Source: https://www.justice.gov/atr/chapter-4-variations-intellectual-property-licensing-practices
Timestamp: 2019-04-26 13:42:10+00:00

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According to panelists, reach-through licensing agreements can create efficiencies when they promote the dissemination of an upstream research tool, by, for example, creating a way to value the research tool or establish a reasonable royalty.(62) Some have reported that the initial fee for use of a patented research tool may be difficult to determine when there is no "commercial product in existence" and "the research tool owner and the tool user may have very different views about the proper economic valuation of the tool."(63) Panelists said that by allowing the research tool patent owner to accrue royalties on sales of downstream discoveries in lieu of up-front royalties, the parties are better able to assess the value of the research tool by taking into account the value of the product developed using the research tool.(64) Reach-through licensing agreements also permit the research tool owner and follow-on researchers to share innovation risks, with the research tool owner gambling that his tool will lead to the development of a commercially viable product.(65) In this way, reach-through licenses may facilitate an efficient allocation of risk when there is uncertainty regarding the value of the licensed technology.
Finally, certain licensing practices could impede innovation. If a license includes restrictions on patents that have yet to be issued or filed, competitive concerns could arise about the arrangement's likely effect on future innovation. Scholars have expressed concern about grantbacks that require the licensee to assign all rights to improvements to the grantor, thereby potentially reducing the licensee's incentives to improve the patented technology.(111) Non-assertion clauses that are the functional equivalent of broadly worded grantbacks could raise similar concerns.
1. U.S. Dep't of Justice & Federal Trade Comm'n, Antitrust Guidelines for the Licensing of Intellectual Property (1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,132, available at http://www.usdoj.gov/atr/public/guidelines/0558.pdf [hereinafter Antitrust-IP Guidelines].
5. Id. § 3.4. Recognizing that intellectual property licensing is generally procompetitive, many foreign jurisdictions have followed the United States' lead in creating transparency in this area by adopting their own intellectual property guidelines. E.g., Competition Bureau, Gov't of Can., Intellectual Property Enforcement Guidelines (2000), available at http://www.strategis.ic.gc.ca/pics/ct/ipege.pdf; Guidelines on the Application of Article 81 of the EC Treaty to Technology Transfer Agreements (EC), 2004 O.J. (C 101) 2, available at http://www.europa.eu.int/eur-lex/pri/en/oj/dat/2004/c_101/c_10120040427en00020042.pdf; Japan Fair Trade Comm'n, Guidelines for Patent and Know-How Licensing Agreements Under the Antimonopoly Act (1999), available at http://www.jftc.go.jp/e-page/legislation/ama/patentandknow-how.pdf; Korea Fair Trade Comm'n, Guidelines of Reviewing Undue Exercise of Intellectual Property Rights (2000), available at http://ftc.go.kr/data/hwp/irp_guidelines.doc; Competition Comm'n of Sing., Guidelines on the Treatment of Intellectual Property Rights (2005), available at http://www.ccs.gov.sg/NR/rdonlyres/A67B68FC-DB6F-415B-9DF1-5A97FC6855A9/6714/CCSGuidelineonIPR20051228websitefinal2.pdf; Taiwan Fair Trade Comm'n, Rules for Review of Technology Licensing Arrangement Cases, available at http://www.globalcompetitionforum.org/regions/asia/Taipei/Technology%20Licensing.pdf.
6. Antitrust-IP Guidelines § 3.4.
7. See infra Part II.
8. See infra Part III.
9. See infra Part IV.
10. The panelists discussing these topics included: Michelle Burtis, Director, LECG, Inc.; Joseph Farrell, Professor of Economics and Chair of the Competition Policy Center, University of California, Berkeley; Jeffery Fromm, Former Senior Managing Counsel, Hewlett-Packard Company; Michael McFalls, Partner, Jones Day Reavis & Pogue; Barbara M. McGarey, Deputy Associate General Counsel, National Institutes of Health; Janusz A. Ordover, Department of Economics, New York University; Charles F. (Rick) Rule, Partner, Fried, Frank, Harris, Shriver & Jacobson; Carl Shapiro, Transamerica Professor of Business Strategy, Haas School of Business, University of California, Berkeley. The panel was moderated by Gail Levine, then-Deputy Assistant General Counsel for Policy Studies, Federal Trade Commission; Frances Marshall, Special Counsel for Intellectual Property, U.S. Department of Justice; Sarah Mathias, then-Attorney, Policy Studies, Federal Trade Commission; and David L. Scheffman, then-Director, Bureau of Economics, Federal Trade Commission. Nov. 6, 2002 Hr'g Tr., Relationships Among Competitors and Incentives to Compete: Cross-Licensing of Patent Portfolios, Grantbacks, Reach-Through Royalties, and Non-Assertion Clauses (Afternoon Session), http://www.ftc.gov/opp/intellect/021106ftctrans.pdf [hereinafter Nov. 6 Tr.].
11. E.g., Nov. 6 Tr. at 146-47 (Rule); see also id. at 185-86 (Shapiro).
12. See, e.g., id. at 145 (Ordover).
13. See Antitrust-IP Guidelines § 3.4.
14. Nov. 6 Tr. at 121-22 (McFalls).
15. Id. at 121 (McFalls) ("[I]nstead of giving somebody an affirmative grant . . . [you] say, within this field, just as with a license, I'm not going to [sue] you on patents that I have today."); see also id. at 127-28 (Rule).
16. Id. at 121 (McFalls).
17. Id.; id. at 125 (Farrell) (stating that a non-assertion clause is essentially "royalty-free permission to use one another's IP").
18. Nov. 6 Tr. at 122-23 (Fromm); id. at 127-28 (Rule). Non-assertion agreements may also encompass different categories of IP rights. For example, a non-assertion agreement may permit use of one type of IP (e.g., patents) in return for use of a different type of intellectual property (e.g., copyright). Id. at 123 (Fromm).
19. Cf. David J. Teece, Peter Grindley & Edward Sherry, Understanding the Licensing Option, in Managing Intellectual Capital 135, 135-38 (2000) (discussing when know-how is typically transferred between firms).
20. One panelist stated that a licensor may negotiate a non-assertion clause in lieu of a grantback to prevent its licensee from asserting a hidden blocking position after the product has become successful. Nov. 6 Tr. at 127-28 (Rule). This panelist explained that non-assertion clauses can cover both existing and future portfolios, whereas a grantback generally is limited to future technology. Id. at 127 (Rule).
21. Id. at 128 (Rule).
23. Id. at 129 (Rule).
25. Nov. 6 Tr. at 129 (Rule). One panelist also noted that non-assertion clauses may be used in lieu of a license to avoid breaching an exclusive licensing obligation in another contract or to provide a means of avoiding the application of a "Most Favored Nation" ("MFN") clause in another licensing agreement. Id. at 121 (McFalls). Another panelist reported that courts have not accepted attempts to label grantbacks as non-assertion clauses so as to avoid having to comply with a MFN clause. Id. at 123 (Fromm).
26. Id. at 136 (Fromm) ("[A broad non-assertion clause] can't help but be a disincentive to the licensee, the grantor of the non-assert, to further innovate because essentially what [it has] done is [it has] eliminated the patent thicket, that's for sure."); see also id. at 137-38 (Rule) ("[Y]ou can certainly abuse a non-assert if it's way too broad and it's unconnected to the underlying licensed technology."); id. at 143 (Fromm) (stating that the proper focus is on whether the non-assertion clause is "significantly more extensive" than the scope of a license). According to panelists, although a patent thicket has the potential to impede innovation when access to certain inputs necessary for production is difficult, the elimination of a patent thicket altogether can slow innovation when no firm has the incentive to innovate by designing around an infringing patent. See, e.g., Frederick J. Telecky, Jr., Statement (Feb. 28, 2002 Hr'g R.) at 3 ("Without the need to design around, simple inertia and practicalities such as the necessity of qualifying a new product with customers can be a barrier to innovation."), http://www.ftc.gov/opp/intellect/020228telecky.pdf.
27. See R. Hewitt Pate, Acting Assistant Attorney Gen., U.S. Dep't of Justice, Antitrust and Intellectual Property, Address Before the American Intellectual Property Law Association 2003 Mid-Winter Institute 9 (Jan. 24, 2003) ("[P]otential concerns may arise with agreements among IPR holders not to challenge one another's IPR claims through either innovation or litigation . . . ."), available at http://www.usdoj.gov/atr/public/speeches/200701.pdf.
28. Federal Trade Comm'n, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, Executive Summary, at 5 (2003), available at http://www.ftc.gov/os/2003/10/innovationrpt.pdf [hereinafter FTC Innovation Report].
29. See Lear v. Adkins, 395 U.S. 653, 674 (1969) ("[E]nforcing [a] contractual provision [that would require a licensee to continue to pay royalties during the time it is challenging the patent's validity in courts] would undermine the strong federal policy favoring the full and free use of ideas in the public domain."); see also MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764, 777 (2007) ("We hold that [a licensee is] not required, insofar as Article III is concerned, to break or terminate its 1997 license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed.").
30. Brief for the United States as Amicus Curiae Supporting Petitioner at 23-24, MedImmune, 127 S. Ct. 764 (No. 05-608) (internal citations omitted), available at http://www.usdoj.gov/osg/briefs/2005/3mer/1ami/2005-0608.mer.ami.pdf.
31. Antitrust-IP Guidelines _ 5.5 ("Settlements involving the cross-licensing of intellectual property rights can be an efficient means to avoid litigation, and in general, courts favor such settlements."); Brief for the United States as Amicus Curiae at 17, Andrx Pharms. Inc. v. Kroger Co., 543 U.S. 939 (2004) (No. 03-779) (recognizing that settlements that end litigation may "facilitate innovation and investment in the patented technology by eliminating litigation risks and providing certainty over patent rights") (internal quotations omitted), denying cert. to In re Cardizem CD Antitrust Litig., 332 F.3d 896 (2003), available at http://www.usdoj.gov/osg/briefs/2004/2pet/6invit/2003-0779.pet.ami.inv.pdf; cf. id. at 8 ("Although 'public policy wisely encourages settlements' of legal disputes, McDermott, Inc. v. AmClyde, 511 U.S. 202, 215 (1994), it does not follow that all settlements are in the public interest.").
32. Antitrust-IP Guidelines § 5.6; see also supra Chapter 3, Antitrust Analysis of Portfolio Cross-Licensing Agreements and Patent Pools Part III.D.3 (noting that patent pools may include grantbacks to access newly developed, essential IP).
33. See Nov. 6 Tr. at 119, 121-22 (McFalls); id. at 120, 124 (Fromm).
34. Id. at 123-24 (Fromm).
35. Id. at 124 (Fromm) (referring to nonexclusive agreements); id. at 124-25 (Shapiro); see also discussion of non-assertion clauses supra Part II.
36. See Nov. 6 Tr. at 118-19 (McFalls); id. at 120 (Fromm).
37. Id. at 118 (McFalls).
38. Id. at 118-19 (McFalls).
39. Id. at 119 (McFalls); see also id. at 120 (Fromm) (stating that grantbacks, at least as to improvements, are "reasonably pervasive" in the computer industry).
40. Nov. 6 Tr. at 118 (McFalls).
41. Id. at 117-18 (McFalls).
42. See Michael A. Heller & Rebecca S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, 280 Science 698, 699 (1998); Jane Nielsen, Reach-Through Rights in Biomedical Patent Licensing: A Comparative Analysis of Their Anticompetitive Reach, 32 Fed. L. Rev. 169, 170-71, 176 (2004); see also infra Part IV (discussing reach-through licensing agreements).
43. Nov. 6 Tr. at 118 (McFalls).
44. Antitrust-IP Guidelines § 5.6; see also 1 Herbert Hovenkamp, Mark D. Janis & Mark A. Lemley, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law §§ 25.2 to -.4, at 25-2 to -10 (2002) [hereinafter 1 Hovenkamp et al., IP and Antitrust].
45. Nov. 6 Tr. at 133 (Ordover).
46. 1 Hovenkamp et al., IP and Antitrust § 25.2, at 25-2 ("Nonexclusive grantback clauses are virtually always competitive.").
47. Antitrust-IP Guidelines § 5.6.
48. According to one panelist, grantbacks in the biomedical field aid in valuing a research tool, for example, by granting back an option to a license on the end product. Nov. 6 Tr. at 151-52 (McGarey).
49. See, e.g., id. at 128-29 (Rule) (stating that the same efficiencies are associated with non-assertion clauses).
50. Id. at 135 (Farrell); see also id. at 133-34 (Ordover). The anticompetitive concerns associated with the use of grantbacks within a patent pool are discussed in Chapter 3, Antitrust Analysis of Portfolio Cross-Licensing Agreements and Patent Pools, and are essentially the same as those noted here. Broad grantback clauses that, for example, "cover entirely unrelated technology, [cover] future as well as present patents, [or] cover non-essential as well as essential patents," may deter innovation and should, according to panelists, engender antitrust scrutiny. M. Howard Morse, Cross-Licensing and Patent Pools (Apr. 17, 2002 Hr'g R.) at 14, http://www.ftc.gov/opp/intellect/020417mhowardmorse.pdf; see Apr. 17 Tr., Patent Pools and Cross-Licensing: When Do They Promote or Harm Competition? at 204-05 (Morse) (recognizing that Department of Justice business review letters had approved grantback provisions that were structured so as not to impede innovation), http://www.ftc.gov/opp/intellect/020417trans.pdf.
51. 1 Hovenkamp et al., IP and Antitrust § 25.3, at 25-6 to -7.
52. Nov. 6 Tr. at 120 (Fromm); see also id. at 137 (Fromm) ("[T]here ought to be heightened scrutiny whenever there is . . . a significant difference in the grantback or the non-assertion provisions in the forward-going licenses.").
53. 1 Hovenkamp et al., IP and Antitrust § 25.3, at 25-7; see also John H. Barton, Patents and Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation, 65 Antitrust L.J. 449, 461-62 (1997).
54. See Antitrust-IP Guidelines §§ 3.1, 3.3.
55. See Antitrust-IP Guidelines § 5.6; supra Part III.A; see also Nov. 6 Tr. at 128-29 (Rule) (discussing how grantbacks and non-assertion clauses can promote cooperation and information exchange between licensor and licensee).
56. Patented research tools, which have primarily arisen in the pharmaceutical and biotechnology fields, are technologies "used to find, refine, or otherwise design and identify a potential product." FTC Innovation Report ch. 3, at III(D)(1)(c); see also Nov. 6 Tr. at 159 (McGarey) ("[I]n the context of reach-through [licensing agreements] . . . we're talking about broad enabling tools that are not destined to be products themselves . . . .").
57. FTC Innovation Report ch. 3, at III(E)(1). Although a research tool is used to develop a new product, the sale or use of the new product generally will not infringe the claims of the research tool patent. See Feb. 26, 2002 Hr'g Tr., Business Perspectives on Patents: Biotech and Pharmaceuticals (Afternoon Session) at 260 (Blackburn) ("[A research tool] is not a patent that covers the final product that is the subject of ongoing manufacture and sale."), http://www.ftc.gov/opp/intellect/020226trans.pdf [hereinafter Feb. 26 Tr.].
58. Heller & Eisenberg, 280 Science at 699; see also Janice M. Mueller, No "Dilettante Affair": Rethinking the Experimental Use Exception to Patent Infringement for Biomedical Research Tools, 76 Wash. L. Rev. 1, 16 (2001); Nielsen, 32 Fed. L. Rev. at 171.
59. Heller & Eisenberg, 280 Science at 699.
60. See Mueller, 76 Wash. L. Rev. at 16.
61. Heller & Eisenberg, 280 Science at 699; Nielsen, 32 Fed. L. Rev. at 171; see also Nov. 6 Tr. at 151-52 (McGarey) (stating a reach-through licensing agreement may take the form of a grantback of an option to exclusively license the downstream innovation).
62. Nov. 6 Tr. at 155 (Burtis) ("[If] whatever is commercialized never has a market, then the person who has bought the tool ends up paying a very little amount for the tool."); id. at 171 (Rule) (suggesting the Agencies should not be concerned with reach-through license agreements because the agreements "essentially captur[e] the value created by intellectual property" and allow for a broader dissemination of the technology); see also Nielsen, 32 Fed. L. Rev. at 171 ("Reach-through rights allow patent holders to license and reali[z]e value on their inventions even when that value is speculative. In this respect, they encourage the dissemination of patented inventions and are likely to have a positive effect on innovation."); Mueller, 76 Wash. L. Rev. at 59 ("[Reach-through license agreements are] an expedient method of measuring the value of the use of the research tool rather than an unlawful leverage of the patent right."); Nov. 6 Tr. at 151-52 (McGarey) (acknowledging that a reach-through arrangement is a way to value the technology).
63. Mueller, 76 Wash. L. Rev. at 16.
64. See Nov. 6 Tr. at 154-56 (Burtis) ("[P]eople [like] reach-through agreements because . . . [they are] a way to efficiently price . . . ."); Feb. 26 Tr. at 279 (Blackburn) ("I think that really reduces to a price negotiation, how much does the tool owner profit from the successful development of a product. So that allocation of risk I think is taken care of in the pricing."); see also Nielsen, 32 Fed. L. Rev. at 176 ("If an upstream invention is subsequently determined to be a foundational research tool, setting a value on it too early would deprive the patent holder of valuable income, and allow the licensee to reali[z]e a windfall gain. Reach-through rights allow the patent holder to defer decisions about the value of research tools and technologies.").
65. See, e.g., Feb. 26 Tr. at 275 (Blackburn) ("Reach-through royalties are a way to lower the up-front costs for the smaller firms and to have a risk-sharing arrangement basically with the tool owner . . . ."). But see id. at 278 (Oehler) (questioning whether "risk is truly shared" when a tool may prove valuable in early stages of research and development but the end product fails in clinical trials).
66. See, e.g., Nov. 6 Tr. at 153 (McGarey) (arguing that reach-through agreements can result in a "pile-up" of royalties that impair innovation); July 10, 2002 Hr'g Tr., Trends in Federal Circuit Jurisprudence (Morning Session) at 56-57 (Scherer) (stating that numerous upstream patents can impede downstream innovation by, among other things, attempting to collect royalties individually), http://www.ftc.gov/opp/intellect/020710trans.pdf; Oct. 30, 2002 Hr'g Tr., Competition, Economic, and Business Perspectives on Substantive Patent Law Issues: Non-Obviousness and Other Patentability Criteria at 175 (Stoner) (asserting that when an upstream patent manages the downstream flow of innovations it could lead to less downstream commercialization), http://www.ftc.gov/opp/intellect/021030trans.pdf [hereinafter Oct. 30 Tr.].
67. See Mueller, 76 Wash. L. Rev. at 7 ("Innovation is impeded by the 'royalty stacking' problem imposed by the numerous upstream patents that must be practiced in order to make the new downstream product."); Organisation for Econ. Co-Operation & Dev., Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies 63 (2002) [hereinafter Genetic Inventions] ("The concerns evoked about reach-through royalties are that they increase royalty stacking, as multiple tests and assays are needed when developing a medicinal product[;] that they make project management more complex and the relationship to all collaborators more delicate[;] and that they are costly to negotiate.").
68. Feb. 27, 2002 Hr'g Tr., Business Perspectives on Patents: Software and the Internet (Morning Session) at 415 (Kohn) (noting the high transaction costs stemming from proliferating patents), http://www.ftc.gov/opp/intellect/020227trans.pdf.
69. See, e.g., Genetic Inventions at 61-62 (describing the large number of license agreements pharmaceutical companies must enter).
70. Heller & Eisenberg, 280 Science at 698; see also Feb. 26 Tr. at 310-11 (Kirschner) (explaining the potential for an anticommons problem in the biotechnology industry due to the proliferation of reach-through royalty agreements); FTC Innovation Report ch. 3, at III(D)(4)(a).
71. Nov. 6 Tr. at 152-53, 158 (McGarey) (discussing the problems reach-through agreements pose for the NIH); see also Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources, 64 Fed. Reg. 72,090, 72,091 (Dec. 23, 1999), available at http://ott.od.nih.gov/pdfs/64FR72090.pdf; Mueller, 76 Wash. L. Rev. at 7-8, 16 (discussing NIH's position). To foster access to protected research tools, for which a license on reasonable terms cannot be freely negotiated, the National Research Council of the National Academies recommends that federal research-sponsoring agencies assume liability for patent infringement arising from the use of a protected research tool by including an "authorization and consent" clause in research funding instruments. Comm. on Intellectual Prop. Rights in the Knowledge-Based Econ., Nat'l Acads., A Patent System for the 21st Century 115-17 (Stephen A. Merrill et al. eds., 2004).
72. Feb. 26 Tr. at 315 (Blackburn) ("[Most research tool owners are] fairly sophisticated and know that [they will] kill the goose if the stack is too high.").
73. If numerous complementary patents are necessary to create a new innovation and these patents are valued independently by multiple licensors, then the total royalties paid generally will be greater than they would be if all patents were controlled by a single licensor. See, e.g.,Carl Shapiro, Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting, in 1 Innovation Policy and the Economy 121, 122-23 (Adam B. Jaffe et al. eds., 2000). In economics, this problem is known as "double marginalization" and can be mitigated with the use of a patent pool. See supra Chapter 3, Antitrust Analysis of Portfolio Cross-Licensing Agreements and Patent Pools Part III.D.1.b.
74. See Nov. 6 Tr. at 169 (Ordover); id. at 171-72 (Rule); id. at 169-70 (McGarey) ("[NIH] certainly [does not] like reach through [licensing agreements] . . . but I don't think I can say that it's anticompetitive or it's something that the Federal Trade Commission or the Department of Justice needs to look at because . . . it's something that the marketplace takes care of, perhaps, very painfully.").
75. See Oct. 30 Tr. at 149 (Cohen).
76. Nov. 6 Tr. at 172-73 (Farrell).
77. Feb. 26 Tr. at 269-70 (Earp) (stating that collecting royalties on noninfringing downstream products raises antitrust and misuse issues); Nov. 6 Tr. at 153 (McGarey) ("[A] patent owner is trying to get, by contract, what they could not get through their patent rights, because typically . . . the tool is not going to show up in the final product. And so, it's a way for a patent owner to really extend rights that the patent system has not really given them."). See generally infra Chapter 6, Competitive Issues Regarding Practices That Extend the Market Power Conferred by a Patent Beyond Its Statutory Term.
78. Feb. 26 Tr. at 270 (Earp) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 135 (1969) ("[C]onditioning the grant of a patent license upon payment of royalties on products which do not use the teaching of the patent does amount to patent misuse.")); see also Nov. 6 Tr. at 157 (Fromm) (advocating for heightened scrutiny of a reach-through agreement when a patentee receives royalties on an unpatented item).
79. Nov. 6 Tr. at 163 (Fromm); see also Brulotte v. Thys Co., 379 U.S. 29, 32 (1964) ("[A] patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.").
80. Nov. 6 Tr. at 162-63 (Shapiro); cf. Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1017 (7th Cir. 2002) ("The duration of the patent fixes the limit of the patentee's power to extract royalties; it is a detail whether he extracts them at a higher rate over a shorter period of time or a lower rate over a longer period of time."), cert. denied, 537 U.S. 1109 (2003); see also Richard Gilbert & Carl Shapiro, Antitrust Issues in the Licensing of Intellectual Property: The Nine No-No's Meet the Nineties, 1997 Brookings Papers on Econ. Activity, Microeconomics 283, 322 (permitting royalties to be paid over a longer period can reduce the deadweight loss from the patent monopoly); infra Chapter 6, Competitive Issues Regarding Practices That Extend the Market Power Conferred by a Patent Beyond Its Statutory Term Part I.
81. Nov. 6 Tr. at 171 (Rule); see also Mueller, 76 Wash. L. Rev. at 62 ("A reach-through license agreement merely time-shifts the royalty payments to the period when they are most accurately indicating the research tool's true value to the user.").
82. Bayer AG v. Housey Pharms., Inc., 228 F. Supp. 2d 467, 471-72 (D. Del. 2002). But see Robin C. Feldman, The Insufficiency of Antitrust Analysis for Patent Misuse, 55 Hastings L.J. 399, 448 (2003) ("Patent misuse rules based on whether the agreement is voluntary fail to recognize that an agreement may be in the interests of both parties and yet be adverse to the interests of the patent system as a whole.") (footnote omitted).
83. Nov. 6 Tr. at 139 (McFalls) ("[T]he focus . . . has to return to what's the actual effect going to be on the grantor of a non-assert's incentive to innovate, and are they an important innovator in the product market in which that entry could occur, and are you going to lose product differentiation or value to consumers at the end of this long road.").
84. Id. at 140 (Farrell); id. at 141-42 (Rule); id. at 142-43 (Fromm).
85. Id. at 131 (Farrell).
86. Id. at 132 (Farrell).
87. Nov. 6 Tr. at 136 (Fromm) (stating market power is difficult to measure); see also id. at 134-35 (Ordover) (focusing on the question of appropriate markets in which to measure market power).
88. Id. at 141 (Rule).
89. Id. at 138 (McFalls).
90. Id. at 145 (Ordover); see also id. at 143 (Fromm) ("[I]s the grantback or . . . non-assert provision significantly more extensive than the forward-going [license]."); Jeffrey Fromm, Patent Pools and Cross-Licensing (Apr. 17, 2002 Hr'g R.) at 8-9 (proposing a rule of presumptive legality for portfolio cross licenses which could be overcome in certain circumstances), http://www.ftc.gov/opp/intellect/020417jefferyfromm.pdf.
91. Nov. 6 Tr. at 145 (Ordover).
93. Id. at 147 (Rule); see also Bruce B. Wilson, Deputy Assistant Attorney Gen., U.S. Dep't of Justice, Patent and Know-How License Agreements: Field of Use, Territorial, Price and Quantity Restrictions, Remarks Before the Fourth New England Antitrust Conference (Nov. 6, 1970), reprinted in Antitrust Primer: Patents, Franchising, Treble Damage Suits 11 (describing the patent licensing practices covered by the Nine No-Nos); Abbott B. Lipsky, Jr., Deputy Assistant Attorney Gen., U.S. Dep't of Justice, Current Antitrust Division Views on Patent Licensing Practices, Remarks Before the American Bar Association Antitrust Section (Nov. 5, 1981), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,129 (abandoning application of the Nine No-Nos).
94. See Nov. 6 Tr. at 145 (Ordover).
95. Id. at 147, 187 (Rule); see also id. at 185 (Shapiro).
96. See Antitrust-IP Guidelines § 3.1 & n.14 ("A firm will be treated as a likely potential competitor if there is evidence that entry by that firm is reasonably probable in the absence of the licensing agreement."); U.S. Dep't of Justice & Federal Trade Comm'n, Antitrust Guidelines for Collaborations Among Competitors § 3.1 (2000), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,161 ("Under the rule of reason, the central question is whether the relevant agreement likely harms competition by increasing the ability or incentive profitably to raise price above or reduce output, quality, service, or innovation below what likely would prevail in the absence of the relevant agreement."), available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf.
97. Antitrust-IP Guidelines § 3.4.
98. See id. § 3.2.3 (considering future innovation); id. § 4.1.2 (discussing licensing arrangements involving exclusivity); id. § 5.5 (considering portfolio cross licenses and patent-pooling arrangements); id. § 5.6 (discussing grantbacks). See generally id. § 3.1.
99. Id. § 2.2; see also Ill. Tool Works Inc. v. Indep. Ink, Inc., 126 S. Ct. 1281, 1293 (2006) ("Congress, the antitrust enforcement agencies, and most economists have all reached the same conclusion that a patent does not necessarily confer market power upon the patentee.").
100. Frank H. Easterbrook, Intellectual Property is Still Property, 13 Harv. J.L. & Pub. Pol'y 108, 109 (1990).
101. Brief for the United States as Amicus Curiae Supporting Petitioners at 13-14, Ill. Tool, 126 S. Ct. 1281 (No. 04-1329), available at http://www.usdoj.gov/osg/briefs/2005/3mer/1ami/2004-1329.mer.ami.pdf; Antitrust-IP Guidelines §§ 2.1, 2.2. The existence of substitute inputs for the patented input that could be used as a work-around when producing the final product may also be relevant to the Agencies' analysis.
102. Ill. Tool, 126 S. Ct. at 1293.
103. Antitrust-IP Guidelines § 2.2.
104. Id. (citing United States v. Grinnell Corp., 384 U.S. 563, 571 (1966)).
105. See id. §§ 2.2, 3.4.
106. See id. § 5.5 ("Collective price or output restraints in pooling arrangements, such as the joint marketing of pooled intellectual property rights with collective price setting or coordinated output restrictions, may be deemed unlawful if they do not contribute to an efficiency-enhancing integration of economic activity among the participants."); supra Chapter 3, Antitrust Analysis of Portfolio Cross-Licensing Agreements and Patent Pools Part III.D.5.
107. See Antitrust-IP Guidelines § 5.5; Nov. 6 Tr. at 116-17 (Rule) ("[P]otentially the big issue is--and this really goes to consumers in many ways--are the restrictions that come along with the cross- licensing and the pooling [agreements] . . . . [I]t is something that . . . lawyers, when they look at these problems, are particularly concerned about as opposed to the question of whether to enter into that agreement, per se.").
108. Sections 4.1.2 and 5.4 of the Antitrust-IP Guidelines outline the analysis relevant to both exclusivity and exclusion in the context of the types of arrangements discussed in this Chapter.
109. Antitrust-IP Guidelines § 2.3.
110. Id. §§ 3.4, 4.1.2.
111. See supra notes 50-53 and accompanying text.
112. See, e.g., R. Hewitt Pate, Assistant Attorney Gen., U.S. Dep't of Justice, Competition and Intellectual Property in the U.S.: Licensing Freedom and the Limits of Antitrust, Address Before the 2005 EU Competition Workshop 8-9 (June 3, 2005), available at http://www.usdoj.gov/atr/public/speeches/209359.pdf; Gerald F. Masoudi, Deputy Assistant Attorney Gen., U.S. Dep't of Justice, Intellectual Property and Competition: Four Principles for Encouraging Innovation, Address Before the Digital Americas 2006 Meeting 7-8 (April 11, 2006), available at http://www.usdoj.gov/atr/public/speeches/215645.pdf; Schor v. Abbott Labs., 457 F.3d 608, 610 (7th Cir. 2006) (Easterbrook, J.) ("[Absent some exclusionary practice,] [t]he price of [a patented product] cannot violate the Sherman Act: a patent holder is entitled to charge whatever the traffic will bear."); see also Antitrust-IP Guidelines § 2.2.
113. See supra Part IV.
114. Antitrust-IP Guidelines § 4.2.
115. See, e.g., Nov. 6 Tr. at 147, 187 (Rule); id. at 185 (Shapiro).
116. Antitrust-IP Guidelines § 3.1; see also id. §§ 3.3, 3.4.
117. Id. § 3.4. However, the Agencies may challenge a license restraint under the per se rule if "there is no efficiency-enhancing integration of economic activity and if the type of restraint is one that has been accorded per se treatment . . . ." Id.; see also id. § 3.4 ex.7 (explaining that the Agencies may challenge a licensing agreement under the per se rule when it is "a sham intended to cloak [the] true nature" of the arrangement).

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