Nine No-Nos of Patent Licensing (1970)

Patent

I’m thinking about the USDOJ’s “Nine No-Nos” of Patent Licensing. These were the subject of an important set of remarks in 1970 by then Bruce Wilson (USDOJ) on antitrust considerations for patent and know-how license agreements.  At the time, the DOJ considered these all per-se antitrust violations.  US Antitrust Law has really relaxed since then, and for the most part these are no longer per-se violations.  That said, they still represent cautionary signs of potential antitrust trouble — especially if coupled with actual market power.

The nine no-nos:

  1. Tying: Don’t require the purchase of unpatented materials as a condition of a patent license;
  2. Assign-Back: Don’t require the licensee to assign-back subsequently developed patents;
  3. Resale Restrictions; Don’t restrict the right of a product purchaser to re-sell the product;
  4. Using Non-Patented Products: Don’t restrict the licensee’s ability to deal in products outside the scope of the patent;
  5. Exclusive Licenses: Take care with exclusive licenses — especially if in a horizontal market relationship.
  6. Package Deals: Don’t require mandatory package licenses;
  7. Relationship with Payments: Royalty provisions should be reasonably related to the licensee’s sales;
  8. Licensee’s Use of Product: Don’t restrict a licensee’s use of a product made by a patented process; and
  9. Minimum Resale Price: Don’t include minimum resale price provisions for the licensed products.

Bill Coston (Venable) has a nice review of the nine and explains how they are relevant today (as of 2013) (The Patent-Antitrust Interface: Are There Any No-No’s Today?).  Coston also presents his “Four Frowned Upons”:

But the antitrust laws still do have considerable relevance to current patent law practices. There are at least  “Four Frowned-Upons”:

  1. Generic and branded pharmaceutical patent settlements where the branded pays the generic a “reverse payment” to stay off the market for some period of time.
  2. Dedication of standard essential patents (“SEPs”) to a standard-setting organization and then failing to honor a commitment to offer fair, reasonable and non-discriminatory (“FRAND”) licensing terms and, instead, seeking injunctive relief.
  3. Creation of a patent pool by horizontal competitors that includes some patents which are not essential to a standard, accompanied by an agreement not to license the non-essential and competitive alternative product patents outside of the pool license.
  4. Resale price maintenance agreements in patent licensing.

Upcoming: What are the antitrust Frowned-Upons for Patent Prosecution:?