Counseling Guidelines for the Licensing of Intellectual Property

The Department of Justice and Federal Trade Commission Antitrust
Guidelines for the Licensing of Intellectual Property (1995 IP
Guidelines)1 continue to be a key resource for advising clients on the
antitrust boundaries of technology licensing, even though they date back
to 1995 and are merely persuasive—not binding—authority in the
courts.2 Other relevant authority includes the 2007 joint report on
Antitrust Enforcement and Intellectual Property Rights: Promoting
Innovation and Competition3 along with analogous reports issued by
competition agencies in other jurisdictions,4 and case law addressing the
1. See U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for
the Licensing of Intellectual Property (1995) [hereinafter 1995 IP
Guidelines], available at http://www. usdoj. gov/atr/public/ guidelines/
2. The 1995 IP Guidelines reflect the enforcement position of the federal
antitrust authorities, but they are not binding on the courts. Nonetheless,
the 1995 IP Guidelines themselves are based primarily on existing case
law and current economic thinking, making them persuasive authority
and an informed source for counselors. See Yee Wah Chin & Kathryn E.
Walsh, Antitrust Counseling in Intellectual Property Licensing, 832
PLI/Pat 267, 275 (2005); Richard J. Hoskins & Zubin P. Khambatta,
Antitrust Law and Intellectual Property Licensing: An Overview, 806
PLI/PAT 449 (2004). Also relevant to understanding the enforcement
position of the agencies are the various mechanisms used to provide
industry guidance, including speeches from the top ranking officials,
studies from agencies’ leading economists, policy statements regarding
the negotiation and settlement of claims that fall short of litigation, and
joint reports generated from investigative hearings into particular
practices and hearings.
3. U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Enforcement and
Intellectual Property Rights: Promoting Innovation and Competition
(2007) [hereinafter 2007 IP Report], available at
public/hearings/ ip/222655.pdf.
4. The European Commission has issued a notice of particular relevance for
intellectual property licensing practitioners. See European Comm’n,
Communication from the Commission—Guidelines on the Application of
Article 101 of the Treaty on the Functioning of the European Union to
Technology Transfer Agreements, 2014 O.J. (C 89) (Mar. 21, 2014)
356 Intellectual Property and Antitrust Handbook
appropriate antitrust principles to be applied in the context of intellectual
property licensing. In addition, the agencies also respond to specific
requests for guidance from the business community—through the
Department of Justice (DOJ)’s business review letter and the Federal
Trade Commission (FTC)’s staff advisory opinion letter processes—
detailing how they would evaluate and react to particular types of
business conduct. Finally, counselors should be aware of case law that
involves the sale of goods (as opposed to the licensing of intellectual
property), which also provides important guidance as to the appropriate
antitrust framework to apply to the licensing of intellectual property. In
fact, the first principle set forth in the 1995 IP Guidelines is that,
generally, intellectual property ought to be treated much like other forms
of property.5 These sources should be considered collectively by the
antitrust counselor. This chapter relies most extensively on the 1995 IP
Guidelines and the 2007 IP Report and notes some differences in the
case law or agency guidance from other jurisdictions. Those looking for
a more comprehensive discussion of these subjects should also consult
the more substantive treatment of many of the subjects in the preceding
chapters, as well as the related ABA treatise, Federal Antitrust
Guidelines for the Licensing of Intellectual Property: Origins and
At the most basic level, the 1995 IP Guidelines instruct that antitrust
counseling is inherently a fact-specific process, requiring attorneys to
comprehend the substance of a licensing transaction.7 To facilitate the
process, the 1995 IP Guidelines outline a multistep approach for
effective counseling.
[hereinafter 2014 EU TECHNOLOGY TRANSFER GUIDELINES]. There are
also two additional notices from the Commission that, although more
general in scope, are also helpful: European Comm’n, Communication
from the Commission—Guidelines on the Application of Article 81(3) of
the Treaty, 2004 O.J. (C 101) (Apr. 27, 2004) [hereinafter 2004 EU
Commission, Communication from the Commission—Guidance on the
Commission’s Enforcement Priorities in Applying Article 82 of the EC
Treaty to Abusive Exclusionary conduct by Dominant Undertakings, 2009
O.J. (C 45) (Feb. 24, 2009).
5. See 1995 IP GUIDELINES, supra note 1, §§ 2.0-2.1.
6. ABA Section Of Anttirust Law, The Federal Antitrust Guidelines For The
Licensing Of Intellectual Property: Origins And Applications (3d ed.
7. 1995 IP GUIDELINES, supra note 1, § 1.0, n.2.
Counseling Guidelines For The Licensing Of Intellectual Property 357
As an initial matter, counselors must identify the nature of the
licensing restrictions associated with the transaction and how such
restrictions affect the parties’ relationship to one another and to other
potential competitors.8 This inquiry requires an examination of what
anticompetitive effects potentially can arise from a particular
arrangement, and in so doing, a determination of the level of antitrust
scrutiny likely to be applied. In the absence of market power, antitrust
liability is unlikely to attach to any but the most suspect of licensing
practices.9 However, counselors should keep in mind that a licensor may
possess market power in a technology market even if the licensor appears
to have an insignificant share of sales in a market for physical products.10
Moreover, some practices rise to the level of per se violations or per se
patent misuse, and thus risk leaving a licensor unable to enforce its
patent rights even if no market power or anticompetitive effects can be
Where market power exists, or where the parties purport to have a
compelling need for engaging in practices traditionally viewed as
problematic, the counselor must evaluate the strength and legitimacy of
the proffered business justifications and whether the procompetitive
goals of the restraints can be accomplished by less restrictive means.12
Finally, where licensing restrictions are reasonably necessary to advance
valid business justifications yet present a risk of restraining competition,
the counselor must evaluate whether the arrangement will produce
sufficient offsetting procompetitive effects to outweigh the potential for
anticompetitive harm.13
8. See id. §§ 3.3-3.4.
9. See id. § 3.4.
10. See id. § 3.2.
11. The distinction between antitrust and patent misuse inquiries, and the
narrow categories of per se patent misuse, are discussed in more detail in
part F.1 of this chapter and in Chapter II. See Virginia Panel Corp. v.
MAC Panel Co., 133 F.3d 860, 869 (Fed. Cir. 1997) (two types of per se
patent misuse are tying arrangements “in which a patentee conditions a
license under the patent on the purchase of a separable, staple good, and
arrangements in which a patentee effectively extends the term of its
patent by requiring post-expiration royalties.”) (citation omitted). See
generally Geoffrey D. Oliver, Princo v. International Trade Commission:
Antitrust Law and the Patent Misuse Doctrine Part Company,
ANTITRUST, Spring 2011, at 62-67.
12. See 1995 IP GUIDELINES, supra note 1, §§ 3.4, 4.1-4.2, 5.1.
13. For a discussion of valid business justifications, see part E of this chapter.

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