Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

Potential Patent Licensing “No-No” #5: A Licensor’s Agreement Not to Grant Further Licenses

Yes or No?

This post continues the series of posts regarding patent licensing and competition issues.  The post prior to this one can be found here.

Here, we’re concerned with an exclusive license.  Under an exclusive license, the licensor agrees not to license others, and may agree not to practice the patent itself.

Generally speaking, an exclusive license — exclusive in the sense that no other licensee is granted rights — does not violate the antitrust laws.

However, an exclusive license

may raise antitrust concerns … if the licensees themselves, or the licensor and its licensees, are in a horizontal relationship. Examples of arrangements involving exclusive licensing that may give rise to antitrust concerns include cross-licensing by parties collectively possessing market power (see section 5.5), grantbacks (see section 5.6), and acquisitions of intellectual property rights (see section 5.7).

DOJ/FTC Antitrust IP Guidelines Section 4.1.2.  In short, if the licensor and licensee are actual or potential competitors, and an exclusive license serves to create or enhance the exercise of market power, the license may raise antitrust concerns.

This is a good time to remind everyone about this blog’s obvious general disclaimer: I try to write these posts to be informative and (hopefully) interesting, but they don’t constitute advice.  Every fact pattern is different, and you shouldn’t take action based merely on a blog post.  Of course.

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