Just over a week ago, the US Federal Trade Commission and the Department of Justice’s Antitrust Division published a proposed updateto the current US Antitrust Guidelines for the Licensing of Intellectual Property (the IP Licensing Guidelines). Issued in 1995, the IP Licensing Guidelines are the US equivalent of the European Commission’s Technology Transfer Guidelines, and set out the US agencies’ antitrust enforcement policy on the licensing of patents, copyright, trade secrets and know-how. Whereas the Technology Transfer Guidelines were introduced in 2004 and updated in 2014 (our contemporaneous comments on the changes can be found here), the IP Licensing Guidelines have been in effect for rather longer. The FTC and DOJ have asked for comments on the proposed update from interested parties – including lawyers, economists, consumer groups and the business community – by 26 September 2016.
According to this FTC press release, the US agencies’ aim is to “modernize the IP Licensing Guidelines without changing the agencies’ enforcement approach with respect to intellectual property licensing…”. The proposed update thus retains the basic analytical framework of the 1995 guidelines. As FTC Chairwoman Edith Ramirez puts it, the updated guidelines “reaffirm our view that US antitrust law leaves licensing decisions to IP owners, licensees, private negotiations and market forces unless there is evidence that the arrangement likely harms competition”.
The proposed revisions do, however, take into account developments in US case law that have occurred in the last 20 years or so. One of the most significant such developments was the US Supreme Court’s decision in Leegin Creative Leather Products v PSKS (2007) that resale price maintenance (RPM) agreements should be assessed under the rule of reason, rather than being treated as per se illegal. The proposed amendments to the guidelines reflect this change in thinking. Although the Leegin case arose in a sale of goods context, the US agencies take the view that the Supreme Court’s analysis of vertical pricing restrictions applies equally to price maintenance in IP licences. The rule-of-reason treatment of RPM by the US courts and agencies stands in contrast to the stricter EU approach: RPM is treated as a ‘hardcore restriction’ in the Commission’s Technology Transfer Block Exemption. Another area in which the US and EU agencies take divergent approaches is in relation to the treatment of obligations to pay royalties after the expiry of the licensed IP right. The revised US guidelines refer to the recent Supreme Court case of Kimble v Marvel (2015), in which it was confirmed that post-expiry patent royalties are unenforceable. In contrast, the Commission’s Technology Transfer Guidelines state (at paragraph 187) that “the parties can normally agree to extend royalty obligations beyond the period of validity of the licensed intellectual property rights without falling foul of Article 101(1) of the Treaty”.
Yet in other respects, US and EU attitudes to the relationship between IP licensing and competition law are very similar. Both view IP licensing as typically pro-competitive and good for innovation. The draft revised text of section 2.3 of the US guidelines states: “Licensing can allow an innovator to capture returns from its investment […] through royalty payments from those that practice its invention, thus providing an incentive to invest in innovative efforts”. This echoes the view expressed by the Commission in paragraph 9 of its Technology Transfer Guidelines: “[…] licensing as such is pro-competitive as it leads to dissemination of technology and promotes innovation by the licensor and licensee(s)”. In addition, the function of the antitrust “safety zone” outlined in section 4.3 of the US guidelines is akin to that of the “safe harbour” established by the Commission’s Technology Transfer Block Exemption: both seek to provide a degree of certainty for licensors and licensees alike and use market share thresholds.
In the final analysis, the proposed revisions to the US guidelines are arguably most striking for what they omit to deal with. They do not address, for example, any issues relating to the licensing of standard essential patents (SEPs) or (other than in a single, brief paragraph) settlement agreements. This is perhaps surprising given that both the FTC and the DOJ have paid considerable attention to such issues in recent years. While the Commission’s Technology Transfer Guidelines also do not address these subjects exhaustively, they are in this respect arguably more helpful to practitioners and businesses than the US equivalent. Where licensing agreements relate to both EU and US markets, however, it remains important for those involved to have regard to both sets of guidance.