Question
(redacted)
December 10, 1996
Dear Mr. Smith
I write to confirm your advice concerning the reportability under the H-S-R Act of a hypothetical transaction that I described as follows: A pharmaceutical company, P, plans to acquire a patent license from Company Q. Assume for the sake of the discussion that P is a $100 million person, Q is a $10 million person, and P has valued the license at more than $15 million.
The question is whether the license is exclusive for H-S-R purposes. The patent covers a drug delivery system used in cosmetic skin creams that are used for dry skin, wrinkles and the like. Q has licensed at least two cosmetic companies to incorporate the patented technology into skin creams that they sell through regular retail channels. Qs other licensees will continue to sell the product at retail. Q also sells creams, which incorporate the technology, through physician channels of distribution. The proposed license agreement would grant P the exclusive right to sell the creams through physician channels. Q and its cosmetic company licensees would retain the right to sell exactly the same cream through retail or other non-physician channels.
You advised that under these circumstances, the license from Q to P will not be considered by the Staff to be the kind of exclusive license whose acquisition could require reporting. (See ABA, Premerger Notification Practice Manual, Interpretation No. 49.) You observed that the continued availability to consumers of the same product from other sources alleviates the kind of potential antitrust risk that might be thought to flow from exclusivity.
If this letter does not accurately describe your advice, please give me a call as soon as you can. As always, I am very grateful for your prompt and thorough consideration of our question.
Yours truly,
(redacted)
Richard B. Smith, Esq.
Premerger Notification Office
Bureau of Competition - Room 301
Federal Trade Commission
Washington, DC 20580
Via Federal Express