FTC and DOJ Antitrust Division Seek Comment on Proposed Update to IP Licensing Guidelines

Antitrust law book and gavelThe Federal Trade Commission and the Department of Justice’s Antitrust Division seek public comment on a proposed update of the Antitrust Guidelines for the Licensing of Intellectual Property, also known as the IP Licensing Guidelines. The IP Licensing Guidelines, which state the agencies’ antitrust enforcement policy with respect to the licensing of intellectual property protected by patent, copyright, and trade secret law and of know-how, were issued in 1995 and are now being updated.

In the past 20-plus years, the IP Licensing Guidelines have served their intended purpose of providing guidance to businesses and the public regarding potential antitrust issues that may arise in the context of intellectual property licenses. In their 2007 joint report entitled Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition (the “Antitrust IP Report”), the agencies reaffirmed the integral role of the IP Licensing Guidelines in their analysis of antitrust and intellectual property issues. With the IP Licensing Guidelines as an analytical tool, the agencies have accumulated additional antitrust enforcement experience and policy expertise in this area. The proposed update announced today reflects this knowledge. It is intended to modernize the IP Licensing Guidelines without changing the agencies’ enforcement approach with respect to intellectual property licensing or expanding the IP Licensing Guidelines to address other topics and areas that are addressed, for example, in the 2007 Antitrust IP Report.

“Licensing is a cornerstone of a strong system of IP rights because it offers one way that firms can maximize the value of their IP and realize an appropriate return on their investment,” said FTC Chairwoman Edith Ramirez. “These updated Guidelines reaffirm our view that U.S. 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 IP Licensing Guidelines have been invaluable to the department’s investigative and enforcement efforts since they were issued in 1995,” said Acting Assistant Attorney General Renata Hesse, in charge of the Department of Justice’s Antitrust Division. “They have also guided business planning, and they have been cited by courts, in numerous government briefs, business review letters, and policy documents. Although the Guidelines are sound, it is time to modernize them to reflect changes in the law since they were issued.”

In the agencies’ view, the IP Licensing Guidelines remain soundly grounded, as a matter of antitrust law and economics, in three basic principles:

  • The agencies apply the same antitrust 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.
  • The agencies do not presume that intellectual property creates market power.
  • The agencies recognize that intellectual property licensing allows firms to combine complementary factors of production and is generally procompetitive.

Nevertheless, the agencies have determined that some revisions are in order because the IP Licensing Guidelines should accurately reflect intervening changes in statutory and case law. For example, Congress recently enacted the Defend Trade Secrets Act of 2016, creating for the first time a federal cause of action for misappropriation of trade secrets. Also, the change from a 17-year patent term (from the date of grant) to a 20-year patent term (from the date of filing) effectuated by the Uruguay Round Agreements Act of 1994 was on the verge of taking effect when the IP Licensing Guidelines were issued in 1995. Similarly, copyright terms are longer now than when the IP Licensing Guidelines were issued. The proposed updated IP Licensing Guidelines account for these statutory developments.

Case law developments include the Supreme Court’s decision in Illinois Tool Works, Inc. v. Independent Ink, Inc., in which the Court subscribed to the agencies’ view in the IP Licensing Guidelines that a patent does not necessarily confer market power on the patentee. Another important development is the Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., which held that resale price maintenance (RPM) agreements should be evaluated under the rule of reason, overturning a nearly century-old view of per se illegality. Although Leegin arose in the context of resale price restrictions on goods sold by retailers, the agencies find that its analysis applies equally to pricing restrictions in intellectual property licensing agreements. The IP Licensing Guidelines therefore have been amended to reflect rule-of-reason treatment of vertical price agreements.

The agencies are also updating the IP Licensing Guidelines’ discussion of general principles to reflect the research in the FTC’s 2011 Evolving IP Marketplace report. The agencies also added language to reinforce their longstanding view that “the antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors, in part because doing so may undermine incentives for investment and innovation.”

In addition, the agencies are updating the analysis of markets affected by licensing arrangements to mirror the approach taken in the 2010 Horizontal Merger Guidelines. The IP Licensing Guidelines’ approach to innovation markets has been revised to reflect the agencies’ actual experience with this mode of analysis. The proposed update retains the concept of “innovation markets,” but refers to them as “Research and Development Markets” to more accurately reflect how these markets have been defined in enforcement actions.

The Commission vote approving issuance of the proposed updated IP Licensing Guidelines for public comment was 3-0.

The agencies are interested in receiving comments on the proposed update from interested parties, including attorneys, economists, academics, consumer groups, and the business community. Interested parties may submit public comments to ATR-LPS-IP Guidelines until September 26, 2016. Submitted comments will be made publicly available on the Agencies’ websites

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Federal Trade Commission

Federal Trade Commission

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Discuss this

There are currently 13 Comments comments.

  1. Paul F. Morgan August 13, 2016 11:23 am

    An interesting question is what AT or other “changes in the law since they were issued” affecting patent licensing since 20 years ago are there OTHER than those noted above? Just off the top of my head, the legal effects and reasonable royalty rates of patents subject to standards-settings, shared ”free” software required license conditions, reverse payments to drug patent challengers, IPRs, eBay, KSR, Alice, and other Sup. Ct. decisions making it easier and cheaper to challenge patents rather than pay for or maintain payments on a patent license. State and FTC actions against trolls sending thousands of threatening letters to small businesses demanding licenses but with no intent to actually enforce the asserted patents is another legal novelty.

  2. Ron Hilton August 13, 2016 5:15 pm

    What do the current guidelines say regarding refusal to license “essential facilities” such as patents on industry standards? Does actual competitive harm have to be shown, or is the fact that the standard is essential in order to compete in a given industry enough grounds for action?

  3. Paul F. Morgan August 13, 2016 6:25 pm

    RH, I do not even understand how a patent could properly be called an “essential facility.” I was merely noting that there has been significant new litigation on patents affected by standards settings in the past 20 years.
    But is not the first and most important question on that subject whether or not the patent owner or its predecessor engaged in a standards setting activity that generated an implied or express license in the subject patent?

  4. Paul F. Morgan August 13, 2016 6:39 pm

    It would also be interesting to see more discussion of why “Research and Development Markets” is not a missleading title? There is no market or profit in R&D itself [just costs] as distinct from commercially successful products, processes or patents that with luck may result from some R&D, plus significant other investments. What is the AT case law support on this issue?

  5. Ron Hilton August 14, 2016 1:24 am

    What about “defacto” industry standards which were not the result of any deliberate standard-setting activity? Once defacto industry-wide dominance by the standard is achieved, resulting in an essential facility, the doctrine should apply.

  6. Anon August 14, 2016 10:28 am

    That would eviscerate the most valuable patents Ron and punish those that were “too” successful.

    An excessively poor idea.

  7. Ron Hilton August 14, 2016 6:48 pm

    That’s the common refrain in opposition to antitrust in general – that it “punishes” success.

  8. Anon August 15, 2016 8:24 am


    You are conflating patents with monopolies.

  9. Ron Hilton August 15, 2016 11:44 am

    A patent confers the right to exclude a competitor from practicing a specific invention – a monopoly is the successful exclusion of competition in a specific market. They are not the same, but they are obviously related. When a specific patented invention covers an essential standard in a specific market, then the relationship is undeniably clear and direct.

  10. Anon August 15, 2016 4:06 pm

    You are still conflating / one is – by law – awarded (in the trade off of the Quid Pro Quo) and you want to treat that award as you would a pariah.

    That’s just not kosher.

  11. Ron Hilton August 15, 2016 5:18 pm

    Just because property ownership has been awarded does not allow it to be used illegally. For example, the telephone system used to be a government supported monopoly, but when it was used illegally to prevent access by other carriers, that monopoly was ended. They were still able to profit from their property, but not denying others access to it.

  12. Anon August 15, 2016 8:38 pm


    You presuppose (I could say ASSume) some illegality when none is present.

    You are still conflating.

  13. Paul F. Morgan August 16, 2016 12:09 pm

    Back to “innovation markets” aka “R&D markets.” Note that in addition to the confusion of patents with market monopolies, there are historic confusion attempts by the FTC and JD between untried, uncontested, consent judgment settlements versus actual judicial precedents. Presenting the former as proof of the antitrust law soundness of legal-economic theories for which there is no clear judicial authority. [Sometimes referred to as “luncheon law” from where novel AT theories are often presented.] [If any other attorney did that in a courtroom they could be severely sanctioned.]
    In contrast, the FTC should be complimented on persisting in finally getting actual judicial AT decisions, including a Sup. Ct. decision, on the inherently AT suspect practice of “reverse payment” settlements in pharmaceutical patent cases.