ACI FOUNDATION STRATEGIC DEVELOPMENT COUNCIL (SDC)
ANTITRUST AND INTELLECTUAL PROPERTY
COMPLIANCE POLICY AND GUIDELINES
May 21, 2002 (Adopted)
Free and open competition results in the most efficient allocation of goods to the greatest number of people at the lowest cost. In connection with this philosophy, the antitrust laws were enacted in order to ensure that vigorous competition exists in the American economy. Accordingly, it is in the interest of the SDC and all its Members that strict compliance with the antitrust laws be maintained at all times.
The Justice Department and private litigants are paying increasing attention to the activities of associations and their members. The SDC performs valuable and legitimate functions in encouraging research and development relating to concrete. Because it brings together competitors in several industries, the SDC’s activities also carry inherent antitrust risk. To minimize this risk, SDC Members, Member representatives and consortia must strictly adhere to the following antitrust guidelines.
Sections 1 and 2 of the Sherman Act, and similar provisions of state law, are the basic antitrust laws. The federal antitrust laws are enforced by the Department of Justice, and state laws are enforced by state attorneys general. Violations are felonies, and penalties for violations can be severe, with fines of up to $10 million for corporations and up to $350,000 for individuals, along with mandatory prison terms.
Under the Federal Trade Commission Act, the FTC can obtain civil penalties for anti-competitive conduct. Private individuals or corporations injured by antitrust violations may file lawsuits and recover treble damages, injunctions, and attorney fees.
Many activities of trade and professional associations promote competition, consumer welfare, and the public interest. Association activities that do not have the purpose or effect of limiting competition with or among members or in the broader marketplace are generally lawful. Associations, however, can run into antitrust problems in these general areas relevant to the SDC:
Any agreement or understanding between competitors that fixes or stabilizes prices, price ranges or the methods for setting prices, limits output, divides markets or allocates customers is illegal “per se.” These classic “horizontal” agreements are illegal whether or not they have any actual effect on competition. Unlawful collusion does not require a signed agreement or even the words “I agree.” It can be inferred from evidence that competitors exchanged information on prices, costs, customers, markets or market shares. Even social activities and informal gatherings in connection with association meetings have been used to show an “opportunity” to conspire.
Association members have been sued for agreeing not to do business with certain customers or suppliers and for attempting to block a competitor from access to a market. Unfair or biased standards-setting activities have been challenged as group boycotts.
Associations may limit membership to companies or organizations that have a functional relationship to business of the association, i.e., in the case of the SDC, membership may be limited to organizations involved in the concrete industry. Associations may set membership requirements in other respects but cannot legally deny membership where it may be essential to a company’s ability to compete in a market. In such instances, the association may have to show strong reasons and fair procedures for expelling a member, excluding an applicant from membership, or barring nonmembers from participating in programs. Similarly, there may be instances where non-members are entitled to have access to the benefits of membership (on paying a reasonable fee) if denial of such benefits would adversely affect the non-member’s ability to compete.
Standards can enhance safety and promote product uniformity. Standards that restrict entry into the industry, inhibit innovation, or limit the ability of industry members to compete, can run afoul of antitrust prohibitions. Thus, any standards developed or promoted by an association must be supported by legitimate reasons for excluding any product, process or technology, and such exclusions must be limited to those necessary to accomplish the purpose of the standard. As a general matter, performance standards are preferred over specific standards.
Generally, antitrust law permits an association to disseminate composite data regarding past transactions. However, the exchange of current or proposed prices, or the exchange of information regarding future production projections is generally prohibited.
All Members, Member representatives and other Participants must be vigilant when it comes to antitrust violations. The actions of some association members may be attributed to others who may not have participated in illegal discussions or activities. Members have been sued for knowing of questionable activity but not actively objecting to it. Associations have been sued for members’ unauthorized anti-competitive actions.
In America’s free-enterprise economic system, businesses compete with each other not only on price but also by differentiating their products in ways they hope will appeal to customers. Research and development is an important part of competitors’ efforts to improve and differentiate their products. Participants in consortia formed as a result of SDC activities may pool their research efforts, which may have the effect of limiting competition on research and development. This potential restriction of competition is generally permissible.
In some cases, one or more of the participants in a consortium will license intellectual property to the consortium or the other participants, or will agree to supply goods or services to the consortium or each other. Where a business contracts to provide goods, services, or intellectual property to its competitor, the antitrust laws view this transaction as fundamentally “vertical.” This means that any “ancillary” agreement between the parties not to compete is judged under the “rule of reason” rather than the “per se” rule, provided two important qualifications are satisfied:
Any such agreement not to compete must be closely related to subject matter of the supply agreement or license. If the agreement not to compete goes beyond this scope, it will be viewed as a “per se” unlawful horizontal market division.
The competitors may not agree on the prices either of them will charge any customer because even vertical agreements on resale prices are generally unlawful.
Consortia formed through SDC activities will have the maximum available protection from antitrust liability if they are organized as “legitimate” joint ventures. This is because the antitrust laws view a true joint venture as a single business entity that is incapable of conspiring with itself. The formation of a legitimate joint venture is viewed as a partial merger, and is judged under the rule of reason.
“Legitimate” Joint Ventures1. To be “legitimate,” a joint venture must:
The partners in a legitimate joint venture may agree not to compete with each other or with the venture, so long as the restrictions are:
Importantly, and unlike a license or supply agreement, the parties to a legitimate joint venture may also agree on the prices to be charged by the venture.
Where a joint venture among competitors is not “legitimate,” any agreement by the partners on prices or customers is unlawful “per se.” Likewise, any restriction on competition that extends beyond the scope of the joint venture is unlawful “per se.”
A joint venture may be registered with the Department of Justice and FTC under the National Cooperative Research and Production Act within 90 days of the formation or change in the membership or purposes of a joint venture. A short notice of the registration is published in the Federal Register. Registration does not immunize a consortium from liability but reduces potential liability to single damages (instead of the triple damages normally available in antitrust prosecutions) under both the federal and the state antitrust laws for activities properly within the scope of the joint venture.
In general, the partners in a joint venture are free to decide who to allow to join, and the owner of a patent or trade secret is free to license it to others or deny a license as it sees fit. However, if membership in the consortium or a license to use the technology it develops is a practical necessity to allow a company to compete in a market, the partners may be obligated to allow access to the venture or to license its technology on reasonable terms. Counsel should be consulted on this or other issues as they may arise.
This Policy is designed to help the SDC, the consortia, and their Participants steer a judicious course to avoid antitrust problems. Therefore, it does not attempt to delineate the outer boundaries of conduct that may be lawful and does not constitute a concession that the instructions it contains are necessarily required by law.
A qualified lawyer who is familiar with all SDC activities should attend all meetings and review all agendas and minutes.
Agendas and minutes should be prepared for all meetings of the SDC, its committees, and the governing body of each consortium. Counsel should review the minutes before publication.
Meeting agendas should be followed to avoid discussions that might raise antitrust concerns.
When attending meetings of the SDC or the consortia, whether formal or informal, it is imperative that Participants and Participant representatives:
If a Participant feels discussion at any meeting is improper, the Participant should state his or her objection to the lawyer in attendance. If any questionable discussion takes place at a meeting when counsel is not present, the Participant should state his objection and make it known to the lawyer as soon as possible.
Consortia Participants shall not enter into any agreement or engage in any other conduct restricting, requiring, or otherwise involving the production or marketing by any Participant of any product, process, or service, other than the production or marketing of proprietary information developed through the consortia, such as patents and trade secrets.
Consortia Participants shall not enter into any agreement or engage in any other conduct to restrict or require the sale, licensing, or sharing of inventions or developments not developed through the consortia.
Consortia Participants shall not restrict or require participation by a Participant in any other research and development activities that are not reasonably required to prevent misappropriation of proprietary information contributed by a party to the consortia or the results of the consortia.
Where practicable, the SDC and each consortium should be registered with the Department of Justice and Federal Trade Commission under the National Cooperative Research and Production Act within 90 days of its formation or any change in its membership or purposes.
Counsel should be consulted before any action is taken to deny membership or expel a Participant from the SDC or any consortium.
Counsel knowledgeable about intellectual property and antitrust issues should be consulted when a consortium develops new technology or is approached by a third party about gaining access to the consortium or its technology.
Each Participant shall execute, and each decision-maker associated with a Consortium shall execute, an SDC-approved Participant Certificate indicating that the Participant/decision-maker has read the ACI Foundation SDC Antitrust Compliance Policy (this document). Prior to conduct of any Consortium meeting, an SDC-approved “Condensed Statement of Antitrust Compliance” be read to the attendees of the meeting and the reading will be noted in the minutes of that meeting.
In carrying out their activities, SDC consortia may develop technology that would warrant intellectual property protection. Further, SDC consortia may be required to evaluate technology covered by intellectual property rights of a consortia Participant or a third party. It is appropriate for consortia Participants to define their rights and obligations with respect to ownership of intellectual property resulting from the consortia activity. Consortia Participants should also address issues relating to the evaluation of technology owned by others.
Since SDC consortia activity could result in the development of work product for which intellectual property protection may be available, it is advisable that the Participants enter into agreements governing the rights and ownership in the work product at the inception of each consortium. Further, because consortia Participants may have their own intellectual property rights, it is recommended that they disclose any pre-existing rights to avoid conflict with work that develops through the consortia activities. Thus, Participants should obtain acknowledgments that these pre-existing rights are not subject to claims of ownership or use by the other consortia Participants. An added benefit of the disclosure is to decrease the likelihood that consortia Participants will inadvertently endorse a particular Participant’s technology, which may subject them to claims from competitors. SDC consortia should also include disclaimers of liability in work product so as to protect SDC and the consortia from claims resulting from any misuse of the consortia work product or claims that the work product may infringe the rights of a third party.
At the inception of their participation in a consortium, SDC consortia Participants should disclose any pre-existing intellectual property rights they own or which may be in process relating to the technology to be evaluated by the consortia. Other Participants, as appropriate, should provide acknowledgments that these pre-existing rights are not subject to claims of ownership or use by them.
At the inception of their participation in a consortium, SDC consortia Participants should enter into a written agreement governing the ownership and use of any technology resulting from consortia activities. The agreement could grant ownership and use to a single Participant, all Participants, or dedicate the work product to the public without any claim of ownership.
SDC consortia work product such as papers, articles, and software shall include an appropriate disclaimer limiting SDC’s liability resulting from the use of the work product.
Each consortium will grant SDC (and/or ACI) the right to reproduce the work product in any form including print, electronic products, databases, and audio-visual products so as to allow dissemination of the SDC work product.
If a consortium references the intellectual property rights of a third party, appropriate permission shall be obtained from the third party in order to reproduce the material in the SDC work.
No Consortia Participant shall use the name of ACI Foundation, American Concrete Institute (“ACI”), or the Strategic Development Council (“SDC”) in any form of publicity without first obtaining written permission from Managing Director of SDC.