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The Â鶹´«Ã½ Trade Commission and the Justice Department today announced guidelines stating their policy regarding the enforcement of U.S. antitrust laws with respect to licensing of intellectual property that is protected by patent, copyright, and trade secret laws, and of know-how. The guides are based on the premise that intellectual-property licensing generally benefits consumers by promoting innovation toward new and useful products and more efficient processes, and by enhancing competition. Therefore, the guides establish a safety zone for intellectual property licensing arrangements among entities that collectively account for no more than 20 percent of each relevant market affected by the restraint when the restraint is not anticompetitive on its face. The guides also state that some licensing arrangements involving intellectual property may raise antitrust issues, so the guides lay out the basic framework the agencies will use in analyzing such arrangements, interspersing examples to illustrate the analysis.

The goal of the guides is to help businesses and others predict when certain conduct might be challenged as anticompeti tive. The FTC and Justice note in the guides that they apply the same general antitrust principles to conduct involving intellec tual property as they do to conduct involving other forms of

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tangible or intangible property, adding that "market power that is solely 'a consequence of a superior product, business acumen, or historic accident' does not violate antitrust laws."

The guides state that the agencies "will not require the owner of intellectual property to create competition in its own technology." According to the guides, however, antitrust issues may arise when a licensing arrangement reduces competition among entities that would have been actual or likely potential competitors in a relevant market in the absence of the license. A licensing restraint may harm such competition if, for example, it facilitates market division or price fixing. In addition, the
guides state, license restrictions in one market may harm such competition in another market by anticompetitively foreclosing access to, or significantly raising the price of, an important component or other input, or by making it easier to engage in coordinated action to raise prices or reduce output.

The guides describe how the agencies determine the relevant market (or markets) in which to analyze the effects of intellec tual-property licensing arrangements. These markets could be
comprised of goods or services, technology, and/or research and development efforts, depending on the circumstances of the licen sing arrangement. The guides then describe how the agencies will evaluate a licensing arrangement's competitive significance. Where the conduct contributes to efficiency-enhancing economic integration, it will be analyzed under the "rule of reason," an
inquiry focusing on whether the conduct has likely anticompeti tive effects and whether it is reasonably necessary to achieve procompetitive benefits that outweigh them. The guides state
that restraints in intellectual-property licensing arrangements are evaluated under the rule of reason "[i]n the vast majority of cases...." In other cases, such as naked price fixing, a restraint's likely effects are so "plainly anticompetitive" as to require challenge under the per se rule without an elaborate
inquiry into the restraint's likely competitive effect, according to the guides.

The new guides also provide more specific discussion of certain areas of antitrust law, including:

• resale price maintenance, whereby the licensor of a product fixes the licensee's resale price for the product;

• tying arrangements, or arrangements that condition the ability of a licensee to license one item of intellectual property on its purchase of another;

• exclusive dealing arrangements; Intellectual Property Guides--04/06/95)

• cross-licensing, where two or more owners of different technologies license each other's technologies, and pooling arrangements where others join in the licensing arrangements; and

• grantbacks, arrangements under which licensees give licensors the right to use the licensees' improvements to the technology.

The Â鶹´«Ã½ Trade Commission vote to approve the DOJ/FTC Antitrust Guidelines for the Licensing of Intellectual Property was 4-0. Copies of the guides are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

(FTC Matter No. P859910)