On Friday, January 13, 2017, the Federal Trade Commission and the Department of Justice issued updated Antitrust Guidelines for the Licensing of Intellectual Property1. These Guidelines, first issued in 1995, explain how the federal antitrust agencies evaluate licensing and related activities involving patents, copyrights, trade secrets, and know-how. According to the agencies, the updated Guidelines are intended to modernize the 1995 Guidelines and reflect intervening changes in statutory and case law, as well as relevant enforcement and policy work, including the agencies’ 2010 Horizontal Merger Guidelines. The agencies also considered public comments on the draft of these updated Guidelines made available in August 2016.
Despite their Friday the 13th issue date, the updated Guidelines appear to continue to be a good omen for licensors as they reaffirm the agencies’ commitment to “an economically grounded approach to antitrust analysis of IP licensing,” supportive of a “strong IP licensing system” designed to promote innovation while incorporating the intervening changes in law that are largely favorable to intellectual property owners and licensors.
The updated Guidelines reiterate the three general principles set forth in the 1995 Guidelines:
(1) the agencies apply the same analysis to intellectual property as to other forms of property, taking into account specific characteristics of the particular intellectual property right;
(2) the agencies do not presume that intellectual property creates market power; and
(3) the agencies recognize that intellectual property licensing is generally pro- competitive.
The Guidelines note in fact instances in which these principles have been affirmed by the Courts, such as in the Supreme Court’s ruling in Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28, 40-45 (2006), that a patent does not necessarily confer market power.
Important changes in the law since 1995 have, however, been incorporated into the amended Guidelines. In particular, for example, the Supreme Court’s opinion in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), which reversed the long-time precedent that resale price maintenance was per se illegal, is cited for support for the revised guidance that the agencies will now apply a rule of reason analysis to price maintenance in intellectual property licensing agreements. The Guidelines also recognize that the agencies may analyze the competitive effects of a licensing arrangement in “technology markets” that have been defined in recent lower court cases.
The updated Guidelines take into account recent policy work by the agencies, such as the 2010 Horizontal Merger Guidelines, which are cited as providing the approach the agencies will take in delineating relevant-goods markets affected by licensing arrangements, and in the measurement of market share in such goods markets.
The updated Guidelines also note changes in intellectual property law, namely for example, by citing recent Federal Circuit case law raising the standard of proof required to show inequitable conduct before the Patent Office.
To discuss how these updated Guidelines may impact your business, please contact the authors.