Antitrust Issues in Litigating Intellectual Property

• Author: Bradford P. Lyerla
• Pages: 85-151

85

chapter 4

Antitrust Issues in Litigating

Intellectual Property

I. Introduction

There is a tension between patent law and antitrust law that courts must

apply to the specific circumstances brought before them. On the one hand,

a patent holder has a legally sanctioned right to exclude others from

making, using, selling, offering to sell, or importing a patented article.1

The policy basis for this right is the public good served by “bring[ing] new

designs and technologies into the public domain through disclosure.”2

This right permits a patent holder to “exact royalties as high as he can

negotiate” from the patent grant,3 and even refuse to license an invention

entirely.4 On the other hand, the patent right is not unlimited, and one of

the limits is antitrust, the laws of which were enacted to promote competi-

tion.5 While there may be actions permissible under the patent grant that

would otherwise raise antitrust concerns, the existence of a patent alone

does not provide an absolute shield to antitrust liability.6

The agencies have provided some guidance to help parties under-

stand and manage potential conflicts between the patent and antitrust

laws. The FTC and DOJ jointly prepared the 1995 Antitrust Guidelines

1. 35 U.S.C. §271(a); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 135

(1969).

2. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151 (1989).

3. Brulotte v. Thys Co., 379 U.S. 29, 33 (1964).

4. Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1215 (9th Cir.

1997).

5. Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 876–77 (Fed. Cir. 1985).

6. Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990).

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CHAPTER 4

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for the Licensing of Intellectual Property.7 The 1995 Licensing Guidelines

address many of the most common antitrust concerns with licensing as

well as provide an overview of the legal framework agencies will use to

review competition concerns involving intellectual property. In addition,

in 2007, the FTC and DOJ prepared an extensive review of antitrust

concerns arising from intellectual property.8 This publication addresses

topics such as unilateral refusals to license intellectual property, compe-

tition concerns arising from collaborative ventures and standard-setting

organizations, antitrust review of cross-licensing and patent pools, and a

renewed analysis of antitrust violations in the licensing and exploitation

of patents. These agency guidelines provide a logical starting point when a

party is confronted with an antitrust concern involving certain intellectual

property.

The tension between patent and intellectual property law is illustrated

in MiniFrame v. Microsoft.9 Plaintiff MiniFrame brought suit against Mic-

rosoft under section 2 of the Sherman Act, based on a change in Microsoft’s

policy regarding its Windows operating system, wherein licenses for the

system were granted on a per-user rather than a per-computer basis. Min-

iFrame sold software that permitted several users to access Windows from

a single computer, and thus the change in Microsoft’s policy significantly

reduced demand for MiniFrame’s product. The basis for MiniFrame’s anti-

trust complaint was that Microsoft, which allegedly had market power

in the relevant market for computer operating systems, by its behavior

refused to deal with MiniFrame, or its customers, on “commercially rea-

sonable and non-discriminatory terms.”10

The district court granted Microsoft’s motion to dismiss. While the

existence of monopoly power is a necessary component of an antitrust

assessment, it is not by itself enough, according to the court. Rather, there

must be anticompetitive conduct coupled with market power in order for

a plaintiff to make out an antitrust violation.11 Such conduct is defined as

“willful acquisition or maintenance of that power as distinguished from

growth or development as a consequence of a superior product, business

7.

U.S. Dep’t of JUStice & feD. traDe comm’n

,

antitrUSt GUiDelineS for the licenSinG

of intellectUal property

§3.2 (Apr. 6, 1995), available at http://www.justice.gov/atr/public

/guidelines/0558.htm.

8.

U.S. Dep’t of JUStice & feD. traDe comm’n

,

antitrUSt enforcement anD intellectUal

property riGhtS: promotinG innovation anD competition

(Apr. 2007), available at http://www

.justice.gov/atr/public/hearings/ip/222655.htm.

9. MiniFrame Ltd. v. Microsoft Corp., No.11 CIV. 7419 RJS, 2013 WL 1385704 (S.D.N.Y.

Mar. 28, 2013), aff’d, 551 F. App’x 1 (2d Cir.).

10. Id. at *1.

11. Verizon Commc’ns Inc. v. Law Offices of Curtis v. Trinko LLP, 540 U.S. 398, 407

(2004).

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Antitrust Issues in Litigating Intellectual Property 87

acumen, or historic accident.”12 And attempted monopolization under sec-

tion 2 of the Sherman Act requires “(1) that the defendant has engaged in

predatory or anticompetitive conduct with (2) a specific intent to monopo-

lize and (3) a dangerous probability of achieving monopoly power.”13

The district court rejected MiniFrame’s contention that either the

change in licensing scheme (from single computer to single user) or Micro-

soft’s pricing of its own multiuser server software (which directly competed

with MiniFrame’s product) constituted anticompetitive conduct. The basis

for this determination was the existence of Microsoft’s patents: the court

characterized the patent grant as providing “broad authority to enforce

... intellectual property rights without violating the antitrust laws,”14 and

indeed has a statutory exemption from such liability for refusing to license

its patent to others.15 The court characterized Microsoft’s behavior as being

for “a wholly justifiable business purpose,” analogous to circumstances

where other intellectual property rights holders have limited distribution

of their products.16

Even in the absence of IP rights, the court found no affirmative obliga-

tion to deal that could be imposed on Microsoft. Generally, a corporation

has “no duty to aid competitors.”17 And the few exceptions to this general

rule (such as a refusal to deal with rivals after previous cooperation, with

concomitant loss of short-term profits) require a showing of predatory

rather than merely competitive behavior, such as selling a product at a

loss in order to force rivals from the marketplace.18 None of these circum-

stances being adequately pled, the court dismissed MiniFrame’s complaint.

On appeal, the Second Circuit affirmed the trial court’s decision dis-

missing MiniFrame’s suit. However, the Second Circuit rested its decision

only upon MiniFrame’s failure to “allege that Microsoft had any prior deal-

ing” with Microsoft, upon which its refusal to deal or Aspen Skiing claim

could be based.19 The appellate court declined to address the trial court’s

“alternative rationale that Microsoft’s conduct is immune from antitrust

liability based on intellectual property law.”20

12. United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966).

13. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993).

14. MiniFrame Ltd. v. Microsoft Corp., No. 11 CIV. 7419 RJS, 2013 WL 1385704, at *3

(S.D.N.Y. Mar. 28, 2013) aff’d, 551 F. App’x 1 (2d Cir. 2013).

15. 35 U.S.C. §271(d)(4).

16. MiniFrame Ltd., 2013 WL 1385704, at *3 (citing Metro-Goldwyn-Mayer Studios Inc.

v. Grokster, Ltd., 545 U.S. 913, 941 (2005)).

17. Trinko, 540 U.S. at 411.

18. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 600 (1985).

19. MiniFrame Ltd. v. Microsoft Corp., 551 F. App’x 1, 2 (2d Cir. 2013).

20. Id.

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