* The views expressed here are those of the author, and not necessarily of the Federal Trade Commission or any Commissioner.
I Introduction
I am pleased to be here today to discuss U.S. perspectives on the relationship between antitrust and intellectual property law, and particularly the role of antitrust in constraining abusive conduct involving intellectual property rights. The topic is broad and my time is limited, so I am not going to attempt an exhaustive analysis.(1) I shall first outline some fundamental principles that emerge from the case law and from the Antitrust Guidelines for the Licensing of Intellectual Property issued jointly in 1995 by the U.S. Department of Justice and the Federal Trade Commission (IP Guidelines).(2) Then, I shall illustrate the application of some of these principles in an important recent pair of cases: the cases brought by the FTC (3) and by Intergraph(4) Corporation against Intel alleging abuse of its monopoly power in the market for computer microprocessor chips.
II The Purposes of U.S. Intellectual Property and Antitrust Law
It is sometimes said that great artists work best in circumstances of creative tension. The same may be true of antitrust and intellectual property law. On their face, the two legal regimes may appear to conflict: intellectual property law rewards and encourages innovation by providing limited monopoly rights, while antitrust law prohibits monopolization. But ultimately, as our IP Guidelines emphasize, both serve, and are interpreted by U.S. courts and enforcers to further, "the common purpose of promoting innovation and enhancing consumer welfare."(5)
Economists have long debated whether competitive or monopolistic market structures best promote innovation.(6) I doubt that that question can be answered in an abstract, absolute form; surely, some blend of monopoly incentives and competitive discipline is desirable. But it is also important to recognize that innovation does not occur in a vacuum or spring unaided from the head of Zeus. When the FTC held hearings in 1995 on Global and Innovation-Based Competition, witness after witness emphasized that most innovation builds on, and depends on access to, someone else's idea.(7)
Antitrust law promotes market structures that encourage initial innovation with a competitive market "stick" -- that is, firms that fail to innovate will get left behind. Intellectual property law encourages initial innovation with the "carrot" of limited exclusivity, and the profits that flow therefrom.(8) Antitrust law enables follow-on innovation by protecting competitive opportunities beyond the scope of the exclusive intellectual property right. Intellectual property law enables follow-on innovation by requiring public disclosure of the initial innovation (at least in the patent context) and affording follow-on innovators rights of "fair use" and freedom from intellectual property "misuse." The basic principle that mediates the tensions, to which we shall return, is that intellectual property rights provide legal monopoly power, but only within the defined, limited scope of the right.
III Fundamentals of U.S. Intellectual Property/Antitrust Law
Now let me try to crystallize these policy notions by outlining some relevant aspects of U.S. intellectual property and antitrust law.
A The Nature of Intellectual Property Rights in the U.S.
Let's start with three key points about intellectual property rights in the U.S.
First, the U.S. favors strong intellectual property protection: The starting point for U.S. law in this area is a fundamental national commitment to strong protection of intellectual property rights as private rights of property. In fora such as the World Trade Organization, the U.S. is typically at the forefront of efforts to strengthen intellectual property protection. Our domestic approach is much the same, including constitutional protection for intellectual property rights against government interference under our Takings and Due Process Clauses.
Second, intellectual property means a right of exclusion: Because of the "public good" qualities of intellectual property, the essence of intellectual property rights is the right to exclude. This right exists regardless of whether an intellectual property owner, say, a patentee, actually practices and markets her invention. Consistent with this approach, while the antitrust laws generally prohibit certain exclusionary conduct, they "do not negate the patentee's right to exclude others from patent property."(9) Under the IP Guidelines, even if an intellectual property owner is found to have market power, that market power, if not otherwise unlawful, does not "impose on the intellectual property owner an obligation to license the use of that property to others."(10) Nor can a mere unilateral refusal to license or use a patent be deemed "misuse" under patent law.(11) As a corollary to this principle, neither intellectual property misuse law nor antitrust law prohibits either a mere effort to obtain enforcement of one's right of exclusion, or a mere demand for a supracompetitive fee as a condition of an intellectual property license.(12)
Third, intellectual property rights are, however, "conditioned by a public purpose,"(13) and "misuse" by seeking to extend market power beyond the scope of the right of exclusion may result in loss of intellectual property protection: U.S. courts will not enforce patents or copyrights while those rights are being "misused," or, after misuse, until the misuse is "purged." This principle has long been recognized in the patent context, and a majority of appellate courts have affirmed it in the copyright context. Indeed, it is commonplace for an answer to an intellectual property infringement complaint to plead both a patent or copyright misuse defense and an antitrust counterclaim based on essentially the same facts.(14)
However, the misuse rule is easier to state than to apply. The relevant statute tells us what is not patent misuse: merely seeking to enforce one's rights, refusing to license and/or failing to practice one's own invention.(15) What extra factors are required to convert the exercise of one's intellectual property rights into misuse is less clear. Because misuse is a defense which in essence asks the court not to lend affirmative assistance to anticompetitive conduct -- a shield and not a sword -- it probably includes, but goes somewhat beyond, antitrust prohibitions. According to the Ninth Circuit Court of Appeals, "while it is true that the attempted use of a copyright to violate antitrust law probably would give rise to a misuse of copyright defense, the converse is not necessarily true -- a misuse need not be a violation of antitrust law in order to comprise an equitable defense to an infringement action."(16)
The area in which the misuse defense is most likely to extend beyond the scope of antitrust liability is tying, i.e., requiring the purchase of the patentee's unpatented goods as a condition of a patent license.(17) For example, in the leading patent misuse case, Morton Salt, the Supreme Court declined to enforce a patent for a machine that inserted salt tablets into cans of food because the patentee required commercial canners who wanted leases of its patented machines (and concomitant patent licenses) to use only its subsidiary's salt tablets, which were unpatented. The Court explained that "a patent affords no immunity for a monopoly not within the grant, and the use of it to suppress competition in the sale of an unpatented article may deprive the patentee of the aid of a court of equity to restrain an alleged infringement by . . . a competitor."(18) Significantly, the Court was unmoved by the view of the court below that "it did not appear that the use of its patent substantially lessened competition or tended to create a monopoly in salt tablets." Even absent proof of such actual or likely anticompetitive effects in the market for the "tied," unpatented product, the courts will not assist the patentee's efforts to hamper competition by enforcing its patent while such efforts persist.
B Antitrust Principles
Now let's review some basic antitrust principles as they apply to intellectual property right holders. While I'll confine my remarks to non-merger antitrust principles, the general policies furthered by U.S. merger and non-merger antitrust law are much the same.
First, with limited exceptions, U.S. antitrust law generally applies the same principles to cases involving intellectual property rights - be they patents, copyrights, trade secrets or trademarks - as to cases involving any other property rights: As the IP Guidelines put it, "[i]ntellectual property is . . . neither particularly free from scrutiny under the antitrust laws, nor particularly suspect under them."(19)
To understand how these general principles apply to cases involving intellectual property, you need to know in general terms what Sections 1 and 2 of our Sherman Act prohibit. Section 1 prohibits an agreement between two or more economically independent entities that unreasonably restrains competition. Agreements between horizontal competitors to fix minimum prices or to carve up markets into local monopolies are classic examples that are so inherently anticompetitive that they are treated as illegal per se. The mere presence of intellectual property rights does not immunize such conspiracies from liability. For example, the mere fact that rival computer makers each incorporate Intel's patented microprocessor chips and their own proprietary intellectual property into their products would not give them carte blanche to divide America into exclusive territories by direct horizontal agreement among themselves, or to fix prices by means of a series of licensing agreements with Intel in which Intel brokers the price-fixing arrangement for them by imposing resale price maintenance requirements as a condition of the licenses; such agreements are illegal per se.(20)
Vertical agreements, including patent licenses, are generally treated under the rule of reason. That is to say, in analyzing a restraint in an intellectual property license where there is no express or implied agreement between actual or potential horizontal competitors, the decisive question is "whether the restraint is likely to have anticompetitive effects and, if so, whether the restraint is reasonably necessary to achieve procompetitive benefits that outweigh those anticompetitive effects."(22) However, a patent license that incorporates a tying provision like the one in Morton Salt may be illegal if (1) "the seller has 'appreciable economic power' in the tying product market" (which is not necessarily implicit in the fact of ownership of a relevant intellectual property right), and (2) "the arrangement affects a substantial volume of commerce in the tied market."(23)
Cases involving unilateral abuse of intellectual property power often arise under Section 2 of the Sherman Act. Section 2 does not require an agreement, but instead requires either actual or likely monopoly power.(24) It prohibits monopolization, defined as "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."(25) It also prohibits attempted monopolization, which requires exclusionary conduct with "specific intent to monopolize" which creates a "dangerous probability" of monopolization of a relevant antitrust market.(26) Under these standards, merely having monopoly power by virtue of a patent is no problem in and of itself, but exclusionary practices with the purpose of extending the scope or likely duration of such power are subject to rule of reason antitrust scrutiny.(27)
Second, when it comes to the relevant market and assessing market power, there is no presumption either way as to whether an intellectual property right defines a market or confers market power. The case law is mixed on this point, but the prevailing view - or at least, the view of the antitrust enforcement authorities and the Federal Circuit Court of Appeals - is that market power should not be presumed from the ownership of an intellectual property right.(28) Rather, just as, say, a relevant market in oil refining is delineated by identifying the smallest group of refineries that a hypothetical monopolist would have to control to be able to profit by imposing a small but significant and nontransitory gasoline price increase, a relevant technology market for antitrust purposes is "the smallest group of technologies and goods over which a hypothetical monopolist of those technologies and goods likely would exercise market power."(29) It is also important to take care in defining the relevant market -- a point to which I'll return in discussing the Intel cases. An intellectual property right or licensing agreement may have a competitive effect in a products market, for final or intermediate goods made using that intellectual property; in a technology market, if the IP right is marketed separately from the products in which it is used; or in an innovation market, i.e., on competition in research and development to develop new or improved goods or processes.(30)
Third, intellectual property licensing agreements - both one-way licenses and cross-licenses -- are seen as typically procompetitive, since they facilitate the integration of intellectual property rights with complementary factors of production.(31) This is particularly true of cross-licenses of blocking or complementary patents, i.e., cases in which it is either impracticable or inefficient to practice one invention without another. Because of the procompetitive potential of the license, licenses containing ancillary restraints, including exclusive licenses, are analyzed under a rule of reason approach.(32) In the IP Guidelines, the antitrust enforcement agencies have indicated that they will exercise their enforcement discretion to limit the potential chilling effects on procompetitive licensing arrangements of the uncertainty inherent in the rule of reason. The Guidelines create a presumptive "safety zone" for "a restraint in [a non-merger] intellectual property licensing arrangement if (1) the restraint is not facially anticompetitive [i.e., of a per se illegal nature] and (2) the licensor and licensees collectively account for no more than twenty percent of each relevant market significantly affected by the restraint."(33) Of course, the mere fact that an agreement involves a transfer or license of intellectual property rights does not immunize it from antitrust scrutiny.
Fourth, and finally, the application of antitrust principles to the conduct of intellectual property litigation merits a special mention: U.S. policy guards litigants' First Amendment rights of access to the courts every bit as zealously as intellectual property holders' property rights, and under our so-called Noerr-Pennington doctrine, the good faith exercise of the right of access to court is immune from antitrust liability.(34) U.S. courts also follow a general, rebuttable policy of encouraging good faith settlement of litigation.
These complementary policies limit the application of antitrust principles to conduct within judicial proceedings. However, the antitrust immunity is strictly limited to the confines of the good faith exercise of the right to seek judicial redress: sham litigation, and settlement provisions that are not reasonably necessary to resolve litigation, enjoy no antitrust immunity. A good faith and minimally reasonable attempt to enforce intellectual property rights by litigation is immune from antitrust scrutiny. But both enforcing fraudulently procured patents and bringing objectively baseless infringement claims on otherwise invalid intellectual property rights have given rise to antitrust liability where the normal elements of Section 1 or Section 2 liability have been met.(35)
IV A High-Tech Case Study: The Intel Cases
How do all these factors play out in practice? I think the best way to understand them is to look closely at a complex case which raises a lot of the issues that I've outlined. The Intel cases illuminate better than most the dividing lines between lawful exercise of intellectual property rights of exclusion and monopolistic extension or abuse of those rights, not least because they show how different approaches to the intellectual property context in which exclusionary behavior occurs can lead to sharply diverging results. On the one hand, FTC enforcement against Intel, which focused primarily on actual and potential competitive effects in the microprocessor chip technology and innovation markets, culminated in a consent agreement which barred Intel's coercive and exclusionary behavior. On the other hand, a Federal Circuit opinion issued earlier this month in the parallel private case brought by Intergraph, which focused on competitive effects downstream in the computer market, found no antitrust violation. As I'll explain, I believe that the differing analyses of the FTC and the Federal Circuit are reconcilable.
The facts of the Intel cases were as follows: Intel was and is the world's leading manufacturer of high performance computer microprocessor chips, or CPUs. At the time these cases were brought, Intel had a market share of about 80 percent in the world CPU product market, which was a relevant antitrust market. Barriers to entry into the CPU market were high. Those barriers included a large number of both Intel and non-Intel patents on CPU technology; sunk costs of design and manufacture; economies of scale; network effects, or the need to ensure compatibility with complementary software products, such as Microsoft's Windows operating systems, an issue that Intel had mastered by virtue of Windows-Pentium intellectual property cross-licensing arrangements -- the "Wintel alliance" -- with Microsoft; and the potential costs for an entrant of winning consumer trust in a technical market in which reliability and trust were critical, and in which the reputational values attached to Intel's trademarks were huge. As a result, the Federal Circuit did not question the shared view of the district court in the Intergraph case and the FTC that Intel was a monopolist with strong market power in the CPU market.(36) Having, however, acquired that power initially by apparently proper competitive means, not least by virtue of its CPU patents and trademarks, there was nothing unlawful about Intel's being a monopolist.
Intel's customers in the CPU product market are OEMs, alias original equipment manufacturers, alias computer makers. OEMs compete with each other in various downstream markets, such as the desktop personal computer (or PC) and high-end graphics workstation markets, which for present purposes we can assume to be substantially competitive. In order to produce a valuable end-product for consumers, these OEMs must produce software and machines that integrate with the CPU technology that they buy. In order to enable OEMs to do so in a sufficiently timely manner to be able to compete effectively in the fast-evolving computer market, and in order to facilitate simultaneous roll-out of new CPU technology by multiple OEMs and thus maximize the value of advertising expenditure at launch, it was Intel's general practice to supply at least major, or "strategic," OEMs with trade secret advance technical information and prototype CPUs on a rolling basis. It did so, however, under contracts that were terminable at will and authorized use of the technical information only for purposes of building Intel-compatible computers.
Digital, Compaq and Intergraph were three of Intel's strategic customer OEMs. Digital, and Compaq, which has since acquired Digital, manufactured, amongst other things, PCs. Intergraph was and is primarily a graphics workstation manufacturer. All three had made substantial investments, including committing to Microsoft Windows operating systems, that effectively locked them in to Intel's CPUs.
The three OEMs also each had patents on certain CPU technologies, although at the relevant times, only Digital manufactured and sold CPUs in direct horizontal competition with Intel. In 1994-97, each of the three in effect asserted their patents against Intel. Digital did so directly; Intergraph and Compaq were initially more polite to their principal CPU supplier, but did effectively the same thing, by suing rival OEMs for incorporating Intel CPUs that they alleged violated their patents. (Intergraph later sued Intel directly.)
With minor variations, Intel's response in each case was to publicly: (1) cut the three OEMs off from its trade secret advance technical information and supplies of patent-protected CPU prototypes (while continuing to supply the information and prototypes to their OEM competitors); and (2) threaten (although it never made good on this threat) to cease regular CPU supplies to them. The purpose of Intel's retaliation was to make the OEMs drop their suits and license their CPU patents on favorable terms to Intel. Digital and Compaq settled their claims with Intel on that basis, whereupon Intel promptly resumed its former, cooperative supply practices with them. Intergraph sued under Sections 1 and 2 of the Sherman Act and initially won a preliminary injunction in the district court requiring Intel to continue its standard supply practices.(37)
Let's first look at the Federal Circuit panel's analysis of Intergraph's case on appeal in its decision issued earlier this month: (I should note that this decision is potentially subject to re-hearing en banc by the full Federal Circuit court, or to discretionary review by the Supreme Court.) The Federal Circuit focused most of its attention on the downstream market(s), the graphics workstation market(s) in which the plaintiff before the court, Intergraph, was an active competitor. It reviewed the antitrust rules applicable to Intel's exclusionary conduct in restricting Intergraph's access to important inputs to its core business under various rubrics, but two will suffice for our purposes.
First, refusal to deal. As the court noted, a refusal to deal may violate Section 2 when (1) "the refusal is directed against competition," (2) its "purpose is to create, maintain, or enlarge a monopoly," and (3) there is no or insufficient "valid business justification" for the conduct.(38) On the other hand, regardless of the involvement or non-involvement of intellectual property rights, and apart from a much debated narrow exception for "essential facilities," "in the absence of any purpose to create or maintain a monopoly [in a relevant antitrust market], the [Sherman] act does not restrict the long recognized right of a trader or manufacturer engaged in a purely private business, freely to exercise his own independent discretion as to parties with whom he will deal."(39) In other words, as I mentioned in outlining Section 2 liability, success or a "dangerous probability" of success in gaining or extending monopoly power in a relevant antitrust market is a prerequisite for liability for unilateral conduct.
Looking at the record before it, the Federal Circuit found "neither evidence nor suggestion of monopoly power . . . or the willful acquisition or maintenance of monopoly power" by Intel in Intergraph's downstream market(s), which Intel had not yet entered (although there was evidence that it had plans to do so).(40) Nor did the Federal Circuit see any evidence that Intel's actions were intended to enhance its potential competitive position in the downstream market(s).(41) Absent such evidence, Intel's monopoly power in the CPU market could not make it a monopolist in the downstream market(s) in which Intergraph competed.
Second, leveraging. The Federal Circuit also considered the district court's view that Intel "'has attempted to leverage its monopoly power in the . . . CPU market to prevent Intergraph from competing in, . . . and to control and dominate competition in [the downstream] market(s).'"(42) The Federal Circuit rejected this theory of liability on essentially the same basis as the first: insufficient evidence in the record before the court of actual or likely harm to competition in the downstream market(s). As the Federal Circuit put it, "Intel's action affected only Intergraph, in a heavily populated competitive market."(43) Since Intel neither secured and exploited an unfair advantage for itself in the downstream market(s), nor rendered the downstream market(s) as a whole less competitive, its conduct did not give rise to the harms that can make leveraging unlawful: "threaten[ing] the [downstream] market with the higher prices or reduced output or quality associated with the kind of monopoly that is ordinarily accompanied by a large market share."(44)
What about the upstream market, the CPU product market? In part because it was faced only with a private claim made by Intergraph, which was not engaged in the sale of CPUs, the Federal Circuit had little to say about the market in which Intel had its power and its patents. The court acknowledged, of course, that Intergraph had patents on CPU technology. Indeed, obtaining a license on those patent rights was Intel's main objective. But, said the court, "the patent grant is a legal right to exclude, not a commercial product in a competitive market."(45) Intergraph had left the CPU product market several years earlier, and stated no intention to re-enter. In the Federal Circuit's words, "[f]irms do not compete in the same market unless, because of the reasonable interchangeability of their products, they have the actual or potential ability to take significant business away from each other." Because Intergraph did not compete and was not likely to compete in the CPU product market, the Federal Circuit concluded that the harms to Intergraph's business of which it complained would not weaken competition or strengthen or extend monopoly power in the CPU market.
Now let's turn to the FTC case, brought on the basis of a fuller factual record: After an extensive investigation, the FTC filed an antitrust complaint against Intel in June 1998.(46) That complaint contained four key allegations. The first three points are all points accepted or assumed by the Federal Circuit: (1) Intel had monopoly power in the CPU market;(47) (2) Intel refused to deal with certain customers "as a means of coercing licenses to their rival microprocessor technology;"(48) and (3) it thereby harmed the three OEMs' ability to compete in the downstream computer markets.(49) The fourth, however, goes beyond the Federal Circuit's limited examination of the upstream market: (4) the "natural and probable effect" of Intel's coercive conduct was to weaken the three OEMs' patent rights and incentives to innovate, and the incentives of others to innovate, in the CPU market.(50)
The FTC's legal argument was a classic Section 2 argument: Intel, a monopolist, had "willfully maintained its monopoly power in the [CPU] market through exclusionary conduct that was not reasonably necessary to serve any legitimate, procompetitive purpose," with the "specific intent to monopolize both the current generation and future generations of [CPUs],"and with a "dangerous probability" of success in doing so.(51)
The FTC case was resolved earlier this year by a consent agreement in which subject to various caveats preserving its freedom to exercise its intellectual property rights of exclusion for other purposes, Intel undertook for 10 years not to engage in similar retaliatory action against CPU customers who assert or refuse to license their intellectual property rights.(52) As is customary in regulatory consent agreements, Intel did not admit liability. But I believe that the FTC case was legally sound. Let me explain why.
As the Federal Circuit held, U.S. monopolization law requires that one first identify a relevant antitrust market in which monopoly power is being exerted or extended. The FTC investigation revealed that what we've so far called "the CPU market" was somewhat more complex than just a single market. In fact, consistent with the IP Guidelines, one can identify three distinct upstream markets in the Intel cases: (1) the existing market for CPU products;(53) (2) the market for current CPU technology;(54) and (3) the innovation market in which future CPU technology is being developed.(55)
The Federal Circuit looked only at the first of these, the current CPU goods market, and only at the competitive significance in that market of Intergraph, which, as it noted, had withdrawn from that market with no intention of re-entry. The FTC investigation looked more broadly at all three markets, and had the benefit of facts and evidence relating to other competitors. In the CPU goods market alone, the Federal Circuit might well have reached a different conclusion had the case of Digital, which was at the time an active seller of CPUs in competition with Intel, come before it.
More interesting, however, are the current technology and future technology, or innovation, markets. Just because you and I hold, between us, all the relevant patents for a particular widget does not make it unlawful monopolization for me to persuade you to give me a license to yours. If there are lots of products that compete with the widgets, if we can produce better widgets by pooling our technology, or if alternative widget technology can readily be developed, there may be little harm and some benefit to competition. But if, as the FTC alleged of Intel, I already enjoy monopoly power and my means of persuading you are coercive and deprive you of any economic benefit from the work that went into your patents, you and others will be discouraged now and in the future from research and development efforts on this and similar widgets, and my monopoly power will be strengthened and extended. Even assuming that Intel had lawfully acquired an 80% market share in the existing CPU product market, it was not entitled to leverage that monopoly power to harm the ability and incentives of existing and potential rivals in CPU research and development for the future. By coercively extending its lawful monopoly power over existing CPU products into the markets for future CPU technology and goods, and effectively using its patents to prevent others from engaging in lawful follow-on innovation, Intel, I believe, violated Section 2.
V Conclusion
The Intel cases involve complex facts and some fairly subtle distinctions. But I think that they ultimately yield a couple of complementary lessons that characterize quite well the balance struck between the rights of an intellectual property owner and the values of competition in U.S. law. On the one hand, the Federal Circuit's analysis, focused on downstream markets, underlines the right of intellectual property owners, like other property owners, to choose their business partners. Intellectual property owners are not presumed to be monopolists, and they hold their rights for themselves, not in trust for any customer who can claim that they need a license to be able to compete. On the other hand, the FTC's analysis, focused on the CPU product and innovation markets, emphasizes that an intellectual property right does not give its owner the right to harm competition by extending the practical scope or likely duration of her monopoly power beyond the legal rights she has been granted.
Endnotes
1. For more complete surveys of U.S. case law, see, e.g., ABA, Antitrust Law Developments, 4th ed., ch. XI.B (1997 & Supp.). For a more policy-oriented discussion, see Federal Trade Commission Staff Report, Anticipating the 21st Century: Competition Policy in the New, High-Tech, Global Marketplace, chs. 6-8 (May 1996) (FTC Staff Report).
2. U.S. Department of Justice & Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (April 6, 1995).
3. See In re Intel Corp., No. 9288, Complaint (FTC June 8, 1998): </os/1998/06/intelfin.cmp.htm>; Agreement Containing Consent Order (FTC March 17, 1999): </os/1999/9903/d09288intelagreement.htm>.
4. Intergraph Corp. v. Intel Corp., 1999 U.S. App. Lexis 29199 (Fed. Cir. Nov. 5, 1999).
5. IP Guidelines § 1.0 (citing Atari Games Corp. v. Nintendo of America, 897 F.2d 1572, 1576 (Fed. Cir. 1990)).
6. See, e.g., K. Arrow, Economic Welfare and the Allocation of Resources for Inventions, in The Rate and Direction of Inventive Activity (R. Nelson, ed. 1962) (highlighting the incentives for research and development created by competitive market structures); J. Schumpeter, Capitalism, Socialism and Democracy (1943) (highlighting the economies of scale for research and development available to large firms in a concentrated market); see generally FTC Staff Report, supra, n.2, ch. 6.
7. For example, Joseph Stiglitz, then Chairman of the President's Council of Economic Advisors, testified as follows: "We often talk about how important patents are to promote innovation, because without patents, people don't appropriate the returns to their innovation activity, and I certainly very strongly subscribe to that. . . . On the other hand, some people jump from that to the conclusion that the broader the patent rights are, the better it is for innovation, and that isn't always correct, because we have an innovation system in which one innovation builds on another. If you get monopoly rights down at the bottom, you may stifle competition that uses those patents later on, and so . . . the breadth and utilization of patent rights can be used not only to stifle competition, but also [can] have adverse effects in the long run on innovation. We have to strike a balance."
Testimony of Joseph E. Stiglitz before the FTC Hearings on Global and Innovation-Based Competition (October 12, 1995) at 24-25. See generally FTC Staff Report, supra, n.2.
8. See, e.g., Intergraph, 1999 U.S. App. Lexis 29199, at *45 ("The patent and antitrust laws are complementary, the patent system serving to encourage invention and the bringing of new products to market by adjusting investment-based risk, and the antitrust laws serving to foster industrial competition.").
9. Intergraph, 1999 U.S. App. Lexis 29199, at * 44.
10. IP Guidelines § 2.2.
11. 35 U.S.C. § 271(d)(4); see also Miller Insituform, Inc. v. Insituform of N. Am., Inc., 830 F.2d 606, 609 (6th Cir. 1987); United States v. Westinghouse Elec. Corp., 648 F.2d 647-48 (9th Cir. 1981); SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1206-07 (2d Cir. 1981).
12. See, e.g., In re Independent Serv. Orgs. Antitrust Litig., 964 F. Supp. 1479, 1490 (D. Kan. 1997).
13. United States v. Univis Lens Co., 316 U.S. 241, 251-52 (1942).
14. See, e.g., Morton Salt Co. v. G.S. Suppiger, 314 U.S. 488 (1942) (patent); Lasercomb Am., Inc., v. Reynolds, 911 F.2d 970 (4th Cir. 1990) (copyright). Even where the substantive scope of antitrust and misuse doctrine are the same, misuse doctrine has independent significance insofar as the special "antitrust standing" requirements imposed on antitrust plaintiffs do not apply to a misuse defense.
15. 35 U.S.C. § 271(d) provides: "No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent rights against infringement or contributory infringement; (4) refused to license or use any rights to the patent; or (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned."
16. Lasercomb, 911 F.2d at 978.
17. For the antitrust treatment of tying arrangements, see p.6 & n.23, infra.
18. Morton Salt, 314 U.S. at 491 (citations omitted).
19. IP Guidelines § 2.1.
21. Id., § 3.4.
22. The Supreme Court has stated the applicable rule as follows: "A tying arrangement is 'an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.' Such an arrangement violates § 1 of the Sherman Act if the seller has 'appreciable economic power' in the tying product market and if the arrangement affects a substantial volume of commerce in the tied market." Eastman Kodak Co. v. Image Tech. Servs., 504 U.S. 451, 461-62 (1992) (citations omitted). For an example of such an unlawful agreement, see Systemcare, Inc. v. Wang Corp.,117 F.3d 1137, 1143 (10th Cir. 1997) (en banc). For the approach taken by the enforcement agencies, see IP Guidelines § 5.3.
23. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984) ("Congress authorized Sherman Act scrutiny of single firms only when they pose a danger of monopolization. Judging unilateral conduct in this manner reduces the risk that the antitrust laws will dampen the competitive zeal of a single aggressive entrepreneur.").
24. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 596, n.19 (1985).
25. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993).
26. U.S. antitrust law also creates a third form of substantive liability which merits mentioning. The Robinson-Patman Act creates liability for price discrimination in certain circumstances involving the sale of a commodity. It may be implicated in cases involving the sale of patented or copyrighted goods, but an intellectual property license per se falls outside the scope of the Act.
27. See IP Guidelines § 2.2; Abbott Labs. v. Brennan, 952 F.2d 1346, 1354-55 (Fed. Cir. 1991). Compare Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 16 (1984) (dicta suggesting that patent rights raise a presumption of market power) with id. at 37, n.7 (O'Connor, J., concurring) ("a patent holder has no market power in any relevant sense if there are close substitutes for the patented product"). The U.S. concept of market power and the European law concept of dominant position appear to be in harmony on this point. See, e.g., Deutsche Grammophon v. Metro [1971] E.C.R. 487, ¶16.
28. IP Guidelines § 3.2.2.
29. See id., §§ 3.2.1, 3.2.2, 3.2.3.
30. Id., §§ 2.3, 3.1, 3.4. For example, cross-licenses between patentees of copyright holders are treated under a rule of reason approach. See, e.g., id., § 5.5; Standard Oil Co. v. United States, 283 U.S. 163 (1931). Pooling patents or copyrights to facilitate the creation of a new integrated product will usually be lawful, see, e.g., Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 441 U.S. 1 (1979), but intellectual property pools that create monopoly power in a relevant antitrust market and/or preclude individual participants from licensing their rights to outsiders to the pool can raise substantial antitrust issues, see, e.g., United States v. Krasnov, 355 U.S. 5 (1957); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969).
31. IP Guidelines § 4.1.2.
32. Id., § 4.3.
33. The leading cases on this doctrine are: Professional Real Estate Investors, Inc. v. Columbia Pics. Indus., Inc., 508 U.S. 49 (1993); California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508 (1972); Mine Workers v. Pennington, 381 U.S. 657 (1965); Eastern Railroad Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).
34. See, e.g., Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965) (attempted enforcement of fraudulently procured patent); Professional Real Estate Investors, 508 U.S. at 60-61 (litigation to enforce invalid copyright may fall outside immunity if "objectively baseless" and "an attempt to interfere directly with the business relationships of a competitor") (citations and internal quotation marks omitted). See generally ABA, The Antitrust Counterattack in Patent Infringement Litigation (1994). On the anticompetitive effects and need for antitrust scrutiny of some intellectual property infringement suit settlements, see generally Assistant Attorney General Joel I. Klein's Address at the 1997 Annual Meeting of the American Intellectual Property Association, "Cross-Licensing and Antitrust Law" (May 2, 1997): <http://www.usdoj.gov/atr/speeches/1123.htm>.
35. See Intergraph, 1999 U.S. App. Lexis 29199, at *16-*21.
36. Intergraph Corp. v. Intel Corp., 3 F. Supp. 2d 1255 (N.D. Ala. 1998).
37. Intergraph, 1999 U.S. App. Lexis 29199, *32-*33.
38. Id., at *30 (emphasis added) (quoting United States v. Colgate & Co., 250 U.S. 300, 307 (1919)).
39. Id., at *21-*22.
40. Id., at *33.
41. Id., at *34.
42. Id., at *38.
43. Id., at *36 (internal quotation marks and citations omitted).
44. Id., at *21.
45. In re Intel Corp., No. 9288, Complaint (FTC June 8, 1998): </os/1998/06/intelfin.cmp.htm>.
46. Id., ¶¶ 4-10.
47. Id., ¶¶ 11-14.
48. Id., ¶ 13.
49. Id., ¶¶ 14, 39.
50. Id., ¶¶ 40-41.
51. In re Intel Corp., No. 9288, Agreement Containing Consent Order (FTC March 17, 1999): </os/1999/9903/d09288intelagreement.htm>.
52. See IP Guidelines § 3.2.1.
53. See id., § 3.2.2.
54. See id., § 3.2.3.