FTC Proposes Changes to HSR Reportability of Patent Licenses

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The Federal Trade Commission has announced proposed rule changes that will impact the reportability of pharmaceutical patent licenses under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). If the rules are enacted, a transfer of “all commercially significant rights” with respect to a patent will potentially subject parties to the premerger reporting and waiting periods under the HSR Act; this will be the case regardless of whether manufacturing rights (a guiding factor in currently determining whether a license is “exclusive” and therefore a potentially reportable asset transfer) are retained by the licensor.

In explaining its rationale for the rulemaking, the FTC indicated that, although the transfer of a patent involves a fairly straightforward analysis under the HSR Act, the transfer of only certain patent rights has caused much confusion. Currently, only the transfer of a bundled right to “make, use and sell” a product covered by a patent is reportable; as a result, manufacturing rights retained by the licensor typically render a license non-reportable even when valuable commercial rights are conveyed to the licensee.

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Published In: Antitrust & Trade Regulation Updates, General Business Updates, Intellectual Property Updates, Mergers & Acquisitions Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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