Antitrust Agencies Release Intellectual Property Report, Cover Little New Ground

Nearly five years after they held joint hearings on the intersection of antitrust and intellectual property, the Federal Trade Commission and Department of Justice have issued a report on the topic. Although touted as providing the first insight into the agencies' views since their 1995 Antitrust Guidelines for the Licensing of Intellectual Property ("Antitrust-IP Guidelines"), the Joint Report on Antitrust Enforcement and Intellectual Property Rights ("Joint Report") breaks relatively little new ground.

The 2002 hearings, entitled "Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy," featured over 10 months of testimony from more than 300 commentators offering views on biotechnology, computer hardware and software, Internet, and pharmaceutical industries, and others. Issues covered include 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. Perhaps the two most significant issues explored are refusals to license and patent pools.

The Agency's Attitude towards Intellectual Property Has Evolved

In the Antitrust-IP Guidelines, the agencies pointed out that, "for the purpose of antitrust analysis, the Agencies regard intellectual property as being essentially comparable to any other form of property." In contrast, the Joint Report goes to some lengths to explain why intellectual property is different from traditional property, noting how:

intellectual property may be easier to steal (copy);

intellectual property may be used without interfering with the ability of others to use it;

the fixed costs of creating intellectual property are high and the marginal costs of using it are low; and

the boundaries of intellectual property may be difficult or expensive to define.

The agencies are working through the implications of this evolved view and the Joint Report reflects some of that process.

Unconditional Refusals to License Treated Permissively

The case law has reflected some conflict about how to approach unilateral refusals to license, specifically with respect to whether (and how) to consider the subjective intent of the licensor. Attempting to resolve this dispute, the agencies conclude that antitrust liability for mere unilateral, unconditional refusals to license patents will not play a meaningful part in the...