Intellectual property laws protect copyrights, trademarks, and patents and grant the owner somewhat of a monopoly to use those rights. Conversely, antitrust laws discourage any type of monopoly or behavior that would be considered anticompetitive. As expected, these two tenets of business in the United States inherently clash against each other at times.

While tension can be expected between these two sets of laws, knowing what happens when intellectual property laws clash with antitrust laws can help your business make better decisions and protect your legal rights.

Intellectual Property and Antitrust Laws

Those companies or persons that hold intellectual property rights must adhere to antitrust rules and regulations. The Sherman Antitrust Act governs the licensing and use of intellectual property and attempts to regulate the conduct of intellectual property owners who hold a substantial position in a specific market related to their trademark, copyright or patent.

Some businesses have attempted to circumvent antitrust and monopoly accusations by licensing their intellectual property through an exclusive or non-exclusive license to competitors. However, this type of transaction is governed by the Clayton Act and the Federal Trade Commission (FTC), as they relate to mergers and acquisition law. If a business sells or issues a license for a competitor to use their intellectual property, the FTC — the agency responsible for enforcing antitrust laws — will apply a merger analysis to determine any anti-competitive impact. Section 7 of the Clayton Act prohibits a merger if, ““in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”

Additional legal guidance on the intersection of intellectual property and antitrust laws are provided in:

  • The IP Guidelines. This set of guidelines established by the FTC and the Department of Justice (DOJ) in 1995, essentially acknowledged that intellectual property is an actual form of property, that intellectual property rights are not assumed to always create unfair power in a market, and that intellectual property allows companies to be competitive against each other.
  • FTC and DOJ Hearings. In 2007, these two agencies created a report called “The Joint Report” that provided further guidance regarding intellectual property rights.

Major Issues

While determining whether a clash between intellectual property rights and antitrust laws exists is very specific to certain set of facts and circumstances, in general, most legal enforcement agencies and courts have determined that intellectual property is pro-competitive in most situations. However, one major issue to consider when evaluating a potential antitrust violation is whether an intellectual property license is being granted in a horizontal relationship between two entities — one where there is competition in the market. Such a relationship does not indicate that a deal is anti-competitive, but rather it can assist in determining whether there may be any anti-competitive outcomes from a licensing agreement. Therefore, these transactions will be more closely scrutinized to determine if there are any per se antitrust violations.

Additionally, courts will look to see if the intellectual property somehow balances any anti-competitive effects with the pro-competitive effects. If a court determines that there are pro-competitive reasons to grant a licensing restraint for intellectual property, the above-mentioned enforcement agencies will look to see if that licensing restraint is considered “reasonably necessary” to achieve that benefit. (See, e.g., American Motor Inns v. Holiday Inn, 521 F.2d 1230, 1249-1250 (3d Cir. 1975).)

Contact an Experienced Intellectual Property Attorney

The law surrounding the nexus between intellectual property rights and antitrust law is complex. If you have any questions about how your intellectual property rights or business decisions may be affected or limited by antitrust laws, contact our experienced intellectual property attorneys at The Myers Law Group at 888-676-7211 or online today.