Since 1995, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have maintained intellectual property licensing guidelines, most recently updated in 2017. Those guidelines, titled “Antitrust Guidelines for the Licensing of Intellectual Property,” discuss how the FTC and DOJ evaluate licensing for patents, copyrights, trade secrets, and know-how and how they analyze potential antitrust violations. The agencies explain that the guidelines are designed to provide information to businesses and consumers on how they enforce intellectual property licensing and are intended to both protect consumers and promote competition and innovation.
The guidelines embody three general principles: “(a) for the purpose of antitrust analysis, the Agencies apply the same analysis to conduct involving intellectual property as to conduct involving other forms of property, taking into account the specific characteristics of a particular property right; (b) the Agencies do not presume that intellectual property creates market power in the antitrust context; and (c) the Agencies recognize that intellectual property licensing allows firms to combine complementary factors of production and is generally procompetitive.”
Ultimately, the agencies hope the guidelines will aid in predicting whether the agencies would challenge a particular practice as anticompetitive. To achieve that goal, the guidelines provide a thorough analysis of various antitrust considerations—e.g. types of affected markets, horizontal and vertical relationships, and the rule of reason—and include a number of illustrative examples. The guidelines identify a few arrangements that are likely to receive scrutiny: horizontal restraints, minimum resale price maintenance, tying arrangements, exclusive dealing, cross-licensing and pooling arrangements, grantbacks, and certain transfers of intellectual property rights. The guidelines also explain the “safety zone” where the agencies will not challenge a restraint if it is not facially anticompetitive and the licensing parties account for no more than 20% of each relevant, significantly affected market.
Notably absent in the list of intellectual property rights discussed in the guidelines is trademarks. The guidelines explain, “Although the same general antitrust principles that apply to other forms of intellectual property apply to trademarks as well, these Guidelines deal with technology transfer and innovation-related issues that typically arise with respect to patents, copyrights, trade secrets, and know-how agreements, rather than with product-differentiation issues that typically arise with respect to trademarks.”
When undertaking their evaluation of intellectual property licensing, the FTC and DOJ focus on an actual licensing practice and its effects, not on the formal terms of a licensing agreement. Their approach is to analyze whether a particular practice is likely to have anticompetitive effects and whether such practice is reasonably necessary to achieve competitive benefits outweighing those effects.
Those interested or concerned in how the FTC and DOJ may view certain intellectual property licensing practices can review the guidelines at any time on the FTC’s website.