also state that the Agencies normally will evaluate licensing arrangements that appear likely to have anticompetitive effects by identifying the relevant markets in which those effects will likely occur.[12] And the Guidelines explain the Agencies' approach to applying U.S. antitrust laws to IP-related conduct of global scope.[13] Per the updated Guidelines, the Agencies will apply U.S. antitrust laws to global IP licensing conduct that has a sufficient nexus with the United States if considerations of international comity and foreign government involvement do not preclude the agencies' investigation or enforcement.[14]

The IP Licensing Guidelines' most extensive substantive changes concern the Agencies' evaluation of "research and development markets" (which the 1995 Guidelines called "innovation markets").[15] While both the 1995 and updated Guidelines explain that such markets consist of R&D "directed to particular new or improved goods or processes,"[16] the updated Guidelines further encompass "the assets comprising research and development related to the identification of a commercializable product."[17] The updated Guidelines omit an example and related discussion included in the 1995 Guidelines suggesting the Agencies previously would have deemed R&D markets competitive if they featured a large number of firms with the capability and incentive to participate in the market;[18] the updated Guidelines contain no such safe harbor.[19] And the Guidelines now explain that the Agencies will assess whether "close substitutes" exist for licensed R&D—such that the Agencies will not challenge the licensing arrangement absent extraordinary circumstances—based on the following factors: "the nature, scope and magnitude of the R&D efforts of . . . independently controlled entities [other than the licensing parties]; their access to financial support, intellectual property, skilled personnel or other specialized assets; their timing; and their ability, either acting alone or through others, to successfully commercialize innovations."[20]

Finally, a number of the updated IP Licensing Guidelines' revisions account for intervening changes in law. The Guidelines:

  • Update references to the duration of patents and copyrights to reflect intervening statutory amendments;[21]
  • Address the recently enacted Defend Trade Secrets Act;[22]
  • Reiterate that a firm's unilateral refusal to assist its competitors generally does not violate the antitrust laws, "in part because doing so may undermine incentives for investment and innovation";[23]
  • Recognize intervening case law clarifying that the ownership of an IP right does not necessarily confer market power;[24]
  • Address intervening case law concerning resale price maintenance by confirming that the Agencies will apply the rule of reason when evaluating price maintenance in IP licensing arrangements;[25] and
  • Incorporate recent Federal Circuit case law concerning inequitable conduct before the U.S. Patent and Trademark Office.[26]

Footnotes

[1] https://www.justice.gov/opa/pr/doj-and-ftc-issue-updated-antitrust-guidelines-licensing-intellectual-property.

[2] Id.

[3] Id.

[4] https://www.justice.gov/opa/pr/doj-and-ftc-issue-updated-antitrust-guidelines-licensing-intellectual-property.

[5] Cf., Statement of Commissioner Maureen K. Ohlhausen, FTC, on IP Licensing Guidelines (Jan. 13, 2017), https://www.ftc.gov/system/files/documents/public_statements/1049793/
mkohlhausen_statement_ip_guidelines.pdf (referring to the Agencies as having "modestly update[d] the Guidelines").

[6] https://www.justice.gov/atr/guidelines-and-policy-statements-0/2017-update-antitrust-guidelines-licensing-intellectual-property.

[7] IP Licensing Guidelines § 2.0. The updated Guidelines do incorporate stylistic revisions to principle (a). Compare 2017 IP Licensing Guidelines § 2.0 with 1995 IP Licensing Guidelines § 2.0. These revisions appear not to suggest any substantive change in the Agencies' approach.

[8] https://www.justice.gov/opa/pr/doj-and-ftc-issue-updated-antitrust-guidelines-licensing-intellectual-property. See also R. Hesse, Acting Assistant Attorney General, "Ring in the New Year with Modernized DOJ/FTC IP Licensing Guidelines," DOJ Antitrust Division (Jan. 13, 2017), https://www.justice.gov/opa/blog/ring-new-year-modernized-dojftc-ip-licensing-guidelines ("[D]evelopments since 1995 prompted us to undertake the process of modernizing them to reflect changes to the law, as well as the agencies' recent enforcement and policy experience.").

[9] See, e.g., IP Licensing Guidelines, § 2.1 n.13, § 5.5 n.81, § 6 n.90 (citing DOJ & FTC, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition (2007)); id. § 2.3 n.18 (citing FTC, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition (2011)); id. § 5.5 n.84, § 5.5 n.85 (citing business review letters concerning patent pooling).

[10] Id.

[11] Id. § 3.2.2 (updated to remove statement, "The Agency would analyze the competitive effects of the proposed joint venture [in a given hypothetical] by first defining the relevant markets in which competition may be affected and then evaluating the likely competitive effects of the joint venture in the identified markets"); compare 1995 Guidelines § 3.2.2.

[12] Id. § 3.2.

[13] Id.

[14] Id.

[15] The Agencies have explained that the changed terminology "more accurately reflect[s] how these markets have been defined in enforcement actions. See Pressrelease, DOJ, "DOJ and FTC Seek Views on Proposed update of the Antitrust Guidelines for Licensing of Intellectual Property" (Aug. 12, 2016), https://www.justice.gov/opa/pr/doj-and-ftc-seek-views-proposed-update-antitrust-guidelines-licensing-intellectual-property.

[16] Id. § 3.2.3; 1995 Guidelines § 3.2.3.

[17] IP Licensing Guidelines § 3.2.3.

[18] See 1995 IP Licensing Guidelines § 3.2.3 (example 3 and related discussion).

[19] Compare 2017 IP Licensing Guidelines § 3.2.3.

[20] IP Licensing Guidelines § 4.3.

[21] IP Licensing Guidelines § 1.

[22] Id.

[23] Id. § 2.1.

[24] Id. § 2.2 (quoting Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 45-46 (2006)).

[25] Id. § 5.2 n.68 (discussing Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877 (2007)).

[26] Id. § 6 (discussing, for example, Transweb, LLC v. 3M Innovative Props. Co., 812 F.3d 1295 (Fed. Cir. 2016); Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc)).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Jeffrey A. Jaeckel
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