Territorial Restraints in International Technology Agreements after Topco

Published date01 September 1972
DOI10.1177/0003603X7201700302
Date01 September 1972
Subject MatterArticle
TERRITORIAL
RESTRAINTS
IN
INTERNATIONAL
TECHN'OLOGY
AGREEMENTS
AFTER
TOPCO
by
MARTIN
J.
ADELMAN·
and
ERNIE
L.
BROOKS··
INTRODUCTION
Owners of
proprietary
technology, patented or secret,
are
often unable or unwilling to directly exploit
that
technology
in all countries.
For
example, an American company
may
directly exploit its
proprietary
technology in the United
States, refusing to license others in the United States, but still
seek to
earn
money abroad from its technology by licensing a
foreign company.' In such a license, in order to protect the
home market, the licensor may insist on a restriction restrain-
ing competition from the licensee in the United States, and
occasionally the licensor may even agree not to compete with
the licensee in the prescribed
territory
of the licensee. Re-
cently, limitations in international
proprietary
technology li-
censes have received close scrutiny by the Justice Department
McGlynn, Reising, Milton &Ethington, Troy, Michigan; Adjunct
Professor of Law, Wayne State University.
••
McGlynn, Reising, Milton &Ethington, Troy, Michigan.
1Licensing rather than direct foreign investment for exports is
receiving renewed attention by American companies. See generally the
article in the
Commerce
Department publication Commerce Today
reprinted in 84 P.T.C.J. D-1 (June 29, 1972). The most complete
recent work on the international aspects of American antitrust law ia
COMMON
MARKET
AND
AMERICAN
ANTITRUST
(Rahl, ed. 1970) [herein-
after
RAHL].
See also
BREWSTER,
ANTITRUST
AND
AMERICAN
BUSINESS
ABROAD
(1958);
FUGATE,
FOREIGN
COMMERCE
AND
THE
ANTITRUST
LAWS
(1958).
763
764
THE
ANTITRUST
BULLETIN
in articles.s in speeches," and, most importantly, in the filing
of the Weetimqhouee complaint."
In
addition,
just
this term
the Supreme Court declared in Topco"
that
horizontal terri-
torial restrictions, like price fixing,
are
per
se violations of
the
antitrust
law. Since the
parties
to an international pro-
prietary
technology license
are
in a horizontal relationship,
at
least
after
the license is in effect, these developments make
timely an intensive study of the
antitrust
status
of
territorial
restraints on United
States
imports
and
exports found in
international
proprietary
technology licenses.
In the first
part
of the following discussion the effects of
United
States
antitrust
law on technology licenses will be
put
to one side in favor of hypotheticals designed to crystal.
lize the issues presented by
territorial
restrictions in pro-
prietary
technology licenses. Subsequently, these issues will
be scrutinized in the light of United
States
antitrust
law in-
cluding Topeo and earlier authorities. This analysis demon-
SSee, e.g., Wilson, Patent and Know-How License Agreements:
Field of
Use,
Territorial, Price and Quantity Restrictions, in
ANTI-
TRUST
PRIMER:
PATENTS,
FRANCHISING,
TREBLE
DAMAGE
SUITS,
PROC.
OF
THE
FOURTH
NEW
ENGLAND
ANTITRUST
CONF.
11 (1970) [herein-
after
WILSON]
;Stern, The Antitrust Status of Territorial Limitations
in Territorial Licensing, 14
IDEA
580 (1970) [hereinafter
STEllN].
SAddress by Richard H. Stern, before the New York State
Bar
Association, New York,
Jan.
27, 1971; Address by Richard H. Stern,
before the American
Patent
Law Association, Chicago, May 15, 1970;
Address by Bruce B. Wilson, before the Boston
Bar
Antitrust
Com-
mittee, Boston, Nov. 6,
~970.
.. United States v. Westinghouse Elec. Corp., Civil No.
C-70-852-
SAW (M.D. Cal.
Filed
Apr. 22, 1970). The complaint is based on
technology licensing agreements executed in the mid-1960's between
Westinghouse
and
Mitsubishi. These agreements were preceded by
similar agreements dating from 1923. Under the agreements Westing-
house
and
Mitsubishi exchanged patented
and
unpatented technology.
Territorial restrictions included in the agreements limited Mitsubishi's
sales in Canada
and
the United States
and
Westinghouse's sales in
Japan.
The Justice Department asserted
that
the
territorial
restraints
included in the technology agreements were in violation of Section 1
of the Sherman Act.
SUnited States v. Topco Assoc., Inc.,
--
U.S.
--,
31 L. Ed.2d
515 (1972).

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