Question
October 2, 1995
VIA MESSENGER
Richard B. Smith, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580
Re: HSR Treatment of Agreement to File as
Agent for Patent Term Extension
Dear Dick:
Thank you for taking the time this morning to speak with me. I am writing to confirm our discussion regarding the proper treatment under the HSR Act and Rules of the following conduct involving our client.
We discussed the following set of facts:
1. Company A holds a process patent for the manufacture of a particular (redacted) used as the (redacted) in a number of very different (redacted) Company A uses this (redacted) as the (redacted) in a (redacted) which it produces and sells (redacted) Company A holds the (redacted) to produce and market this (redacted) containing the (redacted) Company A also sells the same (redacted) to Company B to be used in preparing Company Bs own (redacted). Those sales are made by Company A to Company B pursuant to a long-term supply agreement.
2. Company B (our client) uses the (redacted) produced by Company A to produce a (redacted). In order to produce this (redacted) Company B licenses two patents: the proces patent held by Company A and a use patent held by Company C. Company Bs license from Company A is an implied license to utilize the (redacted) sold to it by Company A in the formulation and sale of its (redacted) Company Bs license from Company C is a license to use the (redacted) purchased from Company A in the production of a (redacted). Because the (redacted) produced by Company B is for use (redacted) which produce products intended for (redacted) Company B must also have (redacted) Company B has (redacted) to produce and sell a (redacted) utilizing the (redacted) produced by Company A.
3. Finally, Company C holds a use patent for the (redacted) containing the (redacted) produced by Company A. Company C does not itself produce any (redacted) it licenses Company B to produce this (redacted) and licenses another company to produce the (redacted).
Pursuant to the terms of the (redacted) or their agents can, under specific circumstances, apply to the U.S. Patent and Trademark Office (PTO) for a three-year extension of the term of one of the patents which form the basis of their (redacted) Company B, therefore, has the right to apply for extension of any one of the patents that underlie it (redacted) and in particular either Company As process patent or Company Cs use patent. By the terms of the 1984 Patent Act, however, Company A alone is not otherwise eligible to apply for or to receive a term extension.
In return for certain consideration from Company A (the exact terms of which are undetermined at this point), Company B as agent for Company A will file with the PTO an application to extend the term of Company As process patent. If the PTO determines that Company A is eligible for the patent term extension, the PTO would grant that term extension to Company A without further involvement by Company B. Furthermore, the terms of the implies license between Company A and Company B (i.e., the license that flows from the purchase and sale of the (redacted) would not change as a result of this transaction. Company B would have no greater or lesser right to use the (redacted) produced by Company A in the production of its own (redacted). The patent term extension for the benefit of Company A would be received, to the extent that the PTO determines it is appropriate, from the PTO, not from Company B.
Under these circumstances, we determined that the transaction between Company A and Company B, whereby Company B would file the patent term extension application with the PTO as agent for Company A and forego its right to extend any other patent related to its (redacted) would not constitute a transfer of voting securities or assets within the meaning of the HSR Act and Rules. We noted that, to the extent that Company A would receive a benefit as a result of this transaction, that benefit would be received from the PTO in the form of a patent extension. Company Bs acting as agent on behalf of Company A would not be a reportable event. You indicated that the Premerger Office has taken the position that the acquisition of such an intellectual property benefit by a private party from a government agency is not a HSR-reportable event. If Company A determined, after receiving the patent term extension, to transfer some portion or all of its rights under the term-extended patent to another party, you indicated that this transaction should be separately evaluated for HSR reportability.
I hope that this letter accurately summarizes the substance of our discussion this morning. If I have erred in this summary, or in the conclusion that Company B is free to file with the PTO as agent for Company A and to be compensated for that filing without making a HSR filing, please let me know immediately. We are relying on this advice in order to advise our client.
Thank you again for your time this morning.
Sincerely,
(redacted)
cc: (redacted)