5. The US approach
5.1 Intersection of antitrust and IPR in the US: certainties and uncertainties
At the intersection of antitrust rules and IPR protection, the competition authority and courts on the other side of the Atlantic Ocean similarly starts from the general principle – since nearly 100 years before – that every undertaking, holding a dominant position or not, is free to choose its trading partner and this economic freedom should generally not be restricted by the antitrust rules.205 As mentioned before, on the relationship between IPR and market dominance, EU
competition authorities have stated in many occasions that the mere possession of IPR does not demonstrate the existence of a dominant position.206 An IPR grants the holder exclusive rights
to prevent others from copying, producing, marketing or importing certain products protected by such IPR without the owner’s consent. However, such exclusiveness does not lead to the monopoly in the competition context. In the relevant market there may be interchangeable products, which exert competitive constrains on the IPR holder. This has also been accepted by the US Supreme Court.207 Neither of the Appellate Courts in Kodak208 or in Xerox209 presumed
that the OEMs had market power due to their patents.
With regard to the exercise of IPR particularly, first of all, the US Supreme Court in the case
Continental Paper Bag v. Eastern Paper Bag210 established that generally the IPR holder has
no duty to use his exclusive right, stating that “such exclusion may be said to have been of the very essence of the right conferred by the patent, as it is the privilege of any owner of property
204 Final Judgment, US v. Microsoft, Civil Action No. 98-1232 (CKK), entered November 12, 2002, Para III E. 205 See e.g. Verizon Communications Inc. v Law Office of Curtis V Trinko (hereinafter ‘Trinko’), 540 U.S. 398
(2004).
206 See chapter 2, footnote 210.
207 Illinois Tool Works Inc. et al. v. Independent Ink, Inc., 547 U.S. 28 (2006), at 7.
208 Image Technical Services, Inc. v Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997), (hereinafter ‘Kodak’). 209 In re Independent Service Organizations Antitrust Litigation (CSU et al. v. Xerox Corporation), 203 F.3d 1322
(Fed. Cir. 2000), (hereinafter ‘Xerox’). 210
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to use or not use it, without question of motive”.211 On the freedom to refuse the IPR access
request, Supreme Court and Courts of Appeals shared the same view on this issue in a number of cases prior to the Kodak and Xerox that mere exercising the IPR by refusing to license to third parties would not constitute an infringement under competition rules.212 It is believed that,
as held by the Court of Appeals for the First Circuit in Data General Corporation v. Grumman
System Support Corporation, “while exclusionary conduct can include a monopolist’s
unilateral refusal to license a copyright, an author’s desire to exclude others from use of its copyrighted work is a presumptively valid business justification for any immediate harm to consumers”.213
The fundamental US case law Kodak and Xerox both addressed this key issue at the interface of IPR and competition. However, neither has provided “sufficient guidance on potential antitrust liability for unilateral refusals to license”.214 The divergent approaches adopted by the courts
have generated “uncertainty for licensors and licensees”.215 In both cases the basic facts were
similar that Independent Service Organizations (ISOs) alleged that the Original Equipment Manufacturers (OEMs) had infringed antitrust rules by refusing to supply patented parts. In
Kodak the Ninth Circuit held that OEMs’ refusals to license patented or copyrighted products
were “presumptively legitimate”, but on the other hand the “presumption may also be rebutted by evidence of pretext.”216 Such an evidence of pretext was found in Kodak because the
defendant refused to sell both patented and unpatented parts and was not even conscious of its rights when it did so.217 It thus could be concluded that whether the refusal to license in
question constitutes infringement depends on the intent of the IPR holder. In contrast with
Kodak’s uncertainty, in Xerox the court adopted a quasi-immunity approach for intellectual
property right. The “patentee’s subjective motivation for refusing to sell or license its patented
211 ibid, p429.
212
See e.g. Hartford-Empire Co. v. United States, 323 U.S. 386 (1945); Miller Insituform, Inc. v. Insituform of N.
Am., Inc., 830 F.2d 606 (6th Cir. 1987); United States v. Westinghouse Elec. Corp., 648 F.2d 642 (9th Cir. 1981); SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981); Simpson v. Union Oil Co. of Cal., 377 U.S. 13 (1964). 213 Data General Corporation v. Grumman System Support Corporation, 36 F. 3d 1147, 1187 (1st Cir. 1994). 214 U.S. Department of Justice and Federal Trade Commission, ‘Antitrust Enforcement and Intellectual Property
Rights: Promoting Innovation and Competition’, (2007), p 16. Available at
http://www.ftc.gov/sites/default/files/documents/reports/antitrust-enforcement-and-intellectual-property-rights-pro moting-innovation-and-competition-report.s.department-justice-and-federal-trade-commission/p040101promotingi nnovationandcompetitionrpt0704.pdf, last visited on 20 July 2014.
215 ibid.
216
Kodak, 125 F.3d 1195, 1219. 217
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products” was not in the court’s consideration.218 The rebuttable presumption in Kodak case
was replaced by a quasi per se legal presumption with only three exceptions: “illegal tying, fraud in the Patent and Trademark Office, or sham litigation.”219
It is claimed that Kodak approach is better because it is capable of distinguishing anti-competitive conducts from pro-competitive ones and striking a balance between the IPR holder’s interest and the public interest.220 However, the intent-based approach has been
generally criticised since it is nearly impossible to operate in practise.221 According to Kodak
approach, a refusal motivated by a desire to exercise its IPR and protect its investment is permitted and a refusal motivated by a desire to strengthen its monopoly power or to leverage such power into neighbouring market is prohibited. The intent, however, is very difficult to detect and to prove. It would create the risk of wrongly prohibiting pro-competitive conducts or permitting anti-competitive conducts. Thus the incentives of the IPR holders to investment and to research would be chilled since legitimacy of their behaviour may not be estimated and guaranteed beforehand. Therefore, the focus should be “upon the effect of [the] conduct, not upon the intent behind it”.222 The role of the IPR holder’s intent is to “help to interpret facts and
to predict consequences” 223, but not to decide the case. On the other hand, antitrust immunity
for refusal to license adopted in Xerox has also been criticised, as in general such a broad immunity approach would mistakenly protect anti-competitive refusals which are to the detriment of consumers.224 The so called three exceptions – illegal tying, fraud in the Patent
and Trademark Office, or sham litigation – actually concern the validity of IPR or other abusive practice but have no relevance with the assessment on the substance of the refusal at issue. Furthermore, such general immunity is inconsistent with the more economic approach - currently prevailing both in the EU and US – which takes all relevant, surrounding circumstances into consideration and analyzes on a case-by-case basis.225 The divergent
approaches between Kodak and Xerox have triggered an intense debate on whether a categorical exemption from antitrust liability for unilateral, unconditional refusal to license
218 Xerox, 203 F.3d 1322, 1327.
219 ibid.
220 U.S. Department of Justice and Federal Trade Commission, ‘Antitrust Enforcement and Intellectual Property
Rights: Promoting Innovation and Competition’, (2007), supra note 215, p17.
221 ibid.
222 United States v Microsoft Corp., 253 F.3d 34, 59 (D.C. Cir. 2001). 223 Chicago Board of Trade v. United States 246 U.S. 231, 238 (1918).
224 U.S. Department of Justice and Federal Trade Commission, “Antitrust Enforcement and Intellectual Property
Rights: Promoting Innovation and Competition”, (2007), supra note 215, pp.18-19.
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should be favoured, or antitrust intervention should be allowed under narrow circumstances.226
While the viewpoints among the antitrust practitioners and policymakers still differ widely, US antitrust authorities conclude that pure refusal to license will generally not attract antitrust intervention by stating that “liability for mere unconditional, unilateral refusals to license will not play a meaningful part in the interface between patent rights and antitrust protection…there are numerous imaginable scenarios that involve conduct that goes beyond a mere refusal to license a patent and could give rise to antitrust liability.”227