United States: The Convergence Of The U.S. And European Laws Concerning Compulsory Licensing And Licensing Restrictions... Part V

V. Conclusion

Both in the U.S. and in the EU, the conflict between a monopoly created by intellectual property laws on the one hand and antitrust laws on the other is far from being resolved. Recent developments in U.S. law, including the more liberal application of compulsory IP licensing as an antitrust remedy, may have started a trend toward allowing more antitrust intervention into the intellectual property domain. This trend parallels the European system where for the greater good of establishing one common market, intellectual property protections have yielded to anti-competitive and market integration concerns.

Despite these growing similarities between the U.S. and European attitudes to the place of intellectual property protections in the sphere of competition laws, important differences remain. Notwithstanding the European Commission's adoption of the TBE, the U.S. laws still provide more protection for IP rights and increasingly more often apply the flexible "rule of reason" approach to evaluate licensing arrangements.

Darrell Prescott is a partner and Katarzyna Buchen is an associate at Coudert Brothers in the New York office.

[1] Image Technical Services Inc. v. Eastman Kodak, 125 F.3d 1195 (9th Cir. 1997), cert. denied, 66 USLW 3532 (April 27, 1998) ("Kodak").

[2] Intergraph Corp. v. Intel Corp., 3 F. Supp.2d 1255, 1998 WL 180606 (N.D. Ala., N.E. Div., April, 1998). This decision is currently on appeal to the Federal Circuit.

[3] In the Matter of Intel Corp. (FTC, Docket No. 9288).

[4] RTE v. EC Commission, C 241-242/91P, [1995] 1 ECR 743, [1995] 4 CMLR 718 ("Magill").

[5] Tiercé Ladbroke S.A. v. Commission, T-504/93, [1997] 5 CMLR 309.

[6] Lucazeau et al. v. SACEM et al, 110 & 241-242/88, [1989] ECR 2811, [1991] 4 CMLR 248 ("SACEM").

[7] See Kodak, 125 F.3d at 1225-26 (reversing trial court's injunction requiring that IP royalties charged be reasonable).

[8] Early this year, the European Commission approved the merger of Boehringer Mannheim (BM) Group, DePuy, Inc. and Hoffman-La Roche after, among other things, Hoffman-La Roche's offer to grant world-wide licenses for its key DNA probe technology to all interested market participants. The authors' firm represented Boehringer Mannheim in that transaction. DNA probes, which detect specific segments of DNA from viruses and bacteria, are invaluable for the diagnosis and treatment of complex diseases such as AIDS, cancer and genetic diseases. They also play a vital part in basic research.

[9] See Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 480, 112 S.Ct. 2072 (1992) (plaintiff must prove that defendant willfully acquired or maintained monopoly power "as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.") (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1704 (1966)).

[10] United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 468 (1919).

[11] See e.g., Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S.Ct. 2847 (1985) (upholding liability for exclusionary conduct which involved ending a joint marketing arrangement on finding that plaintiff's ski resort could not compete without being able to offer its customers access to defendant's larger facilities -- i.e. access was indispensable to competition).

[12] United States v. St. Louis Terminal R.R. Assoc., 224 U.S. 383, 32 S.Ct. 507 (1912).

[13] MCI Communications v. Amer. Tel. and Tel. Co., 708 F.2d 1081, 1132-33 (7th Cir.), cert. denied, 464 U.S. 891, 104 S.Ct. 234 (1983).

[14] Delaware Health Care, Inc. v. MCD Holding Co., 957 F. Supp. 535, 546 (D. Del. 1997) (other citations omitted).

[15] See e.g., Alaska Airlilnes v. United Airlines, Inc., 948 F.2d 536, 544-46 (9th Cir. 1991) (rejecting essential facility claim because denial of access would only impose financial burden on excluded competitors, not "eliminate" them), cert. denied, 503 U.S. 977 (1992).

[16] See e.g., Data General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1187 (1st Cir. 1994) ("while exclusionary conduct can include a monopolist's unilateral refusal to license a copyright, an author's desire to exclude others from use of its copyrighted work is a presumptively valid business justification for any immediate harm to consumers"); see also Chisholm-Ryder Co., Inc. v. Mecca Bros., Inc., 1983 U.S. Dist. LEXIS 20282, 217 U.S.P.Q. 1322, 1338, 1982 WL 1950 (W.D. N.Y. 1982), aff'd, 746 F.2d 1489 (Fed. Cir. 1984) ("One would have to be suffering from 'unthinking monopolophobia' to deny [a patent holder] the right, given to it as a quid pro quo -- its right to exclude in exchange for its disclosure to the public of these inventions -- to monopolize the field covered by its patents to the exclusion of all others."); Ortho Pharmaceutical Corp. v. Smith, 15 U.S.P.Q.2d 1856. 1863 (E.D. Pa 1990) ("A compulsory license, which may arise from a refusal to enjoin, is fundamentally at odds with the right of exclusion built into our patent system.").

[17] Image Technical Services, Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1201 (9th Cir. 1997) ("Kodak").

[18] Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 112 S.Ct. 2072 (1992). The authors' firm was counsel to Image Technical Services in the Supreme Court.

[19] Id., 504 U.S. at 481, 112 S.Ct. at 2089, footnote 29.

[20] Kodak, 125 F.3d at 1201.

[21] 125 F.3d at 1219.

[22] Id. at 1225-26.

[23] Id. at 1220.

[24] 125 F.3d at 1218 (citations omitted).

[25] Id. at 1216.

[26] Id. at 1219.

[27] Id. at 1218-19.

[28] Xerox, 989 F. Supp at 1133.

[29] Id.

[30] Id. at 1134.

[31] Id.

[32] Id. at 1135.

[33] Id.

[34] 35 U.S.C. § 271(d)(4).

[35] Id. at 1135-36.

[36] See 134 Cong. Rec. H10646, H10648 (Oct. 20, 1988).

[37] Id. at 1136 citing Rohm & Haas Co. v. Dawson Chem. Co., 557 F. Supp. 739, 835 (S.D. Tex. 1983) ("it would be superfluous to sanction and protect activity within one area of the laws and concurrently prohibit and expose a patentee to damages by reason of another body of law"), rev'd on other grounds, 722 F.2d 1556 (Fed. Cir. 1983).

[38] Id.; see e.g., Polysius Corp. v. Fuller Co., 709 F. Supp. 560, 575 (E.D. Pa. 1989) (pursuant to section 271, "Congress has mandated . . . [that] plaintiffs cannot be guilty of either antitrust violations or patent misuse"), aff'd, 889 F.2d 1100 (Fed. Cir. 1989); see also Data General, 36 F.3d at 1187 (noting that section 271 "may even herald the prohibition of all antitrust claims and counterclaims premised on the refusal to license a patent.")

[39] Id. at 1139 citing SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1204 (2d Cir. 1981), cert. denied, 455 U.S. 1016, 102 S.Ct. 1708 (1982).

[40] Id.

[41] Id; see also Data General, 36 F.3d at 1188 (rejecting an antitrust plaintiff's attempt to invoke Aspen Skiing based on facts similar to the facts of the Xerox case).

[42] Xerox, 989 F. Supp. at 1141.

[43] Id.

[44] Id.

[45] Id. at 1143.

[46] Id.

[47] Id.

[48] U.S. v. Microsoft Corp., 1998 WL 614485, *1 (D.D.C. Sept. 14, 1998, TPJ Civ. A. 98-1232) (internal quotation marks omitted).

[49] Id.

[50] Id. at *27. The court found that there was no leveraging because plaintiffs failed to show that Microsoft monopolized or dangerously threatened to monopolize the market for the tied products. .

[51] Id. at *14.

[52] Id.

[53] Id.

[54] Id. at *15.

[55] Id. (other citations omitted).

[56] Id., citing Kodak, 504 U.S. at 479 n. 29, 112 S.Ct. at 2072 ("The Court has held many times that power gained through some natural and legal advantage such as a patents, copyright, or business acumen can give rise to liability if a seller exploits his dominant position in one market to expand his empire into the next.") (internal citations and quotation marks omitted).

[57] 538 F.2d 14 (2d Cir. 1976).

[58] Microsoft at *16.

[59] Id.

[60] Id. at *17.

[61] Id.

[62] Id.

[63] Complaint, In the Matter of Intel Corp. (FTC, Docket No. 9288) ("Complaint").

[64] Complaint, 39.

[65] Intel Corporation's Answer to Complaint ("Answer").

[66] Answer, Fifth Additional Defense.

[67] Answer, Seventh Additional Defense.

[68] Answer, Fourth Additional Defense.

[69] 365 U.S. 127, 81 S.Ct. 523 (1961).

[70] See United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585 (1965) (executive); California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609 (1972) (judicial); see also Boulware v. State of Nev. Dep't of Human Res., 960 F.2d 793, 797 (9th Cir. 1992) ("Private efforts to influence governmental bodies or courts, even for anti-competitive purposes, enjoy an exemption from the antitrust laws grounded in the First Amendment right to petition.")

[71] TechWeb, The Technology News Site, Intel Complaint Stretches Antitrust Law, June 8, 1998.

[72] Id.

[73] Id.

[74] Id.

[75] Id.

[76] CNNfn web site, Intel Hit with Antitrust Suit, June 8, 1998.

[77] Intel Complaint Stretches Antitrust Law, supra.

[78] Id.

[79] Id.

[80] Id.

[81] Complaint, 6.

[82] Indeed, as discussed in the subsection (a) which follows, Intergraph's 10-K, filed after Intergraph had sued Intel for antitrust violations in Alabama district court, does not list Intel as one of its competitors.

[83] Complaint, 7, 9 ("The entry cost required for developing a new high-performance microprocessor would likely exceed $250 million.". . . "The cost of developing, building and equipping [a modern semiconductor fabrication facility] is approximately $1.2 billion.")

[84] Answer, 1.

[85] In that case, as discussed earlier, the Supreme Court held that one ski resort's termination of a partnership agreement with the other violated the Sherman Act, because the termination was designed to destroy its competitor and would result in fewer choices for consumers. Note, however, that Aspen Skiing case did not involve any IP rights.

[86] 3 F. Supp.2d 1255, 1998 WL 180606 (N.D. Ala., N.E. Div., April, 1998).

[87] "RISC" is an acronym for "Reduced Instruction Set Computer," a type of microprocessor designed for faster computers.

[88] Intergraph, 3 F.Supp.2d at 1273.

[89] See e.g., Kodak, 504 U.S. 451, 480, 112 S.Ct. 2072 (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1704 (1966)).

[90] Id. at 1278.

[91] Id.

[92] Id. at 1279.

[93] Ciba-Geigy Ltd., 5 Trade Reg. Rep. (CCH) 24,12 (1997).

[94] 72 Antitrust & Trade Reg. Rep. (BNA) 202 (Feb. 27, 1997).

[95] In re Baxter International, Inc., FTC, File No. 971-0002, 12/19/96.

[96] Tisseel, a type of sealant, is applied to wounds and raptures to stanch the flow of blood during surgery.

[97] Commission Regulation No. 240/96, O.J. L31/2 (1996). The TBE is discussed in Part IV(B)(1) below.

[98] United Brands v. Commission, [1978] ECR 207.

[99] The Commission defines "essential facility" as a facility or infrastructure, without access to which, a competitor cannot provide services to its customers.

[100] See, e.g., British Midland v. Aer Lingus, O.J. 1992, L 96/34.

[101] Sea Containers/Stena Sealink, O.J. 1994, L 15/8.

[102] Id.

[103] C241-242/91P, [1995] 1 ECR 743, [1995] 4 CMLR 718.

[104] Decision, 54-58.

[105] Id.

[106] T-504/93, [1997] 5 CMLR 309.

[107] 110 & 241-242/88, [1989] ECR 2811, [1991] 4 CMLR 248 ("SACEM")

[108] Id., 33.

[109] On March 10, 1993, the Cour de Cassation ruled that the discotheques had not made out their case that SACEM's royalties were illegal under French or Community law. However, on April 1993, the Conseil de la Concurrence found that SACEM had not been able to justify the level of its royalties and referred the matter to mediation. At the beginning of 1994, finally ending the 15-year conflict between French discotheque owners and SACEM, the parties reached a settlement, which was brokered by the French Ministry of Culture. The settlement set a rate 20% lower than the rate charged by SACEM at that time and was effective retroactively to January 1, 1990. In October 1996, over two years after the settlement was reached, the ECJ confirmed that the issue had been properly submitted to the national court on the ground of lack of sufficient Community interest.

[110] Discon, Inc. v. Nynex Corp., 93 F.3d 1055, 1059 (2d Cir. 1996) (other citations omitted).

[111] Id.; State Oil Company v. Khan, 118 S.Ct. 275 (1997) (overruling Albrecht v. Heralf Co., 390 U.S. 145, 88 S.Ct. 869 (1968) and holding that vertical maximum price fixing is not invalid per se, but instead is subject the "rule of reason" balancing test).

[112] See Northern Pacific Ry. v. United States, 356 U.S. 1, 78 S.Ct. 514 (1958); Audell Petroleum Corp. v. Suburban Paraco Corp., 903 F. Supp. 364, 368 (E.D. N.Y. 1995) ("A tying arrangement is an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product.") (other citations omitted).

[113] Jefferson Parish Hosp. v. Hyde, 466 U.S. 2, 104 S.Ct. 1551 (1984) (four Justices favor removing tying from the per se category of antitrust offenses).

[114] Yentsch v. Texaco, Inc., 630 F.2d 46, 56-57 (2d Cir. 1980); Audell Petroleum, 903 F. Supp. at 368.

[115] Microsoft, 1998 WL 614485, *7 (other citations and internal quotations omitted).

[116] Id. at *12 (other citations omitted).

[117] Transparent-Wrap Machine Corp. v. Stokes & Smith Co., 329 U.S. 637, 67 S.Ct. 610 (1947); see also Lightwave Technologies, Inc. v. Corning Glass Works, 1991 U.S. Dist. LEXIS 543, 19 U.S.P.Q.2d (BNA) 1838 (S.D. N.Y. 1991) (whether grantbacks are unlawful as part of an overall scheme to monopolize the relevant market is a question for the jury).

[118] United States v. General Electric Co., 272 U.S. 476, 47 S.Ct. 192 (1926).

[119] See United States v. Line Material Co., 333 U.S. 287, 68 S.Ct. 550 (1948) (holding that where patents are cross-licensed, a provision in a sublicense establishing the sublicensee's price violates Section 1 of the Sherman Act); Newburgh Moire Co. v. Superior Moire Co., 237 F.2d 283 (3d Cir. 1956) (holding that the grant of multiple licenses, each containing price restrictions does not come within the General Electric doctrine and violates Section 1 of the Sherman Act); Royal Indus. v. St. Regis Paper Co., 420 F.2d 449, 453-54 (9th Cir. 1969) (holding that General Electric is limited to a situation where the patentee licenses another to make and vend and retains the right to make and vend on his own account); Tinnerman Prods. v. George K. Garrett Co., 185 F. Supp. 151, 157-59 (E.D. Pa. 1960) ("if a patentee grants more than one license containing price-fixing provisions, such licenses constitute a violation of the antitrust laws"); but see LucasArts Entertainment Co. v. Humongous Entertainment Co., 780 F. Supp. 285 (N.D. Cal. 1993) (holding that a resale price restriction imposed by a copyright licensor was valid under General Electric because the provision was "reasonably adapted to secure pecuniary reward for the [copyright owner's] monopoly.")

[120] FN 111, supra.

[121] B. Braun Medical Inc. v. Abbot Labs, 124 F.3d 1419, 1426 (Fed. Cir. 1997).

[122] General Talking Pictures Corp. v. Western Electric Co., 305 U.S. 124, 59 S.Ct. 116 (1938).

[123] Id; see also United States v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122 (D.C. 1981).

[124] See e.g., United States v. Bristol-Myers Co., 1982-1 CCH Trade Cases 64,597 (D.D. C. 1982) (consent decree requiring defendant to sell in bulk form).

[125] See aba antitrust section, antitrust law developments 97-100 (4th ed. 1997).

[126] 433 U.S. 36, 97 S.Ct. 2549 (1977).

[127] Id. 51-52 (footnotes omitted).

[128] Id. at 58-59.

[129] See e.g., Cowley v. Braden Industries, Inc., 613 F.2d 751, 753, 755-56 (9th Cir. 1980) (upholding vertical territorial restraints even though the manufacturer controlled 70-80% of market share).

[130] See e.g., United States v. Westinghouse Electric Corp., 648 F.2d 642 (9th Cir. 1981) (approving reciprocal license agreements pursuant to which Westinghouse granted Mitsubishi an exclusive license for manufacture of certain products in Japan under its patents and Mitsubishi granted Westinghouse nonexclusive licenses under Mitsubishi's patents and know-how to manufacture, use, and sell certain products in all countries other than Japan).

[131] United States v. Singer Mfg. Co., 374 U.S. 174 (1963).

[132] Microsoft, 1998 WL 614485, *19.

[133] Id. (other citations omitted).

[134] Id.

[135] The Commission Regulation on the Application of Article 85(3) of the Treaty [of Rome] to Certain Categories of Technology Transfer Agreements, Reg. No. 240/96, O.J. L 31/2 (1996).

[136] See Sylvania, FN 126, supra.

[137] Merck v. Stephar and Exler, 187/80, [1981] ECR 2063, [1981] 3 CMLR 463, paras [10]-[11]; Pharmon v. Hoechst, 19/84, [1985] ECR 2281, [1985] 3 CMLR 775, paras [25] and [30].

[138] See e.g., Columbia Pictures Indus., Inc. v. Redd Horne, Inc., 749 F.2d 154, 159 (3d Cir. 1984) ("The first sale doctrine prevents the copyright owner from controlling the future transfer of a particular copy once its material ownership has been transferred.")

[139] Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Grossmarkte GmBH & Co. KG, 78/70, [1971] E.C.R. 487.

[140] Id. at 489-90.

[141] Id. at 490.

[142] Id. at 500.

[143] See also Bristol-Myers Squibb and Others v. Paranova, 427, 429 & 436/93, [1997] 1 CMLR 1151, 89 ("Where goods bearing a trade mark are placed on the market in a Member State with the consent of the proprietor of the trade mark and another person buys those goods, places them in a new external packaging, to which he affixes the trade mark or through which the trade mark affixed to the internal packaging remains visible, and markets the repackaged goods in another Member State, the proprietor of the trade mark cannot invoke it in order to

prevent such marketing unless the repackaging is done in such a way that it is capable of affecting the original condition of the goods or otherwise impairing the reputation of the trade mark.")

[144] C-267-268/95, [1997] 1 CMLR 83

[145] See FN 138. The case held that proprietor of a patent for a medicinal preparation who sells the preparation in one Member State where patent protection exists, and then markets it himself in another Member State where there is no such protection, cannot avail himself of the right conferred by the legislation of the first Member State to prevent the marketing in that State of the said preparation imported from the other Member State.

[146] Ruling, 2.

[147] Silhouette Int'l Schmied Gesellschaft mbH & Co. KG v. Hartlauer Handelsgesellschaft mbH, C-355/96, [July 16, 1998].

[148] See a block exemption specifically aimed at R & D agreements -- Commission Regulation No. 418/85, O.J. L 353/46 (1985).

[149] Case IV/35.518, [1997] 4 CMLR 1065

[150] Case IV/35.738, [1997] 4 CMLR 145

[151] Notice pursuant to Article 19(3) of Council Regulation No. 17 concerning Case No. IV/34.796 -- Canon/Kodak, O.J. 1997 C 330 of November 1, 1997, p. 10.