The Department of Justice backed off no-poach challenges in franchise agreements in 2019, but the state doubled down. The result? Washington state challenged a raft of no-poach/no-hire provisions in 225 franchise systems, resulting in agreements requiring franchisors to agree not to enforce the offending provisions not just in Washington but nationwide. On April 28, 2020
Renewed Efforts to End No Poaching Provisions
Franchisors need to review their franchise agreements and take immediate action in response to the recent onslaught of legal action over “naked no poaching” provisions in franchise agreements.
In a typical franchise agreement, a franchisor will prohibit a franchisee from poaching its or its other franchisees’ employees during…
Contributed by Ted Jobes, Chair of Fox Rothschild’s Anti-Trust Practice Group
Updating policies that had been on the books for more than two decades, the U.S. Department of Justice and the Federal Trade Commission has issued new Antitrust Guidelines for the Licensing of Intellectual Property that replace guidelines issued by the same agencies in April 1995. Such guidelines state the antitrust enforcement policy of the agencies relating to the licensing of intellectual property protected by patent, copyright and trade secret law, and of know-how. They do not cover the antitrust treatment of trademarks.
These modernized guidelines will be fundamental to the agencies’ review and analysis of the licensing of intellectual property rights and provide guidance to businesses and the public about the agencies’ enforcement approach to intellectual property licensing. The agencies had announced the proposed update of the guidelines and made a draft available for public comment in August 2016. During a 45-day comment period, the agencies received comments from academics, industry, law associations and nonprofit organizations. After considering the comments, the agencies have revised and promulgated the Guidelines.
The 2017 guidelines embody three general principles for the purpose of antitrust analysis, stating that the agencies:
- Apply the same analysis to conduct involving intellectual property as to conduct involving other forms of property, taking into account the specific characteristics of a particular property right;
- Do not presume that intellectual property creates market power in the antitrust context; and
- Recognize that intellectual property licensing allows businesses to combine complementary factors of production and is generally procompetitive.
The guidelines contain a number of substantive changes which reflect changes in the law since the 1995 guidelines were issued. In particular, they reflect a number of significant changes in statutory and case law, and intervening changes in enforcement and policy work, including the 2010 Horizontal Merger Guidelines promulgated by the Department of Justice and the Federal Trade Commission. Among other changes, the 2017 guidelines revise the treatment of resale price maintenance provisions in intellectual property licensing agreements, include updates concerning market definitions and market power, and contain changes relating to situations where an intellectual property license or transfer will be treated as a merger.