Antitrust And Intellectual Property: Convergence, Tension, And Enforcement In Technology Driven Markets

Intellectual property and antitrust share a common goal; consumer welfare through innovation. However, each body of law approaches that objective from different—and sometimes opposing—directions.

IP promotes investment, innovation and competition from new technology and ideas by granting a lawful right to exclude others from practicing one's novel invention. On the other hand, antitrust regulates commercial conduct that restricts competition and that lacks a countervailing procompetitive justification.

When IP rights are asserted or used in commercial transactions, tension can sometimes arise between the antitrust and IP laws. The friction is particularly apparent in technology markets where control over standards, platforms, or distribution channels can toggle between legitimate IP utilization and unlawful market foreclosure.

In the U.S., two recent cases are illustrative of the ways in which courts handle lawsuits with antitrust and IP elements. In WhaleCo Inc. (conducting business as Temu) v. Shein, rival ultra fast fashion companies clashed over Shein conduct designed to allegedly prevent Temu's rapid U.S. growth.

Temu alleged that Shein improperly sent takedown notices to Temu for uncopyrighted images and engaged in a suite of other copyright/trade infringement activities related to Temu's offerings. Temu also alleged broader Sherman Act claims, including restraints on trade through a prolonged scheme to limit Temu's access to suppliers and monopolization through high market share in the ultra-fast fashion market.

Notably, Temu's antitrust claims were predicated on Shein's conduct in China, allegedly restricting domestic Chinese ultra-fast fashion suppliers through loyalty statements, restriction on suppliers' IP rights through exclusivity arrangements, and price floor commitments, all designed to scare or prevent suppliers from partnering with Temu.

Against this backdrop, the court dismissed the antitrust claims and allowed the domestic IP disputes to proceed. The court did not address the merits of Temu's U.S. antitrust allegations. Instead, the court found that the challenged conduct flowed from activity in China that did not have a sufficient U.S. nexus. The Temu ruling illustrates that complex cross border disputes involving IP and antitrust are common, but the resolution will depend on a fact-specific inquiry on a case-by-case basis. Cases in US courts involving a foreign supply chain should expect to plead a clear U.S. connection.

Disney v. InterDigital is one of the latest examples of a FRAND antitrust action. Disney is faced with InterDigital IP claims that alleged InterDigital made fair, reasonable, and nondiscriminatory (FRAND) commitments in licensing its technology, but did not actually intend to abide by such promises. FRAND commitments are contractual assurances that create collaborative standards to access patent holders' technology and prevent against overwhelming market power.

In this case, the Trump administration's Department of Justice (DOJ) weighed in, supporting InterDigital. The DOJ filed a statement of interest in October urging the court not to presume market power solely on the basis of standard essential patent (SEP) status. The DOJ contended that possession of a patent, even one deemed essential to a particular industry or technology, does not automatically confer monopoly power. Instead, plaintiffs must still plausibly allege market and monopoly power and competitive harm. The filing reflects a sympathy towards SEP owners compared to SEP implementers.

These cases illustrate how courts are drawing clear lines between IP enforcement and antitrust, insisting on reasoned theories of harm. The landscape for analyzing antitrust and IP enforcement often changes over time and over political climates. As such, the best suited practitioners stay up to date on recent enforcement trends, outcomes, and subject matter developments to continue to provide comprehensive client advice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.