United States: FTC And DOJ Update Antitrust Guidelines For The Licensing Of Intellectual Property


On January 13, 2017, the Federal Trade Commission and the Antitrust Division of the US Department of Justice issued updated Antitrust Guidelines for the Licensing of Intellectual Property (the Guidelines). The revised Guidelines follow nearly half a year of consideration and public commentary.

In Depth

On January 13, 2017, the Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) issued updated Antitrust Guidelines for the Licensing of Intellectual Property (the Guidelines). The revised Guidelines follow nearly half a year of consideration and public commentary. According to the FTC, the updates were "intended to modernize the IP Licensing Guidelines without changing the agencies' enforcement approach with respect to intellectual property licensing or expanding the IP Licensing Guidelines to address other topics." In that vein, the modest updates to the Guidelines affirm that the antitrust agencies still believe that IP issues do not require an altered analysis and that the licensing of intellectual property is generally procompetitive."

Major Themes from 1995 Guidelines Still Hold True

Perhaps most importantly for business decision-makers is that the FTC and DOJ stand by the major themes of the 1995 version of the Guidelines. These major themes include the following

  1. The antitrust agencies will continue to "apply the same analysis to conduct involving intellectual property as to conduct involving other forms of property";
  2. This analysis "do[es] not presume that intellectual property creates market power in the antitrust context";
  3. The FTC and DOJ "recognize that intellectual property licensing . . . is generally procompetitive"; and
  4. "The antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors."

In addition, the FTC and DOJ have not altered the antitrust "safety zone" established in the 1995 Guidelines to "provide some degree of certainty" to licensors and licensees of intellectual property. Pursuant to this policy, "[a]bsent extraordinary circumstances, the Agencies will not challenge a restraint in an intellectual property licensing agreement if (1) the restraint is not facially anticompetitive and (2) the licensor and the licensee collectively account for no more than twenty percent of each relevant market significantly affected by the restraint."

In a statement released by FTC, Commissioner Maureen Ohlhausen praised the revised Guidelines for "embracing the principles of commendable flexibility" from the 1995 Guidelines with the "modest" update. By reaffirming these views, the agencies have continued to provide businesses with consistent guidance and the ability to plan their practices with full knowledge of the methods that will be utilized by the agencies to conduct an antitrust analysis.

Revisions Reflect Developments in Case Law

While the major themes of the Guidelines remain the same, the update is designed to account for the significant changes in both antitrust and intellectual property law that have occurred since the Guidelines were first issued in 1995. For this reason, the major changes in the Guidelines seek to reflect recent statutory and case law developments that have come to fruition since the mid-1990s.

One area where this is especially evident is in the agencies' discussion of price maintenance agreements. In the 1995 Guidelines, the agencies stated that "it has been held per se illegal for a licensor of an intellectual property right in a product to fix a licensee's resale price of that product." However, the revised Guidelines adjust this discussion to reflect the Supreme Court of the United States' 2007 opinion in Leegin Creative Leather Products, Inc. v. PSKS, Inc., where the Court overruled its nearly 100-year-old precedent that resale price maintenance agreements were per se violations of the antitrust laws. The revised Guidelines now state that "the Agencies will apply a rule of reason analysis to price maintenance in intellectual property licensing agreements" to weigh the procompetitive benefits of the agreement with any anticompetitive effects.

Similarly, the revised Guidelines also cite the Supreme Court's 2013 opinion in FTC v. Actavis, Inc. to demonstrate that a firm can still be considered a potential competitor "even though the firm's prospects may be uncertain." This sentiment differs slightly from the 1995 Guidelines, which only stated that "[a] firm will be treated as a likely potential competitor if there is evidence that entry by that firm is reasonably probable in the absence of the licensing agreement." In Actavis, the Court held that a "pay-for-delay" scheme between a drug manufacturer with a drug that is about to come off patent and a prospective generic drug manufacturer could harm competition.

The recent cases do not always differ from the guidance provided in 1995. Some recent cases provide additional support for the FTC and DOJ's statements. For example, in its 2006 opinion in Illinois Tool Works Inc. v. Independent Ink, Inc., the Supreme Court concluded that "a patent does not necessarily confer market power upon the patentee." This case endorsed the view expressed by the antitrust agencies in their 1995 Guidelines and is now cited in the update.

Updates Specifically Decline to Provide Specific Guidance on Controversial IP Issues

Notably absent from the update is more specific guidance on controversial topics sought by public commenters during the FTC and DOJ revisions. One of these controversial topics is standard-essential patents (SEPs) and licensing on fair, reasonable and non-discriminatory (FRAND) terms. At least 16 of the 24 comments mentioned SEPs in some way. Likewise, five comments addressed the evolving role of patent assertion entities (PAEs), more colloquially known as "patent trolls."

Some commenters applauded the agencies for "correctly reject[ing] the invitation to adopt a special brand of antitrust analysis for SEPs [and PAEs] in which effects-based analysis is replaced with unique presumptions and burdens of proof." Others questioned whether the failure of the agencies to include references to these topics will lead market participants to conclude that the agencies believe the positions presented in prior speeches, reports, enforcement actions and business review letters are no longer valid.

The FTC and DOJ's press release appeared to address these comments by reassuring commenters "that the flexible effects-based enforcement framework set forth in the IP Licensing Guidelines remains applicable to all IP areas" and that "the business community may consult the wide body of DOJ and FTC guidance available to the public." The agencies specifically stated that the standard antitrust framework described in the Guidelines applies to "a variety of conduct involving intellectual property, including standard-setting activities and the assertion of standard-essential patents." It appears that the agencies have declined to set out a unique set of rules to address these issues.

Overall, the updated Guidelines continue to provide decision-makers with the ability to understand how the antitrust agencies will evaluate their intellectual property licensing agreements. These decision-makers should generally take comfort that the agencies continue to believe that licensing behavior is generally procompetitive, but should still seek the guidance of antitrust counsel to assess whether their licensing agreements could have anticompetitive effects on any goods, technology, or research and development markets.

FTC And DOJ Update Antitrust Guidelines For The Licensing Of Intellectual Property

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