The Department Of Justice Announced Its Reexamination Of The Prior Houston Patent Law

ftc.gov, Sep 21, 2005

The Department Of Justice Announced Its Reexamination Of The Prior Houston Patent Law

First, in 1981, the Department of Justice announced its reexamination of the prior Department’s negative view of patent license restrictions168 with a speech to the Houston Patent Law Association  by Deputy Assistant Attorney General Lipsky. He discredited the “Nine No-Nos.” He said that the “‘Nine No-Nos’, as statements of rational economic policy, contain more error than accuracy.” The speech contrasted a proper antitrust treatment of patents with antitrust in other areas, recognizing that the market power conferred by the patent was not “of independent competitive concern.”  Lipsky, Views, supra note 119, at 515. Lipsky introduced his remarks by stating: For the better part of the last decade, Division enforcement policy toward patent licensing has been advertised using a list of forbidden practices commonly known as the “Nine No-Nos.” Each of these practices is thought to be especially deserving of antitrust condemnation by virtue ofsome inherently anticompetitive feature. 

While the antitrust analyst is at liberty outside the patent field to dabble in such issues as whether the market power of the seller was lawfully or unlawfully acquired, or whether the extent of that market power is or ought to be of independent competitive concern, the patentee comes to judgment with those questions settled according to constitutional and congressional instructions. Thus, Houston Patent Law Association  the independent decisions of the patentee regarding the means by which an invention is to be combined with other productive inputs ought to be regarded as having no inherent anticompetitive import. The Chief of the Intellectual Property Section of the Antitrust Division, Roger Andewelt, at the same time, characterized the changed point of view as “a second revolution.” He recognized the link between economic welfare and technological progress and cited the data: It is estimated that during the past 80 years, technological progress has accounted for almost one-half of the growth in per capita real income.

Companies that invest heavily in the research and development of new technologies have about three times the growth rate, twice the productivity rate, nine times the employment growth, and only one-sixth the price increases as companies with relatively low investments in R&D. Andewelt commented on the “basic failure” of past courts and the Department of Justice “to recognize some fundamental facts about the nature of intellectual property and the beneficial
role that technology licensing plays in a healthy, competitive economy.” Andewelt observed that: The creation and development of sophisticated new technology is an enormously expensive and risky undertaking. There is never any guarantee that years of hard work and bushels of money poured into R&D will result in usable technology or, even if it does result in usable technology, that commercial success will follow. He recognized that “we must provide an adequate incentive” for this effort and that is the role of the patent laws. Andewelt then explained that the patent system prevented “free riding” competitors from “appropriat[ing] to themselves much of [a patent’s] value, denying to the inventor the full fruits of his creation  . Unless the ‘free rider’ problem is somehow addressed, those who might otherwise 172 Roger B. Andewelt, Basic Principles to Apply at the Patent-Antitrust Interface, Remarks to the Houston Patent Law Association (Dec. 3, 1981).