57
I. Introduction
Intellectual property holders typically exploit their intellectual property
by forming licensing agreements with third parties. If performed appro-
priately, licensing intellectual property can foster pro-competitive behavior
between parties. However, if not performed appropriately, licensing intel-
lectual property may be perceived as anticompetitive, which may result in
increased exposure to antitrust liability. This chapter focuses on antitrust
issues associated with the licensing of intellectual property and explores
the boundary between forming pro-competitive and anticompetitive licens-
ing agreements.
II. Analyzing Antitrust Issues in Licensing Agreements
There are generally two types of conduct by an intellectual property holder
that give rise to antitrust liability in intellectual property licensing. First,
there are multilateral actions between an intellectual property holder and
a third party such as a licensee that result in a restraint of trade. Multi-
lateral action cases are generally analyzed under section 1 of the Sher-
man Act,1 which states that “[e]very contract, combination in the form of
trust or otherwise, or conspiracy, in restraint of trade or commerce among
the several States, or with foreign nations, is declared to be illegal.”2 A
1. 15 U.S.C. § 1.
2. Id.
chapter 3
Antitrust Issues in Licensing
Intellectual Property
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CHAPTER 3
58
violation of section 1 of the Sherman Act has three elements: (1) an agree-
ment, (2)which unreasonably restrains competition, and (3) which affects
interstate commerce.3 The overwhelming majority of antitrust issues in
intellectual property licensing are associated with multilateral action
cases such as an intellectual property holder imposing a restraint on the
licensee’s use of intellectual property in a licensing agreement.
Second, there are unilateral actions by the intellectual property holder
resulting in or expanding monopoly power. Unilateral action cases are ana-
lyzed under section 2 of the Sherman Act.4 This chapter primarily focuses
on the multilateral actions of intellectual property holders and provides
an analytical framework for determining whether an intellectual property
licensing agreement may create antitrust liability under section 1 of the
Sherman Act.
3.1 The DOJ and FTC Licensing Guidelines
The U.S. Department of Justice and the U.S. Federal Trade Commission
jointly released in 1995 antitrust guidelines for the licensing of intellectual
property,5 hereinafter the 1995 Licensing Guidelines. The 1995 Licensing
Guidelines provide the antitrust enforcement policy of the Department of
Justice (DOJ) and the Federal Trade Commission (FTC), hereinafter in
this chapter collectively referred to as the agencies. The 1995 Licensing
Guidelines describe the analytical framework used by the agencies in
examining potential anticompetitive practices associated with the licens-
ing of patents, copyrights, trade secrets, and know-how. In contrast to pre-
vious position statements by the agencies, it is important to recognize that
the agencies state in the introduction of the 1995 Licensing Guidelines that
“[t]he intellectual property laws and the antitrust laws share the common
purpose of promoting innovation and enhancing consumer welfare.”6
In January 2017, the agencies replaced the 1995 Licensing Guide-
lines with Antitrust Guidelines for the Licensing of Intellectual Property,7
hereinafter the 2017 Licensing Guidelines. The 2017 Licensing Guidelines
provide the updated antitrust enforcement policy of the agencies with
3. See Richter Concrete Corp. v. Hilltop Basic Res., Inc., 547 F. Supp. 893, 917 (S.D. Ohio
1981), aff’d, 691 F.2d 818 (6th Cir. 1982); Consol. Farmers Mut. Ins. Co. v. Anchor Sav. Ass’n,
480 F.Supp. 640, 648 (D. Kan. 1979); Mardirosian v. Am. Inst. of Architects, 474 F.Supp.
628, 636 (D.D.C. 1979).
4. 15 U.S.C. § 2.
5.
U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N
,
ANTITRUST GUIDELI NES FOR THE LICENSIN G OF
INTELLECTUAL PROPERTY
(Apr. 6, 1995) [hereinafter 1995
LICENSING GUIDELINES
], http://www
.justice.gov/atr/public/guidelines/0558.htm.
6. Id. § 1.
7.
U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N
,
ANTITRUST GUIDELINES FOR THE LICENSING
OF INTELLECTUAL PROPERTY
(Jan. 12, 2017) [hereinafter
2017 LICENSIN G GUIDELIN ES
], https://
www.ftc.gov/system/files/documents/public_statements/1049793/ip_guidelines_2017.pdf.
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Antitrust Issues in Licensing Intellectual Property 59
respect to the licensing of intellectual property protected under patent,
copyright, and of know-how.8 Therefore, the 2017 Licensing Guidelines
provide an excellent starting point for analyzing and evaluating the anti-
trust implications of intellectual property licensing agreements. Because
of their continuing influence and the likelihood that IP practitioners have
limited experience with the 1995 Licensing Guidelines or the 2017 Licens-
ing Guidelines, this chapter will discuss the 2017 Licensing Guidelines
in detail. It should be noted that the agencies did not address antitrust
enforcement policy for trademarks in the 1995 Licensing Guidelines or the
2017 Licensing Guidelines; however, the agencies mention that the same
general principles may also be applied to trademarks.9
3.1.1 General Principles
The 2017 Licensing Guidelines provide three guiding principles used by
the agencies in shaping their antitrust enforcement policy. First, the agen-
cies apply the same general antitrust principles to the use of intellectual
property as to the use of any other form of property. The agencies describe
that “[i]ntellectual property has important characteristics, such as ease of
misappropriation, that distinguishes it from many other forms of property
. . . and [does] not require the application of fundamentally different prin-
ciples.”10 The agencies further comment that “the exercise of intellectual
property rights is thus neither particularly free from scrutiny under the
antitrust laws, nor particularly suspect under them.”11 In addition, the
agencies recognize that the 2017 Licensing Guidelines “apply equally to
domestic and international licensing arrangements.”12
Second, the agencies do not presume that intellectual property creates
market power. The agencies define market power as “the ability profitably
to maintain prices above, or output below, competitive levels for a signifi-
cant period of time.”13 The agencies comment that “market power (or even
a monopoly) that is solely ‘a consequence of a superior product, business
acumen, or historic accident’ does not violate the antitrust laws.”14 The
agencies further note that market power does not “impose on the intel-
lectual property owner an obligation to license the use of that property
toothers.”15
8. Id. § 1.0.
9. Id. § 1.0 n.1.
10. Id. § 2.1 (emphasis added).
11. Id.
12. Id.
13. Id. § 2.2.
14. Id.; see also United States v. Grinnell Corp., 384 U.S. 563, 571 (1966).
15. Id., see also
2017 LICENSING GUIDELINES,
supra note 7.
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