Antitrust And Trade Regulation Update: New Guidance On Patent Pools From Justice Department

Article by Paul T. Denis and Rebecca P. Dick

For the first time, the Antitrust Division of the Justice Department ("DOJ") has accepted a consolidated arrangement for licensing competing technologies. The acceptance, contained in a response to a business review letter request submitted nearly three years ago, required the parties to modify their proposal substantially.

Recently released correspondence reveals what changes the DOJ required and offers guidance for others trying to license or make new products involving multiple rights holders. It also suggests how parties might secure review more quickly the next time.

DOJ Reaffirms Treatment of Traditional Patent Pools

One notable feature of the DOJ letter is its reaffirmation of earlier guidance about what constitutes a lawful patent pool. Business review letters issued by the DOJ in previous administrations developed a 4-part test for identifying lawful patent pools:

(1) the pool must be limited to patents that are necessary to practice the technology in question;

(2) essentially must be determined by independent experts;

(3) the patents deemed essential must be clearly identified to prospective licensees; and

(4) prospective licensees must be offered the opportunity to license individual patents la carte as well as in a package.

DOJ Breaks New Ground by Approving Consolidated Licensing of Competing Technologies

DOJ's most recent business review related to third-generation mobile wireless telecommunications ("3G") technology. There are five varieties of this telephony, largely distributed along regional lines. Each version of 3G technology works best with the 2G technology from which it evolved. The parties proposed a single scheme for the licensing of all types of 3G, with a mix of royalty options, including some licenses based on fixed formulas and some to be individually negotiated. They assumed that the different technologies would not compete - that customers were "path-dependent" and would upgrade to the 3G equivalent of their existing 2G products. They hoped to foster wide use of 3G, a difficult goal given that more than 100 companies hold essential rights and the technology has many uses, with varying commercial potential.

The 3G business review letter goes beyond prior reviews in identifying the circumstances under which the DOJ will accept consolidated licensing arrangements that include competing patents or technologies. At a minimum, the DOJ appears to require:

(1)...