On January 12, 2017, the U.S. Department of Justice and the Federal Trade Commission released updated Antitrust Guidelines for the Licensing of Intellectual Property (the “Guidelines”). These Guidelines replaced those issued on April 6, 1995, and state the agencies’ policies regarding the licensing of patents, copyrights, trade secrets, and know-how; the Guidelines do not cover the antitrust treatment of trademarks.
Intellectual property laws provide incentives for innovation by establishing enforceable property rights for the creators of new and useful products, efficient processes, and original works of expression. Antitrust laws prohibit certain actions that may harm competition and thus consumers. These sets of laws are complementary and aim to encourage innovation and consumer welfare. The Guidelines are meant to provide predictability as to how both the intellectual property and antitrust laws will be applied in the licensing context. However, the Guidelines do not replace the judgment and discretion that must be applied in each case as determined by the facts.
While the updated Guidelines reflect changes in the law, the general principles embodied by the Guidelines remain the same.
- “The Agencies apply the same antitrust 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”;
- “the Agencies do not presume that intellectual property creates market power”; and
- “the Agencies recognize that intellectual property licensing allows firms to combine complementary factors of production and is generally procompetitive.”
One of the changes in the Guidelines deals with Minimum Resale Price Maintenance (“RPM”). RPM occurs when a licensor conditions a license on the resale price of a product incorporating the licensed technology. A shift in caselaw occurred in 2007, when the Supreme Court decided Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). In Leegin, the Court concluded that RPM agreements should be evaluated under the rule of reason and are not per se illegal, overruling the 1911 decision in Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911), holding that the agreements were per se illegal. To reflect the new caselaw, the Guidelines state that RPM agreements will be analyzed on a case-by-case basis, weighing the competitive benefits against the potential harms of RPM agreements.
Another notable update centers on the application of a merger analysis in connection with the acquisition of intellectual property rights, even when there is no actual merger occurring. The Guidelines state that certain transfers of rights “are most appropriately analyzed by applying the principles and standards used to analyze mergers, particularly those in the 2010 Horizontal Merger Guidelines.” A merger analysis will be applied when there is “an outright sale by an intellectual property owner of all of its rights to that intellectual property and to a transaction in which a person obtains through grant, sale, or other transfer an exclusive license for intellectual property (i.e., a license that precludes all other persons, including the licensor, from using the licensed intellectual property).” Importantly, the merger analysis is not limited to transactions involving exclusive licenses. It may also be invoked when a particular transaction’s effect is to substantially decrease competition in a relevant market.
It will be interesting to see the real-world application of the Guidelines under the new administration.