With relatively little fanfare, the U.S. Department of Justice's Antitrust Division and the Federal Trade Commission released a proposed update of their 21-year-old Antitrust Guidelines for the Licensing of Intellectual Property, along with an invitation for interested parties to comment by September 26, 2016.
The antitrust agencies do not propose significant changes to their enforcement approach with respect to IP licensing. Rather, the Proposed IP Guidelines modernize their 1995 IP Guidelines to account for enforcement experience and policy expertise acquired during the past two decades, as well as changes in statutory and case law. Overall the changes are modest. As with developments in antitrust law more generally, most of the relatively few substantive changes permit greater flexibility in IP licensing.
The most significant change is the confirmation that the agencies will not seek to apply the per se rule to vertical price maintenance in licensing arrangements. This change brings the Proposed IP Guidelines into line with the Supreme Court's decision in Leegin Creative Leather Products v. PSKS, 551 U.S. 877 (2007), which reversed longstanding precedent and held that resale price maintenance agreements are to be evaluated under the rule of reason. The Proposed IP Guidelines state that "the Agencies will apply a rule of reason analysis to price maintenance in intellectual property licensing agreements," although the agencies continue to hold open the possibility of application of the per se rule to horizontal pricing arrangements. (Section 5.2.)
The agencies also propose to clearly state that "The antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors, in part because doing so may undermine incentives for investment and innovation." (Section 2.1.) The 1995 IP Guidelines already recognized "certain rights to exclude" inherent in intellectual property; the additional statement incorporates in the IP context the Supreme Court's decision in Verizon Communications v. Trinko, 540 U.S. 398 (2004), which limited liability for refusing to share resources with competitors. The Proposed IP Guidelines also clarify that the exercise of intellectual property rights is neither immune from nor suspect under the antitrust laws.
The Proposed IP Guidelines cite to Illinois Tool Works v. Independent Ink, 547 U.S. 28 (2006); in support of the position (already reflected in the 1995 IP Guidelines) that an intellectual property right does not necessarily confer market power on its owner. The Proposed IP Guidelines continue to confirm that, if an intellectual property owner possesses market power, that owner does not necessarily have an obligation to license the use of that intellectual property. However, the Proposed IP Guidelines add that the agencies "may . . . impose licensing requirements to remedy anticompetitive harm or, in the case of a merger, to prevent the substantial lessening of competition." (Section 3.1, fn. 25.)
Additional proposed changes account for the Defend Trade Secrets Act of 2016, which created a federal cause of action for misappropriation of trade secrets. The proposed update also accounts for statutory changes to the life of patents and copyrights, which took effect shortly after the agencies adopted the 1995 IP Guidelines. With the exception of one example that has been deleted, the examples are almost identical to those of the 1995 Guidelines.
The agencies' press releases specifically stated that the Proposed IP Guidelines do not expand the subject matter of the 1995 Guidelines. The agencies provided additional analysis of issues such as grantbacks, reach-through licenses, tying and bundling, post-expiry royalties, patent pools and standard-essential patents in their 2007 joint report, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition,and in other public statements and filings. The agencies nevertheless chose not to include such additional analysis in the Proposed IP Guidelines.
The agencies are soliciting comments on the Proposed IP Guidelines from interested parties. All comments must be submitted by September 26, 2016, and will be posted for the public on the agencies' websites.
The proposed update of the IP Licensing Guidelines can be found here.