DOJ, FTC Issue Proposed Update of Antitrust-IP Guidelines

On August 12, 2016, the Department of Justice and Federal Trade Commission released a proposed update of their Antitrust Guidelines for the Licensing of Intellectual Property.1  While the agencies reinforced many of the existing propositions established in the original 1995 guidelines, there are several notable changes.  First, the updated guidelines incorporate more recent Supreme Court precedent to reverse a century-held proposition that vertical resale price maintenance agreements, whether in the IP context or otherwise, are per se illegal.  Second, the agencies align their approach to IP agreements with the Horizontal Merger Guidelines, recognizing the shift towards greater flexibility in assessing competitive effects, accounting for varying types of evidence in addition to market shares.  The updated guidelines also reflect minor edits that do not result in much substantive change in agency policy, such as additional citations and the clarification of language.

Generally, the updated guidelines still embody the same three principles that were laid out in the original guidelines published over 20 years ago: (1) the agencies apply the same antitrust analysis to IP that they do to other property; (2) IP does not necessarily confer market power; and (3) IP licensing is generally procompetitive.2  The agencies, however, have revised and clarified their approach to allow for more flexibility in analyzing IP licensing agreements and restraints.

Notably, the updates do not address or clarify certain popular and arguably contentious topics, such as patent assertion entities, standard essential patents, and fair, reasonable and non-discriminatory licensing terms.  However, with regards to patent assertion entities, the agencies have been drafting a specific report, which is rumored to be published in the coming weeks.

Resale Price Maintenance and the Rule of Reason

Perhaps the most meaningful change was to align the guidelines with the Supreme Court’s 2007 ruling on vertical resale price maintenance (RPM) agreements.  In Leegin Creative Leather Products, Inc. v. PSKS, Inc., the Supreme Court overruled a 100-year old decision that held vertical RPMs per se illegal under the antitrust laws.3  The Court in Leegin instead applied a rule of reason analysis.4  The update thus reflects this development in the law and applies a rule of reason analysis “when a licensor conditions a license on the resale price of the product incorporating the licensed technology.”5  The agencies also reiterate that a rule of reason analysis is the presumptive approach for evaluating the majority of IP licensing restraints, relying in part on Leegin for this proposition.  The agencies note the “sliding scale in appraising reasonableness” and how “the quality of the proof required should vary with the circumstances.”6  These changes also appear to reflect a desire by the agencies to have greater flexibility in their approach to the economic effects, and ultimately the legality, of various IP-related agreements.

Aligning the Agencies’ Current Approach and Enforcement

As for more general revisions, the agencies updated the guidelines to better reflect their recent approach to assessing the competitive effects of licensing arrangements (and agreements in general), as outlined in the DOJ’s and FTC’s 2010 Horizontal Merger Guidelines.7  The updated guidelines first acknowledge the likelihood of analyzing effects within a technology or research and development market (formerly referred to as an innovation market) rather than a goods market only.  The guidelines also reflect a more flexible assessment of competitive effects.  While defining the market and determining market shares is a common approach, the guidelines highlight other types of evidence that can be used to assess market power, such as the hypothetical monopolist test.8  Although these concepts were all reflected in the 1995 Guidelines, the proposed update revises the order of assessment, seemingly down-playing a structured approach.9  Once again, it appears that the agencies are emphasizing their desire to have greater flexibility in how they evaluate IP-related restraints.

Next, the agencies replaced the term “innovation market” with “research and development market” to more accurately reflect recent enforcement actions and to broaden the description.  The guidelines now describe this market as “innovation that is related to research to identify a commercializable product or to the development of particular goods or services.”10  The agencies also added factors that may be relevant to assessing potential substitute technologies in defining the market as well as citations to various cases and FTC consent decrees that have identified examples of research and development markets in the last 20 years.11

Incorporating Evolving Case Law

The updated guidelines contain several other revisions that incorporate recent changes in statutory or case law.  With respect to invalid or unenforceable IP rights, the guidelines recognize the more stringent requirements necessary to prove a violation of Section 2 of the Sherman Act through fraud on the patent and trademark office.12  The revised section also provides a more detailed explanation of the “sham litigation” exception to Noerr-Pennington immunity.13  As for statutory updates, the introductory section acknowledges recent changes under federal law, such as the newly created federal cause of action for misappropriation of trade secrets, a 20-year patent term from the filing date, and the extension of works that can be protected by copyright.14

Reinforcing Existing Propositions

Finally, the updated guidelines cite recent Supreme Court cases to reinforce propositions initially outlined in the 1995 Guidelines and generally adhered to by the agencies.  For example, the guidelines now cite Verizon Commc’ns v. Law Office of Curtis V. Trinko for the long-held proposition that the antitrust laws generally do not hold a firm liable for a unilateral refusal to deal with its competitors, even in the context of refusing to license IP.15  Similarly, the guidelines now cite the Supreme Court’s decision in Ill. Tool Works Inc. v. Indep. Ink, Inc. as further support for its prior belief that an IP right does not necessarily confer market power.16

The guidelines also refer to recent agency action and conduct to provide further support for assertions contained in the original 1995 guidelines.  For example, the updated guidelines now cite to a series of FTC hearings in 1999 entitled “The Evolving IP Marketplace” to show the potential procompetitive benefits of IP licensing and its ability to encourage innovation.17  Similarly, the agencies added citations to the DOJ’s business review letters favorably assessing certain patent pools in support of their likely procompetitive benefits.18


Endnotes    (↵ returns to text)
  1. U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for the Licensing of Intellectual Property (Aug. 12, 2016) [hereinafter, the “Proposed Antitrust-IP Update], available at
  2. Id. at §2.0.
  3. 551 U.S. 877 (2007) (overruling Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911)).
  4. Id.
  5. Proposed Antitrust-IP Update, supra note 1, at §5.2.
  6. Id. at §3.4 (citing FTC v. Actavis, Inc., 133 S. Ct. 2223, 2237-38 (2013) (internal citations omitted)).
  7. See id. at §3.2, fn. 30 (citing the U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines (2010) for the proposition that market shares can be measured based upon projected revenues or other factors, such as unit sales or capacity when competitively significant).
  8. See generally id. at §3.2.2.  This shift is in line with the 2010 Horizontal Merger Guidelines.
  9. Id.
  10. Id. at §3.2.3.
  11. Id.
  12. Id. at §6 (citing Thereasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290-92 (Fed. Cir. 2011) (en banc) for raising the standard of proof for inequitable conduct).
  13. Id.
  14. Id. at 1.0, fns. 3, 9, 10.
  15. Id. at §2.1, fn. 13 (citing Trinko, 540 U.S. 398, 407-08 (2004)).
  16. Id. at §2.2, fn. 15 (citing Illinois Tool, 547 U.S. 28, 45-46 (2006)).
  17. Id. at §2.3.
  18. Id. at §5.5.  Notably, the updated guidelines recognize that “[t]he absence of the safeguards used in these pools will not necessarily make the pool anticompetitive.”  Id.