The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) 1995 Antitrust Guidelines for the Licensing of Intellectual Property have, for the past 21 years, helped attorneys and businesses identify and steer clear of potential antitrust issues in their IP licensing arrangements. While the Guidelines do not themselves have the force of law, they are reliable indicators of when the principal U.S. antitrust enforcement agencies will, or will not, challenge private IP licensing transactions.
This month, the agencies released a long-needed update to the 1995 Guidelines. The update remains in draft form, and it is likely that a final updated version of the Guidelines will be released late this year, once the agencies assess and implement changes suggested during the public comment period.
Overall, the update usefully refreshes the agencies’ positions with case law that has emerged since 1995. In some areas, the law has changed substantially since the release of the original Guidelines. For example, the update reflects the shift from per se illegality to “rule of reason” analysis for resale price maintenance following Leegin Creative Leather Prods. v. PSKS (U.S. 2007) and other cases, the recognition in Verizon v. Law Offices of Curtis V. Trinko (U.S. 2004) that a unilateral refusal to license IP does not itself constitute a violation of the antitrust laws, and the holding in Illinois Tool Works v. Independent Ink (U.S. 2006) that patents do not by themselves confer market power. The update also references other agency policy guidelines that have been issued since 1995, including the DOJ-FTC joint 2010 Horizontal Merger Guidelines, the FTC’s 2011 Evolving IP Marketplace report, and a number of DOJ business review letters concerning patent pools.
What the updated Guidelines fail to address, however, is the substantial body of agency guidance issued over the past decade regarding the licensing of standards-essential patents (SEPs) on terms that are “fair, reasonable and non-discriminatory” (FRAND). This guidance, which directly relates to the intersection of IP licensing and antitrust law, is squarely within the subject matter that the Guidelines purport to address.
The agencies’ past guidance on these issues has appeared in numerous official agency pronouncements, orders and policy statements including:
- The DOJ’s 2007 Report - Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition
- The Joint DOJ-USPTO 2013 Policy Statement On Remedies For Standards-Essential Patents Subject To Voluntary F/Rand Commitments
- The FTC’s 2012 Third Party Statement on The Public Interest, In re. Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof, ITC Investigation No. 337-TA-752 (Jun. 6, 2012)
- The FTC’s 2011 Report - The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition.
- The DOJ’s 2006 Business Review Letter relating to VITA
- The DOJ’s 2007 Business Review Letter relating to IEEE
- The DOJ’s 2013 Business Review Letter relating to IPXI
- The DOJ’s 2015 Business Review Letter relating to IEEE
- The FTC’s 2013 Order in the matter of Google/Motorola Mobility
- The FTC’s 2013 Order in the matter of Robert Bosch GmbH
In addition to these official policy statements, numerous public statements and speeches concerning standardization and FRAND licensing have been made by high ranking agency officials.
This large body of guidance provided by the agencies and agency leadership over the past decade clearly indicates that collaborative standard-setting should be viewed as a procompetitive activity that has the potential to yield significant market efficiencies, promote innovation and enhance consumer welfare. By the same token, the agencies have also raised awareness of potential anticompetitive harms that could result when firms engage in abusive conduct relating to FRAND licensing. Among other things, both the DOJ and FTC, as well as the federal courts, have expressed concern regarding a SEP holder’s use of injunctive relief when it has committed to grant licenses on FRAND terms.
Collectively, this guidance has markedly shaped the practice of standards-setting organizations and private firms engaged in standard-setting. It has had a notable impact not only on market actors in the United States, but on firms, standards bodies and regulatory agencies around the world. In this regard, the DOJ and FTC have been viewed as world leaders in considering these complex legal and economic issues and are routinely cited by agencies and courts around the world.
The omission of any mention of SEPs and FRAND in the updated Guidelines is not only surprising, but potentially damaging to the significant progress that has been made regarding these issues. By their silence, the agencies invite those who are unhappy with their recent positions on these issues to suggest that the agencies may have retreated from these positions, and that they may no longer be willing to commit to them publicly. We can only hope that this is not the case, and that the agencies’ palpable silence in this area is based on an assumption that there is no need to repeat their extensive FRAND guidance in yet another policy document. At a minimum, however, the agencies should indicate that nothing in the updated Guidelines changes their prior guidance on SEP and FRAND issues.
Because of the significant impact of the agencies’ guidance, I was joined by a number of law and business scholars in filing comments with the DOJ and FTC urging the agencies to reconsider their omission of SEPs and FRAND from the Guidelines and to at least reference the continued vitality of this important policy area in the final version of the updated Guidelines.
Jorge L. Contreras* teaches in the areas of intellectual property, law and science, and property law. He is the recipient of the Early Career Teaching Award at the College of Law and serves on the Scientific Advisory Board of the Utah Genome Project.
* Mr. Contreras is a guest blogger and his views do not necessarily reflect All Things Frand or its members companies.