Question
(redacted)
December 2, 1996
Patrick Sharpe, Esq.
Premerger Notification Office
Federal Trade Commission
Room 303
6th & Pennsylvania Avenue, N.W.
Washington, D.C. 20236-20580
Dear Mr. Sharpe:
This letter confirms your agreement with my conclusion that the transaction described below would not be subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).
Company A and Company B are equal owners of Partnership C, having jointly formed C several years ago. Company A, at Cs formation, granted to C an exclusive license to intellectual property* relating to certain brands of a consumer product that A had created, and that license expires according to its terms in August 1998. Since its formation, C has developed and now owns certain other brands of the same consumer product. B produces for C all of the products that C now sells, including products sold under the brands licensed from A and the products sold under the brands that C itself has developed and now owns. The parties now intend to execute an agreement under which B will become the exclusive sales representative for all of the products that B now produces for C and that C now sells.
[*Staff comment: trademarks]
More specifically, the agreement will confer upon B the right to act as exclusive sales representative for all of those products for an initial term that expires in August 1998 (when Cs existing license from A also expires).** B will also receive from C a nonexclusive sublicense to As intellectual property and a nonexclusive license to Cs intellectual property for use in connection with the marketing of the products for which B will act as sales representative during the initial term.*** The agreement will further give to B the option of extending its rights thereunder for a perpetual term (commencing September 1998 and continuing in perpetuity) upon notice of intent to exercise that option on or before mid-April 1998. Upon that exercise, and for the perpetual term, B would obtain the right to continue acting as exclusive sales representative for the same group of products. It would also receive from C a continuing nonexclusive license to Cs intellectual property and from A a nonexclusive license to As intellectual property for use in connection with the marketing of the products for which B would continue acting as exclusive sales representative during the perpetual term.
[** Staff comment: exclusive distribution license]
[***Staff comment: non-exclusive licenses]
The grant to B of exclusive sales rights does not constitute the acquisition by B of assets for purposes of the HSR Act. Nor does Bs receipt of licenses to associated intellectual property constitute acquisition by B of such assets since those licenses will be nonexclusive (A and C respectively retaining use and all other ownership rights thereunder). Accordingly, entry into the agreement described hereinabove would not be a transaction reportable under the HSR Act.
My thanks to you for your assistance.
Sincerely
(redacted)