DOJ and FTC Update Antitrust-Intellectual Property Licensing Guidelines

09 September 2016 Legal News: Antitrust Publication
Author(s): James T. McKeown Elizabeth A. N. Haas Kate E. Gehl

Legal News: Antitrust

On August 12, 2016, the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) announced they are seeking public comments on the first update to the Antitrust Guidelines for the Licensing of Intellectual Property issued in 1995. The majority of the Proposed Guidelines update relevant authorities to reflect developments in court decisions, statutory law, the agencies’ practice, and the agencies’ guidance over the past 20 years, while leaving intact the main principles and substantive guidance of the 1995 Guidelines.

The agencies re-affirmed their commitment to three broad principles, namely that the agencies:

  • Apply the same antitrust analysis to conduct involving intellectual property as they apply to conduct involving other forms of property 
  • Do not presume that intellectual property creates market power 
  • Recognize that licensing intellectual property allows firms to combine complementary factors of production and is generally procompetitive

Proposed Guidelines § 2.0.1 The Proposed Guidelines confirm and clarify the agencies’ analytical framework for (1) horizontal and vertical transactions involving intellectual property licensing, and (2) “research and development markets,” a newly coined term in the Proposed Guidelines. What the Proposed Guidelines do not address include the agencies’ enforcement positions with respect to patent assertion entities, royalties for standard-essential patents and pay-for-delay patent settlements – significant topics on which FTC and DOJ guidance would be welcome and that may draw public comment.

Resale Price Maintenance

Perhaps the most significant proposed change concerns the Guideline’s discussion of minimum price restraints imposed by licensors on licensees’ downstream sales or resales of products that incorporate licensed technology. Proposed Guidelines § 5.2. Consistent with the Supreme Court’s decision in Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877 (2007), the agencies propose to modify the 1995 Guidelines from the position of presuming that such vertical price restraints are per se anticompetitive to analyzing the restrictions under the rule of reason. Although licensors imposing minimum downstream prices would not draw per se challenges under federal law, the agencies note that some states continue to treat such restraints as illegal per se under their state antitrust laws. Proposed Guidelines § 5.2 & n. 69.

Refusal to License

The revisions also make explicit that the antitrust laws generally do not impose liability for a unilateral refusal to license intellectual property. In this respect, the Proposed Guidelines highlight the Supreme Court’s decision in Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) and advise that “the antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors, in part because doing so may undermine incentives for investment and innovation.” Proposed Guidelines § 2.1. The agencies nonetheless temper this statement in other areas of the Proposed Guidelines, for example, by stating that while market power does not impose on the intellectual property owner an obligation to license the use of that property to others, the agencies may impose licensing requirements to remedy anticompetitive harm or to prevent the substantial lessening of competition as the result of a merger. Proposed Guidelines § 3.1.

Research and Development Markets

The agencies plan to replace the concept of an “innovation market” with a “research and development” market. The agencies report that the proposed change is largely semantic and meant to reflect the agencies’ actual experience with this mode of analysis. The agencies distinguish technology markets from research and development markets, with the technology market focused on existing technologies. By contrast, a research and development market focuses on the “assets comprising research and development” that are related to innovation to identify a “commercializable product” or “directed to particular new or improved goods or processes.” The Proposed Guidelines provide that the agencies would only delineate a research and development market when the capabilities to engage in the relevant research and development can be associated with specialized assets or characteristics of specific firms. Proposed Guidelines § 3.2.3.

In assessing whether a restriction or arrangement has anticompetitive effects, the agencies will consider whether the restriction or arrangement is likely to lessen competition and/or reduce the pace of the development of new products. Consistent with the 1995 Guidelines, a joint venture or merger that combines competing research and development operations is unlikely to draw a challenge by the agencies if there are at least four other independently controlled entities that possess comparable capabilities and incentives to undertake such research and development. In evaluating whether research and development by one entity is a close substitute for efforts by another entity, the agencies will consider a number of factors, including the nature, scope and magnitude of the research and development efforts, their access to financial support and skilled personnel or specialized assets and their ability to commercialize innovations successfully. Proposed Guidelines § 4.3. The agencies also will consider whether restrictions or agreements among competitors as to research and development efforts will affect competition in markets for existing products.

Other Updates

There are several other significant updates as well. For example, in the 1995 Guidelines, the agencies stated they “will not presume that a patent, copyright, or trade secret necessarily confers market power upon its owner”; however, they cautioned that “the law is unclear on this issue.” The proposed update removes that qualification in light of the Supreme Court’s decision in Illinois Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006), which definitively held that a patent cannot be presumed to confer market power.

Consistent with this revision are other updates highlighting the pro-competitive benefits of intellectual property cross-licensing and reflecting a greater permissiveness regarding common kinds of restraints and restrictions within intellectual property. For example, the proposed update seeks to recognize the legality of innovative licensing practices previously reviewed by the agencies, explaining that “DOJ has reviewed favorably several patent pools with safeguards in place to mitigate potential anticompetitive harms” and that “[a] number of the pooling arrangements that the Department of Justice reviewed contained mechanisms to narrow the scope of grantbacks, making them more likely to be procompetitive.” Nevertheless, these safeguards are not required by the Proposed Guidelines, and the agencies continue to make clear that they “will assess the particular facts of every case.” Proposed Guidelines §§ 5.5 & n. 84 and 5.6 & n. 85.

The Proposed Guidelines also recognize the use of partially exclusive licenses (such as field of use licenses); contain a more detailed explanation of the “sham litigation” exception to Noerr-Pennington immunity; and provide notice that the agencies may apply a merger analysis to “a transaction involving a license that does not fall within the traditional definition of an exclusive license but in substance transfers intellectual property rights and raises the same potential antitrust concern.” Proposed Guidelines §§ 4.1, 5.7 and 6.

Additionally, the Proposed Guidelines incorporate new case law from the Federal Circuit, Transweb, LLC v. 3M Innovative Properties Co.,812 F.3d 1295, 1307 (Fed. Cir. 2016); Therasense , Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290-92 (Fed. Cir. 2011) (en banc), clarifying that a heightened standard of proof applies to inequitable conduct claims and is now on par with that of Walker Process fraud in almost all respects, requiring “but for” materiality and specific intent to deceive, although inequitable conduct claims still incorporate an exception in cases of affirmative egregious misconduct. Proposed Guidelines § 6 & n. 92.

Proposed Guidelines Silent on Other Current and Significant Issues

The proposed changes do not seek to address several intellectual property issues that recently caused considerable discussion. For example, the proposed revisions are silent regarding the agencies’ policy concerning patent-assertion entities (or “nonpracticing entities”), which are the subject of recent debate and a soon-to-be released FTC study,2 and that are addressed in recent guidelines in jurisdictions outside the United States. Nor do the Proposed Guidelines provide insight into the agencies’ assessment of or proposed resolution for practices like “hold-up” conduct by owners of standard-essential patents that are subject to voluntary commitments to licensing on fair, reasonable, and non-discriminatory terms. The proposed update does, however, reference several prominent standard-essential patent cases in a footnote related to the discussion of technology markets. Finally, despite citing FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013), in discussing application of the rule of reason generally, the proposed update does not discuss future applications of that analysis to reverse-payment (“pay for delay”) patent settlements, a legal tactic first used by branded drug manufacturers that has been a top priority of FTC enforcement in recent years.

The agencies seek comment on the proposed changes from “interested parties, including attorneys, economists, academics, consumer groups and the business community.” Companies operating in the technology and intellectual property licensing arena should consider how the Proposed Guidelines might affect them – both as to changes proposed by the agencies and those areas in which the agencies declined to propose updates. The public comment deadline is September 26, 2016.


1See also August 12, 2016 Press Release: FTC and DOJ Seek Views on Proposed Update of the Antitrust Guidelines for Licensing of Intellectual Property,

2The results of the FTC study have not yet been published. It is expected that any report on the study results will provide some insight into the specific practices of patent-assertion entities that the FTC views as detrimental to competition and policy decisions to reduce any identified harmful practices.


Jim McKeown
Milwaukee, Wisconsin

Elizabeth Haas
Milwaukee, Wisconsin

Kate Gehl
Milwaukee, Wisconsin