Month: June 2022

Elizabeth Herbst Schierman

Published January 2022

Intellectual property—like patents, trademarks, etc.—is reportedly “the most valuable asset class on the planet,”¹ and a company’s intangible assets are often the largest percentage of the business’s value. This value percentage has nearly tripled in the past thirty-five years, from 32% in 1985, to 80% in 2005, and to 90% in 2020 for the S&P 500 companies.^2,3 But, while patent-forward companies like IBM spend hundreds of millions of dollars annually on patents alone,⁴ most companies understandably have more limited resources and must select which assets to formally protect.

Identifying the inventions and trademarks of the greatest potential value is an important step in allocating limited resources to maximize the value and strength of a company’s patent and trademark portfolios. This article provides a roadmap of what businesses should consider when selecting the inventions to patent and the trademarks to register.

Identifying All Potentially-Protectable Inventions and Trademarks

First and foremost, it is important for any company to recognize all the invention and trademark assets the company possesses.

Patentable inventions extend beyond just devices, machines, and other physical articles of “manufacture,” to subject matter such as processes (e.g., methods of fabrication or use), compositions of matter (e.g., innovative materials),⁵ and designs.⁶ Even improvements to already-known inventions may be patentable.⁷ One “product” may be associated with numerous inventions, any or all of which may be patentable if novel (i.e., not previously patented or otherwise publicly known technology),⁸ non-obvious (i.e., not an obvious modification of known technology),⁹ and useful.

Trademarks, too, extend beyond just logos to practically any indication of the source, sponsorship, or endorsement of goods or services.¹⁰ Each such “mark” may be separately registerable. For example, a business may have a standard character company name (e.g., MCDONALD’S®¹¹), nicknames (e.g., MICKEY DS®¹²), product names (e.g., BIG MAC®¹³), design logos (e.g., the McDonald’s arches¹⁴), mascots (e.g., Ronald McDonald¹⁵), trade dress (e.g., a restaurant’s yellow awning¹⁶), or even sound marks (e.g., the A-B-C-E-D audio tone note progression¹⁷ of the “I’m Lovin’ It” commercials).

With very few exceptions, the only way to hold exclusive rights to make, use, offer to sell, or sell an invention within the United States, or to import the invention into the United States, is to secure an issued U.S. patent.¹⁸ Without a patent in hand, there is usually no way to prevent a competitor from making and selling the same invention, whether copied from the original or independently produced.

“With very few exceptions, the only way to hold exclusive rights to make, use, offer to sell, or sell an invention within the United States, or to import the invention into the United States, is to secure an issues U.S. patent. ¹⁸“

Enforceable and exclusive trademark rights, on the other hand, may arise through use of the trademark, even without a trademark registration. However, unregistered (i.e., “common law”) trademark rights tend to be limited and difficult to enforce. Federal registration provides significant

benefits, including a presumption of ownership and nation-wide exclusive right to use the registered trademark on or in combination with the goods/services listed in the trademark registration.

Selecting the Inventions to Patent

Once all the “inventions” have been identified, deciding which to protect via a patent should include considering more than just the cost of the patenting process.¹⁹ The following considerations are aimed at prioritizing the inventions with the greatest potential for valuable patent protection:

Has the invention already been publicly disclosed?

Under U.S. patent law, once an invention has been made public, a one-year, non-extendable window opens for filing a patent application.²⁰ When the window closes, so does the opportunity to secure a U.S. patent. In most other countries, the opportunity to seek a patent ends immediately upon a public disclosure of the invention, regardless of where in the world the disclosure occurred.²¹ (Thus, it is usually best to file a U.S. patent application before any disclosure of the invention to preserve the right to file foreign or international patent applications claiming priority to the U.S. filing.)

Is the invention new, non-obvious, and useful compared to prior-known technology in the relevant field?

Novelty, non-obviousness, and utility are the three primary requirements for patentability. The more similar an invention is to already-existing technology (i.e., “prior art”), the lower the likelihood of acquiring a patent and the more challenging, time consuming, and costly the patenting process is likely to be. This is also why a pre-application patent search, conducted by a knowledgeable patent practitioner, is usually advisable and provides an opportunity to evaluate the invention’s patentability and to focus the patent application toward the most innovative aspects of the invention.

How difficult would it be for a competitor to compete without using the innovative features of the invention?

The importance of this “design-around” consideration should not be overlooked. Any new, non-obvious, and useful invention may be patentable, but if a competitor could avoid practicing the invention and still have a competitive product—e.g., in terms of cost and performance—in the marketplace, a patent would hold little real-world value to the patent owner. On the other hand, if a competing product would be inferior or overly costly to produce or use without benefit of the invention, the more valuable a patent on that invention is likely to be.

What is the likelihood of a competitor reverse engineering or independently developing the invention?

A patent provides exclusive rights in an invention to the patent owner in exchange for publicly disclosing certain details about the invention.²² Contrarily, a process, composition, or other product maintained as a “trade secret”—and therefore not publicly disclosed—may be protected from misappropriation by others.²³

Trade secret law does not prohibit “reverse engineering,” such as independent examination of a commercially available, not-patented product to discern its features and then copying or modifying those features for a competing product. Trade secret law also does not prevent a competitor from independently developing the same process, composition, etc.

The higher the likelihood for competitor reverse engineering or independent development, the greater the value of patent protection. And, even for a patented product, the value of the patent depends on the scope of the claims, which should be crafted to cover foreseeable reverse engineering and other “design arounds” for competitor products.

Are subsequent, improved versions of the invention contemplated?

If an initial invention is likely to lead to modified versions down the road, securing broad patent protection for the initial invention is advisable, as are continuing patent applications (e.g., continuations, divisionals, and continuation-in-part patent applications) for the later “improvement” inventions. Skipping a patent application for the initial invention with a plan of patenting the later improved versions is ill advised because the initial, marketed (i.e., publically disclosed) invention will likely constitute “prior art” to the later-filed patent application, limiting the scope of potential protection available for the later improved versions.

Would patent infringement be detectable?

To prove patent infringement, the patent owner generally must prove, e.g., that an infringing device includes each and every claimed feature of a patented device, that an accused infringer has performed each and every claimed act of a patented process, and that an accused material includes each and every claimed ingredient/property of a patented composition. If examination of a competitor’s products would not enable a patent owner to determine whether or not each and every claimed feature, step, or ingredient/property has been practiced, then the patent is of little real-world value.

How litigious is the industry?

Patents are commonly understood to be swords for battling nefarious infringers, but the protective shield-like aspects of patents are often overlooked. A non-litigious company may think it unnecessary to secure patents if it has no present intention of ever enforcing patents in court. However, if that same company finds itself accused of infringing a competitor’s patents, having a strong patent portfolio of its own may provide opportunities for counter-claims, settlement leverage, and cross-licensing. One notorious company recently vowed not to initiate patent suits against others while warding off lawsuits and patent validity challenges against it.²⁴ Accordingly, building a diverse patent portfolio strengthens both sword and shield, the latter being very helpful in a litigation-prone industry.

How does the product’s expected commercial lifetime compare to the potential patent lifetime?

Generally, a U.S. utility patent is enforceable from the date the patent issues (also known as its “grant” date) until it expires, which—if all necessary maintenance fees are paid during the life of the patent—is a twenty years from the first effective filing date of the patent application.²⁵ But, it takes an average of about two years to secure a patent.²⁶

If a new product is likely to become commercially obsolete within its first two years in the marketplace, investing in the usual patenting process may not provide much value to the company. That said, there are opportunities to expedite the patenting process for additional cost,²⁷ and these opportunities should be considered for innovations with shorter commercial lifetimes.

The previous list of considerations is by no means exhaustive, but is intended to be a useful tool for allocating limited resources toward protecting the inventions with the greatest potential value so as to grow a patent portfolio of maximum value to the company.

These considerations also reflect best practices for securing the strongest patent protection for an invention once the decision to file a patent application has been made. These best practices generally include, e.g., keeping inventions secret before filing a patent application; engaging a patent practitioner to conduct a patent search and evaluation before drafting a patent application; tailoring patent claims toward innovative features while avoiding room for “design-arounds”; omitting trade secret information, where possible, in patent applications; drafting patent claims with all contemplated alternatives and improvements in mind; tailoring patent claims toward detectable features; and diversifying patent claims for strong patent portfolios.

Once the decision has been made to pursue patent protection for an invention, an appropriate prosecution strategy should be crafted to make best use of limited resources. For example, “small entity” and “micro entity” patent applicants may reduce required U.S. patent fees by 50% or 75%, respectively. Starting with a “provisional” patent application (i.e., a generally low-cost, informal application) may be a good strategy for businesses wishing to minimize initial costs and/or test the market with an inventive product, process, services, etc., for up to a year before investing in a full “nonprovisional” patent application.

When foreign—in addition to U.S.—patent rights are of definite interest, a single international patent application (known as a “PCT” or a “Patent Cooperation Treaty” application) may be filed first and used to retain the opportunity to later file for patents in any or all of more than 150 PCT-contracting countries/regions, including the U.S. This strategy can generally delay country-specific patenting costs for thirty or thirty-one months.

When filing a PCT application, the “International Searching Authority” (ISA) (i.e., the country whose patent office is selected by the applicant to examine the claims of the PCT application) should be strategically selected, too. For example, if Europe is an expected primary market for the invention, the European Patent Office (EPO) may be a good ISA choice and worth its relatively higher fees. Alternatively, the Korean Intellectual Property Office (KIPO) is generally a lower-cost ISA and may be good selection in some technology areas. Pursuing patents in more than one country may also provide opportunities to use patenting success in one jurisdiction to expedite the patenting process and save cost in other jurisdictions, by virtue of the widely-available “Patent Prosecution Highway” (PPH).

So, after deciding to file a patent application, the next steps should be just as carefully considered, planned, and tailored according to the particular needs and goals—budgetary and otherwise—of the business and invention.

Selecting the trademarks to register

As for trademarks,²⁸ the considerations for deciding which marks to register in the U.S. and/or abroad go beyond merely identifying names and logos used in interstate commerce as indications of the source, sponsorship, or endorsement of the goods and services. These considerations should include all of the following:

Which marks are most used by the company to distinguish itself and its goods/services?

A company may refer to itself in many ways, such as by a formally-registered business name, an assumed business name (i.e., a “d/b/a” name), initials, etc. The same may be true for individual product names and product line names. The names and symbols (i.e., the “marks”) most used by the company to distinguish itself and its goods/services from others are the marks most valuable for trademark registration.

Which marks are most used by others when referring to the company or its goods/services?

Regardless of how frequently a company refers to itself by its formally-registered business name or refers to its products by their company-chosen product name, its customers, its competitors, or others may choose to use alternative names, nicknames, initials, etc. These more frequently used marks may, therefore, gather more “good will” and a stronger association between customer and company than the marks frequently used by the company alone, making registration of these marks relatively more valuable to the company.

Which marks would lead to damaging confusion if a competitor were to start using something looking or sounding similar in association with similar goods/services?

The marks that, if adopted either exactly or similarly by a competitor, would result in the most confusion of customers and/or the greatest reputation damage to the company, are the marks that should be highly prioritized for formal federal registration. A competing product of inferior quality, marketed under a confusingly similar name or logo, is likely to lead customers to distrust the quality of the original product. Bad press about a similarly-named competitor may tarnish the reputation of the original company, too.

This concern may be greatest for goods/services marketed to consumers not likely to exercise great care in their purchasing decisions. For example, purchasers of relatively inexpensive goods on massive online shopping venues may be less likely to be investigate the seller and quality of purchased goods than purchasers of high-priced items sold in person by clearly-authorized distributors and in negotiated transactions.

The greater the likelihood and extent of damage—to company and/or goods/services reputation—if a competitor were to adopt a confusingly-similar mark, the more highly prioritized formal trademark registration should be.

For which marks would it be most detrimental if the company could not expand into additional geographic areas and/or goods/services areas?

Without a federal trademark registration, the scope of common law trademark rights is generally limited to only the areas of actual use. This more limited scope of rights of the common law trademark owner leaves open the chance for another to establish exclusive common law trademarks rights in the other areas (e.g., other geographic areas; other goods/services areas) or even to secure a federal trademark registration, either of which may inhibit the initial common law trademark owner from expanding its own trademark use or securing federal trademark registration. Accordingly, the marks for which expanded use is a possibility should be prioritized for trademark registration.

Which marks are expected to be in use long term and without significant change?

If a mark will be used only for a short time (e.g., for a one-season product line; for a one-time pop-up store) or if the mark is likely to be changed before settling on a final form (with a change in spelling, phrasing, design, etc.) federal trademark registration is unlikely to provide much value.

Which marks are most unique and distinctive?

The more unique (e.g., fanciful, arbitrary, or at least suggestive) a particular mark is, the more likely the mark will be registerable in the absence of a conflicting registration. Marks that merely describe the associated goods/services (e.g., an ingredient, quality, characteristic, function, feature, purpose, or use of the goods/services) will face rejection and a difficult road for registration.²⁹ Generic terms for the associated goods/services are not registerable, period.³⁰

At least for planned—but not yet in use—marks, is the mark available to use and register?

A mark not yet being used in commerce, but for which there is a good faith intention to make such use in the near future, may be the subject of a federal trademark registration application on an “intent-to-use” (ITU) basis.³¹ However, before choosing a new trademark to adopt and register, it is generally wise to have an experienced trademark attorney conduct a trademark search to see whether someone else has conflicting trademark rights, whether registered or unregistered.

In addition to the above, foreign manufacturing and/or markets raise the likely value of securing trademark registrations, in the U.S. and abroad, and should be carefully considered.

Conclusion

By identifying the inventions and trademarks with the highest potential value to the company, limited resources may be smartly allocated, and the patent and trademark portfolios developed by the company can provide the strongest possible protection to the business’s intangible assets.

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Endnotes

1. John P. Ogier, Intellectual Property, Finance and Economic Development, WIPO MAGAZINE, Feb. 2016, https://www.wipo.int/wipo_magazine/en/2016/01/article_0002.html.

2. Bruce Berman, Latest Data Show That Intangible Assets Comprise 90% of the Value of the S&P 500 Companies, IP CLOSEUP, Jan. 19, 2021, https://ipcloseup.com/2021/01/19/latest-data-show-that-intangible-assets-comprise-90-of-the-value-of-the-sp-500-companies/.

3. Aran Ali, The Soaring Value of Intangible Assets in the S&P 500, VISUAL CAPITALIST DATASTREAM, Nov. 12, 2020, https://www.visualcapitalist.com/the-soaring-value-of-intangible-assets-in-the-sp-500/.

4. See Thomas Alsop, Companies with the Most Patents Granted 2020, STATISTA, Feb. 1, 2021, https://www.statista.com/statistics/274825/companies-with-the-most-assigned-patents/ (identifying IBM as the company with the most U.S. patents granted to them in 2020, at 9,130 issued U.S. patents); see Pedram Sameni, Patexia Insight 94: IBM’s US Patent Budget is Estimated Around $280M Annually, PATEXIA, Oct. 28, 2020, https://www.patexia.com/feed/patexia-insight-94-estimating-the-ip-spending-for-uspto-s-largest-client-20201027.

5. Machines, manufactures (e.g., devices), processes, and compositions of matter are protectable by “utility” patents. See 35 U.S.C. § 101 (“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”)

6. Designs are protectable by “design” patents. See 35 U.S.C. § 171(a) (“Whoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor, subject to the conditions and requirements of this title.”)

7. 35 U.S.C. § 101.

8. 35 U.S.C. § 102.

9. 35 U.S.C. § 103.

10. See 15 U.S.C. § 1125(a).

11. U.S. Trademark Registration No. 743,572, registered Jan. 8, 1963.

12. U.S. Trademark Registration No. 1,292,557, registered Aug. 28, 1984.

13. U.S. Trademark Registration No. 1,126,102, registered Oct. 16, 1979.

14. See, e.g., U.S. Trademark Registration No. 4,568,939, registered July 15, 2014.

15. U.S. Trademark Registration No. 1,017,161, registered July 29, 1975.

16. U.S. Trademark Registration No. 4,676,898, registered Jan. 20, 2015.

17. U.S. Trademark Registration No. 3,034,331, registered Dec. 27, 2005.

18. See 35 U.S.C. § 271.

19. See Gene Quinn, The Cost of Obtaining a Patent in the US, IPWATCHDOG.COM, Apr. 4, 2015, https://www.ipwatchdog.com/2015/04/04/the-cost-of-obtaining-a-patent-in-the-us/id=56485/.

20. 35 U.S.C. § 102 (“A person shall be entitled to a patent unless . . . (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States . . . .”).

21. See, e.g., European Patent Guide § 3.3.001 (discussing the principle of “absolute novelty”), available at https://www.epo.org/applying/european/Guide-for-applicants/html/e/ga_c3_3_1.html.

22. See U.S. Constitution, Art. I, Sec. 8, Cl. 8 (“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries . . . .”).

23. See 18 U.S.C. § 1836; Idaho Code § 48-801.

24. Elon Musk, All Our Patent Are Belong to You, TESLA, June 12, 2014, https://www.tesla.com/blog/all-our-patent-are-belong-you (promising that “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology”). “Acting in good faith” involves certain requirements, such as not asserting patents or other intellectual property rights against Tesla, not challenging any Tesla patent, and not knocking-off Tesla products. Patent Pledge, TESLA, last updated Nov. 7, 20214, https://www.tesla.com/legal/additional-resources#patent-pledge.

25. 35 U.S.C. § 154(a)(2) (“Subject to the payment of fees under this title, such grant shall be for a term beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed in the United States or, if the application contains a specific reference to an earlier filed application or applications . . . from the date on which the earliest such application was filed.”).

26. Patents Data, at a Glance August 2021, UNITED STATES PATENT AND TRADEMARK OFFICE, Aug. 2021, https://www.uspto.gov/dashboard/patents/ (listing “traditional total pendency” as 23.2 months).

27. USPTO’s Prioritized Patent Examination Program, USPTO, last visited Oct. 10, 2021, https://www.uspto.gov/ patents/initiatives/usptos-prioritized-patent-examination-program.

28. The terms “trademarks” is used generally in this article and includes all types of “marks” used in trade, including service marks, trade dress, collective marks, etc.

29. Possible Grounds for Refusal of a Mark, USPTO, last visited Oct. 10, 2021, https://www.uspto.gov/trademarks/ additional-guidance-and-resources/possible-grounds-refusal-mark.

30. TRADEMARK MANUAL OF EXAMINING PROCEDURE § 1209.01(c).

31. Trademark Applications – Intent-to-Use (ITU) Basis, USPTO, last visited Oct. 10, 2021, https://www.uspto.gov/ trademarks/apply/intent-use-itu-applications.

Ann-Marie Fulfer

Idaho State Bar President

First and Second Districts

Published January 2022

If I concentrate, I can still hear my father’s rich voice in his “neutral” American accent, which he had developed to replace the “M’waukee” accent of his youth.

Earl came from a working-class background in Milwaukee, Wisconsin. After he lived in the city orphanage from the ages of six to 12, his mother brought him and his brother home so they could work and help with household expenses.

When I was young, Dad and I would often sit together, chatting or reading. He introduced me to J.R.R. Tolkien when I was 11, and the magic I still feel when I read Lord of the Rings is inextricably tied to my memories of him. He was a gifted storyteller and child entertainer. Occasionally, when he and I were alone together, he would say, “You are bright, and with hard work, you can be anything you want to be.”

I love and miss my dad, and I still appreciate his supportive pronouncement. But his statement lacks both a definition of “hard work” as well as an acknowledgement of how becoming “anything you want to be” requires a support system that includes guidance. Without mentors, how do we know what to do and when to do it as we work toward achieving our goals and success (being what we want to be)? I think that just as we each define what our goals are and what success is, we also define what hard work is for ourselves. For me, it is giving my best effort at completing a task or tasks even (or perhaps especially) when I want to do something else – like re-read Tolkien.

When Dad was young, he discovered the choir at the Episcopal church; he loved singing and had a beautiful voice. It was at the church that he met a man who would become his mentor and would guide him through his teen years, encourage him to complete high school, and assist him in applying to the University of Wisconsin. For Dad, hard work was the time he dedicated to his studies as well as his actual jobs earning money. And one of his big successes was being the first college graduate in his family. Dad would spend the rest of his life committed to assisting people entering unfamiliar spaces through his mentorship as well as financial support.

Like almost anyone starting a new venture in an unfamiliar space, most law students need advice, mentoring, and experience to get them from day one of Law School to Attorney. For many years I have worked with law students. I love what I do and have met so many wonderful people who have taught me a lot through our conversations, and I hope I have returned the favor. But students also need real world exposure to the practice of law.  If a law student reaches out to you, take a minute to respond. Set up a phone call or a Zoom call and talk to them. If you have a pro bono case, think about whether you could have a student conduct research or write a memo for you.

If you do not already have a pro bono case but would like to donate your time to a low-income client, the Idaho Volunteer Lawyers Program (IVLP) matches volunteer attorneys with eligible applicants, provides malpractice insurance, offers training, and so much more. You can find more information on the Idaho State Bar’s website. IVLP will also work with you and the College of Law if you want to assign work to a law student for your pro bono case.

If you would like to mentor a student and help them learn necessary skills that lawyers should possess (e.g., effective communication, office management, problem solving, money matters), you can seek out the student members of your Practice Section or reach out to the College of Law where we have recently started a mentorship program that offers structure to the mentorship process.

As lawyers, we are bright and generally lead full, busy lives at work and at home, but if we can carve out time to mentor law students, or even take a few to lunch, we can maybe help them succeed in being who they want to be.

Before I close, I want to give a shout out to the Access to Justice Idaho Campaign, which raises supplemental funds to support three state-wide organizations that provide pro bono legal services to low-income, vulnerable Idahoans: IVLP, Idaho Legal Aid Services, and DisAbility Rights Idaho. If you have the means, please consider giving to this organization. You can do so online at www.isb.idaho.gov/AccesstoJustice.

I also want to thank the dynamic people with whom I have been sharing time in-person and via Zoom during my time as an Idaho State Bar Commissioner: current commissioners, Kurt Holzer, Kristin Bjorkman Dunn, Laird Stone, and Gary Cooper; past commissioners, Judge Mike Oths, David Kerrick, and Don Carey; and ISB staff Diane Minnich, Brad Andrews, Julia Crossland, Caralee Lambert, Maureen Braley, Teresa Baker, and Lindsey Welfley.

If you are from the First District or the Fourth District and are interested in serving as a commissioner, look out for the notice of elections in March. Nomination forms will be due on the first Tuesday of April.

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Matthew D. Purcell

Published January 2022

Everything is bigger in America and, it appears, its companies are no different. Following an unprecedented reduction in federal antitrust charges against corporations and individuals during the Trump Administration, the Biden Administration is ready to increase enforcement of federal antitrust laws against large corporations and individuals it views as engaging in anticompetitive practices in the marketplace.¹  This article will give a brief history of antitrust laws and the current statutory landscape. The article will then focus on the enforcement issues that plague this area of law and what this author believes we can expect from the Biden Administration.

Historical and current statutory landscape

Antitrust laws were initially enacted in the United States at a federal and state level in the late 1800’s and early 1900’s to counteract what many believed to be unfair business practices by large corporate monopolies and trusts. Since the initial introduction of antitrust legislation, federal and state antitrust laws have expanded to prohibit businesses from engaging in a wide range of anticompetitive activities, including (1) price-fixing schemes, (2) anticompetitive mergers, acquisitions, and joint ventures, (3) unfair and anticompetitive distribution models, and (4) other activities and transactions intended to achieve a monopoly. In summary, antitrust laws are intended to encourage competition in the marketplace and to discourage anticompetitive behaviors.

Principally, the federal antitrust laws in effect today are (1) the Sherman Act, including Section 1 which prohibits agreements that unreasonably restrain trade and Section 2 which prohibits monopolization, attempts to monopolize or conspiracies to monopolize ² (2) the Clayton Act, which, among other things, prohibits price discrimination, exclusive dealing or tying arrangements, and mergers and acquisitions that may substantially lessen competition,³ and (3) the FTC Act, which, in an attempt to bolster the Sherman Act, prohibits unfair methods of competition or deceptive acts or practices.⁴ In addition to the foregoing federal antitrust laws, there are state antitrust laws similar in scope to the federal laws, but they are not always identical, including those related to the enforcement of non-competition agreements between employers and employees.⁵

Enforcement issues

Enforcement of federal antitrust laws is largely the responsibility of the Antitrust Division of the Department of Justice and the Federal Trade Commission. However, just as federal antitrust laws are a patchwork of legislation, so is the enforcement. For example, a violation of Section 1 of the Sherman Act is subject to civil enforcement by the Department of Justice and the Federal Trade Commission.⁶ The DOJ may also bring criminal charges for Section 1 violations. In addition to the federal agency enforcement, violations of Section 1 can give rise to court actions for damages brought by private plaintiffs and state attorneys general on behalf of their residents.⁷

Federal enforcement of Section 2 of the Sherman Act is the same, except the DOJ does not generally prosecute violations of Section 2 criminally.⁸ Meanwhile, violations of the Clayton Act do not carry any criminal liability but do provide for civil penalties and may be enforced by private parties, the DOJ and the FTC.⁹ Predictably, the FTC Act is enforceable by the FTC, but it is not enforceable by private parties.¹⁰

Such a hodgepodge of federal antitrust laws—to say nothing of state antitrust laws—and the various means of enforcing those laws, results in a difficult and complex legal landscape of differing interpretations, policies, enforcement, and defenses. As one might imagine, due to this complexity and lack of uniformity, enforcement of antitrust laws lacks consistency and is prone to political pressures, societal and community viewpoints, and contemporary economic considerations.

“Such a hodgepodge of federal antitrust laws […] and the various means of enforcing those laws, results in a difficult and complex legal landscape of differing interpretations, policies, enforcement, and defenses.”

One area of particular enforcement concern is with regards to Hart-Scott-Rodino (HSR) filings.¹¹ The HSR Act (which amends the Clayton Act) established a federal premerger notification program which requires parties to report large mergers and acquisitions to the FTC and DOJ prior to closing the transaction.¹² Following the pre-closing filing, the parties to the transaction must wait for a specified period (typically, 30 days for the initial waiting period) which allows the agencies to review the proposed transaction to determine if the proposed transaction is likely to substantially harm competition.¹³ Following the waiting period, and assuming that the FTC and DOJ have not taken further action, the parties may close the transaction—albeit with the caveat that the agencies may always take a retroactive look back if necessary.¹⁴

In the event that the FTC and DOJ need more time to evaluate the proposed transaction, they can make a second request—thereby extending the waiting period and launching a more in-depth investigation.¹⁵ Regardless of whether the parties are subject only to the initial waiting period or whether they are subject to the second request, once that waiting period expires and the agencies have taken no action, it is largely accepted that the parties may consummate the transaction with very little risk that the FTC and DOJ will come back to further scrutinize, or perhaps even un-wind, the transaction.¹⁶

On August 3, 2021, the FTC announced that due to “a tidal wave of merger filings that is straining the agency’s capacity to rigorously investigate deals ahead of the statutory deadlines”, it is unlikely that the FTC will be able to fully investigate deals within the standard 30 day waiting period.¹⁷ As such, investigations that are not completed in the 30 day waiting period “remain open and ongoing” and parties that choose to proceed with closing transactions that have not been fully investigated do so at their own risk.¹⁸

In one sense, there is nothing new in this announcement as the FTC has always retained the right to determine if a merger is unlawful even after a pre-merger review has been completed. However, the proactive announcement combined with President Biden’s recent Executive Order on Promoting Competition in the American Economy (which expressly states that it is the Biden Administration’s policy to provide greater scrutiny of mergers and acquisitions even after the transactions have closed), should give parties to large transactions pause, particularly in the industries identified in the Executive Order as the focus of the administration’s antitrust enforcement efforts.¹⁹ Parties to large transactions should allocate risk in their transaction documents regarding HSR filings and the possibility of pre-closing or post-closing enforcement actions by the FTC.

The FTC and DOJ may seek to further amend their current HSR guidelines. The FTC and DOJ recently announced that “current guidelines deserve a hard look to determine whether they are overly permissive” and that the antitrust enforcers planned “to jointly launch a review of our merger guidelines with the goal of updating them to reflect a rigorous approach consistent with applicable law.”²⁰ We should expect further changes soon.

Executive Order on Promoting Competition in the American Economy

On July 9, 2021, President Biden signed an Executive Order on Promoting Competition in the American Economy.²¹ The primary focus of the Executive Order is to encourage and empower federal agencies to scrutinize large corporations across multiple sectors of the U.S. economy to curb anticompetitive activities. It adopts a “whole of government competition policy” to what has historically been a fragmented patchwork of laws, agency oversight, and enforcement^.22 In short, the Biden Administration wants to change the way the federal government approaches competition issues.²³

The rationale from the Biden Administration in issuing the Executive Order is the belief that (1) too few companies control too much of their respective markets, i.e., “Big is Bad,” (2) prices have increased too much, too fast, (3) barriers to competition are driving down wages for workers, and (4) innovation is stagnating. ²⁴ Certainly, arguments can be made that other factors besides the lack of enforcement of federal antitrust laws have contributed to these results. However, it is well-known that many industries have seen rapid consolidation of competition in recent years.

We need to look no further than the technology sector which has drastically consolidated since the beginning of the 21^st century. But it is not just the technology sector that has seen massive consolidation. For example, in the agricultural seed market, just four companies: (i) Bayer (which acquired Monsanto in 2018), (ii) Corteva (created through the merger of Dow and DuPont in 2017), (iii) Chem China (which acquired Syngenta in 2017), and (iv) BASF, control more than 60% of global proprietary seed sales—a fact which the accompanying Fact Sheet to the Executive Order highlights.²⁵

While hyper partisanship is en vogue in the United States, the Executive Order and enhanced antitrust enforcement is a rarity in that it largely enjoys bipartisan support, ²⁶ particularly when it comes to the colloquial terms of “Big Tech” (Facebook, Apple, Google, Microsoft, and Amazon) and “Big Ag.” Republicans often view the former, Big Tech, as having a unique ability to censor freedom of speech rights while viewing the latter, Big Ag, as having a detrimental effect on family-run farms, a sanctum sanctorum for conservatives and liberals alike.

The bipartisan support for further antitrust legislation and increased enforcement from both Democratic and Republican politicians is even enjoyed by many members of the judiciary and federal agencies. Current U.S. Attorney General, Merrick Garland, recently stated: “The Supreme Court has repeatedly referred to the antitrust laws as the charter of American economic liberty, and I deeply believe that.”²⁷ The position that a competitive marketplace is critical to our form of government is echoed in the opening lines of the Executive Order: “A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers.”²⁸

The Executive Order creates 72 initiatives to address economic competition problems and specifically calls out—it appears in terms of priority—the following industries as the focus of the administration’s antitrust enforcement efforts: (1) technology, (2) agriculture, (3) healthcare, (4) banking and financial institutions, and (5) transportation.²⁹

Next steps for the Biden Administration

Based on the content of the Executive Order and the early actions of the Biden Administration, we should expect to see the following five developments over the next several years.

First, there will be an increase of antitrust enforcement charges filed by the FTC and DOJ against corporations and individuals during the Biden Administration. These charges are likely to be widespread across industries and federal and state antitrust laws, but should be particularly expected in the technology, agriculture, healthcare, banking and financial institutions, and transportation industries.

Second, in addition to enforcement actions by the FTC and DOJ, there will be an increase of federal and state investigations into the practices of large corporations, particularly in the Big Tech and Big Ag industries, which will likely result in increased class action litigation.

Third, there will be continued political pressure from both the left and the right on the Big Tech and Big Ag industries to stop further consolidation, and perhaps, to break-up the limited market participants. We have already seen the pressure increasing with a steady scrutiny from federal and state agencies, legislators, academics, trade organizations, interest groups, and grass roots organizations. This pressure even comes from unlikely sources, such as Yale Law School sponsoring a “Big Ag and Antitrust” conference in 2020.³⁰ Its purpose and underlying position are succinctly stated in the opening sentence of the conference guide: “Since the mid-20^th century, a handful of corporations have grown to dominate America’s farm and food sectors” and the conference aims “to explore the role of antitrust and competition policy in creating America’s food system and its potential for improving it.”³¹ Anticompetitive behaviors in Big Tech and Big Ag are in the crosshairs. Market participants have been warned.

Fourth, there will be increased scrutiny of previously completed, or soon-to-be-completed, mergers and acquisitions and a potential unwinding of large transactions that have anticompetitive results. In July 2021, the $30 billion merger of insurance brokers Aon Plc and Willis Towers Watson Plc was terminated following the DOJ’s lawsuit seeking to block the merger.³² This was the first major victory—and a very aggressive step—of the Biden Administration’s new antitrust enforcement policy. The action and end result, with Aon paying Willis a $1 billion break-up fee, was surprising considering that European regulators had recently approved the proposed merger (with qualifications)—and European regulators have typically taken a more stringent approach to antitrust enforcement^.33 The position of the Biden Administration on the Aon-Willis proposed merger should not be viewed as an isolated event. We should expect the Biden Administration to continue with its aggressive enforcement of antitrust laws to restructure the economy.³⁴

Fifth, the Executive Order took direct aim at employer non-competition agreements and burdensome occupational licensing requirements intended to restrict competition.³⁵ We should expect to see state legislatures (and court systems) further evaluate current laws and turn towards viewing overly restrictive non-competition agreements and occupational licensing requirements as inhibiting competition and restricting mobility in the labor markets. Unfettered employer-driven labor barriers or profession-driven occupational barriers are no longer du jour.

Conclusion

Our clients depend on us to identify legal issues and risks and to advise them accordingly. Both in-house and outside counsel should expend the time and resources necessary to educate their clients on antitrust risks and how to avoid anticompetitive behaviors and actions. These training opportunities should be a deep dive into what business activities may give rise to potential antitrust investigations and enforcement, such as relevant market share, supply and distribution agreements, strategic relationships and collaborations, and non-competition or exclusionary agreements.

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Endnotes

1. There were 274 charges filed against corporations and individuals in the last four years of the Obama Administration (2013-2016). There were less than half of that number (129) of charges filed against corporations and individuals in the four years of the Trump Administration (2017-2020). See “Antitrust Division Workload Statistics FY 2010-2019” available at https://www.https://www.justice.gov/atr/file/788426/download.

2. Sherman Antitrust Act of 1890, 15 U.S.C. §§1-7.

3. Clayton Antitrust Act of 1914, 15 U.S.C. §§12-27.

4. Federal Trade Commission Act of 1914, 15 U.S.C. §§41-58.

5. Exec. Order No. 14,036.

6. Sherman Act 15 U.S.C. §§1-7

7. Id.

8. Id.

9. Clayton Act 15 U.S.C. §§12-27

10. Federal Trade Commission Act of 1914, 15 U.S.C. §§41-58

11. Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. §§18a.

12. https://www.ftc.gov/enforcement/premerger-notification-program

13. Id.

14. Id.

15. Id.

16. Id.

17. Vedova, Holly, “Adjusting Merger Review To Deal With The Surge In Merger Filings,” Aug. 3, 2021, available at https://www.ftc.gov/news-events/blogs/competition-matters/2021/08/adjusting-merger-review-deal-surge-merger-filings

18. Id.

19. Exec. Order No. 14,036 86 FR 36987, available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/

20. Statement of FTC Chair Lina Khan and Antitrust Division Acting Assistant Attorney General Richard A. Powers on Competition Executive Order’s Call to Consider Revisions to Merger Guidelines (July 9, 2021), https://www.ftc.gov/news-events/press-releases/2021/07/statement-ftc-chair-lina-khan-antitrust-division-acting-assistant.

21. Exec. Order No. 14,036.

22. Id. at Section 2.

23. Id. at Section 4. The Executive Order establishes a White House Competition Council within the Executive Office of the President. The Council will be led by the Assistant to the President for Economic Policy and Director of the National Economic Council consist of many cabinet-level members. The Council is responsible, among other things, for coordinating, promoting, and advancing federal government efforts to enforce antitrust laws.

24. Fact Sheet: Executive Order on Promoting Competition in the American Economy dated July 9, 2021 available at https://www.https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

25. “The Sobering Details Behind the Latest Seed Monopoly Chart” by Kristina Kiki Hubbard dated January 11, 2019 available at https://civileats.com/2019/01/11/the-sobering-details-behind-the-latest-seed-monopoly-chart/

26. “Lawmakers unveil major bipartisan antitrust reforms that could reshape Amazon, Apple, Facebook and Google” dated June 11, 2021 by Lauren Feiner at CNBC available at: https://www.cnbc.com/2021/06/11/amazon-apple-facebook-and-google-targeted-in-bipartisan-antitrust-reform-bills.html

27. “Under Garland, DOJ Takes Harder Line on Antitrust” by John D. McKinnon and Aruna Viswanatha, Wall Street Journal, Tuesday, July 27, 2021 on page A6.

28. Exec. Order No. 14,036, Section 1.

29. Fact Sheet: Executive Order on Promoting Competition in the American Economy dated July 9, 2021 available at https://www.https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

30. Big Ag & Antitrust: Competition Policy for a Sustainable and Humane Food System, dated January 16, 2021 available at https://law.yale.edu/animals/events/big-ag-antitrust-conference

31. Id.

32. “Aon, Willis halt $30 billion merger over monopoly concerns, delay” by Alwyn Scott and Sohini Podder, Reuters, July 26, 2021, available at https://www.reuters.com/business/finance/aon-willis-towers-watson-call-off-30-bln-merger-2021-07-26/

33. Id.

34. “Under Garland, DOJ Takes Harder Line on Antitrust” by John D. McKinnon and Aruna Viswanatha, Wall Street Journal, Tuesday, July 27, 2021 on page A6.

35. Exec. Order No. 14,036.