[Congressional Record Volume 143, Number 2 (Thursday, January 9, 1997)]
[Extensions of Remarks]
[Pages E90-E91]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF THE INTELLECTUAL PROPERTY ANTITRUST PROTECTION ACT OF 
                                  1997

                                 ______
                                 

                           HON. HENRY J. HYDE

                              of illinois

                    in the house of representatives

                       Thursday, January 9, 1997

  Mr. HYDE. Mr. Speaker, today I am introducing the Intellectual 
Property Antitrust Protection Act of 1997. I am pleased to be joined by 
my colleagues on the Judiciary Committee, Mr. Sensenbrenner, Mr. Gekas, 
Mr. Smith, Mr. Gallegly, Mr. Canady, Mr. Bono, and Mr. Frank who are 
original cosponsors 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.

[[Page E91]]

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.
  On May 14, 1996, the Judiciary Committee held a thorough hearing on 
H.R. 2674, an identical bill that was introduced in the last Congress. 
At the hearing, the bill received support from the Intellectual 
Property Owners, the American Bar Association, and the Licensing 
Executives' Society. The administration agreed that the bill reflected 
the proper antitrust policy, but hesitated to endorse a legislative 
remedy.
  Despite the administration's reluctance to endorse the bill fully in 
last year's hearing, 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, April 6, 1995, p. 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 a lower Federal court decision that 
construed patents and copyrights as automatically giving the 
intellectual property owner market power. Digidyne Corp. v. Data 
General Corp., 734 F.2d 1336, 1341-42 (9th Cir. 1984), cert. denied, 
473 U.S. 908 (1984). The sheer size of the Ninth Circuit and its 
location make this holding a serious problem, even though some other 
courts have not applied the presumption. 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). The Ninth Circuit covers nine States and two 
territories, and it has a population of more than 45 million people. In 
addition, it contains a significant portion of the computer industry, 
including Silicon Valley in California and Microsoft in Washington.

  So, in this very important area, the law says one thing in the Ninth 
Circuit, a different thing in other circuits, and in still other 
circuits, the courts have not spoken. See Antitrust Guidelines for the 
Licensing of Intellectual Property, p. 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 passed the Senate during past Congresses 
with broad, bipartisan support. S. 438 passed the Senate once as 
separate legislation and twice as an amendment to House-passed 
legislation during the 100th Congress. S. 270, a similar bill, passed 
the Senate again during the 101st Congress.
  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 tying 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, 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. If you would like to join as a cosponsor, please 
call Joseph Gibson of the Judiciary Committee staff at extension 5-
3951.

                          ____________________