IP acquisitions and antitrust

How the DOJ analyzes patent acquisitions

Over the past several years, the technology industry has seen a sharp increase in patent-related litigation. The patent wars have in turn spurred a rise in patent portfolio acquisitions because those portfolios can be and are used as weapons in such litigation.

Patent portfolio acquisitions, like all other acquisitions, are subject to antitrust review by the Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC) whenever they meet the threshold tests for pre-merger notification. The DOJ recently concluded its investigations of several acquisitions involving significant transfers of intellectual property rights, including:

While Google lost the Nortel auction, it was able to acquire a significant wireless patent portfolio by agreeing to purchase Motorola Mobility for $12.5 billion. The transaction involved Motorola Mobility’s entire asset portfolio, including its handset and set-top box businesses, but Google’s primary interest was Motorola’s strong collection of more than 17,000 patents. Google executives used the word “patent” at least 24 times in Google’s Aug. 15, 2011 press conference announcing the deal.

The DOJ reviewed the Rockstar and Google transactions simultaneously along with an acquisition of Novell patents by Apple as part of the CPTN consortium. The DOJ’s analysis focused on standard essential patents (SEPs), which are patents that are essential in implementing or using a standard such as 4G wireless technology. In particular, the DOJ considered whether the acquiring firms could use these patents to reduce competition in two ways.

While the DOJ’s resolution of the Rockstar and Motorola transactions was instructive in many ways, there are many unanswered questions, including: how does the DOJ assess whether a foreclosure strategy would be unprofitable, and what does “FRAND” really mean? Moreover, patents that are not SEPs generally are not subject to FRAND commitments, so acquisitions of such patents may be even more difficult to analyze.

If a patent portfolio empowers an acquirer to raise some rivals’ costs, but also enables the acquirer to compete more successfully against other rivals, how will the DOJ define the relevant technology market or deal with this competitive conundrum? The DOJ is likely to continue its in-depth reviews of significant patent acquisitions, so the answers to these questions may be just around the corner.

Contributing Author

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Logan Breed

Logan Breed is a partner in the Washington D.C. office of Hogan Lovells, concentrating on antitrust clearance of mergers and acquisitions, antitrust litigation, and non-merger...

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Corey Roush

Corey Roush is a partner in the Washington D.C. office of Hogan Lovells, where he focuses on antitrust litigation, white collar criminal defense, corporate governance...

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Leigh Oliver

Leigh Oliver is an associate in the Washington D.C. office of Hogan Lovells, with a focus on antitrust and trade regulation law

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