The DOJ-FTC IP Guidelines: Suggestions for Promoting Innovation

Kristian Stout —  28 September 2016

This week, the International Center for Law & Economics filed comments  on the proposed revision to the joint U.S. Federal Trade Commission (FTC) – U.S. Department of Justice (DOJ) Antitrust-IP Licensing Guidelines. Overall, the guidelines present a commendable framework for the IP-Antitrust intersection, in particular as they broadly recognize the value of IP and licensing in spurring both innovation and commercialization.

Although our assessment of the proposed guidelines is generally positive,  we do go on to offer some constructive criticism. In particular, we believe, first, that the proposed guidelines should more strongly recognize that a refusal to license does not deserve special scrutiny; and, second, that traditional antitrust analysis is largely inappropriate for the examination of innovation or R&D markets.

On refusals to license,

Many of the product innovation cases that have come before the courts rely upon what amounts to an implicit essential facilities argument. The theories that drive such cases, although not explicitly relying upon the essential facilities doctrine, encourage claims based on variants of arguments about interoperability and access to intellectual property (or products protected by intellectual property). But, the problem with such arguments is that they assume, incorrectly, that there is no opportunity for meaningful competition with a strong incumbent in the face of innovation, or that the absence of competitors in these markets indicates inefficiency … Thanks to the very elements of IP that help them to obtain market dominance, firms in New Economy technology markets are also vulnerable to smaller, more nimble new entrants that can quickly enter and supplant incumbents by leveraging their own technological innovation.

Further, since a right to exclude is a fundamental component of IP rights, a refusal to license IP should continue to be generally considered as outside the scope of antitrust inquiries.

And, with respect to conducting antitrust analysis of R&D or innovation “markets,” we note first that “it is the effects on consumer welfare against which antitrust analysis and remedies are measured” before going on to note that the nature of R&D makes it effects very difficult to measure on consumer welfare. Thus, we recommend that the the agencies continue to focus on actual goods and services markets:

[C]ompetition among research and development departments is not necessarily a reliable driver of innovation … R&D “markets” are inevitably driven by a desire to innovate with no way of knowing exactly what form or route such an effort will take. R&D is an inherently speculative endeavor, and standard antitrust analysis applied to R&D will be inherently flawed because “[a] challenge for any standard applied to innovation is that antitrust analysis is likely to occur after the innovation, but ex post outcomes reveal little about whether the innovation was a good decision ex ante, when the decision was made.”

Kristian Stout


Kristian Stout is the Associate Director for Innovation Policy at the International Center for Law and Economics (ICLE). As a technology professional and entrepreneur for over ten years, Kristian’s scholarship is influenced by a practical understanding of the challenges facing innovators in the modern economy. Kristian has previously been a lecturer in the computer science department of Rutgers University, is frequently invited to speak on law and technology topics, and has been published in law journals and legal treatises. Kristian is an attorney licensed to practice law in New Jersey and Pennsylvania, is a partner at A&S Technologies, a software services firm, and sits on the board of CodedByKids, a nonprofit organization that provides STEM education to underprivileged children.

One response to The DOJ-FTC IP Guidelines: Suggestions for Promoting Innovation


    Indeed, the very idea that there is a “market” for R&D is flawed — R&D is not bought and sold in the same manner as patent rights (technology markets) or goods and services. Moreover, it is far from clear that a merger under which the new company expends fewer resources on R&D than the two pre-merger companies is anticompetitive (althoug it might be). R&D efficiencies and synergies could be achieved, such as complementarities among research tracks and a reduction in purely duplicative research. Moreover, the merged company could choose to maintain competing efforts within a new research department.