Licensing Notes - introduction to the essential facilities doctrine

In this note, we prepare for our coverage of the Trinko case with an introduction to the essential facilities doctrine.

Let’s start will two fairly clear propositions about patent and copyright law in the United States. The first is that the proprietor of a patent or a copyright controls the extent to which she exploits her intellectual property. She need never manufacture or publish; there is no working requirement in U.S. law. And the proprietor may assign all or part of her IP rights to others. But there is no obligation to do so. A patent or copyright holder need not share her IP with anyone. To use the language of antitrust, there is no duty to deal, no duty to license.

Now the second proposition. A proprietor of a patent or copyright who chooses to exploit her intellectual property right -- whether directly or by means of a license to another -- may charge ‘what the market will bear.’ There are no limits -- imposed by either intellectual property law or antitrust law -- on the amount of license royalties that can be demanded.

Both of these propositions -- the freedom to license (or not) and the freedom to set royalties -- are seen to flow naturally from the very monopolies that patent and copyright law establish. A patent or copyright generates a set of exclusive rights. To require the proprietor to license to another is inconsistent with those exclusivities and undercuts the monopoly the intellectual property creates. A limit on royalties reduces the economic reward conferred by Congress on authors and inventors.