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Congress Steps Up Its Oversight of Competition in Intellectual Property Licensing

Posted  November 12, 2019

By Seth D. Greenstein

Congress is staking out new markers in its oversight of intellectual property licensing as Senators and Representatives grapple with a changing technological landscape.

The House Judiciary Committee’s ongoing bipartisan investigation into competition in digital markets—including requests for information to Facebook, Google, Amazon, and Apple—garnered significant press attention earlier this fall.  The Senate, however, has not as yet followed suit.  Senator Mike Lee, chairman of the Antitrust, Competition Policy and Consumer Rights Subcommittee of the Senate Judiciary Committee, has questioned shoehorning antitrust law solutions into tech company concerns ranging from data privacy to freedom of speech.

Perhaps flying under the radar, the Senate Judiciary Committee has been busy in recent weeks addressing the impact on competition from diverse intellectual property licensing practices, and issuing letters to government officials and entertainment industry executives.

Influential Senators on the Judiciary Committee took note last December when Makan Delrahim, the Assistant Attorney General for the Antitrust Division, announced in his “Telegraph Road” speech that the Antitrust Division officially was withdrawing its assent from the 2013 joint policy statement with the U.S. Patent and Trademark Office, on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, which had been interpreted as putting two agencies’ thumbs on the scale against injunctive relief as a remedy for infringement of standard-essential patents (“SEPs”).  According to AAG Delrahim, a new policy statement on injunctive relief needed to address both SEP patent “hold-up” by patentees and “hold-out” by standards licensees, and the potential that standard-development organization policies may empower licensees to extract “sub-optimal concessions from patent holders that undermine the incentive to innovate”—thereby harming competition.  USPTO Director Andrei Iancu similarly stated in September that “when it comes to FRAND-encumbered standard essential patents (SEPs), any policy statement should incentivize good faith negotiations and dis-incentivize threats of either patent hold-up or patent hold-out.”

On October 21, 2019, Senators Thom Tillis and Christopher A. Coons—the chair and ranking member of the Intellectual Property Subcommittee of the Senate Judiciary Committee o Judiciary—sent a joint letter to Attorney General Barr and AAG Delrahim endorsing the concerns expressed by Delrahim in his “Telegraph Road” remarks.  The joint letter noted stakeholder concerns over “a growing divide” between the Justice Department, the Federal Trade Commission, and the USPTO over the role of antitrust law in addressing SEPs and FRAND commitments.  To bridge the divide, the Senators asked DOJ to work with the USPTO to develop a revised policy statement that ensures “a proper balance between protecting all innovators and consumers.”

Copyright licensing has also caught the attention of Senator Lindsey Graham, chairman of the Senate Judiciary Committee.  On November 1, 2019, Senator Graham issued three sets of letters at the intersection of copyright and competition policy, to assure the proper operation of licensing systems subject to direct and indirect federal regulation.

  • First, Senator Graham’s letter to AAG Delrahim noted the “broad” and “intense divisions” among stakeholders concerned with DOJ’s ongoing review of the existing consent decrees requiring compulsory blanket licensing by ASCAP and BMI for the public performance of musical works. Without prejudging the outcome of DOJ’s review—which received 878 comments seeking to continue, modify, or end the decrees—Senator Graham urged DOJ to avoid disruption to the music marketplace and to not end the consent decrees without enabling establishment of an alternative licensing structure.
  • Second, Senator Graham sent letters to the four major television networks (ABC/Disney, CBS, Fox, and NBC) requesting commitments by the networks to engage in negotiations and voluntary licensing of network programing to satellite providers at current rates, for at least one year, should Congress allow the existing statutory compulsory video licenses to expire at year’s end. News reports that all four networks have agreed to Graham’s suggestions.  (Note:  On November 7, Senate Commerce Committee Chairman Roger Wicker introduced the “Satellite Television Access Reauthorization Act” to extend the statutory compulsory licenses for an additional five years, and has scheduled a markup for next week.)
  • Third, Senator Graham asked Register of Copyrights Karyn Temple to develop performance metrics for the new Music Licensing Collective, created by the Music Modernization Act to allocate royalties paid by digital music services under a statutory compulsory music performance license to the respective composers, authors, and music publishers of the performed works, and to assess the impact and value of federal regulation and administrative expenditures on the matching success rate.

The thread connecting these seemingly disparate inquiries is whether legal constraints remain necessary or useful to promote competition among intellectual property licensors.  Historically, antitrust law proactively has regulated licensing rules for SDOs, and has influenced copyright statutes to avoid market failures, particularly in markets for audio and audiovisual entertainment, by adopting statutory compulsory licenses that remove administrative barriers and facilitate public access to copyrighted works.

The Senators’ letters may portend future Judiciary Committee efforts to de-regulate intellectual property licensing.  But they also reflect a practical reality:  For decades, federal intervention in the licensing of intellectual property has proved a necessary market lubricant, facilitating licensee competition and public access to intellectual property, while reducing administrative effort and expense for licensors.  We therefore should expect continuing federal legislative oversight over any proposal that alters the balance among licensors, licensees, and the public interest.

Edited by Gary Malone