Appendix A The 1995 Guidelines

• Pages: 171-208

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APPENDIX A

THE 1995 GUIDELINES

1. Intellectual property protection and the antitrust laws

1.0 These Guidelines

1

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

2

. By stating their general policy, the

Agencies hope to assist those who need to predict whether the Agencies

will c hallenge a practice as anticompetitive. However, these Guidelines

cannot remove judgment and discretion in antitrust law enforcement.

Moreover, the standards set forth in t hese 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.

3

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

making, usi ng, or selling in the United States the invention claimed by

1. These Guidelines supersede section 3.6 in Par t I, "Intellectual Property

Licensing Arrangements," and cases 6, 10, 11 , and 12 in Part II of the

U.S. Department of Justice 1988 Antitrust Enforc ement Guidelines for

International Operations.

2. These Guidelines do not cover the antitrust treatment of trad emarks.

Although the same general antitrust principles that app ly to other forms

of intellectual property apply to trademarks as well, t hese Guidelines deal

with technology transfer and innovation-related issues that typically arise

with respect to patents, copyrights, trade secrets, and kno w-how

agreements, rather than with product-differentiation issues t hat typically

arise with respect to trademarks.

3. As is the case with all guidelines, users should rel y on qualified counsel

to assist them in evaluating the antitrust risk associated with any

contemplated transaction or activity. No set of guideline s can possibly

indicate how the Agencies will assess the particular fact s of every case.

Parties who wish to know the Agencies' specific e nforcement 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 p ursuant to 16 C.F.R.

§§ 1.1-1.4.

172 Intellectual Property Guidelines Origins and Ap plications

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

4

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.

5

A copyright protects only

the expression, not the underlying ideas.

6

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.

7

Trade secret

protection is conditioned upon efforts to maintain secrecy and has no

fixed term. As with cop yright 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.

8

The intellectual property laws provide incentives for innovation

and its dissemination and commercialization by e stablishing 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

4. See 35 U.S.C. § 154 (1988). Section 532(a) of the Uru guay Round

Agreements Act, Pub. L. No. 103-465, 108 Stat. 4 809, 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.

5. See 17 U.S.C. § 102 (1988 & Supp. V 1993). Cop yright protection lasts

for the author's life plus 50 years, or 75 years from first p ublication (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 semico nductor chip product

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

protection for works of authorship.

6. See 17 U.S.C. § 102(b) (1988).

7. Trade secret protection derives from state law. See ge nerally Kewanee

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

8. "[T]he aims and objectives of patent and antitrust laws ma y seem, at first

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

complementary, as both are aimed at encouraging in novation, industry

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

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

Appendix A 173

reduce the commercial value of innovation and erode incentives to invest,

ultimately to the detriment of consumers. The antitrust laws promote

innovation and consumer welf are 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 i nvolving any

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

intellectual property is in all respects the s ame as any ot her form of

property. Intellectual property ha s 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.

9

Although there are clear and important differences in the purpose,

extent, and duration of protection provided under the intellectual

property regimes of patent, copyright, and trade secret, the governing

antitrust principles are the same. Anti trust analysis takes differences

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

of intellectual property may vary substantially, depending o n the nature

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

lesser legal power of an owner to exclude others i s also taken into

account by standard antitrust analysis.