Effective Competition Advocacy Efforts—Division Holds Public Workshops on Most-Favored-Nation Clauses and Patent Assertion Entities
The Antitrust Division holds public workshops to promote competition principles and draw attention to important issues that affect antitrust law and policy. Workshops provide a forum for open discussion on challenging and cutting-edge competition issues and offer insight into the Division’s policy priorities. In 2012, the Department of Justice and the Federal Trade Commission (FTC) held two joint public workshops that brought together panelists from business, academia, the bar, and government. The first workshop, held in September, addressed most-favored-nation clauses (MFNs) while the second, held in December, focused on patent assertion entities (PAEs).
Most-Favored-Nation Clauses and Antitrust Enforcement and Policy
MFNs have been featured in some of the Division’s recent cases, such as its challenge to Blue Cross Blue Shield of Michigan’s use of MFNs in its contracts with hospitals. The Division’s lawsuit alleged that this use of MFNs reduced competition in local commercial group and individual health insurance markets and likely raised prices for health insurance in Michigan. Michigan recently barred health care insurers from including MFNs in their contracts, and the Division’s case has ended now that these provisions can no longer cause consumer harm.
The workshop consisted of a series of panels exploring the conditions under which MFNs thwart competition and harm consumers. Among other topics, panelists covered the legal treatment of MFNs, economic theories concerning MFNs, and industry experiences with MFNs. Additional information on the workshop and materials submitted by the panelists are available on the Division’s website.
Patent Assertion Entity Activities
The workshop on PAE activities continued the efforts by the Division and the FTC to address the balance between competition policy and patent rights, and followed the 2010 joint workshop on The Intersection of Patent Policy and Competition Policy.
PAEs are a type of nonpracticing entity (NPE) that owns patents but does not practice them. NPEs include organizations such as universities that may not practice their patents because of resource limitations or because practicing would conflict with their academic mission. PAEs, by comparison, acquire patents from existing owners and make money by licensing them to—and litigating against—manufacturers that use the patents. Their lack of direct investment in patent creation combined with their frequent use of litigation results in PAEs having significant implications for competition and innovation. The workshop provided an open forum for discussing the nature of PAEs and the role antitrust law should play with respect to PAE behavior when their conduct harms the competitive process.
The workshop began with an introduction to PAE activities and licensing and then turned to industry representatives—both from PAEs and their licensees—to hear their real-world experiences. Panelists addressed both the potential efficiencies and potential harms that PAEs can generate and how antitrust law should apply to PAE activity.
The agencies received numerous public comments in response to the workshop. The comments, along with some of the materials from the panelists’ remarks, are available on the Division’s website.