Antitrust and Intellectual Property

• Pages: 135-170

135

CHAPTER VI

ANTITRUST AND INTELLECTUAL PROPERTY

A. Introduction: Do Antitrust Laws Apply to Conduct Involving

Patents?

The antitrust laws apply to conduct involving patents generally, with

only limited exceptions. As a general matter, conduct involving a patent

needs to be assessed under the antitrust laws in the same manner as

conduct not involving a patent. Patents that contribute to or create market

power are the most likely to raise significant antitrust issues, but patent

holders can sometimes be affected by the antitrust laws even under

circumstances that may not seem intuitively likely to be implicated by

the antitrust laws. 1

The issues raised by patent-related conduct may be better understood

by briefly examining the intersection of patents and antitrust under U.S.

law. Patent law and antitrust law are core components of U.S. law

regulating competition between firms. Antitrust laws are intended to

apply generally to competition and to ensure robust competition. In

contrast, the patent grant provides an innovator with a limited respite

from competition in exchange for the patent holder’s investment in the

invention and its contribution to the public domain by publishing the

patent. A patent has the potential to restrict competition because it

provides its holder with the right to exclude others, including

competitors, from practicing the claimed invention.

The juxtaposition of patent and antitrust laws is sometimes referred

to as presenting “tension” or “conflict” and often presents courts and

antitrust enforcers with difficult questions. In those instances in which a

patent right appears to conflict with antitrust law, it is sometimes not

1. For ease of discussion, except where noted otherwise, this chapter

addresses antitrust issues related to patents. Many of the topics discussed

in this chapter also apply to copyrights, trademarks, trade secrets, and

other forms of intellectual property protection, but a discussion of those

laws lies outside the scope of this chapter.

136 Frequently Asked Antitrust Questions

easy to determine whether, or to what degree, certain conduct is

protected from antitrust liability. The Supreme Court has provided only

limited guidance in this area to date. Lower courts, the U.S. Department

of Justice (DOJ), the Federal Trade Commission (FTC), and state

attorneys general sometimes differ in how they treat specific antitrust

issues that involve patents. Consequently, it often can be difficult to

provide simple “rules of the road” in this area of law.

Depending on the circumstances, each stage in the life-cycle of a

patent has the potential to present to the patent holder various antitrust

risks, including the risk of an investigation or enforcement action

brought by the DOJ, the FTC, state attorneys general, or private litigants,

any of which may result in significant expense even if the patent holder

is ultimately held not to have violated antitrust laws. Consequently, firms

that are acquiring or enforcing patent rights should consider whether

conduct that is contemplated will raise antitrust risks and, if so, whether

there are appropriate means of reducing such risks while accomplishing

bona fide business objectives.

In addition, the U.S. patent code2specifically addresses certain

issues that may bear on potential application of the antitrust laws, such as

the territorial scope of a patent license.3

Further, to the extent that certain uses of patents are treated as

“immune” from antitrust law, such immunity is typically not available

when the patent at issue has been procured through fraud or is being

enforced through a “sham” action by a patent holder who knows that the

patent is invalid or otherwise unenforceable.4

This chapter aims only to facilitate the identification of potentially

significant antitrust issues that may be raised by conduct involving

patents. To that end, it provides a brief, high-level overview of some of

the more significant antitrust risks that may arise during the life-cycle of

a patent. However, each of the topics addressed below merits detailed

analysis based on the specific facts at issue.

B. We Are Going to Acquire a Patent. Could That Raise Antitrust

Issues?

Yes, acquiring a patent or an exclusive right to a patent can raise

both procedural and substantive antitrust issues.

2. 35 U.S.C. §§ 1-376.

3. 35 U.S.C. § 261.

4. See infra part F of this chapter.

Antitrust and Intellectual Property 137

First, the acquisition of a patent or a patent license5that is exclusive

as to all (including as to the patentee) may be reportable under the Hart-

Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR),

regardless of whether the acquisition raises substantive antitrust issues.

While a detailed discussion of HSR rules lies outside the scope of this

chapter, HSR may be implicated if the value of the patent(s) (or

exclusive license) and other assets being acquired exceed $70.9 million

(2013 threshold).6If an HSR filing is required, the acquisition cannot be

closed prior to expiration of the applicable waiting period.7

Second, acquisitions of patents, exclusive licenses, and other assets

can raise substantive antitrust issues. In particular, such acquisitions are

subject to review under Section 7 of the Clayton Act, regardless of

whether they are reportable under the HSR Act. Section 7 bars

acquisitions of assets, including patents, where “the effect of such

acquisition may be substantially to lessen competition, or to tend to

create a monopoly.”8For example, if two firms propose to merge and

that merger would consolidate the only two types of patented technology

to make a type of product, the parties would need to consider whether

other products would sufficiently constrain their behavior postmerger,

such that the combination would not lessen competition in a relevant

market under Section 7.

Defining the relevant market that applies to the acquisition of a

patent or an exclusive patent license can raise issues that are not well

settled by existing case law. For example, while such a relevant market

may include a traditional product market, the DOJ and the FTC (taken

together, the “agencies”) have taken the position that the relevant market

may be defined as a so-called “technology market” that may be

comprised only of patents or patented technology or an “innovation

market” that involves only research and development relating to patents.9

5. For the antitrust implications of exclusive patent licensing, see infra part

C.1.c of this chapter.

6. The “size-of-transaction” threshold is amended annually to reflect

inflation and is announced by the FTC each January. Revised

Jurisdictional Thresholds of the Clayton Act, 78 Fed. Reg. 2406, 2407

(Jan. 11, 2013).

7. Please see Chapter III for additional discussion of the HSR process.

8. 15 U.S.C. § 18.

9. See, e.g., Cephalon Inc., 138 F.T.C. 583, 637 (2004) (analyzing the loss

in innovation competition that would likely result from the merger of two

manufacturers of brand-name pharmaceuticals); see generally U.S. DEP’T

OF JUSTICE &FED.TRADE COMM’N,ANTITRUST GU IDELINES FOR THE