another item of intellectual property or a
good or a service has been held in some
cases to constitute illegal tying.” But,
it also states that “[a]lthough tying arrangements may result in anticompetitive
effects, such arrangements can . . . result
in significant efficiencies and procompeti-tive benefits.” In other words, if there is a
good reason (i.e., considering the totality
of the facts, commerce and free trade are
promoted), courts can allow an otherwise
illegal connections of separate pieces of
IP. Is your head hurting yet?
Pursuant to the Antitrust-IP
Guidelines, a court can consider both the
anticompetitive effects and the efficien-
cies attributable to a tie. The Feds are
likely to challenge a tying arrangement
if: “(1) the seller has market power
in the tying product, [which the Feds
will not presume necessarily just be-
cause the license involves a patent,
copyright, or trade secret]; (2) the ar-
rangement has an adverse effect on
competition in the relevant market
for the tied product; and ( 3) efficien-
cy justifications for the arrangement
do not outweigh the anticompetitive
effects.” If a package
license is found to con-
stitute tying, the Feds
will evaluate it using
the same rule of reason
principles they use to
analyze tying arrange-
ments that do not in-
volve IP.
Whether the legal
analysis applied to
intellectual property
bundling is some form
of the per se rule or the
more expansive rule of
reason, it will be incumbent upon a plaintiff to establish that a
defendant has market
power in the tying product.
Market power is not gonna
be presumed merely from
the existence of a patent.
Basically, the Feds
will take this approach.
Although the intellectual
property right (let’s say your
patent) confers the power
to exclude with respect to a
specific product, there will
often be sufficient actual or
potential close substitutes
that prevent the exercise of
market power. So, the Feds
will investigate the relevant
market to determine wheth-
er the intellectual property
at issue grants any market power in dol-
lars and cents. Even if such market power
is found, the Feds will further investigate
whether the business practice under scru-
tiny is likely to be anticompetitive on bal-
ance. Though some would say that the
risk of litigation is fairly small (that the
Feds or an individual plaintiff will come
after you for anti-trust), the state of the
law today makes risky contracts a bit too
dangerous. Be advised that if you decide
to sue upon the basis of a patent that has
been licensed in a bundling arrangement,
it may trigger an antitrust counterclaim.
One way to [offer] package licenses
and not get immediately hauled into court
is to make sure there’s an alternative to
the tied product that is readily available.
This approach does not provide a com-
plete out-of-harm’s way, the difficulty of
proving that the pricing bundle is suffi-
ciently coercive and the expense of bring-
ing an antitrust case may give you some
measure of comfort. However, when the
Feds do identify anticompetitive situa-
tions, they will usually pursue them.
I know. Where the hell does this leave
the C-suite trying to license a package of
IP? It tells us that we need to seek out an
anti-trust expert BEFORE negotiations
get too far down the pike. But, maybe
overarching all of this, is that it tells us
that the nuisance of doing so better be
worth the trouble.CW
“Multiple
intellectual
property rights
may be legally
combined into
bundles...There has
been considerable
judicial talent
thrown at trying
to come up with
bright line per se
guidelines.
