In April 1995, the Department of Justice and the Federal Trade Commission (the "Agencies") issued Antitrust Guidelines for the Licensing of Intellectual Property which set out the antitrust enforcement policy concerning both domestic and international licensing of intellectual property protected by patents, copyrights, trade secrets and know-how. The licensing of trademark rights is not included in these guidelines. A purpose of the guidelines is to provide guidance as to whether the Agencies will challenge the license or terms of the license because they are considered anticompetitive. The Agencies will look to the actual effects of the license rather than its formal terms.

The following principles are asserted:

In evaluating restraints in license agreements, a "rule of reason" will be used to determine whether the restraint is likely to have anticompetitive effects and, if so, whether the restraint is reasonably necessary to achieve the competitive benefits and whether the benefits outweigh the anticompetitive effects. Price fixing, output restrictions and market division among horizontal competitors as well as certain boycott and resale price maintenance provisions are plainly anti competitive and are per se unlawful.

The guidelines provide that an analysis of various types of markets affected by the license will be undertaken when evaluating the restraints in a license agreement. These are goods, technology and innovation markets. The effect on goods markets is determined by an analysis of prices, quantities, qualities or varieties of goods and services. A technology market is the intellectual property that is licensed as well as close substitutes - the technology or goods that are close enough substitutes to constrain the exercise of market power significantly with respect to the intellectual property that is licensed. In identifying the relevant technology or goods market, the Agencies will seek to identify the smallest group of technologies or goods over which a hypothetical monopolist of these technologies or goods is likely to exercise market power and the Agencies will identify other technologies and goods which buyers would substitute at a cost comparable to that of using licensed technology.

The effect on innovation markets may also be considered. Innovation markets relate to research and development, including the development of new or improved goods or processes or close substitutes for the licensed goods or processes.

The guidelines provide for a "safety zone" where, absent extraordinary circumstances, a restraint will not be challenged if the restraint is not facially anticompetitive and the licensor and its licensees collectively account for no more than 20% of each relevant market significantly affected by the restraint. In the absence of extraordinary circumstances, the Agencies will not challenge a restraint that may affect competition in a technology market if the restraint is not facially anticompetitive and there are four or more independently controlled technologies (in addition to the technologies controlled by the parties to the licensing agreement) that may be substituted for the licensed technology at a comparable cost to the user. With respect to innovation markets, absent extraordinary circumstances, a restraint will not be challenged if it is not facially anticompetitive and four or more independently controlled entities, in addition to the parties to the licensing agreement or arrangement possess the required specialized assets or characteristics and the incentive to engage in research and development that is a close substitute of the research and development of the parties to the license agreement.

Mergers and acquisitions concerning intellectual property are governed by the Justice Department's 1992 Horizontal Merger Guidelines rather than the Intellectual Property Guidelines.

The guidelines include a number of examples showing how the principles set out will be applied in terms of goods, technology and innovation markets.