FTC Proposes Changes to HSR Reportability of Patent Licenses


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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