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Bundling Patents with Trade Secrets

Here is what the DOJ & FTC have to say in this 2007 Report. One research tip is to use Google books to find buried concepts like hybrid patent/trade secret licenses... Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition The panel also discussed whether antitrust issues can arise if a patent holder tries to extend the market power conferred by a patent beyond its expiration by bundling the patent license with trade secrets or know-how. Unlike patents, trade secrets enjoy perpetual protection provided the proprietary information remains secret. If the patent in such a “hybrid agreement” expires, or if the trade secrets hold little or no value, the licensing of these rights may incorporate restrictions that effectively establish a cartel.

That was the Department of Justice’s allegation in United States v. Pilkington. Pilkington had once held patents on a process for making flat glass. During the life of those patents, Pilkington set up a worldwide licensing regime with exclusive territories in which each licensee could practice the patent. By the early 1980s, the principal U.S. patents on the process had expired. Nevertheless, Pilkington continued to enforce a worldwide licensing scheme with exclusive territories based solely on the licensing of trade secrets. The Department challenged this scheme in 1994, alleging that any remaining trade secrets consisted of engineering solutions with no substantial value over equally efficacious engineering alternatives. The Department argued that the licensing of the know-how was a sham, and it had simply become a device for implementing a cartel. Most intellectual property bundling agreements, in contrast, are not sham agreements, and they often serve as mechanisms for reducing transaction costs, alleviating blocking positions, or creating other efficiencies.

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