FTC And DOJ Release Report On Antitrust Enforcement And Intellectual Property Rights

On April 17, 2007, the Federal Trade Commission and Department of Justice issued a long-awaited joint report on Antitrust Enforcement and Intellectual Property Rights. The 220-page Report is the result of years of research by the DOJ and FTC, including two dozen days of hearings in 2002, and reaches a number of conclusions concerning six areas addressed below. http://www.ftc.gov/opa/2007/04/ipreport.shtm The Report reaffirms enforcement policy set forth in the FTC and DOJ's 1995 Antitrust Guidelines for the Licensing of Intellectual Property. http://www.usdoj.gov/atr/public/guidelines/0558.htm Notably absent from the Report's analysis is an evaluation of the settlement of patent disputes under the Hatch-Waxman Act between brand manufacturers and generic manufacturers.

(1) Unilateral refusals to license patents. On the issue of unilateral refusals to deal, the Report suggests that neither the Ninth Circuit's 1997 Kodak decision (125 F.3d 1195), focusing on subjective intent, nor the Federal Circuit's 2000 Independent Service Organizations Antitrust Litigation decision (203 F.3d 1322), with language broadly suggesting that a refusal to license a patent cannot violate the antitrust laws absent "illegal tying, fraud in the Patent and Trademark Office, or sham litigation," provides the right approach. It notes that imposing antitrust liability for mere refusals to license competitors would compel firms to assist their rivals contrary to existing antitrust law and policy as reflected in the Supreme Court's opinion in Verizon v. Trinko, 540 U.S. 398 (2004). Additionally, liability in such circumstances would restrict the patent holder's ability to exercise the right to exclude, which is the core right of an issued patent. Leaving room for further debate and disputes, the Report concludes that conditional refusals to license that cause competitive harm could be subject to antitrust liability, but that "[a]ntitrust liability for mere unilateral, unconditional refusals to license patents will not play a meaningful part in the interface between patent rights and antitrust protections."

(2) Standard-setting organizations. The Report's treatment of the activities of standard-setting organizations (SSOs) focuses on the ex ante aspects of licensing in the standard-setting context. The Report concludes that joint negotiation of licensing terms by SSO participants before the standard is set can be procompetitive and is unlikely to constitute a per se...