Patents and Antitrust Law

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Federal antitrust laws generally prohibit businesses from engaging in monopolistic activities—that is, to engage in practices purposely designed to give the business dominant control over a particular market segment. However, by definition, a patent is a legal monopoly over the production, use, and distribution of an invention. In an attempt to reconcile these conflicting legal goals, the United States (and most countries) restricts the ways companies holding patents may use them in the marketplace.

In addition to preventing monopolistic activities, antitrust laws prohibit business practices that restrain the free flow of commerce (called restraint of trade). Among the more common types of patent-related activity that may potentially cause antitrust violations are:

  • price fixing—for example, a patent owner requiring licensees of a patent to charge certain prices for goods manufactured under the patent
  • exclusive dealing agreements—for example, a patent owner encouraging patent licensees not to deal with certain customers
  • tying agreements—that is, requiring a customer who wishes to purchase the patented invention to also purchase other goods or services as a condition of the purchase; for instance, putting a provision in a license agreement that requires the licensee of a mainframe computer to use the licensor to service the computer would tie the purchase of the computer to the purchase of the service
  • requirements contracts, whether mandatory or encouraged by price reductions—for example, prohibiting a purchaser of goods covered by a patent from purchasing comparable items from another source
  • patent thickets—a collection of patents owned by various companies that prevent a newcomer from entering a field of technology or invention
  • territorial restrictions—for example, restricting licensees to certain geographical areas in their marketing of goods covered by the patent, and
  • concerted refusal to deal—for example, excluding some potential customers from use of the device or process covered by the patent while including others.

Practically speaking, antitrust laws should not be a concern for most patent owners, as few patents have a large enough impact on the related market or industry to raise the antitrust warning flag. If, however, a patent is so broad in its coverage that the actual ebb and flow of commerce might be affected by it, there is no substitute for good knowledge of antitrust law. This is especially true when important inventions are involved in patent infringement lawsuits, because defendants often charge that the plaintiff committed an antitrust violation and therefore cannot enforce the patent.