Unilateral refusals to license

Journal of Competition Law and Economics

Volumn 2, Issue 1, 2006, Pages 1-42

  Hovenkamp, Herbert ^a   Janis, Mark D ^a   Lemley, Mark A ^b,c  

^a UNIVERSITY OF IOWA COLLEGE OF LAW   (United States)

^b STANFORD LAW SCHOOL   (United States)

^c Keker and Van Nest LLP   (United States)

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EID: 33645555846     PISSN: 17446414     EISSN: 17446422     Source Type: Journal    
DOI: 10.1093/joclec/nhl002     Document Type: Article

References (238)

1. We distinguish the enforcement of a valid intellectual property right from situations in which the intellectual property owner is alleged to have attempted to enforce an invalid or not-infringed intellectual property right. Those cases are discussed in Chapter 11 of Herbert Hovenkamp, Mark D. Janis & Mark A. Lemley, IP and Antitrust: An Analysi of Antitrust Principles Applied to Intellectual Property Las (Aspen Law & Business, 2004).
2. For a useful theoretical treatment of the problem, see William Baxter, Legal Restrictions on Exploitation of the Patent Monopoly: An Economic Analysis, 76 Yale L.J. 267 (1966).
3. We discuss only internally developed intellectual property rights in this article.
4. U.S. 405 (1908).
5. Id. at 428 (citing district court).
6. Id. at 429.
7. There are myriad other cases permitting non-use. See, e.g., United States v. Studiengesellschaft Kohle, 670 F.2d 1122, 1127 (D.C. Cir. 1981).
8. U.S.C. §271(d)(4). Although the statute refers to patent misuse, and does not directly cover antitrust violations, the policy it expresses is still relevant.
9. See, e.g., Metallurgical Indus. v. Fourtek, 790 F.2d 1195, 1200 (5th Cir. 1986) (licensing secret process to two companies was not sufficient disclosure to end trade secret protection).
10. See, e.g., Harper & Row v. Nation Ents., 471 U.S. 539 (1985) (right of first publication specifically protected)
11. Salinger v. Random House, Inc., 811 F.2d 90 (2d Cir. 1987) (no fair use by biographer of unpublished letters).
12. 210 U.S. at 430.
13. Accord Genentech v. Eli Lilly & Co., 998 F.2d 931, 949 (Fed. Cir. 1993)
14. W.L. Gore & Assoc. v. Carlisle Corp., 529 F.2d 614, 623 (3d Cir. 1976)
15. Ward S. Bowman Jr, Patent And Antitrust Law: A Legal And Economic Appraisal (1973) ("the legal propriety of a basic patent monopoly has to be recognized").
16. See, e.g., Orson, Inc. v. Miramax Film Corp., 189 F.3d 377 (3d Cir. 1999).
17. Cf. Perfumer's Workshop v. Roure Bertrand du Pont, Inc., 737 F. Supp. 785, 790-91 (S.D.N.Y. 1990) (ownership and enforcement of trade secrets does not violate the antitrust laws).
18. We distinguish cases in which the intellectual property statute itself creates a compulsory licensing scheme. See, e.g., 17 U.S.C. § 111 (cable retransmissions), 112(e) (digital music sound recordings), 115 (cover license for musical compositions), 116 (jukeboxes), 118 (public broadcasting) and 119 (satellite broadcast retransmissions). In those cases, an intellectual property owner's remedies are of course limited to the specified monetary remedy, but the limit arises by operation of intellectual property law, and applies whether or not the intellectual property owner itself makes use of the right.
19. 69 F.2d 577 (7th Cir. 1934).
20. Id.
21. See also Foster v. American Mach. & Foundry Co., 492 F.2d 1317 (2d Cir. 1974) (upholding what amounted to a compulsory license: A reasonable royalty damage award but no injunction)
22. Vitamin Technologists v. Wisconsin Alumni Research Foundation, 146 F.2d 941, 946-47, 956 (9th Cir. 1945) (holding that patentee's refusal to license a process for enriching margarine with Vitamin D to margarine manufacturers was patent misuse and denying any relief, legal or equitable.)
23. See Campbell v. Acuff-Rose Music Co., 510 U.S. 569, 578 n.10 (1994) ("courts may also wish to bear in mind that the goals of the copyright law, 'to stimulate the creation and publication of edifying matter,' are not always best served by automatically granting injunctive relief when parodists are found to have gone beyond the bounds of fair use")
24. Abend v. MCA, Inc., 863 F.2d 1465, 1479 (9th Cir. 1988) (finding "special circumstances" that would cause "great injustice" to defendants and "public injury" were injunction to be issued).
25. See Hartford-Empire Co. v. United States, 323 U.S. 386, 432-33 (1945) ("a patent owner is not in the position of a quasi-trustee for the public ... [it] has no obligation either to use it or grant its use to others"). We emphasize that we consider in this article only claims that a law-abiding intellectual property owner can be made to license its rights. The fact that antitrust law does not itself compel licensing does not preclude the use of a compulsory licensing scheme as a remedy for other sorts of antitrust violations. Indeed, Hartford-Empire itself imposed such an antitrust remedy.
26. Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962).
27. 797 F.2d 370 (7th Cir. 1986).
28. Id. at 375,
29. but see American Needle, Inc. v. New Orleans Saints, 385 F. Supp. 2d 687 (N.D. Ill. 2005) (refusing to dismiss claim that NFL violated antitrust laws by granting an exclusive license to place its logos on clothing to a co-defendant, Reebok, and withdrawing licenses from all other clothing manufacturers, including the plaintiff).
30. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).
31. 797 F.2d at 375.
32. 830 F.2d 606 (6th Cir. 1986).
33. Id. at 609.
34. The Antitrust Division's Intellectual Property Guidelines take the position that licensing is essentially procompetitive: "Intellectual property typically is one component among many in a production process and derives value from its combination with complementary factors. Complementary factors of production include manufacturing and distribution facilities, workforces, and other items of intellectual property. The owner of intellectual property has to arrange for its combination with other necessary factors to realize its commercial value. Often, the owner finds it most efficient to contract with others for these factors, to sell rights to the intellectual property, or to enter into a joint venture arrangement for its development, rather than supplying these complementary factors itself. "Licensing, cross-licensing, or otherwise transferring intellectual property (hereinafter 'licensing') can facilitate integration of the licensed property with complementary factors of production. This integration can lead to more efficient exploitation of the intellectual property, benefiting consumers through the reduction of costs and the introduction of new products. Such arrangements increase the value of intellectual property to consumers and to the developers of the technology. By potentially increasing the expected returns from intellectual property, licensing also can increase the incentive for its creation and thus promote greater investment in research and development." United States Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property §2.3.
35. Cf. Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 949 (Fed. Cir. 1993) (patentees must have the power to select exclusive licenses as they see fit).
36. Miller Insituform, 830 F.2d at 609.
37. This argument is developed in Phillip Areeda & Herbert Hovenkamp, 3 Antitrust Law ¶708d (2d ed. 2000).
38. A further complication is that, unlike patents, trade secrets and in some cases copyrights can be kept secret from the world. Requiring licensing of these intellectual property rights would require someone to know of their existence.
39. For example, suppose that a royalty of $10 is set by a court for a patent on a component of a product that costs $500. Over the next several years, the price of the product drops to $25. The royalty now seems exorbitant, and licensees will doubtless want relief from the original royalty.
40. See, e.g., Corsearch v. Thomson & Thomson, 792 F. Supp. 305 (S.D.N.Y. 1992) (questioning whether terminating a license of a copyrighted database to a competitor could be anticompetitive, but not addressing the issue because it found no monopoly power).
41. Commentators have argued, for instance, that price discrimination has such procompetitive justifications, and indeed that it may not be evidence of the existence of market power at all. See Benjamin Klein & John Shepard Wiley Jr, Competitive Price Discrimination as an Antitrust Justification for Intellectual Property Refusals to Deal, 70 Antitrust L.J. 599 (2003) (arguing that price discrimination is procompetitive and does not tend to show market power)
42. Jonathan B. Baker, Competitive Price Discrimination: The Exercise of Market Power Without Anticompetitive Effects, 70 Antitrust L.J. 643 (2003) (arguing that price discrimination does show market power, but not necessarily anticompetitive effect). To the extent that these arguments are correct, a desire by an intellectual property owner to price discriminate may serve to justify a unilateral but conditional refusal to deal.
43. For good discussions of essential facilities in the intellectual property context, see Teague I. Donahey, Terminal Railroad Revisited: Using the Essential Facilities Doctrine to Ensure Accessibility to Internet Software Standards, 25 AIPLA Q.J. 277 (1997)
44. Abbott B. Lipsky Jr & J. Gregory Sidak, Essential Facilities, 51 Stan. L. Rev. 1187, 1218-20 (1999)
45. David McGowan, Regulating Competition in the Information Age: Computer Software as an Essential Facility Under the Sherman Act, 18 Hastings Comm. & Ent. L.J. 771 (1996).
46. The monopolist in an essential facilities case may be thought to have "acted" in some sense, by refusing to deal or to continue dealing with a competitor, but generally speaking a unilateral refusal to deal is not the sort of affirmative anticompetitive conduct that the antitrust law is concerned with.
47. United States v. Terminal R.R. Ass'n, 224 U.S. 383 (1912).
48. Otter Tail Power Co. v. United States, 410 U.S. 366 (1973).
49. MCI Comm. Corp. v. AT&T, 708 F.2d 1081 (7th Cir. 1983).
50. A very different sort of essential facility-type claim is envisioned by those few cases that impose a duty to continue dealing. For example, in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), the Court held that a ski company that owned three of the four mountains in a local area was obligated to continue offering a multi-area skiing pass with its sole competitor in that local area. Although the Court did not discuss the case in essential facilities terms, there is no other antitrust concept that readily fits these circumstances. By avoiding the use of essential facilities language, however, the Court short-circuited inquiry into how important the multiarea pass actually was to competition.
51. MCI, 708 F.2d at 1132-33.
52. See William J. Baumol & J. Gregory Sidak, The Pricing of Inputs Sold to Competitors, 11 Yale J. Reg. 171 (1994).
53. See Alaska Airlines v. United Airlines, 948 F.2d 536, 544-46 (9th Cir. 1991) (airline computer reservation system was not an essential facility because airlines could compete without it, albeit at higher cost).
54. Whether this defense would extend to other sorts of business justifications for refusing to deal is not clear.
55. Jerry Hausman and Gregory Sidak have argued that this same limiting principle concerning competition in the downstream market is necessary if the mandatory access provisions for local exchange networks, codified in the Telecommunications Act of 1996, are to advance consumer welfare. See Jerry A. Hausman & J. Gregory Sidak, A Consumer-Welfare Approach to Mandatory Unbundling of Telecommunications Networks, 109 Yale L.J. 417 (1999).
56. It is not clear that Terminal Railroad fits easily in this framework, but that case may be complicated by its reliance on a conspiracy between different railroads in violation of section 1.
57. Verizon Communications v. Law Offices of Curtis V. Trinko, 540 U.S. 398, 411 (2004).
58. See, e.g., Phillip Areeda, Essential Facilities: An Epithet in Need of Limiting Principles, 58 Antitrust L.J. 841 (1989)
59. Herbert Hovenkamp, Federal Antitrust Policy 7§.7 ("The so-called essential facility doctrine is one of the most troublesome, incoherent and unmanageable of bases for Sherman 2§ liability. The antitrust world would almost certainly be a better place if it were jettisoned").
60. See Mark A. Lemley, Antitrust and the Internet Standardization Problem, 28 Conn. L. Rev. 1041, 1085-86 (1996).
61. The European Court of Justice did find a copyrighted television guide to be an essential facility in the Magill case, C-241/91 P (E.C.J. 1995).
62. 195 F.3d 1346 (Fed. Cir. 1999).
63. Id. at 1350. Most of those antitrust claims are based on Intel's efforts to link the two sets of intellectual property rights together. As such, they involve conditional rather than pure unilateral refusals to deal.
64. Intergraph Corp. v. Intel Corp., 3 F. Supp. 2d 1255 (N.D. Ala. 1998).
65. 195 F.3d at 1356-59.
66. Id. at 1357 ("the essential facility theory is not an invitation to demand access to the property or privileges of another, on pain of antitrust penalties and compulsion; thus the courts have required anticompetitive action by a monopolist that is intended to 'eliminate competition in the downstream market.'").
67. Id. ("A non-competitor's asserted need for a manufacturer's business information does not convert the withholding of that information into an antitrust violation"). Cf. Multivideo Labs v. Intel Corp., 2000 WL 502866 (S.D.N.Y. 27 April 2000) (monopoly leveraging claim fails where the parties are not competitors). The court was arguably incorrect to conclude that the parties were not in the same market. Although Intergraph sold its products in a market downstream from Intel's, Intergraph's intellectual property rights, the assertion of which triggered the dispute, were in the same technology market as Intel's primary line of business (microprocessors). The court's failure to recognize this does not affect the essential facilities analysis, however, because any such competition would exist in the market for the essential facility itself, not the downstream market Intel was allegedly trying to control.
68. 995 F. Supp. 728 (S.D. Tex. 1998).
69. Id. at 751.
70. Id. at 752.
71. Id. at 754.
72. The court did not discuss the possibility that network effects could have economic consequences for the market similar to those of natural monopolies.
73. 995 F. Supp. at 753
74. Id. at 755.
75. Id. at 753.
76. Id. at 755-56.
77. 719 F. Supp. 1551 (S.D. Fla. 1988), rev'd on other grounds, 999 F.2d 1436 (11th Cir. 1993).
78. Id. at 1563. This conclusion was reversed on appeal.
79. Id. at 1566.
80. Aldridge, 995 F. Supp. at 755 n.146.
81. Accord, Lipsky & Sidak, supra note 32.
82. For more detail, see Phillip Areeda & Herbert Hovenkamp, 3A Antitrust Law ¶771-74, 787 (2d ed. 2000) (arguing that the essential facilities doctrine is generally unwarranted, but that an exception may reasonably be made for public utilities).
83. Verizon Communications v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004).
84. See also United States v. Westinghouse Elec. Corp., 648 F.2d 642 (9th Cir. 1981) (government challenged a refusal to deal on the ground that Mitsubishi had "become so wedded to Westinghouse technology, because of the Agreements, as to be unable to compete in the United States market").
85. Whether or not our per se rule is adopted, it should be clear that courts regularly reject such claims. In addition to the cases discussed above, see Service & Training, Inc. v. Data General Corp., 963 F.2d 680 (4th Cir. 1992) ("a better mouse trap is not necessarily an essential facility")
86. Sun Dun, Inc. v. Coca-Cola Co., 740 F. Supp. 381, 394 (D. Md. 1990) (trademark is not an essential facility)
87. Hudson's Bay Co. v. Am. Legend Co-Op, 651 F. Supp. 819, 843 n.14 (D.N.J. 1986) (same).
88. 274 F. Supp. 2d 743, 745 (D. Md. 2003).
89. No. C-3626 (F.T.C. 14 November 1995).
90. Id.
91. The Tunney Act, Pub. L. No. 93-528, 88 Stat. 1706 (1974), codified as amended at 15 U.S.C. §16(b)-(h) (1994), requires that courts approve such settlements as being in the public interest, but the standard applied is quite lax.
92. See United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995).
93. Indeed, this is plausibly what was at stake in BellSouth. Although the district court concluded that the organization of Bell's yellow pages was copyrightable, the Eleventh Circuit ultimately held otherwise.
94. Morris Communications Corp. v. PGA Tour, 364 F.3d 1288 (11th Cir. 2004)
95. New York Mercantile Exchange v. Intercontinental Exchange, Inc., 2004 WL 1494383 (S.D.N.Y. 30 June 2004).
96. 708 F.2d 1081 (7th Cir. 1983).
97. 326 U.S. 1 (1945).
98. For a full analysis of the case, see Herbert Hovenkamp, Exclusive Joint Ventures and Antitrust Policy, 1995 Colum. Bus. L. Rev. 1.
99. The case did not hold that AP must open its network to all comers, just that it could not discriminate against newspapers that competed with existing members. See Phillip Areeda & Herbert Hovenkamp, 3A Antitrust Law ¶772b2 (2d ed. 2000). Although this is a point of distinction from the typical essential facilities case, the nondiscrimination obligation the Court did impose is certainly outside the realm of normal antitrust rules.
100. To similar effect are Drinkwine v. Federated Publications, Inc., 780 F.2d 735 (9th Cir. 1985),
101. and TV Communications Network v. Turner Network Television, 964 F.2d 1022 (10th Cir. 1992). In both cases the court rejected claims that a copyright owner controlled an essential facility - an advertising tabloid in Drinkwine and a TV network in TV Communications, but both cases reject the claim on the antitrust merits, for failure to prove market power, without mentioning the fact that the defendants in both cases produce copyrighted works. One case has permitted an essential facilities theory to survive a motion to dismiss without discussing the copyrighted works that were doubtless involved in the case.
102. In In re Evic Class Action Litig., 2002 WL 1766554 (S.D.N.Y. 31 July 2002), the court held that the plaintiffs stated an antitrust claim that United Parcel Service forms and tracking software were essential facilities to third parties who sought to compete with UPS in providing "excess value" insurance for packages shipped by UPS. The UPS forms and software in question are doubtless copyrighted, though the court makes no mention of that fact. Nonetheless, this case may be one (like MCI) in which the copyrighted works are only incidental to the control of the facility itself, particularly since copyright law does not forbid the creation of interoperable programs.
103. Of course, in such a case the plaintiff will still have to meet the extremely high standards for making out an essential facilities claim. The circumstances in which it will be able to do so are extremely rare.
104. Goldwasser v. Ameritech Corp., 222 F.3d 390, 400 (7th Cir. 2000).
105. 540 U.S. 398 (2004).
106. For good discussions of refusals to license intellectual property as antitrust violations, see, e.g., Teague I. Donahey, At the Intersection of Antitrust and Intellectual Property: Lessons from Intergraph v. Intel and CSU v. Xerox, 10 FED. CIR. BAR J. 129 (2000)
107. Dana W. Hayter, When a License Is horse than a Refusal: A Comparative Competitive Effects Standard to Judge Restrictions in Intellectual Property Licenses, 11 Berkeley Tech. L.J. 281 (1996)
108. Michael H. Kaufmann, Image Technical Services, Inc. v. Eastman Kodak Co.: Taking One Step Forward and Two Steps Back in Reconciling Intellectual Property Rights and Antitrust Liability, 34 Wake Forest L. Rev. 471 (1999)
109. Marina Lao, Unilateral Refusals to Sell or License Intellectual Property and the Antitrust Duty to Deal, 9 Cornell J.L. & Pub. pol'y 193 (1999)
110. David McGowan, Networks and Intention in Antitrust and Intellectual Property, 24 J. Copr. L. 485 (1999)
111. Richard S. Vermut, A Synthesis of the Intellectual Property and Antitrust Laws: A Look at Refusals to License Computer Software, 22 Colum.-VLA J.L. & Arts 27 (1997).
112. For a general discussion, see Phillip Areeda & Herbert Hovenkamp, 3a Antitrust Law ¶770 (2d ed. 2000).
113. See, e.g., Lorain Journal Co. v. United States, 342 U.S. 143 (1951).
114. See, e.g., Abbott Labs. v. Brennan, 952 F.2d 1346, 1354 (Fed. Cir. 1991) (market power conferred by IP rights cannot violate the antitrust laws; "the patent right must be coupled with violations of 2§").
115. 195 F.3d 1346 (Fed. Cir. 1999).
116. Id. at 1358 (citations omitted).
117. Id.
118. Id. at 1358-59. The court made no specific reference to Intel's patents as a factor in this decision, despite the district court's determination that Intel had used its patents to restrain trade, and that its patent rights did not immunize it from antitrust liability.
119. See Intergraph Corp. v. Intel Corp., 3 F. Supp. 2d 1255, 1279 (N.D. Ala., 1998).
120. 203 F.3d 1322 (Fed. Cir. 2000) (referred to herein as Xerox). To the extent it is relevant, HH was consulted by the defendants in this case.
121. Id. at 1326.
122. Curiously, for this proposition the court quoted Image Technical Servs. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997), discussed below, which is itself the one case that arguably does impose such liability.
123. Id. at 1327 (emphasis in original).
124. See also Atari Games Corp. v. Nintendo of Am., 897 F.2d 1572, 1576 (Fed. Cir. 1990) (extending patent rights beyond the scope of the grant violates the antitrust laws).
125. Id. at 1328.
126. Id. at 1327.
127. See Miller Insituform Inc. v. Insituform of North Am., 830 F.2d 606, 609 (6th Cir. 1987) ("A patent holder who lawfully acquires a patent cannot be held liable under Section 2 of the Sherman Act for maintaining the monopoly power he lawfully acquired by refusing to license the patent to others"),
128. SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1206 (2d Cir. 1981) ("where a patent has been lawfully acquired, subsequent conduct permissible under the patent laws cannot trigger any liability under the antitrust laws").
129. 203 F.3d at 1328-29.
130. 36 F.3d 1147 (1st Cir. 1994).
131. Id. at 1184.
132. Id. at 1185-86;
133. see also Rural Tel. Serv. Co. v. Feist Publications, Inc., 957 F.2d 765, 767-69 (10th Cir. 1992) (evaluating the reasonableness of a copyright owner's refusal to license telephone white pages).
134. Id. at 1187.
135. The court continued in a footnote: "Wary of undermining the Sherman Act, however, we do not hold that an antitrust plaintiff can never rebut this presumption, for there may be rare cases in which imposing antitrust liability is unlikely to frustrate the objectives of the Copyright Act." Id. at 1187 n.64.
136. To similar effect is Corsearch v. Thomson & Thomson, 792 F. Supp. 305, 323 (S.D.N.Y. 1992) (noting in dictum that the enforcement of a copyright was a presumptively valid business justification for a refusal to license).
137. Id. at 1188-89.
138. Xerox, 203 F.3d at 1329. Curiously, an earlier Ninth Circuit case had held with little discussion that a computer hardware manufacturer that owned a copyright in maintenance software was free to refuse to provide that software to ISOs, a result that suggests an even stronger presumption than Data General's.
139. See Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995)
140. see also Advanced Computer Service v. MAI Sys. Corp., 845 F. Supp. 356 (E.D. Va. 1994) (same).
141. 125 F.3d 1195 (9th Cir. 1997).
142. To the extent it is relevant, HH was consulted by the defendants in this case. Although it did not cite Kodak, the district court's decision in American Needle, Inc. v. New Orleans Saints, 385 F. Supp. 2d 687 (N.D. Ill. 2005), appeared to track Kodak's reasoning.
143. Eastman Kodak v. Image Technical Servs., 504 U.S. 451 (1992).
144. 125 F.3d at 1220.
145. Id. at 1215.
146. Id. at 1216.
147. Id. at 1216-17.
148. Id. at 1218.
149. The district court did not consider this issue at all, and did not give any instruction to the jury regarding a presumption based on ownership of intellectual property rights. Although the Ninth Circuit held that the district court erred in failing to give such an instruction, it found that the court's error was harmless because the facts of the case rebutted the presumption. Id. at 1218-19.
150. The evidence of this is pretty clear: Kodak's own employees testified that intellectual property rights had nothing to do with their decision to cut off the ISOs. Id. at 1219-20.
151. Id. at 1219.
152. Id. at 1217.
153. One court that recognized the rather stark change in the law wrought by Xerox is Telecomm Technical Services, Inc. v. Siemens Rolm Comms., Inc., 150 F. Supp. 2d 1365, 1368-69 (N.D. Ga. 2000). That court reversed its prior decision, concluding that after Xerox independent service organizations could not bring an antitrust claim based on an effort to leverage power from the parts market into the service market. Ironically, although the Telecomm court rendered its decision based on its belief that Federal Circuit law was controlling, on appeal the Federal Circuit ordered the case transferred to the Eleventh Circuit because of the Supreme Court's intervening decision in Holmes v. Vornado, 535 U.S. 826 (2002).
154. See Telecomm Technical Services, Inc. v. Siemens Rolm Comms., Inc., 295 F.3d 1249 (Fed. Cir. 2002).
155. In light of the different opinions, antitrust defendants may be expected to file patent infringement claims wherever possible to vest jurisdiction in the Federal Circuit, with its more lenient rules. Although the Federal Circuit is likely to hear most of the patent-related antitrust cases in the future, and has asserted authority over the antitrust rules to be applied in such cases, that does not ameliorate the conflict problem. First, there is a clear conflict between the circuits in their treatment of copyright issues. Second, not all patent issues will be appealed to the Federal Circuit, both because some antitrust cases (like Image Technical) do not involve patent infringement claims by either side, and because in an important subset of patent-antitrust cases - those brought by federal or state agencies the case will not involve direct patent issues and will not be appealed to the Federal Circuit.
156. 203 F.3d at 1324.
157. See, e.g., Olympia Equip. Leasing v.Western Union Telegraph, 797 F.2d 370 (7th Cir. 1986).
158. It is not clear why this is. Image Technical originally involved both tying and monopolization claims, but only the monopolization claim went to the jury.
159. 203 F.3d at 1327.
160. As noted above, the Federal Circuit in Xerox adopted the First Circuit approach for copyrights. 203 F.3d at 1328-29.
161. By referring to these costs, we intend to encompass not only the increased costs of litigation, but any reduction in innovation incentive attributable to the more uncertain status of intellectual property rights.
162. 472 U.S. 585 (1985).
163. The case is discussed in much more detail in Phillip Areeda & Herbert Hovenkamp, 3a Antitrust Law ¶772c (2d ed. 2000).
164. 472 U.S. at 585.
165. Id. at 601.
166. Id. at 602-603.
167. Cf. Herbert Hovenkamp, The Monopolization Offense, 61 Ohio ST. L.J. 1035, 1044-45 (2000) (Aspen is "problematic to say the least").
168. Verizon Communications v. Law Offices of Curtis V. Trinko, 540 U.S. 398, 409 (2004).
169. See SmileCare Dental Group v. Delta Dental Plan, 88 F.3d 780 (9th Cir. 1996) (limiting Aspen to continuations of existing ventures).
170. Cf. Phillip Areeda & Herbert Hovenkamp, 3a Antitrust Law ¶772c3 (2d ed. 2000) ("We would at the very least restrict Aspen to circumstances where the defendant terminated an existing joint venture without justification").
171. 504 U.S. 451 (1992).
172. As noted above, on remand Kodak did ultimately assert patents and copyrights.
173. 36 F.3d at 1188.
174. U.S. Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property §2.3.
175. On the importance of the focus on the scope of intellectual property rights, see generally Ward S. Bowman Jr, Patents and Antitrust Law: A Legal and Economic Appraisal (1973)
176. John H. Barton, Patents and Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation, 65 Antitrust L.J. 449 (1997).
177. Xerox, Kodak, and Data General all involved patents or copyrights. One court has held that the irrebuttable Xerox presumption that a unilateral refusal to deal cannot be unlawful does not extend to trade secrets. Telecomm Technical Services, Inc. v. Siemens Rolm Comms., Inc., 150 F. Supp. 2d 1365, 1370 (N.D. Ga. 2000). Although the court was concerned that the broad range of protectable trade secrets would mean that "virtually every anticompetitive refusal to deal would be beyond reach of antitrust law," we are not convinced that trade secrets should be treated differently than other forms of intellectual property. Indeed, there are good reasons to permit trade secret owners (and trademark owners, though no court has addressed it) to refuse to license their rights, since the continued existence of both trade secret and trademark rights will depend in part on how licensees behave. The key to avoiding too broad a rule is to determine whether the power exercised is within the legitimate scope of the intellectual property right. Although entitlement to trade secret protection is broad, that protection is significantly less powerful than patent protection, limiting the effect of permitting unilateral refusals to deal in trade secrets.
178. A separate question is presented when intellectual property enforcement litigation is itself claimed to violate the antitrust laws. The filing of a lawsuit triggers Noerr-Pennington immunity in most circumstances. In this case, however, we deal only with antitrust liability based on refusal to license or provide access to information.
179. To the extent it is relevant, HH and ML were both consultants for the federal government on this case.
180. 1998 WL 614485 (D.D.C., 14 September 1998).
181. Id. at 15 (citations omitted).
182. Id.
183. United States v. Microsoft Corp., 87 F. Supp. 2d 30, 40 (D.D.C. 2000).
184. The court also discussed Microsoft's intent in imposing the restrictions. Properly read, we think the court's discussion of intent is relevant only to the underlying section 2 claim, and not to whether the intellectual property presumption has been rebutted. There is no indication in the opinion that the court intended to take sides in the Image Technical-Xerox debate discussed above.
185. Such efforts are quite common, particularly in the software industry. Software vendors regularly include terms in their licenses purporting to bind licensees to rules more restrictive than those imposed by copyright law. For examples of such terms, see Mark A. Lemley, Beyond Preemption: The Law and Policy of Intellectual Property Licensing, 87 Calif. L. Rev. 111, 124-36 (1999).
186. See, e.g., Feist Pubs. v. Rural Tel. Serv., 499 U.S. 340 (1991)
187. Baker v. Selden, 101 U.S. 99 (1880)
188. U.S.C. §102(b)
189. Id. §106.
190. Id. §107.
191. See, e.g., id. §111 (cable retransmissions), §112(e) (digital music sound recordings), §115 (cover license for musical compositions), §116 (jukeboxes), §118 (public broadcasting) and §119 (satellite broadcast retransmissions).
192. 35 U.S.C. §271(a).
193. See, e.g., United States v. Univis Lens Co., 316 U.S. 241, 249 (1942)
194. Glass Equip. Dev. v. Besten, Inc., 174 F.3d 1337 (Fed. Cir. 1999).
195. See, e.g., Boyden Power-Brake Co. v. Westinghouse, 170 U.S. 537, 562 (1898)
196. Scripps Clinic & Res. Found. v. Genentech, Inc., 927 F.2d 1565 (Fed. Cir. 1991).
197. Accordingly, we think the court in Telecomm Technical Services, Inc. v. Siemens Rolm Comms., Inc., 150 F. Supp. 2d 1365, 1369 (N.D. Ga. 2000), read Xerox too broadly. The court concluded that, under Xerox, a patent on parts necessarily included within its scope the right to control service using those parts. This is not correct as a matter of patent law, where the scope of a patent depends on its particular claims. The preferable approach is to ask whether a restrictive license imposed a condition outside the scope of the particular patent. If so, Xerox should not apply.
198. See, e.g., Hartford-Empire Co. v. United States, 323 U.S. 386, 432-33 (1945)
199. F.M. Scherer, The Economic Effects of Compulsory Patent Licensing, in Monograph Series in Finance and Economics 1977, at 47 (N.Y.U. Graduate Sch. Bus. Admin. Center for Study Fin. Inst. Monograph 1977-2, 1977) (documenting cases of compulsory licensing as an antitrust remedy).
200. Thus, in United States v. Microsoft, it is important to distinguish between the government's claims that Microsoft violated the antitrust laws by refusing to allow modifications to Windows 98 and the government's request for compelled disclosure of source code or applications program interfaces as an antitrust remedy. The former is within the scope of this article, the latter is not.
201. For a general discussion of this distinction, see Phillip Areeda & Herbert Hovenkamp, 6 Antitrust Law ¶1402 (2d ed. 2000)
202. See Zenith Radio Corp. v. Hazeltine Res., 395 U.S. 100, 135 (1969) (concerted refusal to license patents was illegal, even if unilateral refusals would not have been).
203. 203 F.3d at 1325.
204. Id. at 1327.
205. See, e.g., Image Technical, 125 F.3d at 1218 (discussing unilateral refusals to license).
206. For a discussion of Walker Process and sham litigation, see Chapter 11 of Herbert Hovenkamp, Mark D. Janis & Mark A. Lemley, Ip and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law (Aspen Law & Business, 2004).
207. F.3d at 1327 (emphasis in original)
208. see also Atari Games Corp. v. Nintendo of Am., 897 F.2d 1572, 1576 (Fed. Cir. 1990) ("a patent owner may not take the property right granted
209. 203 F.3d at 1327.
210. 2000-1 Trade Cas. ¶72,890 (N.D. Cal. 2000).
211. We agree with David McGowan's reading of the situation: "The Federal Circuit's recent [Xerox ] decision ... is best read as affirming the distinction between simple and conditional refusals.... [T]he exception the Federal Circuit explicitly recognized for tying arrangements includes conditional agreements that have the same possible economic effects - extending the economic power of a patent beyond the scope of the patent grant." David McGowan, Innovation, Uncertainty, and Stability in Antitrust Law, 16 Berkeley Tech. L.J. 729, n. 175 (2001) (also noting that a reading limited to tying cases "would make little economic sense").
212. Eastman Kodak v. Image Technical Servs., 504 U.S. 451, 480 n. 29 (1992).
213. The Court has drawn the same line in the copyright context. 193 See United States v. Loew's, 371 U.S. 38, 47-48 (1962).
214. A somewhat broader statement of the conditional refusal-unilateral conduct distinction is United States v. Westinghouse Elec. Corp., 648 F.2d 642, 647 (9th Cir. 1981). There, the court drew a distinction between acts which expand the patent monopoly and those which merely enforce a patent right within its lawful scope. As examples of the former, the court cited tying arrangements, block-booking agreements, price-restricted patent pools, and acquisition of patents from third parties.
215. 15 U.S.C. §14.
216. See International Salt Co. v. United States, 332 U.S. 392 (1947).
217. For an extensive discussion of this issue in the law of tying, see Phillip Areeda & Herbert Hovenkamp, 10 Antitrust Law ¶1752-57 (2d ed. 2005).
218. For a much more detailed discussion of this issue, see Phillip Areeda & Herbert Hovenkamp, 7 Antitrust Law ¶1439-58 (2d ed. 2004).
219. See, e.g., United States v. Colgate & Co., 250 U.S. 300, 307 (1919).
220. See generally Monsanto Co. v. Spray-Rite Corp., 465 U.S. 752 (1984).
221. 963 F.2d 680 (4th Cir. 1992).
222. Id. at 686.
223. 15 U.S.C. §14. Because it is limited to commodities, section 3 of the Clayton Act will apply to conditional transfers of goods embodying intellectual property, such as books, videos, and computer disks, but not to pure licenses of intellectual property rights.
224. United States v. Microsoft Corp., 253 F.3d 34, 63 (D.C. Cir. 2001) (en banc) (Microsoft IV).
225. Telecomm Technical Services, Inc. v. Siemens Rolm Comms., Inc., 150 F. Supp. 2d 1365, 1369 (N.D. Ga. 2000), aff'd, 388 F.3d 820 (11th Cir. 2004).
226. See also United States v. Westinghouse Elec. Corp., 648 F.2d 642, 647 (9th Cir. 1981) (distinguishing between a refusal to license to some parties, which is within the scope of the patent grant, and tying or conditioning a patent license in a way that "seeks to expand that monopoly by misuse, agreement, or accumulation").
227. 645 F.2d 1195 (2d Cir. 1981).
228. To trigger section 7 of the Clayton Act, the acquisition of a patent must be from an external source. Internal development of inventions that are then patented cannot give rise to antitrust liability. See Automatic Radio Co. v. Hazeltine Res. Co., 339 U.S. 827 (1950).
229. In re Intel Corp., Analysis of Proposed Consent Order to Aid Public Comment, FTC Dkt no. 789288 (March 1999).
230. Id.
231. Evidence that the case should be treated differently from Xerox includes the fact that the Federal Circuit decided the Intergraph case only three months before Xerox, yet clearly did not articulate anything like a per se rule of legality. See Intergraph Corp. v. Intel Corp., 195 F.3d 1346 (Fed. Cir. 1999).
232. Id.
233. Id. at 1357.
234. In re Intel Corp., Agreement Containing Consent Order I§I.A-B, FTC Dkt. no. 9288 (March 1999).
235. 195 F.3d at 1356.
236. Digital Equipment Corporation, unlike Intergraph, was at the time a direct competitor of Intel through its Alpha chip, as well as a purchaser of Intel's microprocessor products.
237. This argument is similar to the competitive concerns raised by exclusive grantback clauses, and indeed Intel's alleged policy resembles a grantback clause in significant ways. Significantly, however, Intel's policy more closely resembles a nonexclusive grantback clause, which is not normally thought to be a risk to competition.
238. The FTC consent decree attempted to take this concern into account. It permits Intel to cut off any buyer who sues it for patent infringement and seeks injunctive relief rather than damages. See In re Intel Corp., Agreement Containing Consent Order §II.A, FTC Dkt. no. 9288 (March 1999).