Year in review: intellectual property and antitrust in USA

All questions

Year in review

Antitrust under the Biden administration has been characterised by increased agency enforcement and advancement of aggressive theories of antitrust inspired by the ‘neo-Brandeisian’ school of antitrust, which is sceptical of the previous US antitrust consensus centred around the consumer welfare standard. While the agencies’ enforcement priorities have not to date focused on matters at the heart of the interaction between antitrust and intellectual property, the increased aggressiveness of the agencies has implicated the role of intellectual property in several ways.

The FTC in particular has been aggressive – and creative – in its assertion of its ‘unfair methods of competition’ powers under Section 5 of the FTC Act. In 2023 and 2024, the FTC sent letters to several pharmaceutical companies challenge what the FTC perceives as improper listings of hundreds of patents in the FDA’s Orange Book, in which pharmaceutical companies are required to list their patents covering any FDA-approved drugs. The FTC stated that these improper listings could unfairly impede the entry of competing generic pharmaceuticals, amounting to an unlawful ‘unfair method of competition’ in violation of Section 5,¹ but so far the FTC has stopped short of bringing standalone claims against these pharmaceutical companies. 

Notable for trade secret protection, on 23 April 2024, the Federal Trade Commission published a final rule banning essentially all non-compete provisions in employment contracts nationwide, including rendering null the vast majority of non-such competes currently in effect.² In promulgating the rule, the FTC forecasted that the rule would encourage innovation and small business formation, as skilled employees would be better positioned to start or join new companies and that companies have other means to protect their trade secrets through non-disclosure agreements and claims of trade secret theft. Opponents of the rule forecast that without non-competes, companies will be less innovative, less likely to share trade secrets within their organisation and face higher hurdles to remedying trade secret theft, which by its nature is secret and thus more difficult to prove than violation of a non-compete employment clause. The rule, which would otherwise go into effect on 4 September 2024, already faces several litigation challenges to the FTC’s ability to promulgate such a rule, which may delay or prevent it from going into effect.

In the world of standard essential patents (SEPs), in 2023, the United States began a re-evaluation of its SEP policies and signalled the early stages of a potential alignment with relevant precedent in Europe and other key global jurisdictions. In May, the White House published a National Standards Strategy for Critical and Emerging Technology, which outlined ‘how the U.S. Government will strengthen U.S. leadership and competitiveness in international standards development’.³ Months later, the United States Patent and Trademark office, in collaboration with the International Trade Administration (ITA) and the National Institute for Standards and Technology (NIST) issued a request for public comments, seeking stakeholder input on ‘the ability of U.S. industry to readily adopt standards to grow and compete’.⁴ At this session, the agencies heard from companies stressing the importance of long-term investments and participation in standards development. To achieve this, some agencies stressed, the US needs to support strong enforcement of patents, including those encumbered by requirements to license on fair, reasonable and non-discriminatory (FRAND) terms.

Around the same time, courts and US-based standard setting bodies quietly began shifting toward policies that are, in fact, more favourable to developers of these standards. These precedent shifts and policy changes have started to align with existing law in Europe. For instance, recent policy changes in the Institute of Electrical and Electronics Engineers (IEEE) have grown more permissive of SEP holders seeking injunctive relief, aligning itself in part with German courts who have held the same.⁵ The IEEE similarly stepped back from its prior policy of limiting a royalty base to the smallest saleable patent practicing unit (SSPPU) in favour of a more flexible approach,⁶ not unlike rulings in the United Kingdom.⁷ At least one court has also ruled that FRAND imposes a good faith negotiation requirement on implementers,⁸ much like certain European counterparts have done.⁹

Courts have also continued to demonstrate some of the challenges in bringing FRAND defences using antitrust law, rather than contract law. In the wake of high-profile decisions dismissing antitrust claims, like FTC v. Qualcomm and Continental v. Avanci, SEP holders have continued to see success in dismissing similar allegations.¹⁰ Antitrust claims, however, are far from foreclosed. As the judge in Qualcomm put it, ‘[l]itigation often involves strategic choices’, suggesting that a different approach to an antitrust defence may have led to a more successful outcome.¹¹