Legal Definitions - Antitrust Guidelines for the Licensing of Intellectual Property

The Antitrust Guidelines for the Licensing of Intellectual Property are a set of official principles and criteria jointly issued by the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission (FTC). These guidelines explain how these government agencies evaluate agreements where intellectual property—such as patents, copyrights, trade secrets, or specialized technical know-how—is licensed from one party to another. Their purpose is to help the agencies determine whether specific restrictions or conditions within these licensing agreements might illegally reduce competition in the marketplace, potentially leading to an antitrust investigation or enforcement action.

Here are some examples of situations where these guidelines would be applied:

• Imagine a large pharmaceutical company that holds a patent for a groundbreaking new drug. When licensing this patent to several smaller drug manufacturers for production and distribution, the company includes a clause in the licensing agreement that prohibits the licensees from conducting any research or development on similar drugs, even those that would not infringe the original patent. The Antitrust Guidelines for the Licensing of Intellectual Property would be used by the FTC or Justice Department to assess whether this restriction goes beyond protecting the patent holder's rights and instead unfairly stifles innovation and competition in the broader pharmaceutical market.

• Consider a major technology firm that licenses its proprietary operating system to various computer manufacturers. The licensing agreement requires these manufacturers to also exclusively pre-install the technology firm's web browser and search engine on all computers sold with the operating system, even if the manufacturers or consumers prefer competing browsers or search engines. The government agencies would consult the Antitrust Guidelines to determine if this "tying" arrangement unfairly limits consumer choice and competition among web browser and search engine providers.

• Suppose a company has developed a unique, highly efficient manufacturing process (a trade secret and valuable know-how) that it licenses to a select group of factories. The licensing agreement stipulates that these factories must purchase all their specialized machinery and components exclusively from a single supplier designated by the licensor, even if other suppliers offer more competitive prices or superior products. The Antitrust Guidelines would be relevant in evaluating whether this exclusive purchasing requirement unfairly restricts competition among suppliers of manufacturing equipment and components, potentially harming the factories and ultimately consumers.