by Steve McDaniel, JD, PhD
Technology Litigators
You’ve developed a cool new ad- ditive for a broad spectrum of coatings – even those coatings
outside your own “wheelhouse” coatings. Happens a lot, right? In order to
maximize the return on your R&D investment bringing the additive to market, you begin licensing to others. You
start negotiating a license to your intellectual property surrounding the use of
this novel coating component. You have
a patent covering some aspects, you have
a trademark that delivers goodwill you
have developed in the product, and you
even have some copyrighted software
that can be used to predict formulating
mixtures. Integrating all of this disparate collection of intellectual property is
a lot of know-how, show-how and generalized trade secret information.
You’d like to extract maximal value
out of the hard-won trade secret portfolio, so you suggest to the other party that
you manufacture the coating component,
and that they agree to buy it from you as
a sole source (since you’re the only one
that has access to the trade secret treasure
chest). You might think licensing your
trade secrets would be just like licensing
your other intellectual property (e.g., patents, trademarks, copyrights, etc.). But,
there are some potholes along the road
that may prevent you from hauling your
licensing royalties to the bank.
Linking IP with products or with
other types of intellectual property is
done all the time. You may be offering
licenses that cover multiple patents or
copyrighted materials or you may connect (tie) the sale of two distinct patented goods. Or you might license or
good covered only by trade secret with
another patented good.
A classic “contractual” patent tying
occurs when the tying product (e.g., a
vapor deposition machine for coating
electrical devices) is patented, but the
tied product is not patented. Rather,
it is a raw material used as an input
for the tying product (spe-
cialized coatings that are
vapor deposited), and the
sale of the patented prod-
uct (machine) is condi-
tioned on the purchase of
the unpatented product
(coating). A “technologi-
cal tie” on the other hand
is one where the tying and
the tied product get bun-
dled together physically or
they are co-produced so
that are only useable with
each one another. The in-
famous U.S. government
suit against Microsoft in-
volved both the contrac-
tual and technological
bundling of the Internet
Explorer web browser (in
this case, the tied product)
with MicroSoft’s Windows
operating system (the ty-
ing product).
Multiple intellectual
property rights may be le-
gally combined into bundles
or packages. But, it has to be
done right. There has been
considerable judicial talent
thrown at trying to come up
with bright line per se guide-
lines making prediction pos-
sible. There are some bright
lines. For instance, illegal
mandatory package licens-
ing occurs when a patent owner refuses to
license a particular patent unless a licens-
ee accepts an entire package (or where the
patent owner’s royalty scale has the same
result). It would be helpful if courts had
taken a consistent analytical approach
to tying and bundling cases involving
intellectual property. But, they have not
(employment insurance for lawyers).
This has been the underlying impetus
for the FTC’s laying out a “rule of reason” approach to intellectual property
bundling as is reflected in its Antitrust
Guidelines for the Licensing of Intellectual
Property (“Antitrust-IP Guidelines”). The
Antitrust-IP Guidelines recognize that
“[c]onditioning the ability of a licensee
to license one or more items of intellectual property on the licensee’s purchase of
Tying and Bundling - Nice For Your Holiday Giving,
Not so Much When You’re Licensing Your IP
