The United States of America

Pages11-72
11
Chapter II
THE UNITED STATES OF AMERICA
A. Introduction
In the United States, authorities have recognized that both the
antitrust and intellectual property laws seek to foster competition by
providing incentives for innovation, which ultimately provides
consumers with better products over time.1 U.S. courts and agencies
have continually weighed the competing interests of intellectual property
and antitrust laws, particularly in recent decades, thereby creating a well-
developed body of law. Although the present balance between
intellectual property and antitrust laws is likely to continue to evolve, this
chapter will provide a broad overview of how they currently interact in
the context of licensing agreements.2 This chapter will first provide a
broad overview of U.S. competition and intellectual property laws, and
then discuss licensing issues that may arise at the intersection of these
two areas of law.
1. See, e.g., FED.TRADE COMMN,TOPROMOTE INNOVATION:THE PROPER
BALANCE OF COMPETITION AND PATENT LAW AND POLICY 2-3 (2003)
(discussing policy issues regarding the intersection of antitrust and patent
law and proposing recommendations to address perceived problems);
ANTITRUST MODERNIZATION COMMN,REPORT AND RECOMMENDATIONS
34 (2007) [hereinafter AMC REPORT] (stating that “antitrust enforcers
have recognized the importance of intellectual property as a spur to
innovation and have adopted policies that reflect a greater sensitivity to
the need to protect incentives to innovate”).
2. For more comprehensive coverage of the issues discussed herein, see
ABA SECTION OF ANTITRUST LAW,INTELLECTUAL PROPERTY AND
ANTITRUST HANDBOOK (2007) [hereinafter ABA IP and Antitrust
Handbook] and HERBERT HOVENKAMP ET AL., IP AND ANTITRUST:AN
ANALYSIS OF ANTITRUST PRINCIPLES APPLIED TO INTELLECTUAL
PROPERTY LAW (Supp. 2007).
12 Antitrust Issues in International IP Licensing Transactions
B. The Sources and Basics of United States Competition Law
The Sherman Act, Clayton Act, and Federal Trade Commission Act
are the principal antitrust laws in the United States. Section 1 of the
Sherman Act3 addresses conduct involving an agreement between two or
more independent parties, including parties in both vertical and
horizontal relationships. 4 Section 2 of the Sherman Act 5 focuses
predominantly on unilateral conduct of a single firm, such as claims of
monopolization or attempted monopolization.6 Section 7 of the Clayton
Act7 addresses whether mergers may lead to a substantial lessening of
competition and allows mergers be evaluated either pre- or post-
consummation.8 Federal and state agencies, as well as private parties
(provided certain requirements are met), are empowered to enforce the
Sherman and Clayton Acts.9 Section 5 of the FTC Act10 focuses on
unfair methods of competition and can only be enforced by the FTC.11
1. Section 1 of the Sherman Act
Section 1 of the Sherman Act provides that “[e]very contract,
combination in the form of trust or otherwise, or conspiracy in restraint
of trade or commerce . . . is declared to be illegal.”12 The Supreme Court
has interpreted the statute to prohibit only those restraints that restrict
competition unreasonably.13 The extent of analysis under Section 1
varies according to the nature of the conduct at issue and the surrounding
circumstances. Certain conduct is per se unlawful; a violation can be
3. 15 U.S.C. § 1.
4. See, e.g., Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 730 &
n.4 (1988).
5. 15 U.S.C. § 2.
6. See, e.g., Verizon Commc’ns. v. Law Offices of Curtis V. Trinko, 540
U.S. 398, 407 (2004); Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447,
456 (1993).
7. 15 U.S.C. § 18.
8. See, e.g., United States v. Long Island Jewish Med. Ctr., 983 F. Supp.
121, 135-37 (E.D.N.Y. 1997).
9. See 15 U.S.C. §§ 15a, 26; Standard Oil Co. v. Arizona, 738 F.2d 1021,
1023 (9th Cir. 1984).
10. 15 U.S.C. § 45.
11. See, e.g., FTC v. Motion Picture Adver. Serv., 344 U.S. 392, 394-95
(1953).
12. 15 U.S.C. § 1.
13. See Standard Oil Co. v. United States, 221 U.S. 1, 52 (1911).
The United States of America 13
established without proof of market power or evaluation of
justifications. 14 The most common examples of per se Section 1
violations are naked price-fixing and market allocation among horizontal
competitors, i.e., activities that are likely to cause anticompetitive harm
and never or almost never have an efficiency justification. In contrast,
most conduct is analyzed under the rule of reason, pursuant to which
courts will engage in a more comprehensive analysis that weighs the
conduct’s procompetitive effects against its anticompetitive effects.15
The rule of reason is often used to analyze horizontal and vertical
agreements that accompany economic integration or have the potential to
result in procompetitive benefits.16 For example, licensing agreements
between a licensor and licensee are typically analyzed under the rule of
reason.17
2. Section 2 of the Sherman Act
Section 2 of the Sherman Act provides that “[e]very person who
shall monopolize, or attempt to monopolize, or combine or conspire with
any other person or persons, to monopolize any part of the trade or
commerce . . . shall be deemed guilty of a felony.”18 In United States v.
Grinnell Corp.,19 the Supreme Court held that “[t]he offense of
monopoly under section 2 of the Sherman Act has two elements: (1) the
possession of monopoly power in the relevant market and (2) the willful
acquisition or maintenance of that power.”20 To establish a claim of
attempted monopolization under Section 2, one must prove “(1) that the
defendant has engaged in predatory or anticompetitive conduct with (2) a
specific intent to monopolize and (3) a dangerous probability of
achieving monopoly power.”21 Of particular importance, Section 2 only
prohibits acquisition or attempted acquisition of monopoly power, and
14. See, e.g., United States v. Trenton Potteries, 273 U.S. 392, 396-98 (1927);
N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958).
15. See, e.g., State Oil v. Khan, 552 U.S. 3, 10 (1997).
16. See, e.g., Rothery Storage & Van Co. v. Atlas Van Lines, 792 F.2d 210,
214 (D.C. Cir. 1986).
17. See, e.g., Broad. Music Inc. v. Columbia Broad. Sys., 441 U.S. 1, 23
(1979).
18. 15 U.S.C. § 2.
19. 384 U.S. 563 (1966).
20. Id. at 570-71.
21. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993) (internal
citations omitted).

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