Antitrust Issues in Transactions Involving Intellectual Property

A. Antitrust Statutes and Acquisitions of Intellectual Property
1. Overview of Section 7 of the Clayton Act
Acquisitions of intellectual property are subject to the Clayton Act,1
the Sherman Act,2 and the Federal Trade Commission Act.3 The most
frequently applied of these is Section 7 of the Clayton Act, which
prohibits mergers and acquisitions if, “in any line of commerce or in any
activity affecting commerce in any section of the country, the effect of
such acquisition may be substantially to lessen competition, or tend to
create a monopoly.”4 The Antitrust Division of the Department of Justice
(DOJ) and the Federal Trade Commission (FTC) exercise concurrent
jurisdiction to enforce Section 7 and to challenge mergers, acquisitions,
joint ventures, and other transactions as necessary. States and private
parties also may sue to enforce Section 7 pursuant to Section 4 or 16 of
the Clayton Act.5
1. 15 U.S.C. §§ 12-27.
2. 15 U.S.C. §§ 1-7. Mergers and acquisitions can constitute unreasonable
restraints of trade under § 1 of the Sherman Act, which prohibits “[e]very
contract, combination . . . or conspiracy, in restraint of trade.” 15 U.S.C.
§ 1; see, e.g., United States v. First Nat’l Bank & Trust Co., 376 U.S. 665
(1964); United States v. Columbia Steel, 334 U.S. 495 (1948). They also
can be a form of monopolization or attempted monopolization in
violation of § 2 of the Sherman Act. 15 U.S.C. § 2; see, e.g., Columbia
Steel, 334 U.S. at 531-34.
3. The FTC can challenge transactions under § 5 of the FTC Act, which
prohibits “unfair methods of competition.” 15 U.S.C. § 45 (“Unfair
methods of competition . . . are hereby declared unlawful.”).
4. 15 U.S.C. § 18.
5. Section 4 of the Clayton Act allows any “person . . . injured in his
business or property by reason of anything forbidden in the antitrust
laws” to recover treble damages. 15 U.S.C. § 15(a); see, e.g., Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) (acknowledging
private right of relief under § 7 but denying competitors’ claims because
270 Intellectual Property and Antitrust Handbook
Section 7 encompasses a broad range of acquisitions, including
stocks, assets, and partnership interests. As originally enacted in 1914,
Section 7 prohibited only acquisitions of stock. In 1950, Congress
amended Section 7 with the passage of the Celler-Kefauver Antimerger
Act to include asset acquisitions. Patents,6 copyrights,7 and trademarks8
are considered assets for purposes of Section 7. An acquisition of an
exclusive license to intellectual property is also considered an asset for
the purpose of Section 7 analysis.9
Standard merger analysis typically applies to acquisitions of
intellectual property. Federal (and many state) enforcers assess the
potential competitive effects of transactions under the DOJ/FTC 2010
Horizontal Merger Guidelines (2010 Merger Guidelines)10 and the 1995
Antitrust Guidelines for the Licensing of Intellectual Property (1995 IP
The 2010 Merger Guidelines set forth the analysis used to determine
if a merger or acquisition may substantially lessen competition and result
in increased prices, reduced output, or reduced innovation. This analysis
“while [their] loss occurred ‘by reason of’ the unlawful acquisitions, it
did not occur ‘by reason of’ that which made the acquisitions unlawful.”).
States also are considered “persons” under the Act. Hawaii v. Standard
Oil Co., 405 U.S. 251 (1972). Additionally, any person “threatened [with]
loss or damage by a violation of the antitrust laws” may sue for injunctive
relief. 15 U.S.C. § 26; see, e.g., California v. American Stores Co., 495
U.S. 271 (1990) (upholding divestiture as potential remedy in private
merger challenge).
6. See, e.g., SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1205 (2d. Cir.
1981); Telectronics Proprietary, Ltd. v. Detronic, Inc., 687 F. Supp. 832,
844 (S.D.N.Y. 1988); United States v. Lever Bros., 216 F. Supp. 887, 889
(S.D.N.Y. 1963).
7. See, e.g., United States v. Columbia Pictures, 189 F. Supp. 153, 181-82
(S.D.N.Y. 1960).
8. See, e.g., Lever Bros. 216 F. Supp. at 889.
9. See, e.g., Record Club of Am. v. Capitol Records, 1971 U.S. Dist. LEXIS
11738, at *6-7 (S.D.N.Y. 1971); Western Geophysical Co. v. Bolt
Assocs., 305 F. Supp. 1248, 1251 (D. Conn. 1969); United States v.
Columbia Pictures, 189 F. Supp. 153, 181-82 (S.D.N.Y. 1960).
GUIDELINES (2010) [hereinafter 2010 MERGER GUIDELINES], available at os/2010/08/100819hmg. pdf.
1995 IP GUIDELINES], available at http://www.
Issues in Transactions Involving Intellectual Property 271
involves the consideration of reasonably available evidence, including
market shares, the level of market concentration, changes in market
concentration, the likelihood of unilateral anticompetitive effects or
coordinated interaction, entry conditions, and efficiencies.
The 1995 IP Guidelines provide that certain intellectual property
transfers are to be analyzed with reference to the 1992 Horizontal
Merger Guidelines,12 now replaced with the 2010 Merger Guidelines.
According to the 1995 IP Guidelines, certain transfers of intellectual
property rights are most appropriately analyzed by applying the
principles and standards used to analyze mergers, particularly those in
the 1992 Horizontal Merger Guidelines.13 The 1995 IP Guidelines
explain that the DOJ and FTC will apply a merger analysis to 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).14 Such
transactions may be assessed under Section 7 of the Clayton Act,
Sections 1 and 2 of the Sherman Act, and Section 5 of the Federal Trade
Commission Act.15
2. Acquisition of Patents
Patent acquisitions that may draw antitrust scrutiny fall into three
principal categories: (1) a company transfers the ownership or control of
a patent as part of the purchase of, or merger with, another company;
(2) a company internally develops technology and builds a patent
portolio in a particular field; or (3) a company acquires patent rights
through grantbacks, as discussed earlier in Chapter II.B.10.
A licensing arrangement involving exclusivity may raise
anticompetitive concerns if the licensees themselves, or the licensor and
its licensees, are in a horizontal relationship.16 In that setting, exclusive
licensing may anticompetitively foreclose (or increase the cost of)
competitors’ access to important inputs, or may facilitate coordination to
13. 1995 IP GUIDELINES, supra note 11, § 5.7.
14. Id.
15. Id.
16. Id. § 4.1.2.

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