Appendix 1. 1995 Department of Justice and Federal Trade Commission Antitrust Guidelines for the Licensing of Intellectual Property

• Pages: 421-459

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APPENDIX 1

1995 DEPARTMENT OF JUSTICE AND FEDERAL

TRADE COMMISSION ANTITRUST GUIDELINES

FOR THE LICENSING OF INTELLECTUAL

PROPERTY

1. Intellectual Property Protection and the Antitrust Laws

1.0 These Guidelines state the antitrust enforcement policy of the

U.S. Department of Justice and the Federal Trade Commission

(individually, “the Agency,” and collectively, “the Agencies”) with

respect to the licensing of intellectual property protected by patent,

copyright, and trade secret law, and of know-how.1 By stating their

general policy, the Agencies hope to assist those who need to predict

whether the Agencies will challenge a practice as anticompetitive.

However, these Guidelines cannot remove judgment and discretion in

antitrust law enforcement. Moreover, the standards set forth in these

Guidelines must be applied in unforeseeable circumstances. Each case

will be evaluated in light of its own facts, and these Guidelines will be

applied reasonably and flexibly.2

1. These Guidelines do not cover the antitrust treatment of trademarks.

Although the same general antitrust principles that apply to other forms

of intellectual property apply to trademarks as well, these Guidelines deal

with technology transfer and innovation-related issues that typically arise

with respect to patents, copyrights, trade secrets, and know-how

agreements, rather than with product-differentiation issues that typically

arise with respect to trademarks.

2. As is the case with all guidelines, users should rely on qualified counsel

to assist them in evaluating the antitrust risk associated with any

contemplated transaction or activity. No set of guidelines can possibly

indicate how the Agencies will assess the particular facts of every case.

Parties who wish to know the Agencies’ specific enforcement intentions

with respect to any particular transaction should consider seeking a

Department of Justice business review letter pursuant to 28 C.F.R. § 50.6

or a Federal Trade Commission Advisory Opinion pursuant to 16 C.F.R.

§§ 1.1-1.4.

422 Intellectual Property and Antitrust Handbook

In the United States, patents confer rights to exclude others from

making, using, or selling in the United States the invention claimed by

the patent for a period of seventeen years from the date of issue.3 To

gain patent protection, an invention (which may be a product, process,

machine, or composition of matter) must be novel, nonobvious, and

useful. Copyright protection applies to original works of authorship

embodied in a tangible medium of expression.4 A copyright protects

only the expression, not the underlying ideas.5 Unlike a patent, which

protects an invention not only from copying but also from independent

creation, a copyright does not preclude others from independently

creating similar expression. Trade secret protection applies to

information whose economic value depends on its not being generally

known.6 Trade secret protection is conditioned upon efforts to maintain

secrecy and has no fixed term. As with copyright protection, trade secret

protection does not preclude independent creation by others.

The intellectual property laws and the antitrust laws share the

common purpose of promoting innovation and enhancing consumer

welfare.7 The intellectual property laws provide incentives for

3. See 35 U.S.C. § 154 (1988). Section 532(a) of the Uruguay Round

Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809, 4983 (1994)

would change the length of patent protection to a term beginning on the

date at which the patent issues and ending twenty years from the date on

which the application for the patent was filed.

4. See 17 U.S.C. § 102 (1988 & Supp. V 1993). Copyright protection lasts

for the author’s life plus 50 years, or 75 years from first publication (or

100 years from creation, whichever expires first) for works made for hire.

See 17 U.S.C. § 302 (1988). The principles stated in these Guidelines also

apply to protection of mask works fixed in a semiconductor chip product

(see 17 U.S.C. § 901 et seq. (1988)), which is analogous to copyright

protection for works of authorship.

5. See 17 U.S.C. § 102(b) (1988).

6. Trade secret protection derives from state law. See generally Kewanee

Oil Co. v. Bicron Corp., 416 U.S. 470 (1974).

7. “[T]he aims and objectives of patent and antitrust laws may seem, at first

glance, wholly at odds. However, the two bodies of law are actually

complementary, as both are aimed at encouraging innovation, industry

1995 IP Guidelines 423

innovation and its dissemination and commercialization by establishing

enforceable property rights for the creators of new and useful products,

more efficient processes, and original works of expression. In the

absence of intellectual property rights, imitators could more rapidly

exploit the efforts of innovators and investors without compensation.

Rapid imitation would reduce the commercial value of innovation and

erode incentives to invest, ultimately to the detriment of consumers. The

antitrust laws promote innovation and consumer welfare by prohibiting

certain actions that may harm competition with respect to either existing

or new ways of serving consumers.

2. General Principles

2.0 These Guidelines embody three general principles: (a) for the

purpose of antitrust analysis, the Agencies regard intellectual property as

being essentially comparable to any other form of property; (b) the

Agencies do not presume that intellectual property creates market power

in the antitrust context; and (c) the Agencies recognize that intellectual

property licensing allows firms to combine complementary factors of

production and is generally procompetitive.

2.1 Standard Antitrust Analysis Applies to Intellectual Property

The Agencies apply the same general antitrust principles to conduct

involving intellectual property that they apply to conduct involving any

other form of tangible or intangible property. That is not to say that

intellectual property is in all respects the same as any other form of

property. Intellectual property has important characteristics, such as ease

of misappropriation, that distinguish it from many other forms of

property. These characteristics can be taken into account by standard

antitrust analysis, however, and do not require the application of

fundamentally different principles.8

and competition.” Atari Games Corp. v. Nintendo of America, Inc., 897

F.2d 1572, 1576 (Fed. Cir. 1990).

8. As with other forms of property, the power to exclude others from the use

of intellectual property may vary substantially, depending on the nature

of the property and its status under federal or state law. The greater or