Antitrust Guidelines Overview

Antitrust guidelines for the licensing of intellectual property are regulations related to how intellectual property, or IP, may be commercialized within the United States. The basic purpose driving these laws is to promote innovation and enhance consumer welfare, although some argue that these laws unduly threaten business deals, either in whole or in part, since with any antitrust law violation, one runs the risk of fines. Because of this, it is important to know what the antitrust guidelines for IP licensing are.

1995 Antitrust Guidelines

The current antitrust laws in the United States are based off the 1995 guidelines, which were created around several major themes, those being that:

  • IP would be treated with the same scrutiny as any other form of property.
  • IP would not be presumed to create market power in the context of antitrust cases.
  • IP licensing is recognized as being pro-competitive.
  • IP laws should generally refrain from imposing liability on a company for unilateral refusal to assist competitors.
  • IP licensees or licensors should not have the antitrust “safety zone” altered to provide a degree of certainty to them.
  • IP licensing agreements will not be challenged for restraint by the Federal Trade Commission or Department of Justice if such restraint will not prove to be anti-competitive and the licensee and licensor do no account collectively for more than 20% of the relevant markets that the restraint would significantly effect.

2017 Revised Antitrust Guidelines

In 2017, the Antitrust Division of the US Department of Justice and the Federal Trade Commission updated the intellectual property licensing guidelines in the United States. The most pertinent details relating to these guidelines include the following:

  • The concept of “innovative market” has been replaced by “research and development market.”
  • IP agreements can now have a competitive effect on research and development that should be separately analyzed from markets related to existing technology and underlying products.
  • Partially exclusive licenses, like field-of-use and territorial licenses, are now recognized.
  • Exclusive licenses, including those that are partially exclusive, raise concerns of antitrust violation only if there is a horizontal relationship between the parties involved.
  • For antitrust analysis purposes, conduct involving IP will be analyzed in the same way as conduct involving other kinds of property.
  • Excessive pricing that is not anti-competitive does not carry a liability with it; market power derived from IP is not in violation of antitrust laws.
  • While some activities involving licensing amongst horizontal competitors can be challenged with the per se rule due to their anti-competitive nature, amongst purely vertical IP licensing restraints, the rule of reason holds sway.
  • Resale price maintenance is now addressed in the context of IP.
  • If an IP license constrains rights protection mechanisms (RPMs), this can be judged with rule-of-reason analysis.
  • It is now acknowledged that if there exists in the United States a sufficient nexus of IP, international courtesy considerations and the involvement of foreign governments do not preclude enforcement or investigation, and the antitrust guidelines will apply to all licensing arrangements equally.
  • The discussion of the illegality of a IP licensor to fix the resale price of an IP for the licensee has evolved, so that the rule-of-reason analysis may now be applied to such cases, weighing pro-competitive benefits against anti-competitive effects.
  • A company can be considered to be a potential competitor even if its prospects are uncertain.
  • “Pay-for-delay” schemes carried out between drug manufacturers that hold drugs that are soon to come off patents and drug manufacturers that have a generic version of the drug lined up are now deemed to be possibly harmful to competition.

From the new guidelines, companies should understand three key takeaways, and these are:

  1. That the Federal Trade Commission and Department of Justice recognize that IP agreements can have pro-competitive benefits. So, for companies considering such agreements, the competitive advantages should be documented to strengthen their case, should it be necessary.
  2. That IP licensing can raise concerns of antitrust violation. That said, exclusive licenses involving parties that are only in vertical relationships with one another are not generally deemed problematic.
  3. An “antitrust safety zone” is still provided for IP licenses, as it was in the 1995 guidelines.

So overall, the 2017 revision is not a complete overhaul of the guidelines, but rather a revision meant to modernize the guidelines in the face of a new competitive marketplace, with the underlying principles remaining the same.

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