Updated Antitrust Guidelines for IP Licensing Address New Laws, Omit Some Key Areas

by Perkins Coie

Perkins Coie

In 1995, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) (collectively, the Agencies) published guidelines that delineated how and when the Agencies would evaluate intellectual property licensing and other activities under the antitrust laws. In addition to the advances in intellectual property and antitrust law that post-dated the guidelines, several recent trends in IP license agreements have raised antitrust concerns. First, the number of standard essential patent (SEP) license agreements has exploded with the increase of technology that is dependent on interoperability standards, including cell phones and the internet. Antitrust litigation surrounding SEP license agreements has become commonplace, with several suits being filed against major companies just in the past two months. Second, patent litigation settlements—particularly when dealing with generic pharmaceuticals—have faced antitrust challenges.

After receiving input from industry participants, legal scholars and the America Bar Association, the Agencies released the final guidelines on January 13, 2017, and substantively, the updated guidelines do little more than conform the Agencies’ joint policy to some—but not all—major antitrust and IP licensing developments since 1995. However, the updated guidelines remain silent on SEP licenses and litigation settlement agreements. SEP holders and implementers and parties to settlement agreements will need to consult the guidelines and multiple other references to determine the antitrust implications of their agreements.

DOJ and FTC Guidance on IP Licensing and Antitrust Law

Since 1995, the DOJ and the FTC adhered to antitrust guidelines that provided guidance on “the licensing of intellectual property protected by patent, copyright, and trade secret law, and of know-how” to “be applied in unforeseeable circumstances.” The guidelines reflected three core principles:

  • First, IP is treated like any other property for the purpose of the antitrust laws, requiring parties to apply general antitrust principles while taking into account the difference in purpose and extent of protection in assessing market circumstances and conditions. That is, the Agencies generally analyzed IP licenses under a rule of reason. Further, the Agencies reviewed the impact of a license mainly in the relevant goods markets, but could also examine the relevant technology markets and research and development markets.
  • Second, IP is not presumed to create market power in the antitrust context because there may be substitutes, and even if an IP right does confer market power, that by itself does not violate the antitrust laws.
  • Third, IP licenses are generally procompetitive because they can lead to combining complementary goods, innovation, lower costs and new products.

While generally pro-competitive, the Agencies explained that IP licenses can raise antitrust concerns when they adversely affect competition. For example, a license agreement that restrains trade by dividing the market among competitors can raise antitrust concerns. Further, an IP holder is not required “to create competition in its own technology,” but when a licensing arrangement “harms competition among entities that would have been actual or likely potential competitors” in the absence of the license, the Agencies may evaluate the antitrust implications of the license. Importantly, the Agencies established a safe harbor when a restraint in an IP license is not facially anticompetitive, and the licensor and licensee collectively account for less than 20 percent of the relevant markets.[1]

New Developments Reflected in DOJ and FTC Updates to IP Licensing Guidelines

On August 12, 2016, the Agencies published proposed updated guidelines in light of developments in the relevant law and changes to the agencies’ related enforcement policies. The Agencies received twenty-four comments from industry participants, trade groups and law professors. While some commenters praised the Agencies’ “efforts to maintain the relevance of the IP Guidelines” in light of developing law and policy and its reaffirmation of the three core principles noted above, others expressed concern that their efforts were not expansive enough. Specifically, some commenters focused on the lack of guidance to entities licensing SEPs in a centralized location and to litigation settlements.

While the difference between the updated guidelines and the 1995 version is largely stylistic, the new guidelines adopt policies consistent with recent precedent in five areas:

  • First, the guidelines now affirm that “antitrust laws generally do not impose liability” upon a firm for its “unilateral refusal to assist[] competitors” because an IP owner’s ability to exclude others from its property promotes competition by offering “incentives for investment and innovation.”[2]
  • Second, the guidelines also abandon the per se prohibition on vertical price maintenance agreements for a rule of reason analysis, consistent with Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007).[3]
  • Third, the guidelines make clear that in assessing a tying arrangement, the Agencies will not presume market power merely because the tying product is patented or is itself a patent, copyright or trade secret, consistent with Illinois Tool Works, Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006).[4]
  • Fourth, where a restraint appears facially reasonable or unreasonable, the guidelines evince the Agencies’ willingness to employ a “sliding scale” analysis, wherein the Agencies will forgo an “elaborate analysis” of market power—alleged justifications for a restraint or particular industry circumstances—and, instead, accept a lesser quality of proof supporting their initial reasonableness assessment.
  • Finally, while not a policy sea change, the guidelines clarify the Agencies’ position on invalid and unenforceable intellectual property rights. It achieves this by incorporating the U.S. Court of Appeals for the Federal Circuit’s heightened standards for finding inequitable conduct and by distinguishing potentially pro-competitive deferred royalty payment schemes from the enforcement of invalid IP generally.[5]

The guidelines also provide examples of how the Agencies will define technology and R&D (formerly referred to as innovation) markets:

  • With respect to technology markets, the guidelines’ examples are citations to court opinions analyzing market definition.[6] For example, the U. S. Court of Appeals for the Third Circuit accepted a Sherman Act Section 2 claim asserting that Qualcomm monopolized the wideband code division multiple access (WCDMA) technology market by promising to license the patented technology on FRAND terms, only to raise the price when the technology became part of an industry standard.[7]
  • In the research and development market context, the guidance introduces numerous factors the Agencies may consider when determining “close substitutes” for the R&D activity at issue. In assessing the ability of other entities to refocus research efforts to the technology at issue, and thereby constrain the alleged anticompetitive activity, the Agencies seek out those currently practicing “close substitute” activities. What constitutes a “close substitute” activity is a function of: the other entities’ “access to financial support,” current “intellectual property,” “skilled personnel” and their ability to “successfully commercialize innovations.”[8]

Updated Guidelines Do Not Address Several Critical Issues for Licensors and Licensees

While making great strides to reconcile the guidelines with current law, the Agencies did not take the opportunity to address several issues facing IP holders and implementers in a single resource. Instead, the Agencies refer individuals and companies to their business review letters, other policy statements and litigation approaches. First, the Agencies did not describe how they would assess the antitrust impact of SEP licenses. Second, the Agencies were silent on how settlement agreements would be analyzed under the guidelines.

SEP agreements facilitate the adoption of interoperability standards. Yet, there is a risk that SEP agreements may have anticompetitive effects. The updated guidelines did not provide any specific insights into how the Agencies will analyze the antitrust implications of SEP agreements. Instead, parties must piece together how the Agencies will enforce the antitrust laws by referring to the guidelines, speeches, policy statements, business review letters, litigation strategy and recent SEP infringement cases. For example, the DOJ and the Patent and Trademark Office noted that the owner of a SEP “may gain market power and potentially take advantage of it by engaging in patent hold-up.” Parties will need to add these statements to the guidelines to determine the antitrust risks of SEP agreements. Some commenters on the draft revisions considered this a missed opportunity, while others applauded the omission. At a minimum, the omission provides the Agencies with maximum flexibility, as evidenced by the FTC’s recent action against Qualcomm.

The guidelines also did not provide any insights into the antitrust implications of settlement agreements as it relates to reverse payment settlement agreements in the pharmaceutical industry. When adapting the guidelines to settlement agreements, parties should refer to recent cases dealing with IP settlement agreements, including F.T.C. v. Actavis, 133 S. Ct. 2223 (2013). Lastly, the parties should also consider the Agencies’ many policy statements, reports and lawsuits on reverse payment settlements. For example, parties should consider the guidelines in light of the FTC’s statement that compensation to delay entering a market includes “a brand manufacturer’s promise not to market an authorized generic” for a set period of time when deciding the antitrust risk associated with settlement agreements. Some commentators viewed the lack of a specific discussion about patent settlements as a missed opportunity to update the guidelines to reflect current economic thinking.





[1] Fed. Trade Comm’n & U.S. Dep’t of Justice, Antitrust Guidelines for the Licensing of Intellectual Property §§ 3.1, .4 (Apr. 15, 1995) available at https://www.justice.gov/sites/default/files/atr/legacy/2006/04/27/0558.pdf (the “1995 Guidelines”).

[2] U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for the Licensing of Intellectual Property at §2.1 (Jan. 13, 2017), https://www.justice.gov/atr/IPGuidelines/download (the “2017 Guidelines”); see also Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-08 (2004).

[3] 2017 Guidelines §3.4.

[4] Id. at § 5.3.

[5] Id. at § 6; see also Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290-92 (Fed. Cir. 2011) (en banc) (standard for inequitable conduct); Kimble v. Marvel Entm’t, LLC, 135 S. Ct. 2401, 2408 (2015) (deferred royalty payments and invalid IP).

[6] 2017 Guidelines at § 3.2.2

[7] See Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 315 (3d Cir. 2007).

[8] 2017 Guidelines § 4.3.

[View source.]

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.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.