Transfer Pricing Associates


In the context of antitrust, the focus of intangible is about the licensing the intellectual property. U.S. Department of Justice and the Federal Trade Commission have issued Antitrust Guidelines for the Licensing of Intellectual Property. This guideline is a useful reference to grasp the important aspects of intellectual property licensing in the context of antitrust.

General Purpose and Principles of the guideline

The purpose of the guideline is to promote innovation and consumer welfare by prohibiting certain actions that may harm competition with respect to either existing or new ways of serving customers. The principles of the guideline are:

Antitrust Concerns

Antitrust concerns can arise when a licensing arrangement harms competition among entities that would have been actual or likely potential competitors in a relevant market in the absence of the license (entities in a "horizontal relationship").

When evaluating a license agreement among different parties, the agencies will focus on the relation between the licensor and licensee. If the licensing parties are in a horizontal relationship, for example, two business units of a company with the same function but serves different regions, special concerns are given to coordinated pricing, output restrictions or the acquisition or maintenance of market power. If the licensing parties are in a vertical relationship – supplier and manufacturer --, the concerns are whether this licensing will harm competition among entities in a horizontal relations at either the level of the licensor or the licenses, or other relevant market.

A non-exclusive license may be arise the same concerns by the agencies as the exclusive license. A non-exclusive can have the same effect of exclusive licensing so that the licensor is unlikely to license others or to practice the technology itself. However, since the agencies focus on the actual practices and the effects, a licensing agreement will not automatically draw attentions from the agencies.

Antitrust “safety zone”

Since licensing arrangement promotes innovation and enhance competition, the Agencies create an antitrust ‘safety zone” to provide some degree of certainty thus to increasing innovation. Based on the guideline, the Agencies will not challenge a restraint in an intellectual property licensing arrangement if:

However, please note that the safety zone will not apply in the merger analysis.

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