Intersection of Intellectual Property and Antitrust: Where Do We Go From Here

Article by Mr Stanley Gorinson and Mr Stephen Baskin

"We're bringing cases and that obviously indicates that we feel there are some areas where there are real problems, where we see abuse of intellectual property regimes." Federal Trade Commissioner Mozelle Thompson, July 14, 2002.

Intellectual property has entered an era in which concerns over monopolistic behavior and assertions that intellectual property protections are anticompetitive have, once again, come to the foreground. All types of protection, such as securing a patent on an invention or a copyright on a piece of music, limit or preclude competition for a certain period of time. The role of antitrust law and the extent to which it can regulate the use of IP presents an interesting and somewhat unpredictable question, particularly since protection of IP is critical to innovation.

IP protection and antitrust are both fundamental policies in the legal structure of the United States. Finding a balance between these two regimes can be a daunting task and a satisfactory balance has never been struck. The economy cannot thrive and diversify if the power to control ideas and products is used to inhibit competition unnecessarily. Yet it is essential to protect competition from excesses that can from time to time emerge through improper use of IP rights.

This article will discuss the intersection between antitrust and IP. It will further focus on the Federal Trade Commission and Department of Justice hearings entitled, "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy." In these hearings, the Commission and the DOJ asked experts in antitrust and IP to express their views in an effort to educate the government on the issues affecting antitrust and IP policy in the 21st century. The antitrust agencie's goal is to once again try to determine the proper balance between these fundamental legal regimes.

The historic connection between antitrust and IP laws

Patent "misuse" - the exercise of the power conferred by the legal monopoly of a patent to affect competition improperly - has fuelled much of the development of antitrust law in this complicated area. Legal monopoly became confused with economic monopoly and populist notions substituted for rational analysis. Thus, by the early 1940s, courts were generally unsympathetic to patent owners and enforced the antitrust laws at the expense of IP protection.

Simplistic antitrust enforcement led to the Patent Act of 1952, which made clear that certain acts, such as authorizing another to perform acts that without consent would constitute infringement or seeking to enforce patent rights against infringement, did not constitute patent misuse. That statutory clarification struck a new balance for only a short period. By the 1960s, new simplistic antitrust theories had come into use that served once again to constrict the rights of IP owners.

As a part of this enforcement regime, the DOJ developed what has become well known as the 'Nine No-No's." These nine guidelines viewed the following IP arrangement,s as illegal per se:

(1) tying arrangements of unpatented materials,

(2) tying arrangements of future license requirements,

(3) restricting the resale of a patented material,

(4) restricting a license's powers over unpatented materials,

(5) agreements where the patentee must gain a licensee's consent to

enter future license agreements with others,

(6) mandatory packaging license,

(7) royalties based on unpatented materials,

(8) restricting licensee's sale of product made using a patented

process, and

(9) price-fixing.

The Nine No-No's were a high point of aggressive and often mindless...

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