In April 2007, the Federal Trade Commission and Department of Justice issued this report, which addressed issues arising when antitrust law is applied to conduct involving intellectual property rights. This is the second report, of two, to come out of a series of 24 hearings spanning 10 months, during which the agencies received comments and heard testimony from over 300 business, government, and academic commentators offering diverse perspectives.
The report discusses issues including: refusals to license patents, collaborative standard setting, patent pooling, intellectual property licensing, the tying and bundling of intellectual property rights, and methods of extending market power conferred by a patent beyond the patent's expiration. The report emphasizes that the agencies should use a flexible rule of reason approach for the vast majority of conduct involving intellectual property rights, in order to promote the common goals of encouraging innovation and competition.
The report’s conclusions include the following:
- Antitrust liability for mere unilateral, unconditional refusals to license patents will not play a meaningful part in the interface between patent rights and antitrust protections. Antitrust liability for refusals to license competitors would compel firms to reach out and affirmatively assist their rivals, a result that is in tension with the antitrust laws.
- Conditional refusals to license that cause competitive harm are subject to antitrust scrutiny.
- Joint negotiation of licensing terms by standard-setting organization participants before the standard is set can be pro-competitive. Such negotiations are unlikely to constitute a per se antitrust violation. The agencies will usually apply a rule of reason analysis when evaluating these joint activities.
- The agencies evaluate the competitive effects of cross-licenses and patent pools under the rule of reason framework articulated in the 1995 Antitrust-IP Guidelines.
- Combining complementary patents within a pool is generally pro-competitive. A combination of complementary intellectual property rights, especially those that block the use of a particular technology or standard, can be an efficient and pro-competitive way to disseminate those rights to would-be users of the technology or standard. Including substitute patents in a pool does not make the pool presumptively anti-competitive — competitive effects will be ascertained on a case-by-case basis.
- The agencies apply a rule of reason analysis to assess intellectual property licensing agreements, including non-assertion clauses, grantbacks, and reach-through royalty agreements.
- The Antitrust-IP Guidelines will continue to guide the agencies’ analysis of intellectual property tying and bundling. The agencies consider both the anti-competitive effects and the efficiencies attributable to a tie, and would be likely to challenge a tying arrangement if: (1) the seller has market power in the tying product, (2) the arrangement has an adverse effect on competition in the relevant market for the tied product, and (3) efficiency justifications for the arrangement do not outweigh the anti-competitive effects. If a package license constitutes tying, the agencies will evaluate it under the same principles they use to analyze other tying arrangements.
- The agencies consider both the [[anti-competitive effects and the efficiencies attributable to a tie or bundle involving intellectual property.
- The starting point for evaluating practices that extend beyond a patent’s expiration is an analysis of whether the patent in question confers market power. If so, these practices will be evaluated under the agencies’ traditional rule of reason framework, unless the agencies find a particular practice to be a sham cover for naked price fixing or market allocation.
- Collecting royalties beyond a patent’s statutory term can be efficient. Although there are limitations on a patent owner’s ability to collect royalties beyond a patent’s statutory term, that practice may permit licensees to pay lower royalty rates over a longer period of time which can reduce the deadweight loss associated with a patent monopoly and allow the patent holder to recover the full value of the patent, thereby preserving innovation incentives.