In the United States, antitrust law and intellectual property (IP) law are two complementary bodies of law, each designed to promote innovation, market competition and consumer welfare.2 However, holders of intellectual property rights (IPRs) are not exempt from the application of US antitrust laws, and may not protect or enforce their rights in a manner that unfairly eliminates competition.3
Antitrust law in the United States is primarily federal law, codified in three main statutes under Title 15 of the United States Code (USC), namely: the Sherman Act, the Clayton Act and the Federal Trade Commission Act (the FTC Act).4 The Sherman Act prohibits agreements in restraint of trade and bars unilateral conduct that monopolises or constitutes an attempt to monopolise a given market.5 The Clayton Act, which governs mergers and acquisitions, prohibits mergers and acquisitions that substantially lessen competition or tend to create a monopoly.6 Finally, the FTC Act broadly prohibits the use of any unfair methods of competition and any unfair or deceptive acts or practices that affect commerce.7 In the United States, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) (together, the Agencies) share jurisdiction for enforcing federal antitrust law.8
In addition to the antitrust statutes and the case law interpreting them, the DOJ and FTC have released the Antitrust Guidelines for the Licensing of Intellectual Property to help IPR holders comply with their antitrust obligations when licensing IP (the Guidelines). In January 2017, the Agencies released an update to their original Guidelines, published in 1995, which included recent precedent cases and incorporated certain sections of the 2010 Horizontal Merger Guidelines.9 The 2017 Guidelines, like the original 1995 Guidelines, emphasise three main principles: (1) for antitrust purposes, the Agencies apply the same framework for analysing IP as they do for tangible property; (2) an IP right does not by itself confer market power on its recipient, within the meaning of antitrust law; and (3) licensing IP can enable firms to achieve more efficient production and is generally viewed as pro-competitive.10 However, the updated Guidelines do not address several important and controversial topics, such as the Agencies' approach to patent assertion entities, standard-essential patents (SEPs) and the evaluation of fair, reasonable and non-discriminatory (FRAND) terms under the antitrust laws. In 2019, the DOJ, along with the USPTO and NIST, issued a new joint policy statement to clarify its position on SEPs.11 The 2019 policy statement explains that SEPs are to be treated no differently than other patents, and all remedies (including injunctions) should be available when SEPs are infringed, depending on the facts of the case.
The federal antitrust statutes, their associated case law and the Agencies' Guidelines and policy statements are the primary resources with which practitioners who operate at the intersection of US antitrust and IP law should be familiar. This chapter provides a high-level overview of those authorities and highlights some of the key issues specific to the juncture of antitrust and IP law in the United States.
II YEAR IN REVIEW
The 2019 calendar year was a busy one for both the courts and the Agencies with respect to antitrust and IP matters.
In January 2017, shortly before President Trump's inauguration, the FTC filed a complaint against Qualcomm alleging that the company, the world's largest supplier of baseband processors for cellular devices, engaged in unfair competition in violation of the FTC Act by, among other things, requiring its customers to pay royalties under a licence agreement with Qualcomm before Qualcomm would agree to sell processors to handset manufacturers (known as the 'no licence, no chips' policy), refusing to license SEPs to its competitors and requiring Apple to agree that it would exclusively source processors from Qualcomm in exchange for reduced royalties.12 In June 2017, the court denied Qualcomm's motion to dismiss the FTC's complaint.13 In mid-2018, the court granted summary judgment to the FTC holding that Qualcomm had a duty, based on its contractual (FRAND) commitments to standard setting organisations, to license rival chipmakers contrary to its policy of licensing only handset makers. On 21 May 2019, following a bench trial beginning in late 2018, the court issued its findings of fact and conclusions of law, holding that Qualcomm's licensing policies violated both Section 1 and Section 2 of the Sherman Act. The court concluded that Qualcomm employed its monopolies in two modem chip markets to coerce mobile phone handset manufacturers to license its patents and pay 'unreasonably high' royalties and that Qualcomm violated an antitrust duty (in addition to its FRAND duty) to license its SEPs to rival modem chip manufacturers. The court enjoined Qualcomm from engaging in these practices going forward, and required it to renegotiate its prior licences.
Qualcomm appealed the district court decision to the Ninth Circuit. On appeal, Qualcomm asked the Ninth Circuit to reverse or vacate the district court's injunction, arguing that (1) Qualcomm is not subject to an antitrust duty to deal requiring that it grant exclusive licences to its chip rivals; (2) royalties that original equipment manufacturers (OEMs) paid to Qualcomm were not an unreasonable surcharge; (3) Qualcomm's chip discounting agreements with OEMs are not prohibited exclusive dealing arrangements; and (4) Qualcomm's FRAND commitments to standard setting organisations were ambiguous and did not require it to grant licences to its chip rivals.14 In its answering brief, the FTC argued that the district court properly enjoined Qualcomm and correctly held that (1) Qualcomm harmed competition by imposing a surcharge on rivals' chips; (2) Qualcomm's breach of its commitments to license competitors was anticompetitive; and (3) Qualcomm engaged in anticompetitive exclusive dealing with Apple.15 The DOJ filed an amicus brief on behalf of the United States, arguing that (1) Qualcomm should not have been liable for antitrust violations because the required element of harm to competition was not met; (2) Qualcomm's refusal to license its SEPs was not anticompetitive because it maximized its profits independent of any potential effect on competition; and (3) the district court's expansive compulsory licensing remedy was too broad, potentially hindering innovation in 5G technologies and compromising national security.16 In February 2020, the Ninth Circuit heard oral arguments from Qualcomm, the FTC, and the DOJ. The district court's decision, if it stands on appeal, may well upend the cellular industry just as 5G is being implemented.17
The year 2019 also saw continued policy changes regarding IP antitrust enforcement at the DOJ and FTC. Assistant Attorney General Delrahim, the head of the Antitrust Division at the DOJ, repeatedly stated that antitrust policy in the Agencies had swung too far in favour of technology implementers; that standard-setting behaviour by patent owners can be adequately addressed under contract and fraud principles and does not implicate antitrust law; and that antitrust enforcement policy must adequately protect innovation and the legitimate interests of patent owners. He also continued to promote a 'New Madison' approach for antitrust enforcement relating to SEPs that the patent owner has committed to license on FRAND terms, that he first announced in 2017, based on the following principles: (1) FRAND is not a compulsory licensing scheme; (2) unilateral refusals to license should be per se lawful; (3) patent 'hold-out' by implementers is a more serious problem than 'holdup' by patent owners; and (4) standards-setting organisation (SSO) rules that 'skew the bargain in the direction of implementers warrant a close look to determine whether they are the product of collusive behaviour'.18 FTC chair, Joseph Simons, has indicated that he agrees at least in part with the DOJ's new approach, saying in a September 2018 address that the FTC 'agree[s] with the leadership of the Department of Justice Antitrust Division that a breach of a FRAND commitment, standing alone, is not sufficient to support a Sherman Act case, and the same is true even for a fraudulent promise to abide by a FRAND commitment' and that the FTC also 'agree[s] with the Division that hold-out in the standard-setting process can raise serious concerns under antitrust law when such hold-out is the result of collusion among potential adopters/licensees'.19 Simons' views stand in contrast to those of former FTC Commissioner, Terrell McSweeny, who disapproved of the New Madison approach.20 In December 2019, the DOJ, USPTO, and NIST released a joint policy statement withdrawing a prior policy statement from 2013. The new policy statement rejects the use of a special set of legal rules limiting remedies for infringement of SEPs subject to FRAND commitments, arguing that such a stance is consistent with United States case law.21
Courts also addressed other aspects of SEP licensing. In December 2017, a district court in California issued a decision determining worldwide FRAND royalty rates for a wireless SEP portfolio. The court used both a 'top-down' patent counting approach, and an analysis of the patent owner's comparable licences, to determine FRAND royalty rates for its portfolio of more than 100 patent families essential to one or more of the 2G, 3G or 4G wireless standards. The top-down approach generally attempts to determine the value to the accused device of the universe of all SEPs and then asks what share of that total value the patent owner should obtain as a result of its numerical share of all SEPs. After determining the FRAND rate, the court held that while the patent owner's prior offers to the potential licensee were not FRAND, it had not negotiated in bad faith, and the court refrained from ruling whether the patent owner had been obliged by its FRAND declarations to the relevant SSO to offer a FRAND rate from the start of licence negotiations.22 In December 2019, the Federal Circuit vacated and remanded the California district court's decision on the ground that the Seventh Amendment of the United States Constitution gives a SEP holder the right to a jury trial to determine compensation for past infringement of SEPs.23 In response to the Federal Circuit's remand, the district judge in April 2020 ordered a jury trial.24
Also in 2019, two district courts addressed and reached different conclusions on whether FRAND commitments require FRAND licences to be based on the smallest saleable patent practising unit (SSPPU) of cellular handsets. In Qualcomm, the court found that royalties should be based on SSPPU (modem chips), while in HTC the court concluded that, under French law, a FRAND commitment does not require the FRAND licence to be based on SSPPU.25 Notably, the final judgment in HTC was appealed to the Fifth Circuit, where the DOJ and USPTO filed an amicus brief in October 2019. In their brief, the DOJ and USPTO reject a SSPPU rule for SEP licences as contrary to sound innovation policy, arguing that market-based evidence can be used to 'demonstrate that an offer is FRAND by showing what others have agreed to in comparable licenses', and parties should be given the flexibility 'to enter into licenses that meet their business needs in different contexts'.26
Courts were asked to further define the contours of FRAND commitments and SEP licensing in Continental v. Avanci. On 10 May 2019, Continental sued Avanci, Nokia Corp. and other technology companies in a district court in California.27 Continental alleged that the technology companies (1) reneged on their FRAND commitments, (2) colluded with Avanci, a patent licensing company, to license SEPs on non-FRAND terms and only to manufacturers at the end of a supply chain, but not component suppliers, and (3) engaged in price fixing or illegal tying by bundling non-SEPs with true SEPs in collective licensing.28 On 11 December 2019, the case was transferred to a district court in Texas, where the case is still pending, on the basis that most of the alleged conspiracy occurred in that state.29
Courts were also busy in 2018 and early 2019 with a number of decisions revamping the contours of US patent law with implications for cases also raising competition issues. The Supreme Court allowed exceptions to the bar against antitrust claims by indirect-purchasers in Apple Inc. v. Pepper, holding that, while app developers set the prices of their products sold through Apple's App Store, purchasers bought the products directly from Apple, and were thus permissible antitrust plaintiffs.30 In another decision, the Court ruled that patent owners may recover foreign lost profits in certain circumstances, reversing long-standing doctrine.31
The Federal Circuit Court of Appeals, which is responsible for appeals from patent cases, ruled in 2018 that whether a patent may be held invalid for claiming unpatentable subject matter (such as abstract ideas or scientific principles) cannot generally be decided summarily, before fact issues have been resolved.32 That Court also held that its exclusive jurisdiction over patent cases does not extend to Walker Process antitrust claims, where the anticompetitive conduct is premised upon the attempted enforcement of a fraudulently obtained patent.33
Courts also issued antitrust decisions regarding patent assertion entities, which may aggregate large portfolios of patents in order to license or enforce them through litigation. In Intellectual Ventures, the plaintiff alleged that Intellectual Ventures' anticompetitive conduct included securing a large portfolio of banking patents, concealing the contents of that portfolio so that the banks could not determine if they needed a licence, and then serially litigating against banks to license the entire portfolio for high royalties. The district court refused to reject the plaintiff's market definition, which claimed the entire portfolio as a relevant market, and expressed concern about Intellectual Ventures' conduct, but dismissed the antitrust claims on First Amendment and collateral estoppel grounds.34 In Cascades, a patent assertion entity brought antitrust claims against companies that refused to license its patents. The court dismissed the claims after the patent was found not infringed, a decision upheld by the Ninth Circuit.35
III LICENSING AND ANTITRUST
Licensing intellectual property can help lead to efficient combinations of inputs and thereby benefit both licensees and consumers, who gain access to new products and less costly goods and services.36 Notwithstanding its pro-competitive virtues, the process of licensing intellectual property can, however, also be exploited to harm competition; for instance, by eliminating actual or potential competitors who would have existed if not for a restrictive licensing arrangement.37 While the Agencies and courts have held that a firm's unilateral refusal to license IP to a competitor is not by itself a violation of the antitrust laws (noting that such a rule could sharply diminish the incentives firms have to invest in ex ante research and development), IPR holders are not exempt from the application of the antitrust laws and thus must avoid engaging in conduct that may have anticompetitive effects.38
As noted, the DOJ and FTC issued a modest refresh to their original Guidelines in early 2017 to reflect intervening developments in statutory and case law.39 The Guidelines emphasise that, in evaluating licensing agreements, the Agencies adopt an effects-based framework with a focus on the actual or likely effects the licence will have on competition.40 Since licensing is generally viewed as pro-competitive, most restrictions in licensing arrangements are evaluated under the 'rule of reason' (simplified, a balancing between the pro-competitive and anticompetitive effects of the alleged conduct),41 rather than the 'per se' rule (under which the conduct at issue is deemed anticompetitive without proof that the conduct had an adverse effect on competition). Perhaps the most notable change in the 2017 Guidelines was to reflect the Supreme Court's June 2007 holding in Leegin Creative Leather Products v. PSKS that minimum resale price maintenance, the practice of setting a minimum price at which a good can be resold, is not per se illegal (as had been reflected in the 1995 Guidelines), but must instead be analysed under the rule of reason.42
The 2017 Guidelines also clarified the parameters of the antitrust 'safety zone', a doctrine intended to aid business planning. The safety zone provides that, in the absence of 'extraordinary circumstances', the Agencies will not challenge a restraint contained in an IP licence provided that the restraint is not anticompetitive on its face (for instance, one that facilitates price-fixing or output restrictions), and that the licensor and the licensee's combined shares for the relevant affected market is below 20 per cent.43 Practitioners should be aware that, while particular licence conditions or restraints may not necessarily run afoul of the antitrust laws, these licence provisions must also be evaluated under other doctrines such as the judicial doctrine (in the case of patents) or the statutory provisions (in the case of copyright) governing exhaustion.
IV STANDARD-ESSENTIAL PATENTS
Collaboratively setting standards for technologies is important to a variety of industries, as the practice facilitates the creation of follow-on inventions while promoting future innovation and interoperability of products.44 However, standard setting may also raise antitrust issues, such as when a patent gains additional market power when the patented technology becomes adopted as part of an industry standard and the patent becomes a SEP. In such an event, the patent's value may increase because it can be used to block implementation of the standard, and the patent owner may attempt to exploit this newly acquired leverage by refusing to license the standard-essential technology unless licensees agree to excessively high royalties (a practice commonly referred to as 'patent holdup').45 In essence, the adoption of patented technology into a standard may confer market power on the patent holder that would otherwise not have existed, and that market power may then be abused if not constrained. If many holders of SEPs engage in patent holdup, the aggregate royalties for patents essential to a given standard may actually be greater than the value of the actual feature, or indeed the product incorporating the feature.46
In response to these issues, and to minimise exploitative licensing, many SSOs ask that patent holders who wish to have their technology considered for incorporation into the industry standard voluntarily pledge to license their patents on FRAND terms. FRAND commitments serve several salutary purposes: linking patent holders with those who incorporate and implement patented technologies; ensuring royalties more closely reflect the actual value of the patent by minimising the surplus attributable solely to adoption of the patented technology into the standard; and incentivising patent holders to put forth their best technology to be standardised. Of course, SSO participation is voluntary and SSO FRAND principles address only the constraints on participating patentees. Other doctrines, including the fact that the patent statute allows for damages in an amount of a 'reasonable' royalty, have been used to curtail royalty demands based on factors other than the actual value of the patented technology to the allegedly infringing device.
SSOs typically do not 'set' a FRAND rate or other terms. In most cases, the SEP holder and licensee attempt to agree on what would constitute FRAND terms and then execute a licence agreement reflecting those terms after successful negotiations. However, the FRAND commitment to the SSO generally is considered a binding commitment that runs with the patent, and may be enforced by a prospective licensee as a third-party beneficiary of the SSO commitment. A breach of a commitment to license on FRAND terms may constitute grounds for an antitrust suit by one injured as a result of the breach. When it comes to policing compliance with FRAND commitments, US antitrust law operates more as a backstop than a primary check on SEP licensing, with the Agencies primarily acting as competition advocates that assist SSOs through a variety of Agency programmes to craft clear guidance for patent holders. Indeed, the Agencies generally refrain from intervention in private licence negotiations unless a patent holder's failure to honour its FRAND commitment is deliberate and rises to the level of an antitrust violation under Section 2 of the Sherman Act.47 Indeed, former Assistant Attorney General Bill Baer in a September 2015 speech at the 19th Annual International Bar Association Competition Conference emphasised that the Agencies, in line with their European counterparts, will not intervene in basic commercial disputes over royalty rates in the absence of bad conduct by the patent holder or improper use of market power.48
Exactly what 'fair, reasonable and non-discriminatory' means in the licensing context, however, remains sometimes controversial and largely unsettled. Although jurists and agencies in Europe have been more active in defining both what constitutes a FRAND rate and the process parties should engage in to get there,49 currently there is less guidance in the United States. While several district courts – most recently in the 201850 and 201951 TCL decisions and the 2019 Ericsson decision52 – and one appellate court53 have directly addressed the issue, determinations of FRAND terms are highly fact-specific and may vary widely depending on the patents, standards and products at issue.54 Thus, the Agencies have been mostly silent on what specifically constitutes FRAND licensing, and the courts have avoided applying bright-line tests. Instead, US courts defining FRAND have considered the rates in 'comparable' licences for similar technologies and patents, the rates for patent pools with respect to standards, the objective value of the patent to the standard, the availability of alternatives and their quality, whether the patent covers the core features of the standard, the possibility of royalty stacking, and the number of essential patents that may read on a particular standard.
In 2015, the US Court of Appeals for the Federal Circuit decided Commonwealth Science and Industry Research Organisation (CSIRO ) v. Cisco Systems, a case involving certain technologies incorporated into the IEEE 802.11 Wi-Fi standard.55 The Federal Circuit held that, while the smallest saleable patent practising unit is one appropriate base for calculating damages, it is not the exclusive method for apportioning the value of a patent to the allegedly infringing product, especially if the record indicates that the parties actually negotiated a different base in reality.56 The CSIRO decision also emphasised that, in determining whether a given royalty is excessive, the actual cumulative royalty paid by the implementer must be proven and the implementer may not rely on abstract recitations alleging royalty stacking or qualitative assertions of the value of inventions without some quantitative evidence.57 The CSIRO decision's focus on actual quantitative evidence is thus consistent with the Federal Circuit's 2014 decision in Ericsson v. D-Link. D-Link involved the adjudication of whether Ericsson had complied with its obligation to license a patent essential to the IEEE 802.11 Wi-Fi standard on FRAND terms, and held that in determining FRAND damages, concerns about patent holdup must be proven using specific facts from the case, rather than on the basis of theory or general probability.58 In January 2019, the US District Court for the Eastern District of Texas held that, as a matter of French law, the FRAND commitment does not require a FRAND licence to be based on the smallest saleable patent practising unit.59 The final judgment in this case is currently on appeal in the Fifth Circuit. In contrast, the FTC v. Qualcomm court granted the FTC's motion for partial summary judgment in November 2018, holding that FRAND licensing obligations required Qualcomm to license its SEPs to competing modem chip suppliers.60 The same Court later found, in May 2019, that basing royalties on handset value, rather than on the value of modem chips, was contrary to the Federal Circuit's approach to royalty apportionment and that modem chips were the smallest saleable patent practising unit in cellular handsets.61 This case is currently on appeal in the Ninth Circuit.
V INTELLECTUAL PROPERTY AND MERGERS
In the United States, all mergers and acquisitions, whether or not they involve transfers of IPRs, must comply with Section 7 of the Clayton Act, which prohibits mergers and acquisitions that substantially lessen competition or tend to create a monopoly.62 In addition, practitioners need to be aware that certain transactions that exceed a certain minimum dollar amount in value must be reported to the FTC and the Antitrust Division of the DOJ before consummation, pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act).63 The HSR Act establishes a waiting period before acquisitions that exceed the threshold may close to give the Agencies sufficient time to scrutinise more closely mergers of a certain size.
Furthermore, the 2017 Guidelines state the Agencies' position that complete sales of IPRs and transfers of exclusive IP licences will be treated as analogous to mergers and thus are subject to the guidance contained in the 2010 Horizontal Merger Guidelines (another DOJ and FTC joint release).64 Importantly, such 'mergers' will not be eligible for treatment under the safety zone for licensing restraints set out in Section 4.3 of the 2017 Guidelines.
As for substantive evaluations of acquisitions, the 2017 Guidelines again emphasise that in evaluating conduct, the Agencies adopt an effects-based framework with a focus on the actual or likely effects on competition and not the potential harms to any individual competitor. For example, the Agencies have approved certain acquisitions subject to conditions aimed at restoring the competition eliminated as a result of the transaction, such as requiring the acquirer to agree to divest certain IPRs. In July 2016, the DOJ agreed to a settlement with Anheuser-Busch InBev (ABI) as part of ABI's acquisition of SABMiller, requiring ABI to, among other things, divest itself of SABMiller's US business and the worldwide brand rights to Miller beer.65 Similarly, in November 2019, the FTC agreed to a settlement with Bristol-Myers Squibb Company (BMS) in connection with BMS' acquisition of Celgene Corporation, requiring BMS to divest Celgene's Otezla business, including the Otezla trademark and other IP.66
VI OTHER ABUSES
Sham litigation and pay-for-delay cases in the pharmaceutical industry continued to gain the attention of the Agencies and courts in 2017. Given the different marketing approval processes for brand-name and generic drugs in the United States, brand-name drug manufacturers have a government-granted monopoly in the market for their drug until a generic competitor is eligible to receive Food and Drug Administration (FDA) approval and actually receives it. Both private parties and the Agencies have alleged that certain brand-name drug companies from time to time seek to limit the onset of generic competition; for example, by offering generic competitors payments to delay filing their Abbreviated New Drug Application for their generic (reverse payments) or by filing sham patent infringement lawsuits and citizen petitions in an effort to delay the onset of generic competition.67 As a general matter, any payments to generic drug manufacturers by brand-name producers are evaluated under the rule of reason because this conduct can have pro-competitive effects.68 While petitioning the government to enforce one's patents is generally considered to be 'speech', protected by the US Constitution under the Noerr–Pennington doctrine, infringement litigation can lose this protection and become subject to antitrust scrutiny when the asserted patents are obtained by fraud, or the litigation claims are objectively baseless and asserted to protect a monopoly.69
In March 2016, the FTC filed a complaint against Endo Pharmaceuticals Inc and others, alleging the companies violated antitrust laws on a pay-for-delay theory, which had the effect of blocking consumers' access to lower-cost generics.70 Specifically, the complaint alleges that Endo not only paid Impax Laboratories and Watson Laboratories – which market Opana ER and Lidoderm respectively – not to file for FDA approval of their generic equivalents, but also agreed as consideration not to market their own generic (known as an authorised generic (AG)) to compete with Opana and Lidoderm, once the generic versions finally did hit the market.71 The case was notable not only because Impax and Watson were the first generic companies to file for marketing approval, but also because it marked the first time the FTC has sought to challenge a 'no-AG commitment' as an anticompetitive reverse payment.72 In early 2017, the FTC settled the case against Endo with a consent judgment prohibiting Endo from engaging in similar conduct in the future, but it maintained the cases against Impax and Watson.73 Following trial against Impax, an administrative law judge dismissed the FTC's claims, holding that (1) Impax likely would not have entered the market earlier; (2) the risk of harm from the settlement was 'largely theoretical,' even though it included a payment to prevent the risk of competition; and (3) the pro-competitive benefits of the settlement were substantial.74 In March 2019, the FTC reversed the administrative law judge's initial decision following an appeal by complaint counsel, ruling that Impax engaged in an illegal pay-for-delay (or 'reverse payment') settlement blocking consumer access to lower-cost generics.75 In June 2019, Impax filed a petition for review, which is currently pending in the Fifth Circuit.
VII OUTLOOK AND CONCLUSIONS
As made evident by the 2019 joint policy statement and the DOJ's involvement in various federal court cases, the regulatory pendulum has moved to a more favourable position than in previous administrations towards patent holders. The Qualcomm appeal, however, shows some discord among regulators in following this trend.
Globally, the trend in recent years towards harmonisation of competition laws as they are applied to IP has continued, with new focus on the meaning and consequences of the patent owner's FRAND commitment by courts in the US, the UK, Germany, Japan and China.
In the year ahead, we look forward to continued development of the law at the intersection of antitrust and IP, either through agency guidance and litigation, private litigation or both.
1 Garrard Beeney and Renata Hesse are partners at Sullivan & Cromwell LLP. The authors wish to acknowledge the valuable contribution to this chapter by Franklin Liu, Thomas Leuba and Betsy Silverstein.
2 Atari Games Corp v. Nintendo of America, Inc, 897 F 2d 1572, 1576 (Fed Cir 1990); Antitrust Guidelines for the Licensing of Intellectual Property Section 1.0, Department of Justice and Federal Trade Commission (2017), available at www.justice.gov/atr/IPguidelines/download (the 2017 Guidelines).
3 2017 Guidelines, Section 2.1.
4 The Antitrust Laws, Federal Trade Commission, www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws.
5 Sherman Act, 15 USC Sections 1 and 2.
6 Clayton Act, 15 USC Section 18.
7 FTC Act, 15 USC Section 45.
8 The Enforcers, Federal Trade Commission, www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/enforcers.
9 DOJ and FTC Issue Updated Antitrust Guidelines for the Licensing of Intellectual Property, DOJ, www.justice.gov/opa/pr/doj-and-ftc-issue-updated-antitrust-guidelines-licensing-intellectual-property.
10 2017 Guidelines at 2; see Illinois Tool Works v. Independent Ink, Inc, 547 US 28, 45 and 46 (2006).
11 US Dep't of Justice, US Pat. & Trade Off., and Nat'l Inst. of Standards and Tech., Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (19 December 2019).
12 Complaint, FTC v. Qualcomm Inc, No. 5:17-cv-00220 (N D Cal, 17 January 2017).
13 FTC v. Qualcomm Inc, 2017 WL 2774406 (N D Cal, 26 June 2017). Following President Trump's inauguration, his new acting FTC chair, Maureen Ohlhausen (who had previously been the only FTC Commissioner to vote against suing Qualcomm), stated that she was worried that the case would fuel attacks on US IPRs by antitrust agencies in Asia and elsewhere. This led to speculation that the FTC might consider settling or dropping the action, but so far it has not done so. Indeed, the court ruled largely in favour of the FTC in May 2019, and Qualcomm has appealed to the Ninth Circuit.
14 Brief of Appellant Qualcomm Incorporated, FTC v. Qualcomm, No. 19-16122 (9th Circuit 27 August 2019).
15 Brief of the Federal Trade Commission, FTC v. Qualcomm, No. 19-16122 (9th Circuit 22 November 2019).
16 Brief of the United States of America as Amicus Curiae in Support of Appellant and Vacatur, FTC v. Qualcomm Inc., No. 19-16122 (9th Circuit 30 August 2019).
17 FTC v. Qualcomm Inc, 411 F. Supp. 3d 658 (N D Cal, 21 May 2019). The district court has since granted Qualcomm's motion to stay the court's decision pending the appeal to the Ninth Circuit.
18 ''Don't Stop Thinking About Tomorrow': Promoting Innovation by Ensuring Market-Based Application of Antirust to Intellectual Property', Assistant Attorney General Makan Delrahim Delivers Remarks at the Organisation for Economic Co-Operation and Development In Paris, 6 June, 2019, available at https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-organisation-economic-co; 'Antitrust Law and Patent Licensing in the New Wild West', Makan Delrahim, Assistant Attorney General, Antitrust Division, US Department of Justice Delivers Remarks at IAM's Patent Licensing Conference in San Francisco, 18 September 2018, available at www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-iam-s-patent-licensing; 'The “New Madison” Approach to Antitrust and Intellectual Property Law', Makan Delrahim Delivers Keynote Address at University of Pennsylvania Law School, 16 March 2018, available at www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-university; Makan Delrahim Delivers Remarks at the USC Gould School of Law's Center for Transnational Law and Business Conference, 10 November 2017 (the 2017 AAG Delrahim Speech), available at www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-usc-gould-school-laws-center.
19 Prepared Remarks of Chairman Joseph Simons Georgetown Law Global Antitrust Enforcement Symposium, 25 September 2018, available at www.ftc.gov/system/files/documents/public_statements/1413340/simons_georgetown_lunch_address_9-25-18.pdf.
20 'Holding the Line on Patent Holdup: Why Antitrust Enforcement Matters', Terrell McSweeny, Commissioner of the Federal Trade Commission, 21 March 2018, available at www.ftc.gov/system/files/documents/public_statements/1350033/mcsweeny_-_the_reality_of_patent_hold-up_3-21-18.pdf.
21 US Dep't of Justice, US Pat. & Trade Off., and Nat'l Inst. of Standards and Tech., Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (19 December 2019).
22 TCL Communication Technology Holdings v. Telefonaktiebolaget LM Ericsson, 2017 WL 6611635 (C D Cal, 21 December 2017).
23 TCL Communication Technology Holdings v. Telefonaktiebolaget LM Ericsson, 943 F.3d 1360 (Fed Cir 2019).
24 TCL Communication Technology Holdings v. Telefonaktiebolaget LM Ericsson, No. SACV 14-341, Dkt 2015 (C D Cal, 3 April 2020).
25 FTC v. Qualcomm, Inc, 411 F. Supp. 3d 658 (N D Cal, 21 May 2019); HTC Corp v. Telefonaktiebolaget LM Ericsson, 2019 WL 126980 (E D Tex, 7 January 2019).
26 Brief of the United States of America as Amicus Curiae in Support of Neither Party, HTC Corp v. Telefonaktiebolaget LM Ericsson, (No. 19-40566, 19-40643), 17–18, 23 ('If the court adopts a rule that FRAND requires SSPPU to be used as the royalty base, all FRAND licenses that do not follow this model could be subject to antitrust challenge and possibly treble damages.').
27 Continental Auto. Sys. Inc. v. Avanci, LLC, No. 19-cv-02933-M, Dkt 1 (N D Tex 10 May 2019).
28 Continental Auto. Sys. Inc. v. Avanci, LLC, No. 19-cv-02933-M, Dkt 97 (N D Tex 23 July 2019).
29 Continental Auto. Sys. Inc. v. Avanci, LLC, 2019 WL 6735604 (N D Tex 11 December 2019).
30 139 S Ct 1514 (2019). In Illinois Brick Co v. Illinois, 431 US 720 (1977), the Court had previously prohibited indirect-purchaser claims.
31 WesternGeco LLC v. 101 Geophysical Corp, 138 S Ct 2129, 2139 (2018).
32 Aatrix Software, Inc v. Green Shades Software, Inc, 882 F 3d 1121, 1125 and 1126 (Fed Cir 2018); Berkheimer v. HP Inc, 881 F 3d 1360, 1369 and 1370 (Fed Cir 2018).
33 Xitronix Corp v. KLA-Tencor Corp, 882 F 3d 1075 (Fed Cir 2018).
34 280 F Supp 3d 691 (D Md 2017).
35 Cascades Computer Innovation v. RPX Corp, 2013 WL 6247594 (N D Cal, 23 February 2016), aff'd, 719 Fed Appx 553 (Ninth Circuit 2017).
36 2017 Guidelines, Section 2.3.
37 United States v. Paramount Pictures, 334 US 131, 144 (1948).
38 Verizon Commcunications Inc v. Law Offices of Curtis V Trinko, LLP, 540 US 398, 407 and 408 (2004).
39 2017 Guidelines.
40 id. at Section 3.1.
41 id. at Section 3.4.
42 id. at Section 5.2; see Leegin Creative Leather Products, Inc v. PSKS, Inc, 551 US 877 (2007).
43 2017 Guidelines, Section 4.3.
44 ''Don't Stop Thinking About Tomorrow': Promoting Innovation by Ensuring Market-Based Application of Antirust to Intellectual Property', Assistant Attorney General Makan Delrahim Delivers Remarks at the Organisation for Economic Co-Operation and Development In Paris, 6 June, 2019, available at https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-organisation-economic-co; ''Telegraph Road': Incentivizing Innovation at the Intersection of Patent and Antitrust Law', Assistant Attorney General Makan Delrahim, 7 December 2018, 19th Annual Berkeley-Stanford Advanced Patent Law Institute, available at www.justice.gov/opa/speech/file/1117686/download; 'Reflections on the Role of Competition Agencies When Patents Become Essential', Assistant Attorney General Bill Baer, 11 September 2015, 19th Annual International Bar Association Competition Conference, available at www.justice.gov/opa/speech/assistant-attorney-general-bill-baer-delivers-remarks-19th-annual-international-bar.
45 FTC v. Qualcomm, Inc, 411 F. Supp. 3d 658 (N D Cal, 21 May 2019) (explaining that Qualcomm's 'no licence, no chips' policy allowed Qualcomm to charge 'unreasonably' high royalties); Ericsson, Inc v. D-Link Sys, Inc, 773 F 3d 1201, 1209 (Fed Cir 2014).
46 Ericsson, Inc, 773 F 3d at 1209.
47 Broadcom Corp. v. Qualcomm, Inc, 501 F 3d 297 (Third Circuit 2007). However, in Amphastar Pharms, Inc v. Momenta Pharms, Inc, the First Circuit Court of Appeals reconfirmed that the Noerr-Pennington doctrine does not immunise conduct before an SSO from antitrust scrutiny. 850 F 3d 52, 56 (First Circuit 2017) (citing Allied Tube & Conduit Corp v. Indian Head, Inc, 486 US 492 (1988)).
48 See footnote 45.
49 See, e.g., Approved Judgment, Unwired Planet International Ltd v. Huawei Techs Co, Case No. A3/2017/1784, EWCA Civ 2344 (2018) (England and Wales Court of Appeal); Unwired Planet v. Huawei  EWHC 711 (Pat) (5 April 2017) (UK); Unwired Planet v. Huawei  EWHC 711 (Pat) (5 April 2017) (Germany).
50 2018 WL 4488286 (C D Cal, 14 September 2018), reversed in part and vacated in part by 943 F.3d 1360 (Fed Cir 2019).
51 Godo Kaisha IP Bridge 1 v. TCL Communication Tech Holdings Ltd, 2019 WL 1877189 (D Del, 26 April 2019) (leaving in place the jury's determination of FRAND royalty rate).
52 HTC Corp v. Telefonaktiebolaget LM Ericsson, 407 F. Supp. 3d 631 (E D Tex, 23 May 2019) (finding that Ericsson's offers to HTC were fair, reasonable and non-discriminatory).
53 Microsoft Corp v. Motorola, Inc, 795 F 3d 1024 (Ninth Circuit 2015).
54 In Qualcomm, the district court held that Qualcomm's rates were 'unreasonably high' and thus not FRAND, but did not determine the FRAND rate Qualcomm should have charged. 411 F. Supp. 3d 658.
55 Commonwealth Scientific and Industrial Research Organisation v. Cisco Systems, Inc, 809 F 3d 1295 (Fed Cir 2015).
56 id. Assistant Attorney General Delrahim has stated that '[w]hile the so-called “smallest saleable component” rule may be a useful tool among many in determining patent infringement damages for multi-component products, its use as a requirement by a concerted agreement of implementers as the exclusive determinant of patent royalties may very well warrant antitrust scrutiny'. 2017 AAG Delrahim Speech; see footnote 18.
57 Commonwealth Scientific and Industrial Research Organisation v. Cisco Systems, Inc, 809 F 3d 1295 (Fed Cir 2015).
58 Ericsson v. D-Link, 773 F 3d 1201, 1234 (Fed Cir 2014).
59 HTC Corp v. Telefonaktiebolaget LM Ericsson, 2019 WL 126980, at *6 (E D Tex, 7 January 2019).
60 FTC v. Qualcomm, Inc, 2018 WL 5848999 (N D Cal, 6 November 2018).
61 FTC v. Qualcomm, Inc, 411 F. Supp. 3d 658, 803 (N D Cal, 21 May 2019).
62 Clayton Act, 15 USC Section 18.
63 15 USC Section 18a.
64 2017 Guidelines, Section 5.7.
65 'Justice Department Requires Anheuser-Busch InBev to Divest Stake in MillerCoors and Alter Beer Distributor Practices as Part of SABMiller Acquisition', 20 July 2016, www.justice.gov/opa/pr/justice-department-requires-anheuser-busch-inbev-divest-stake-millercoors-and-alter-beer.
66 'FTC Requires Bristol-Myers Squibb Company and Celgene Corporation to Divest Psoriasis Drug Otezla as a Condition of Acquisition', 15 November 2019, https://www.ftc.gov/news-events/press-releases/2019/11/ftc-requires-bristol-myers-squibb-company-celgene-corporation.
67 See Apotex Inc v. Acorda Therapeutics, Inc, 823 F 3d 51 (Second Circuit 2016). Former acting FTC chair Ohlhausen has reiterated the FTC's commitment to policing pay-for-delay settlements. However, because the number of such settlements is declining, she suggested that the FTC may move resources into other potentially anticompetitive activities in the brand name/generic context, including abuse of the FDA's regulatory and ANDA approval processes. Remarks at the American Bar Association's Fall Forum, Maureen K Ohlhausen, reported in Law360, 16 November 2017, available at www.law360.com/articles/986119/ftc-s-ohlhausen-sees-light-at-end-of-pay-for-delay-tunnel.
68 FTC v. Actavis Inc, 570 US 136 (2013).
69 Enforcement Perspectives on the Noerr–Pennington Doctrine: An FTC Staff Report, Federal Trade Commission, 2006, available at www.ftc.gov/sites/default/files/documents/reports/ftc-staff-report-concerning-enforcement-perspectives-noerr-pennington-doctrine/p013518enfperspectnoerr-penningtondoctrine.pdf.
70 'FTC Sues Endo Pharmaceutical Inc. and Others for Illegally Blocking Lower-Cost Generic Versions of the Branded Drugs Opana ER and Lidoderm', Federal Trade Commission Bureau of Competition, 31 March 2016, www.ftc.gov/news-events/press-releases/2016/03/ftc-sues-endo-pharmaceuticals-inc-others-illegally-blocking-lower.
73 'Endo Pharmaceuticals Inc. Agrees to Abandon Anticompetitive Pay-for-Delay Agreements to Settle FTC Charges; FTC Refiles Suits Against Generic Defendants', Federal Trade Commission Bureau of Competition, 23 January 2017, www.ftc.gov/news-events/press-releases/2017/01/endo-pharmaceuticals-inc-agrees-abandon-anticompetitive-pay-delay.
74 Impax Laboratories, Inc, 2018 WL 2336009, at *6 (FTC 2018).
75 'FTC Concludes that Impax Entered into Illegal Pay-for-Delay Agreement', Federal Trade Commission, 29 March 2019, https://www.ftc.gov/news-events/press-releases/2019/03/ftc-concludes-impax-entered-illegal-pay-delay-agreement.