[Congressional Record Volume 141, Number 186 (Monday, November 20, 1995)]
[Extensions of Remarks]
[Pages E2225-E2226]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         INTELLECTUAL PROPERTY ANTITRUST PROTECTION ACT OF 1995

                                 ______


                           HON. HENRY J. HYDE

                              of illinois

                    in the house of representatives

                       Monday, November 20, 1995

  Mr. HYDE. Mr. Speaker, today I am introducing the Intellectual 
Property Antitrust Protection Act of 1995. I am pleased to be joined by 
my colleagues on the Judiciary Committee, Mr. Moorhead, Mr. 
Sensenbrenner, Mr. Gekas, Mr. Coble, Mr. Smith of Texas, Mr. Canady, 
Mr. Bono, Mr. Bryant of Tennessee, and Ms. Lofgren who are original 
sponsors of this legislation.
  Because of increasing competition and a burgeoning trade deficit, our 
policies and laws must enhance the position of American businesses in 
the global marketplace. This concern should be a top priority for this 
Congress. A logical place to start is to change rules that discourage 
the use and dissemination of existing technology and prevent the 
pursuit of promising avenues of research and development. Some of these 
rules arise from judicial decisions that erroneously create a tension 
between the antitrust laws and the intellectual property laws.
  Our bill would eliminate a court-created presumption that market 
power is always present in a technical antitrust sense when a product 
protected by an intellectual property right is sold, licensed, or 
otherwise transferred. The market power presumption is wrong because it 
is based on false assumptions. Because there are often substitutes for 
products covered by intellectual property rights or there is no demand 
for the protected product, an intellectual property right does not 
automatically confer the power to determine the overall market price of 
a product or the power to exclude competitors from the marketplace.
  The recent antitrust guidelines on the licensing of intellectual 
property--issued jointly by the antitrust enforcement agencies, the 
Department of Justice and the Federal Trade Commission--acknowledge 
that the court-created presumption is wrong. The guidelines state that 
the enforcement agencies ``will not presume that a patent, copyright, 
or trade secret necessarily confers market power upon its owner. 
Although the intellectual property right confers the power to exclude 
with respect to the specific product, process, or work in question, 
there will often be sufficient actual or potential close substitutes 
for such product, process, or work to prevent the exercise of market 
power.'' Antitrust Guidelines for the Licensing of Intellectual 
Property dated April 6, 1995 at 4 (emphasis in original).
  For too long, Mr. Speaker, court decisions have applied the erroneous 
presumption of market power thereby creating an unintended conflict 
between the antitrust laws and the intellectual property laws. 
Economists and legal scholars have criticized these decisions, and more 
importantly, these decisions have discouraged innovation to the 
detriment of the American economy.
  The basic problem stems from Supreme Court and lower Federal court 
decisions that construe patents and copyrights as automatically giving 
the intellectual property owner market power. Jefferson Parish Hospital 
District No. 2 v. Hyde, 466 U.S. 2, 16 (1984); United States v. Loews, 
Inc., 371 U.S. 38, 45 (1962); Digidyne Corp. v. Data General Corp., 734 
F.2d 1336, 1341-42 (9th Cir. 1984), cert. denied, 473 U.S. 908 (1984). 
To be sure, some courts have also refused to apply the presumption 
despite the Supreme Court's rulings. Abbott Laboratories v. Brennan, 
952 F.2d 1346, 1354-55 (Fed. Cir. 1991), cert. denied, 505 U.S. 1205 
(1992): A.I. Root Co. v. Computer/Dynamics, Inc., 806 F.2d 673, 676 
(6th Cir. 1986). As the guidelines note, the law is unclear on this 
issue. Antitrust Guidelines for the Licensing of Intellectual Property 
dated April 6, 1995 at 4 n. 10. This lack of clarity causes uncertainty 
about the law which, in turn stifles innovation and discourages the 
dissemination of technology.

  For example, under Supreme Court precedent, tying is subject to per 
se treatment under the antitrust laws only if the defendant has market 
power in the tying product. However, the presumption automatically 
confers market power on any patented or copyrighted product. Thus, when 
a patented or copyrighted product is sold with any other product, it is 
automatically reviewed under a harsh per se standard even though the 
patented or copyrighted product may not have any market power. As a 
result, innovative computer manufacturers may be unwilling to sell 
copyrighted software with unprotected hardware--a package that many 
consumers desire--because of the fear that this bundling will be judged 
as a per se violation of the prohibition against tying. The 
disagreement among the courts only heightens the problem for corporate 
counsel advising their clients as to how to proceed. Moreover, it 
encourages forum shopping as competitors seek a court that will apply 
the presumption. Clearly, intellectual property owners need a uniform 
national rule enacted by Congress.
  Very similar legislation, S. 270, passed the Senate four times during 
the 101st Congress with broad, bipartisan support. During the debate 
over that legislation, opponents of this procompetitive measure made 
various erroneous claims about this legislation--let me dispel these 
false notions at the outset. First, this bill does not create an 
antitrust exemption. To the contrary, it eliminates an antitrust 
plaintiff's ability to rely on a demonstrably false presumption without 
providing proof of market power. Second, this bill does not in any way 
affect the remedies, including treble damages, that are available to an 
antitrust plaintiff when it does prove its case. Third, this bill does 
not change the law that tying arrangements are deemed to be per se 
illegal when the defendant has market power in the typing product. 
Rather, it simply requires the plaintiff to prove that the claimed 
market power does, in fact, exist before subjecting the defendant to 
the per se standard. Fourth, this bill does not legalize any conduct 
that is currently illegal.
  Instead, this bill ensures that intellectual property owners are 
treated the same as all other companies under the antitrust laws, 
including those relating to tying violations. The bill does not give 
them any special treatment, 

[[Page E 2226]]
but restores to them the same treatment that all others receive.
  In short, the time has come to reverse the misdirected judicial 
presumption. We must remove the threat of unwarranted liability from 
those who seek to market new technologies more efficiently. The 
intellectual property and antitrust laws should be structured so as to 
be complementary, not conflicting. This legislation will encourage the 
creation, development, and commercial application of new products and 
processes. It can mean technological advances which create new 
industries, increase productivity, and improve America's ability to 
compete in foreign markets.
  I urge my colleagues in the House to join us in cosponsoring this 
important legislation.

                          ____________________