Agencies will analyze vertical price restrictions in licensing agreements on a case-by-case basis, evaluating the competitive benefits and harms from such agreements.[1] Agreements constituting a horizontal cartel will be considered per se illegal.[2]
5.3 Tying Arrangements
A “tying,” “tie-in,” or “tied sale” arrangement has been defined as “an agreement by a party to sell one product … on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that [tied] product from any other supplier.”[3] Conditioning the ability of a licensee to license one or more items of intellectual property on the licensee’s purchase of another item of intellectual property or a good or a service has been held in some cases to constitute illegal tying.[4] Although tying arrangements may result in anticompetitive effects, such arrangements can also result in significant efficiencies and procompetitive benefits. In the exercise of their prosecutorial discretion, the Agencies will consider both the anticompetitive effects and the efficiencies attributable to a tie-in. The Agencies would be likely to challenge a tying arrangement if: (1) the seller has market power in the tying product,[5] (2) the arrangement has an adverse effect on competition in the relevant market for the tying product or the tied product, and (3) efficiency justifications for the
- ↑ Although most states follow federal law in interpreting analogous state antitrust states, some states continue to prohibit minimum resale price maintenance. See, e.g., Darush v. Revision LP, No. CV 12-10296 GAF (AGRx), 2013 WL 1749539, at *6 (C.D. Cal. Apr. 10, 2013) (vertical RPM per se illegal under California’s Cartwright Act); Md. Code Ann., Com. Law § 11-204(b) (West 2016) (“[A] contract, combination, or conspiracy that establishes a minimum price below which a retailer, wholesaler, or distributor may not sell a commodity or service is an unreasonable restraint of trade or commerce.”).
- ↑ See United States v. Apple, Inc., 791 F.3d 290, 324-25 (2d Cir. 2015) (explaining that “where the vertical organizer has not only committed to vertical agreements, but has also agreed to participate in the horizontal [price-fixing] conspiracy” among competitors, courts need not consider “whether the vertical agreements restrained trade because all participants agreed to the horizontal restraint, which is ‘and ought to be, per se unlawful.’” (quoting Leegin, 551 U.S. at 893)).
- ↑ Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 462 (1992) (internal quotation marks omitted).
- ↑ See, e.g., United States v. Paramount Pictures, Inc., 334 U.S. 131, 156-58 (1948) (copyrights); Int’l Salt Co. v. United States, 332 U.S. 392 (1947) (patent and related product), abrogated in part by Ill. Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006).
- ↑ Cf. 35 U.S.C. § 271(d) (2012) (requiring market power in patent misuse cases involving tying).
agreements per se illegal. The Leegin court concluded that such agreements should be evaluated under the rule of reason. See also United States v. Gen. Elec. Co., 272 U.S. 476, 479, 490 (1926) (holding that an owner of a product patent may condition a license to manufacture the product on the fixing of the first sale price of the patented product that it also manufactures); LucasArts Entm’t Co. v. Humongous Entm’t Co., 870 F. Supp. 285, 287-89 (N.D. Cal. 1993) (conditioning license to copyrighted software on price of product incorporating the software did not violate Sherman Act). In a case that preceded Leegin, State Oil Co. v. Khan, 522 U.S. 3 (1997), the Court ruled that maximum resale price maintenance should be evaluated under the rule of reason.
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