7
I. Introduction
Parties considering mergers, acquisitions, joint ventures, or joint develop-
ment agreements should consider whether these collaborations will limit
or appear to limit competition. They must be careful to properly procure
their intellectual property to avoid later antitrust disputes. In managing
their intellectual property portfolios, intellectual property holders also
should be aware of potential antitrust issues associated with their refusal
to sell or license their property, especially if such refusal is done in concert
with others. Federal Trade Commission (FTC) and Department of Justice
(DOJ) officials recently reaffirmed that they will continue to focus on com-
petition concerns in the patent area, including portfolio acquisitions.1 This
chapter will address antitrust issues associated with acquiring, procuring,
and owning intellectual property.
II. Acquisition
The acquisition of intellectual property presents three antitrust ques-
tions: (1) what markets may be affected, (2) how will the acquisition affect
market power in those markets, and (3) what are permissible methods of
intellectual property acquisition?
1. ABA, Intellectual Property Comm., DOJ and FTC Will Continue to Focus on Competi-
tion Concerns in the Patent Area,
TIDBITS,
Mar. 15, 2013.
chapter 2
Antitrust Issues
in theAcquisition,
Procurement, andOwnership
ofIntellectual Property
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CHAPTER 2
8
Sections 2.1, 2.2, and 2.3 discuss three kinds of relevant markets that
may be implicated: goods, technology, and innovation markets. Sections 2.4
and 2.5 discuss important principles for assessing whether market power
may exist: monopolization and barriers to entry. Sections 2.6, 2.7, 2.8, and
2.9 discuss antitrust issues that arise when acquiring intellectual property
in various ways: exclusive versus nonexclusive licenses, joint ventures,
cross-licensing and pooling arrangements, and grantbacks.
2.1 Goods Markets
Related markets of goods can be relevant to evaluating the competitive
effects of an acquisition or licensing arrangement. For example, “[a]
restraint in a licensing arrangement may have competitive effects in mar-
kets for final or intermediate goods made using the intellectual property, or
it may have effects upstream, in markets for goods that are used as inputs,
along with the intellectual property, to the production of other goods.”2
When reviewing a transfer of intellectual property through an acquisition
or license, federal agencies evaluate the delineation of the goods market as
detailed in section 1 of the U.S. Department of Justice and Federal Trade
Commission’s Horizontal Merger Guidelines.3
In the context of a proposed acquisition of intellectual property,
antitrust authorities analyze the relevant product market to determine
whether the acquisition will have anticompetitive effects in that market.
For example, the DOJ closely examined the product market for wireless
device operating systems in connection with three separate proposed
acquisitions.4 At the end of 2011, Google’s Android accounted for approxi-
mately 46 percent of the U.S. smartphone operating system platform sub-
scribers, while Apple, Research In Motion, and Microsoft held 30, 15, and
6 percent of subscribers, respectively.5 The DOJ scrutinized three patent
portfolio acquisitions: (1) Google’s acquisition of 17,000 issued patents and
6,800 applications from Motorola Mobility, including hundreds of standard
essential patents (SEPs) relevant to wireless devices; (2) the acquisition
2.
U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N
,
ANTITRUST GUIDELINES FOR THE LICENSING OF
INTELLECTUAL PROPERTY
§ 3.2 (Apr. 6, 1995) [hereinafter
ANTITRUST-IP LICENSING GUIDELINES]
,
http://www.justice.gov/atr/public/guidelines/0558.htm.
3.
U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, HORIZONTAL MERGER GUIDELINES
§ 5.2 (Aug.
19, 2010) [hereinafter
HORIZONTAL MERGER GUIDELINES
] (“The Agencies normally calculate
market shares for all firms that currently produce products in the relevant market, subject
to the availability of data.”).
4. Press Release, U.S. Dep’t of Justice, Statement of the Department of Justice’s Antitrust
Division on Its Decision to Close Its Investigations of Google Inc.’s Acquisition of Motorola
Mobility Holdings Inc. and the Acquisitions of Certain Patents by Apple Inc., Microsoft Corp.
and Research In Motion Ltd. (Feb. 13, 2012).
5. Id.
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Antitrust Issues in theAcquisition, Procurement, andOwnership ofIntellectual Property 9
by Rockstar Bidco, a partnership including RIM, Microsoft, and Apple, of
6,000 patents and patent applications, including many SEPs relevant to
wireless devices, from Nortel; and (3) Apple’s acquisition of patents held by
CPTN Holdings LLC, formerly owned by Novell.6 After carefully analyzing
the product market and relying on assurances from the acquiring com-
panies about their intended licensing practices with respect to the newly
acquired patents, the DOJ determined that the acquisitions were unlikely
to substantially lessen competition.7
The FTC and the lawyers for Integrated Device Technologies, Inc.
and PLX Technology, Inc. disputed the relevant market to consider when
analyzing the proposed purchase of PLX.8 The FTC contended that the rel-
evant market was PCIe switches.9 In contrast, PLX contended that PCIe
switches were not a relevant market because PCIe switches were part of
a wider “systems interconnect solutions” market, in which PCIe competes
with various data transfer protocols including Ethernet and InfiniBand.10
FTC Commissioner Julie Brill’s public comments about the case suggest
that the FTC believed, after interviews with IDT and PLX customers, that
customers would most likely pay the increased price and not switch to the
alleged substitutes for PCIe switches if faced with a price increase follow-
ing the merger.11
Other product markets involving patents that have been the subject
of recent antitrust inquiry include over-the-counter motion sickness medi-
cation;12 generic pharmaceuticals to supplement fluoride;13 the market for
air-conditioning recycling, recovery, and recharge services;14 and magne-
sium plates for photoengraving applications.15
2.2 Technology Markets
Technology markets “consist of the intellectual property that is licensed
.. . and its close substitutes—that is, the technologies or goods that are
close enough substitutes significantly to constrain the exercise of market
6. Id.
7. Id.
8. Julie Brill, Comm’r, Speech on Merger Enforcement in High-Tech Markets (Jan. 28,
2013).
9. Id.
10. Id.
11. Id.
12. Complaint, In re Prestige Brands Holdings, Inc. & Insight Pharm. Corp., No. C-4487
(F.T.C. Aug. 27, 2014).
13. Complaint, In re Endo Health Solutions, Inc. et al., No. C-4430 (F.T.C. Jan. 29, 2014).
14. Press Release, FTC, FTC Order Restores Competition in U.S. Market for Equipment
Used to Recharge Vehicle Air Conditioning Systems (Nov. 26, 2012).
15. Press Release, FTC, FTC Order Restores Competition in Market for Magnesium
Plates for Photoengraving (Oct. 12, 2012).
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