1	The Antitrust-Patent Interface With a Virtual Walking Tour in Historic Philadelphia Gerry J. Elman Elman Technology Law, P.C. Swarthmore, Pennsylvania
2	Our Roadmap Public Ledger Building The Constitution Center The Bourse Building The Curtis Center State Office Building Byrne U.S. Court House Rohm and Haas Building GSK U.S. Headquarters
3	The Public Ledger Building
4	The Constitution Center
5	The Constitution Center "The Congress shall have Power . . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries" U.S. Const. Art. I, § 8, cl. 8.
6	The Constitution Center "The Congress shall have Power . . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes” U.S. Const. Art. I, § 8, cl. 3.
7	The Bourse
8	The Bourse Across the street from the Liberty Bell, the Bourse was Philadelphia’s first stock market. We are reminded that the antitrust laws are intended to maximize economic consumer welfare by fostering competition in accordance with the principles described in 1776 by Adam Smith in The Wealth of Nations. Antitrust analysis relies on economics. Market power in a “relevant market.”
9	The Bourse CAFC recently enunciated a rebuttable presumption that a patent over a “tying” product provides “market power.” Independent Ink, Inc. v. Illinois Tool Works, Inc., 396 F.3d 1342 (1/25/2005). “It is the duty of a court of appeals to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them.” Id. at 1351. “The presumption can only be rebutted by expert testimony or other credible economic evidence of cross-elasticity of demand, the area of effective competition, or other evidence of lack of market power.” Id. at 1352.
10	The Curtis Center Middle Atlantic Office of the Antitrust Division U.S. Department of Justice Formerly in the Byrne U.S. Court House
11	The Curtis Center Federal Antitrust Laws Sherman Anti-Trust Act (15 U.S.C. § 1 et seq.) (first enacted 1890) Sec. 1: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal ….” Sec. 2: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony ….” Clayton Act (15 U.S.C. § 12 et seq.)(first enacted 1914) Intended to reach incipient anticompetitive activity, primarily concentration of market power. Some anticompetitive conduct is “per se” illegal while other conduct is analyzed under the “rule of reason.” “Rule of reason” takes into account business justification and procompetitive aspects of the conduct.
12	The Patent “Monopoly” What is a patent? The Supreme Court has called the patent grant a “legal monopoly.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 135 (1969). The numbered circuits have followed suit. The CAFC says that a patent is “property. Nowhere in any statute is a patent described as a monopoly." Schenck v. Northern Corp., 713 F.2d 782, 786 n.3 (Fed. Cir. 1983). The difficulty is that 'monopoly' is used in different senses in patent and antitrust law, hence its ambiguity. Because of its antitrust connotations and association with illegality . . ., it often evokes negative reactions inappropriate to a dispassionate analysis of patent law problems.". In re Kaplan, 789 F.2d 1574, 1577 n.3 (Fed. Cir. 1986) .
13	"In 1970 the Antitrust Division..." In 1970 the Antitrust Division enunciated a list of “per se” rules for patent licensing. The “Nine No-No’s” in a speech by Bruce B. Wilson, Deputy Asst. Attorney General. Patent & Know-How License Agreements: Field of Use, Territorial, Price & Quantity Restrictions. Remarks Before the 4^th New England Antitrust Conf. (11/6/70). See Gavin Clarkson, Objective Identification of Patent Thickets (characterizing 1970-1995 as “The Era of the Nine No-No’s”) http://stiet.si.umich.edu/researchseminar/Fall%202004/Patent%20Thickets%20v3.9.pdf
14	"The Nine No-No’s were" The Nine No-No’s were: To require licensee to purchase unpatented materials from licensor. E.g., Eastman Kodak Co. v. Image Tech. Servs., Inc., 112 S. Ct. 2072 (1992); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 9-14 & n.14 (1984); see also 35 U.S.C. § 271 (conditioning a patent license on the license of another patent or purchase of another patented product is not patent misuse unless the patent owner has market power in the relevant market for such other patent or patented product). To require licensee to grant back to patentee any patent which the licensee may later secure. To restrict purchaser of a patented product in the resale of that product. To restrict licensee’s freedom to deal in the products or services outside the scope of the patent. To agree with the licensee that licensee consent is needed before patentee licenses others to practice the patent. To engage in mandatory package licensing. E.g., Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U.S. 827 (1950); Hazeltine Research, Inc. v. Zenith Radio Corp., 388 F.2d 25 (7th Cir. 1967), aff'd in part and rev'd in part, 395 U.S. 100, on remand, 418 F.2d 21 (7th Cir. 1969), rev'd on other grounds, 401 U.S. 321 (1976); International Mfg. Co. v. Landon, Inc., 336 F.2d 723 (9th Cir. 1964), cert. denied, 379 U.S. 988 (1965).
15	"And … continuing the list..." And … continuing the list of Nine No-No’s: To require royalties in an amount not reasonably related to licensee’s sales of products covered by the patent (that is, requiring royalties on sales of other products or beyond life of the patent). E.g., Brulotte v. Thys Corp., 39 U.S. 29 (1964). To restrict licensee’s sales of products made by use of a patented process. To require licensee to adhere to dictated prices in selling licensed products. E.g., United States v. General Electric Co., 272 U.S. 476 (1926); United States v. Line Material Co., 333 U.S. 287 (1948); Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940); United States v. Univis Lens Co., 316 U.S. 241 (1942); This was “high water mark” elevating antitrust concerns over intellectual property rights. William J. Seitz, The Patent-Antitrust Interface: From Rigid Simplicity to Nuanced Ambiguity (paper at the Licensing Intellectual Property seminar at Univ. of Dayton School of Law 3/152002).
16	"Federal Trade Commission Act (..." Federal Trade Commission Act (15 U.S.C. § 45) (first enacted 1914) provides … "That unfair methods of competition in commerce are hereby declared unlawful. The commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the Acts to regulate commerce, from using unfair methods of competition in commerce. ….” FTC enforces civil aspects of antitrust law concurrently with DOJ. The FTC is without a physical presence in Philadelphia. Pennsylvania is served by a regional office in Cleveland as well as by headquarters in Washington, D.C.
17	State Office Building State Antitrust Laws Almost every state … except Pennsylvania … has a general antitrust statute. State attorneys general often collaborate in antitrust damage actions in federal court. See C. Raymond Marvin, 50 ABA Antitrust L.J. 35 (1981). The tetracycline antitrust action was litigated for damages in federal court in Minneapolis during the 1970’s. Forty-three states settled with five pharmaceutical companies for $100 million. U.S. Dept. of Justice declined to settle in Minneapolis and litigated before Judge Charles Weiner here in Philadelphia.
18	Byrne U.S. Court House The Tetracycline patent-antitrust case, tried in Philadelphia 1978-1980. In re COORDINATED PRETRIAL PROCEEDINGS IN ANTIBIOTIC ANTITRUST ACTIONS. United States v. Pfizer Inc., American Cyanamid Co., Bristol-Myers Co., Olin Mathieson Chemical Corp., Squibb Beechnut, Inc., E.R. Squibb & Sons Inc., Upjohn Co., 498 F. Supp. 28 (E.D. Pa. 1980).
19	Byrne U.S. Court House After settling two patent interferences, Chas. Pfizer & Co. obtained the Conover patent 2,699,054 in 1955 on the “wonder drug” tetracycline, one of the first broad spectrum antibiotics. Pfizer licensed the companies with which it was in the interferences (Lederle Labs of American Cyanamid Co. and Bristol Labs), including a web of cross-licenses. Bristol licensed Squibb and Upjohn. Pfizer then vigorously enforced the Conover patent against others, including foreign sources. Primarily from Italy, where drugs were not patentable subject matter.
20	Byrne U.S. Court House FTC took action against Cyanamid and Pfizer for a cross-license agreement settling their interference. In re American Cyanamid et al., 72 F.T.C. 623 (1967); Charles Pfizer & Co. v. FTC, 401 F.2d 574 (6th Cir. 1968), cert. denied, 394 U.S. 920 (1969). The antitrust authorities had gotten wind of Bristol’s assertion that the patent was fraudulently obtained, and the DOJ and state attorneys general sued for damages under Walker Process.
21	Byrne U.S. Court House Supreme Court in Walker Process, 382 U.S. 172 (1965), held that enforcement of a patent obtained through knowing and willful fraud may violate Section 2 of the Sherman Act. Elements of a Walker Process-type case. Defendant procured a patent through actual, not merely technical, fraud, i.e., defendant made a material omission or misstatement to the Patent Office with an intent to deceive; and The enforcement or threatened enforcement of the patent enables the defendant to acquire market power.
22	1995 DOJ & FTC Antitrust Guidelines for the Licensing of Intellectual Property http://www.usdoj.gov/atr/public/guidelines/ipguide.htm See Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later, Richard Gilbert & Willard Tom, Institute of Business and Economic Research, Dept. of Economics, Univ. of Calif. Berkeley, 2001 paper E01’301 http://repositories.cdlib.org/iber/econ/E01-301
23	1995 Antitrust-IP Guidelines Basic principles Standard antitrust analysis applies to IP IP and market power Procompetitive benefits of licensing Antitrust concerns and modes of analysis License could divide markets among firms that would have competed using different technologies. Acquisition of IP may lessen competition in a relevant antitrust market.
24	2000 FTC & DOJ Antitrust Guidelines for Collaboration Among Competitors http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf
25	DOJ Speeches R. Hewitt Pate, Assistant Attorney General PROMOTING ECONOMIC GROWTH THROUGH COMPETITION AND INNOVATION Chinese Academy of Social Sciences, Institute of Law, Beijing, China, 7/1/2004 http://www.usdoj.gov/atr/public/speeches/200701.htm ANTITRUST AND INTELLECTUAL PROPERTY AIPLA Mid-Winter Institute, Marco Island, FL 1/24/2003 http://www.usdoj.gov/atr/public/speeches/204931.htm
26	DOJ Speeches Makan Delrahim, Deputy Assistant Attorney General THE LONG AND WINDING ROAD: CONVERGENCE IN THE APPLICATION OF ANTITRUST TO INTELLECTUAL PROPERTY The George Mason Law Review Symposium, 10/6/2004 http://www.usdoj.gov/atr/public/speeches/205712.htm CONTEMPORARY ISSUES AT THE INTERSECTION OF INTELLECTUAL PROPERTY AND ANTITRUST The Fair Competition & Market Economy 2004 Shanghai International Forum, Shanghai, China, 11/10/2004 http://www.usdoj.gov/atr/public/speeches/206607.htm
27	DOJ Speeches Makan Delrahim, Deputy Assistant Attorney General FORCING FIRMS TO SHARE THE SANDBOX: COMPULSORY LICENSING OF INTELLECTUAL PROPERTY RIGHTS AND ANTITRUST British Institute of International and Comparative Law, London, England, 5/10/2004 http://www.usdoj.gov/atr/public/speeches/203627.htm US AND EU APPROACHES TO THE ANTITRUST ANALYSIS OF INTELLECTUAL PROPERTY LICENSING: OBSERVATIONS FROM THE ENFORCEMENT PERSPECTIVE ABA Section of Antitrust Law Spring Meeting, Washington, DC, 4/1/2004 http://www.usdoj.gov/atr/public/speeches/203228.htm
28	Exhaustion
29	Tying
30	Misuse
31	"U.S" U.S. patent 3,382,280 for propanil, a weed killer for rice fields sold as Stam. Monsanto v. Rohm and Haas Co., 312 F. Supp. 778 ED Pa. 1970 (Masterson, J.). Monsanto’s patent on the compound, US 3,382,280, held invalid.
32	Rohm and Haas Building Rohm and Haas patented the method for the use of propanil as selective post-emergent herbicide, US 3,816,092.
33	Contributory Infringement 35 U.S.C. § 271 (c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.
34	Safe Harbor of 35 U.S.C. 271(d) 35 U.S.C. § 271 (d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent rights against infringement or contributory infringement; (4) refused to license or use any rights to the patent; or (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned.
35	Rohm and Haas Building Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176 (1980). During the 16 years it took to obtain the patent, competitors had manufactured and sold propanil for herbicidal use, labeling it with instructions for application in accordance with the Rohm and Haas process. Competitors continued to do this after the patent was finally obtained. Rohm and Haas objected, but refused to license the competitors. It relied on “label licensing,” granting licenses only to purchasers of Stam. See the Supreme Court opinion for a history of the development of the patent misuse and contributory infringement doctrines, id. at 187-98. 35 U.S.C. 271(d) was held to be applicable safe harbor. A patent is not a “tying product,” and it is not misuse to refuse to license a competitor
36	Monsanto v. Swann Monsanto Co. v. Swann, 308 F. Supp. 2d 937 (E.D. Mo. 2003). Monsanto (through distributors) sold genetically modified soybean and cotton seed to Swann and other farmers with a written license restricted to using the patented herbicide-resistance technology for only one growing season. Defendants kept some of the seed generated by the plants and planted it the next year, contrary to the Technology License. Defendants asserted: that the doctrine of patent exhaustion or first sale preclude the patent infringement claim, and that Monsanto's patent misuse bars its infringement claim.
37	Monsanto v. Swann Monsanto Co. v. McFarling, 302 F.3d 1291 (Fed. Cir. 2002) had rejected the applicability of the first sale or patent exhaustion defense, finding that "the 'first sale' doctrine of exhaustion of the patent right is not implicated, as the new seed grown from the original batch had never been sold" and that "the original sale of the seeds did not confer a license to construct new seeds“.
38	Monsanto v. Swann Defendants claimed, “A fact finder should be permitted to find patent misuse on the grounds that [Monsanto] has impermissibly expanded its patent to require farmers to buy new seed each year rather than save and replant their own seed at substantial cost savings.” Court held: “Without more, a prohibition on saving and replanting a certain brand of seed, does not create an obligation to purchase that same seed in subsequent growing seasons” and rejected contention that it destroys possible competition in a “secondary saved seed market” analogous to a used cars market.
39	SmithKline Headquarters SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1328 (Fed. Cir. April 8, 2005). Paxil antidepressant medication was re-patented as its polymorph paroxetine hydrochloride hemihydrate.
40	SmithKline Headquarters SmithKline argued that practicing the original '196 patent infringes claim 1 of the new '723 patent, but that the '196 patent does not anticipate claim 1 of the '723 patent. SmithKline used the "disappearing polymorph" theory to justify its apparently inconsistent positions. The CAFC didn’t buy it, and found the claim invalid. According to that reasoning, the claim to tetracycline in Pfizer’s Conover patent would have similarly been invalid, as was found by the FTC but not by Judge Weiner here in Philadelphia.
41	Blue Cross v. GSK Blue Cross Blue Shield of Minnesota v. Glaxo Smith Kline plc, 05-cv-00910, D. Minn. Paxil® paroxetine HCl hemihydrate patent In a 99-page complaint filed May 12, 2005, GSK is being sued in a Walker Process-type action … in Minneapolis … where the Pfizer tetracycline cases were first tried.
42	For Further Information ... Visit http://www.elman.com Call Gerry Elman at (610) 892-9942 Send email to gerry@elman.com Elman Technology Law, P.C. PO Box 209 Swarthmore, PA 19081
43	Background Gerry Elman’s roots in Philadelphia go back to 1968, when he joined the Rohm and Haas patent department and walked or biked along Sixth Street to work. He sat in on some of the trial of Monsanto v. Rohm and Haas, but had mixed loyalties because he had previously clerked for the firm representing Monsanto. He served from 1972 to 1976 in Harrisburg as a Deputy Attorney General of Pennsylvania as head of its fledgling Antitrust Unit and precursor to the Consumer Advocate before the PUC. He participated in Nat’l Ass’n of Attorneys General committees on antitrust and in the inception of the public health trust fund from the settlement proceeds of the tetracycline case.
44	Background At that time he acquired an early copy of Ralph Anspach’s Anti-Monopoly board game and played it at a PA DOJ party. In 1976 Gerry moved back to Philadelphia to serve as a trial attorney with the U.S. Department of Justice Antitrust Division in its Middle Atlantic Office, then stationed in the U.S. Court House in Philadelphia. For 26 months we worked full time as part of the team that tried the tetracycline case before Judge Weiner. In 1982, Gerry returned to patent practice, opening his own office in the Bourse Building across the street from the Liberty Bell, and founding Biotechnology Law Report, of which he continues as editor-in-chief. See http://www.liebertpub.com/blr
45	Background In 1988, Gerry moved to Swarthmore, Pennsylvania, where he now practices from offices in his home and in Media (county seat of Delaware County). He does patent and trademark prosecution and counseling, intellectual property litigation, Internet law counseling, and expert witnessing on patent and trade regulation matters. He has a B.S. in physical sciences from the University of Chicago, an M.S. in chemistry from Stanford, and a J.D. from Columbia.