## Facts

- The U.S. Department of Justice Antitrust Division and the Federal Trade Commission jointly issued enforcement guidance on April 6, 1995 addressing antitrust analysis of licensing for patents, copyrights, trade secrets, and know-how.
- The document is an executive-branch policy statement, not an adjudication; it is advisory and applied case-by-case with enforcement discretion.
- The guidance responds to recurring questions about how IP licensing restraints interact with competition policy in technology-driven markets.
- The Agencies describe licensing as commonly procompetitive, while identifying circumstances where licensing terms can reduce competition or facilitate coordination.
- The guidance organizes competitive effects analysis across three categories of relevant markets: goods markets, technology markets, and innovation (R&D) markets.
- The document outlines a “safety zone” under which the Agencies generally will not challenge certain licensing restraints when market shares are limited and the restraint is not facially anticompetitive.
- The 1995 guidance was later superseded by updated agency guidance issued in 2017.

## Issues

1. How should antitrust law be applied to licensing arrangements involving intellectual property and related know-how?
2. Does ownership or licensing of intellectual property create a presumption of market power for antitrust purposes?
3. What framework should be used to evaluate licensing restraints, including when per se rules apply versus rule-of-reason analysis?
4. How should competitive effects be assessed in goods, technology, and innovation markets affected by licensing?
5. Under what conditions will the Agencies treat licensing arrangements as unlikely to warrant enforcement challenge (the “safety zone”)?

## Decision

- The Agencies adopted an enforcement policy applying general antitrust principles to intellectual property licensing in the same manner as to other forms of property.
- The Agencies rejected any general presumption that intellectual property rights, by themselves, confer market power.
- The Agencies stated that licensing often benefits consumers by supporting innovation, dissemination of technology, and competitive entry.
- The Agencies announced that most licensing restraints will be assessed under the rule of reason, focusing on likely competitive effects and cognizable efficiencies.
- The Agencies defined an antitrust “safety zone” for licensing restraints that are not facially anticompetitive when the parties collectively account for no more than 20% of each relevant market affected by the restraint.
- The Agencies identified categories of licensing conduct that may raise antitrust concerns, including restraints that reduce rivalry among actual or potential competitors, foreclose access to key inputs, raise rivals’ costs, or facilitate coordinated behavior.

## Legal Principles

- Antitrust analysis of conduct involving intellectual property generally follows the same principles applied to other property, with attention to the characteristics of IP and licensing.
- Intellectual property ownership or the existence of an IP right does not, without more, establish market power.
- Most restraints in intellectual property licenses are evaluated under the rule of reason; per se treatment is reserved for restraints that would be per se unlawful outside the IP context (e.g., naked price fixing or market allocation among horizontal competitors).
- Competitive effects may be assessed in (a) goods markets, (b) technology markets, and (c) innovation markets, depending on where the restraint is likely to affect competition.
- Licensing can be anticompetitive when it diminishes competition among firms that would have been actual or likely potential competitors absent the license, or when it substantially forecloses markets or enables coordination.
- Cross-licensing and pooling may be procompetitive when integrating complementary technologies and reducing transaction costs, but may be problematic when used to exclude rival technologies, coordinate pricing, or combine substitute technologies in ways that restrict competition.
- Grantbacks may be acceptable where tailored to protect dissemination and investment incentives, but overly broad grantbacks can suppress downstream innovation or entrench market power.
- Tying and exclusive dealing in licensing are assessed using familiar antitrust criteria, with illegality turning on market power, foreclosure, and competitive effects, balanced against plausible efficiency justifications.

## Conclusion

The 1995 DOJ/FTC Guidelines set an effects-based enforcement approach to intellectual property licensing: IP is not presumed to create market power, most license restraints are judged under the rule of reason across goods, technology, and innovation markets, and a 20% market-share safety zone identifies arrangements the Agencies generally view as unlikely to warrant challenge.


Antitrust Guidelines for the Licensing of Intellectual Property, 1995 WL 1146232 (1995)