NLU Intellectual Property and Competition Policy Course Outline

Intellectual Property and Competition Policy, Short Course, Fall 2018

Prof. Jay Kesan, University of Illinois at Urbana-Champaign & Dr. Kirti Gupta, Qualcomm

Intellectual property (IP) rights are fundamentally rights to exclude others from making,
using, selling or offering to sell products and services that infringe on one’s IP rights. As such,
the exercise of one’s IP rights is one of the few legal ways to reduce competition in a market
economy. Antitrust law focuses on maintaining competitive market conditions against a
backdrop of a large variety of market transactions between various entities who may be in
horizontal and vertical relationships to each other. In the context of IP, it is the licensing of IP
rights that is often the focus of antitrust policy. Specifically, when licensing is seen as going
beyond the scope of the original patent grant (such as paying royalties in perpetuity), then it is
likely to raise antitrust concerns. On the other hand, antitrust policy is also increasingly
recognizing that many market transactions and private ordering mechanisms involving IP might
be both pro-competitive and efficiency enhancing. It is this rich legal and policy landscape at
the patent-antitrust interface that is the focus of this short course.

We will cover topics such as introduction to patent licensing, market power and
intellectual property, vertical integration involving tying, exclusive dealing, package or blanket
licensing and anticompetitive royalty provisions, and horizontal restraints such as cross-
licensing, patent pools, standard setting organizations (SSOs) and research and production joint
ventures.

Day 1:

 Introduction

 Patent Licensing

 Fundamentals of Antitrust Law

o Microeconomic underpinnings of antitrust law
 Introduction to DOJ Antitrust Guidelines for the Licensing of IP
 Section 2 of the DOJ Antitrust Guidelines for the Licensing of IP
o Technology Market Definition
 DOJ Guidelines, Examples 1 and 2
o Innovation Markets
 DOJ Guidelines, Examples 3 and 4

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NLU Intellectual Property and Competition Policy Course Outline

Day 2:
Monopolistic Practices Involving IP

 Price fixing
o U.S. v. General Electric Co., 272 U.S. 476 (1926) (approving price-fixing arrangement
between two principal manufacturers of light bulbs)
o U.S. v. U.S. Gypsum Co., 333 U.S. 364 (1948) (finding sufficient evidence of a horizontal
conspiracy among licensees themselves to fix prices, taking case out of GE rule)

 Geographic divisions
o Also known as Territory Restricted Licenses
o 35 U.S.C. §261 – Patent Act
o Blackburn v. Sweeney, 53 F.3d 825 (7th Cir. 1995).
 Holding that a horizontal agreement which limits advertising in another’s area is per
se unlawful.
 Unilateral or concerted refusals to deal
o United States v. Singer Mfg. Co., 374 U.S. 174 (1963).
 Disapproving a settlement agreement that involves pooling plus exclusion even
though the court assumes that the patents were valid.
o Duplan Corp. v. Deering Milliken, Inc., 444 F. Supp. 648 (D.S.C. 1977).
 Construing a cross-licensing agreement as a concerted refusal to deal.
Day 3:

Vertical Relationships

 Vertical integration and related licensing practices by IP holders

o Broadcast Music v. CBS, 441 U.S. 1 (1979) (finding complex upstream and downstream
licensing arrangement to be valid)

o Leegin v. PSKS, 551 U.S. 877 (2007)

 Tying
o International Salt Co. v. United States, 332 U.S. 392 (1947).
 Invalidating a tying relationship in which a licensee of a patented lixator agreed to
purchase salt only from the patentee.

 Anticompetitive royalty rates

o Post-expiration royalties—Kimble v. Marvel Entertainment, LLC, No. 13-720, decided June
22, 2015 by the U.S. Supreme Court, declining to overrule Brulotte v. Thys Co., 379 U.S. 29
(1964), and holding that a contract transferring or licensing patent rights can charge
royalties only for uses of the invention that occur before the patent term expires.

 DOJ Guidelines, Example 8

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NLU Intellectual Property and Competition Policy Course Outline

Horizontal Relationships

 Introduction to horizontal restraints

o DOJ Guidelines, Examples 5, 6, 7, 9

 Cross licensing and patent pools

o Intergraph Corp. v. Intel Corp., 241 F.3d 1353 (Fed. Cir. 2001)
o Texas Instruments v. Hyundai Electronics Indus. Corp., 49 F.Supp.2d 893 (E.D. Tex. 1999)
o DOJ Guidelines, Example 10

Day 4:

Standards and the Interface between IP and Competition

o Standards at the intersection of IP and Competition Law

o How Standards Development Works
o Standard essential patents (SEPs) and FRAND Licensing - issues
 The meaning of FRAND -- Layne-Farrar, Padilla, Schmalensee (2007)
o Patent hold-up and royalty stacking
 Lemley and Shapiro (2007)
 Gelatovic, Haber, Levine (2014)
 Gelatovic and Gupta (2016)
o Standard essential patents (SEPs) and FRAND Licensing - recent case law
 ECJ Huawei vs. ZTE (2015)
 Unwired Planet vs. Huawei (2017)
 TCL vs. Ericsson (2017)

Day 5:

 Recent IP and Competition Policy Developments Worldwide

o DOJ’s remarks on “Innovation Incentives in the Application of Antitrust Law” in 2017-18.

 Assistant Attorney General Makan Delrahim’s Remarks at the USC Gould School of
Law's Center for Transnational Law and Business Conference, November 2017
 Assistant Attorney General Makan Delrahim Delivers Keynote Address at American
Bar Association's Antitrust Fall Forum, November 2017
 Assistant Attorney General Makan Delrahim Delivers Remarks at the U.S. Embassy in
Beijing, February 2018
 Assistant Attorney General Makan Delrahim Delivers Remarks at the College of
Europe in Brussels, February 2018
 Assistant Attorney General Makan Delrahim Delivers Keynote Address at University
of Pennsylvania Law School, March 2018
 Assistant Attorney General Makan Delrahim Delivers Keynote Address at the
LeadershIP Conference on IP, Antitrust, and Innovation Policy, April 2018
o European Commission’s “Setting out the EU approach to SEPs” in Nov 2017
o JPO’s “Guide to Licensing Negotiations Involving SEPs” in June 2018.
o China: Beijing High People’s Court’s and Guangdong High People’s Court’s Guidelines on
Adjudicating Disputes over SEPs.
o DIPP’s initiatives on “SEPs and their availability on FRAND terms”.