To generate profits and protect their intellectual property rights, it is important that companies establish and maintain their trade secrets.[1] However, in some cases, companies can benefit from cooperation as opposed to competition.[2] There are instances in which companies may band together in order to leverage their own positions.[3] By doing so, companies can efficiently pool their resources to fuel their research and development departments while enjoying shared protection of their intellectual property.[4] This is precisely the type of agreement that Cambridge Antibody Technology, Micromet AG, and Enzon Pharmaceuticals have engaged in.[5] Pursuant to this agreement, each company is authorized to use patented technologies developed through their joint effort, thereby securing substantial “freedom to operate.”[6]
Freedom to operate does have limits.[7] There is no guarantee that a company within the agreement won’t commercialize the patent.[8] However, many companies are choosing to sign non-exclusive cross license agreements to ensure that their intellectual property do not infringe on other patent rights. As a result, companies are able to avoid patent litigation, which is extremely costly and time-consuming. Companies can seek alternative strategies to reduce risks of infringement and maximize their freedom to operate.
One down side to these cooperative agreements is that they run the risk of violating antitrust laws.[9] Under the Antitrust Guidelines for the Licensing of Intellectual Property, there are “safety zones” that these companies must share their information within.[10] The guidelines provide that an industry’s “restraints” will not be scrutinized by U.S. agencies if “(i) it is not facially anticompetitive; and (ii) the joint market share of licensor and licensee does not exceed 20% in the affected relevant markets.”[11] Under this regulation, a reviewing court will employ either the per se rule or the rule of reason, where the per se rule demands an action to be automatically unlawful under antitrust laws.[12] Luckily, a majority of licensing arrangements are subject to the rule of reason.[13] Under the rule of reason, a court will determine if the practice is an unreasonable restraint of trade, based on economic factors.[14]
The agreement between Cambridge Antibody Technology, Micromet AG and Enzon Pharmaceuticals is the licensing type that would be subject to the rule of reason.[15] Typically, a court will not hold a technology pool to be anticompetitive unless “(i) excluded competitors cannot effectively compete in the relevant market and (ii) the pool participants collectively possess market power.”[16] Because this agreement is between three large pharmaceutical companies, it is questionable whether the excluded companies will be able to effectively compete against this super-arrangement.[17] According to U.S. law, the arrangement may be anticompetitive if a majority of the research and development is traded in a research and development market.[18] In fact, pharmaceutical companies are largely research and development markets.[19] Because these companies decided to exchange only some research and development, they have largely avoided antitrust scrutiny despite the fact that they have arguably engaged in anti-competitive practices.[20] Companies holding valuable patent portfolios must share such information and should proceed withcaution for they risk patent infringement litigation from other patent owners and may violate antitrust laws by the U.S. government.
[1] What is a Trade Secret, World Intellectual Property Org,. https://www.wipo.int/sme/en/ip_business/trade_secrets/trade_secrets.htm (last visited on Mar. 14, 2019).
[2] IP and Business: Launching a New Product: Freedom to Operate, World Intellectual Property Org., https://www.wipo.int/wipo_magazine/en/2005/05/article_0006.html(last visited on Apr. 18, 2019).
[3] Id.
[4] Jens Hackl, IP Licensing and Antitrust Law – What Companies Have to Consider When Doing Business in the U.S. and the EU, Morrison Foerster, https://www.mofo.com/resources/publications/170801-ip-licensing-antitrust-us-eu.html(last visited on Apr. 19, 2019).
[5] See supra note 2.
[6] Id.
[7] Id.
[8] Id.
[9] Guide to Antitrust Laws, Fed. Trade Commission, https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws(last visited on April 18, 2019).
[10] Antitrust Guidelines for the Licensing of Intellectual Property, Dep’t. of Just., https://www.justice.gov/atr/IPguidelines/download(last visited on April 19, 2019).
[11] Id.
[12] Id.
[13] See Hackl, supra note 4.
[14] Rule of Reason Law and Legal Definition, U.S. Legal, https://definitions.uslegal.com/r/rule-of-reason/(last visited on Apr. 19, 2019).
[15] Press Release, Micromet, Enzon and Cambridge Antibody Technology sign Cross-Licence Agreement in the Field of Single-Chain Antibodies and Phage Display, Enzon Pharmaceuticals, https://investor.enzon.com/news-releases/news-release-details/micromet-enzon-and-cambridge-antibody-technology-sign-cross(last visited Apr. 18, 2019).
[16] See Hackl, supra note 4.
[17] See Press Release, supra note 15.
[18] See Hackl, supra note 4.
[19] Id.
[20] See Press Release, supra note 15.
