November 29, 2016 | Commentary on Property and Economic Rights
The Global Antitrust Institute (GAI) at George Mason University’s Antonin Scalia Law School released today a set of comments on the joint U.S. Department of Justice (DOJ) – Federal Trade Commission (FTC) August 12 Proposed Update to their 1995 Antitrust Guidelines for the Licensing of Intellectual Property (Proposed Update). As has been the case with previous GAI filings (see here, for example), today’s GAI Comments are thoughtful and on the mark.
For those of you who are pressed for time, the latest GAI comments make these major recommendations (summary in italics):
Standard Essential Patents (SEPs): The GAI Comments commended the DOJ and the FTC for preserving the principle that the antitrust framework is sufficient to address potential competition issues involving all IPRs—including both SEPs and non-SEPs. In doing so, the DOJ and the FTC correctly rejected the invitation to adopt a special brand of antitrust analysis for SEPs in which effects-based analysis was replaced with unique presumptions and burdens of proof.
Refusals to License: The GAI Comments expressed concern that the statements regarding refusals to license in Sections 2.1 and 3 of the Proposed Update seem to depart from the general enforcement approach set forth in the 2007 DOJ-FTC IP Report in which those two agencies stated that “[a]ntitrust liability for mere unilateral, unconditional refusals to license patents will not play a meaningful part in the interface between patent rights and antitrust protections.” The GAI recommended that the DOJ and the FTC incorporate this approach into the final version of their updated IP Guidelines.
“Unreasonable Conduct”: The GAI Comments recommended that Section 2.2 of the Proposed Update be revised to replace the phrase “unreasonable conduct” with a clear statement that the agencies will only condemn licensing restraints when anticompetitive effects outweigh procompetitive benefits.
R&D Markets: The GAI Comments urged the DOJ and the FTC to reconsider the inclusion (or, at the very least, substantially limit the use) of research and development (R&D) markets because: (1) the process of innovation is often highly speculative and decentralized, making it impossible to identify all market participants to be; (2) the optimal relationship between R&D and innovation is unknown; (3) the market structure most conducive to innovation is unknown; (4) the capacity to innovate is hard to monopolize given that the components of modern R&D—research scientists, engineers, software developers, laboratories, computer centers, etc.—are continuously available on the market; and (5) anticompetitive conduct can be challenged under the actual potential competition theory or at a later time.
While the GAI Comments are entirely on point, even if their recommendations are all adopted, much more needs to be done. The Proposed Update, while relatively sound, should be viewed in the larger context of the Obama Administration’s unfortunate use of antitrust policy to weaken patent rights (see my article here, for example). In addition to strengthening the revised Guidelines, as suggested by the GAI, the DOJ and the FTC should work with other component agencies of the next Administration – including the Patent Office and the White House – to signal enhanced respect for IP rights in general. In short, a general turnaround in IP policy is called for, in order to spur American innovation, which has been all too lacking in recent years.
This piece first appeared in Truth on the Market.