Package Patent Licensing After Microsoft

Conversely, patent bundling also provides significant pro-competitive efficiencies that may justify its existence. The bundled license is thought to be efficient because of the savings in distribution, marketing and consumer transaction costs, including economies of scale and the ability to price discriminate. See, e.g., Microsoft, 253 F.3d at 87. In addition, when two components are used together in a system, a tying arrangement can provide quality assurance. The tie-in allows the monopolist in one product to ensure that lower quality versions of another product do not lower the first product's performance. Robert Bork, The Antitrust Paradox 375-401 (1978).

Coupled with these pro-competitive efficiencies is the economic theory that patent bundling cannot extract more than a single monopoly rent. See Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1019-20 (7th Cir. 2002) (stating that any 'monopoly power in the tied-product market comes at the expense of losing it in the tying-product market'); Bork, id. at 373-75 ('The tying arrangement, whatever else it may accomplish, is obviously not a means of gaining two monopoly profits from a single monopoly.'); Roger D. Blair & David Kaserman, Antitrust Economics 403 (1985) ('A seller cannot get two monopoly profits from one monopoly.'). In other words, a monopolist cannot gain any extra competitive profits from tying a monopolized product to a product in a competitive market. This position, espoused by the 'Chicago School' of law and economics theorists, reasons that a rational monopolist would only tie products if there were some pro-competitive advantage to doing so. Whatever a particular monopolist's motivations, the Chicago School theory concludes: 'suppression of competition is the one function not accomplished by ' [tying] arrangements.' Bork, id. at 365.

Because of this uncertainty of true anti-competitive effects and the existence of reasonably certain pro-competitive efficiencies, the law surrounding patent bundling has been moving away from the per se liability and toward a 'rule of reason' test. See, e.g., Jefferson Parish, 466 U.S. at 33-38 (O'Connor, J., concurring) (arguing the rule of reason should replace the per se rule as the dominant legal antitrust test for tying arrangements). The rule of reason test is market based and requires a showing of actual anti-competitive effects that outweigh any pro-competitive benefits of the licensing practice.

Legal Doctrines Surrounding Patent Bundling Have Developed in Tandem

The patent misuse doctrine and antitrust laws govern the legality of package licenses. From the beginning, these legal doctrines have developed side by side into similar tests of liability. Evidence of this concurrent development comes from the Patent Misuse Reform Act (PMRA) of 1988 that exempts many patent licenses from a defense of patent misuse in response to an infringement action. 35 U.S.C. ' 271(d); see Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176, 201 (1980) (construing an earlier version of ' 271(d)). The exempt licenses have a patent (or patented product) as the tying product and a non-staple item as the tied product. (A non-staple item is a product with no substantial market apart from use with a patent, while a staple item has a market outside the patent.) See Scheiber, 293 F.3d at 1019-20 (stating that ' 271(d) covers tying and bundling and that a patent (as opposed to a patented product) may be the tying product). Therefore, since the inception of the PMRA, a potential infringer may only claim a patent misuse defense for tying or bundling arrangements where a patent (or patented product) is the tying product and a staple article is the tied product.

Courts have also construed ' 271(d) of the PMRA as eliminating antitrust claims relating to the refusal to license patents. See Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1187 (1st Cir. 1994) ('Section 271(d) clearly prevents an infringer from using a patent misuse defense when the patent owner has unilaterally refused a license, and may even herald the prohibition of all antitrust claims and counterclaims premised on a refusal to license a patent'); but see Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1215 (9th Cir. 1997) (arguing that ' 271(d) does not eliminate all antitrust claims for refusing to license a patent).

Further evidence of the parallel development of the patent misuse doctrine and related antitrust laws is their similar form of 'per se' liability. Historically, three elements were required: 1) the tying and the tied goods are separate products; 2) the availability of the tying item is conditioned on the licensing of the tied item(s); and 3) the licensor has the market power to coerce the licensee to accept the tie. See Microsoft, 253 F.3d at 85 (citing the elements for a per se antirust tying violation); Virginia Panel Corp. v. Mac Panel Co., 133 F.3d 860, 868-69 (Fed. Cir. 1997) (citing the elements for a per se patent misuse violation). The relevant antitrust doctrine, called the 'per se rule,' requires one additional element: 4) a substantial volume of commerce is impaired in the tied market. Jefferson Parish, 466 U.S. at 13. What is significant about this per se rule is that a package license could be rendered unenforceable absent any inquiry into the actual market effects of the license. Recently, the courts have been increasingly reluctant, however, to strike down package licenses under this per se rule under either a patent misuse or antitrust theory. Rather, these two doctrines have continued to develop together and have moved forward into the more modern rule of reason test.

The Early Per Se Rule is Fading in the Face of the Market-Based Rule of Reason

Although the per se rules of patent misuse and antitrust law are the traditional legal tests for tying claims, the rule of reason analysis is the emerging legal doctrine for judging the legality of package licenses. See, e.g., Microsoft, 253 F.3d at 94-95 (antitrust law); Virginia Panel, 133 F.3d at 869 (patent misuse); Department of Justice (DOJ)/Federal Trade Commission (FTC) Antitrust Enforcement Guidelines for the Licensing of Intellectual Property ' 3.4 (1995). The rule of reason asks what the likely anti-competitive effects of the package license are, and whether that licensing arrangement is reasonably necessary to achieve pro-competitive benefits that outweigh these anti-competitive effects. Microsoft, 253 F.3d at 95-96. By necessity, this rule requires careful scrutiny of the surrounding circumstances of each transaction and the resulting competitive effects on relevant markets.

Several relatively recent cases confirm the movement away from the per se test and toward the rule of reason with regard to patent misuse. In fact, two district courts have gone so far as to find that the rule of reason is the only appropriate test because ' 271(d)(5) of the PMRA eliminated per se patent misuse liability for patent licensing cases. Texas Instruments, Inc. v. Hyundai Electronics Indus., 49 F. Supp.2d 893, 909-12 (E.D. Tex. 1999); In re Recombinant DNA Tech. Patent and Contact Litig., 850 F. Supp. 769, 775 (S.D. Ind. 1994).

In Texas Instruments, the court cited legislative history of the PMRA and the language within ' 271(d)(5), where market power is analyzed 'in view of the circumstances,' as evidence strongly suggesting that a rule of reason and not a per se analysis applies in all patent licensing cases alleging patent misuse. Texas Instruments, 49 F. Supp.2d at 909-12. The court pointed to specific formal statements by members of the House and Senate that made it clear that ' 271(d)(5) was attempting to abolish the per se rule in patent licensing cases, and that showings of unreasonableness and anti-competitive effect would be required before misuse would be found. Id.

Moreover, in the most pivotal package license antitrust case in recent years, Microsoft, the D.C. Circuit refused to apply the per se rule in favor of the rule of reason. In that case, the court reasoned that markets for software platforms involve efficiencies never encountered in the case law, and noted that for these types of industries, the court does not have enough empirical evidence regarding the market effects of package licensing to call it a per se violation. Microsoft, 253 F.3d at 93-94; see also White Motor Co. v. United States, 372 U.S. 253, 263 (1963). The court's main concern was that many package licensing arrangements have 'very real' efficiencies that 'have been ignored in the calculations underlying the adoption of a per se rule for tying' and 'that these efficiencies are common in technologically dynamic markets where product development is especially unlikely to follow an easily foreseen linear pattern.' Microsoft, 253 F.3d at 94. With the existence of these efficiencies, the D.C. Circuit could not comfortably say that bundling had so little 'redeeming virtue' and 'that there would be so very little loss to society from its ban, that an inquiry into its costs in the individual case [could] be considered unnecessary.' Id. (citations omitted). Instead, by applying the rule of reason, the court is able to account for the possibility of significant pro-competitive benefits that may outweigh the anti-competitive effects of the licensing agreement. Id.; see also Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 411 U.S. 1, 16-24 (1979) (declining to apply a per se analysis to package arrangement that produced significant efficiencies).

Further, evidence of the emerging dominance of the rule of reason includes the DOJ/FTC policy to use it exclusively in their antitrust enforcement of package licenses. DOJ/FTC Antitrust Enforcement Guidelines for the Licensing of Intellectual Property ' 3.4 (1995). Given recent case law and DOJ/FTC policy in place, it seems very likely that courts will undergo a rule of reason analysis in cases involving emerging technologies. In this current technological economy, it is arguable that almost any patent bundle includes technology that will fall into this category. If, however, the industries and licensing practices involved have been well tested, then the court may still use the per se rule.

Per Se Violations Still Have Their Place

For example, in Virginia Panel, the Federal Circuit stated that the rule of reason should only be used if the practice is neither a per se violation nor a misuse specifically excluded by ' 271(d). Virginia Panel, 133 F.3d at 869. By implication, there may be certain practices, such as conditioning the purchase of a license on a separate staple good or extending the term of the patent with post-expiration royalties, that may still be considered per se violations. Id.; see also Scheiber, 293 F.3d at 1019-21 (condemning a patent bundle license requiring post-expiration royalties).

The reason for keeping the existing per se violations is that they have been extensively analyzed by the courts and have been conclusively determined to be anti-competitive. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 136 (1969); International Salt Co. v. United States, 332 U.S. 392, 395-96 (1947). In these limited situations, the courts have found the licensing practice to impose too great a restraint on the free market by impermissibly extending the grant of the patent monopoly. The character of the per se violation itself 'is considered a sufficient basis for presuming unreasonableness without the necessity of any analysis of the market context in which the arrangement may be found.' Jefferson Parish, 466 U.S. at 9, 16 n.25. Thus, it is irrelevant whether the licensing practice has significant pro-competitive efficiencies. See Scheiber, 293 F.3d at 1019-21 (arguing that although it may be irrational to condemn per se a patent license arrangement having royalties extending past the patent term, the courts are bound to follow Supreme Court precedent directly on-point).

But outside this narrowing field of circumstances where the per se rule may still apply, the existence of these significant pro-competitive efficiencies is the very policy rationale why the rule of reason will most likely dominate as the legal test for the vast majority of package licenses. As previously discussed, bundling results in significant efficiencies, including extensive savings in distribution and consumer transaction costs. This is particularly true for technologies in the computer and electronics industry where products most likely integrate a multitude of elements, each covered by intellectual property. See Cal. Computer Prods., Inc. v. IBM Corp., 613 F.2d 727, 744 n. 29 (9th Cir. 1979); Microsoft, 253 F.3d at 87. Recognizing these important pro-competitive efficiencies offered by package licensing, the courts would most likely look to the 'competitive fringe' and see if they engage in the same type of package licensing. Microsoft, 253 F.3d at 88. If all of the competitive firms bundle, there most likely will be an implication of strong net efficiencies resulting in an almost certain application of the rule of reason. Id.

Conclusion

Microsoft is the leading case on license bundling that applies the rule of reason analysis instead of the per se rule. It is possible that this case marks the emergence and future dominance of the rule of reason for testing the legality of patent bundles and package licenses. This is because many technology markets involve efficiencies that the courts have not taken into account in the per se rule. It is in these industries that the courts may not have enough empirical evidence regarding the market effects of package licensing to call it a per se violation. When attempting to gauge how the law will be applied to future cases that present issues similar to those in Microsoft, it is a noteworthy and important development that current DOJ/FTC policy is to use the rule of reason in antitrust enforcement of package licenses. If this policy is any indication of future trends, the law appears to be heading in a direction where the courts will apply a rule of reason analysis in cases involving challenges to patent license bundles unless the licensing practice involved has been conclusively tested as anti-competitive.

Nathaniel Durance, J.D., 2003, University of California at Berkley, School of Law (Boalt Hall) is clerking for the Hon. Marilyn Huff, Chief Judge of the U.S. District Court for the Southern District of California during the 2003-2004 term and for the Hon. M. Margaret McKeown, U.S. Court of Appeals for the 9th Circuit during the 2005-2006 term. The opinions in this article are those of Mr. Durrance and do not reflect the views of the judges or courts for whom he will be clerking.

The law governing package licensing of patents is currently undergoing a significant change. Historically, package licenses were subject to a 'per se' liability under the controlling legal doctrines. Using this per se test, a package license could be rendered unenforceable absent any inquiry into the actual market effects of the license. The recent case of United States v. Microsoft , 253 F.3d 34 (D.C. Cir. 2001), marks, however, the emergence of an antitrust doctrine called the 'rule of reason' that is likely to become the dominant legal doctrine for testing package licensing of patents. This is a significant change because the rule of reason is a market-based approach that balances the anticompetitive and pro-competitive benefits of the licensing practice. Thus, a package license may be held to be enforceable even if it would have failed the traditional per se test of the patent misuse doctrine or antitrust laws.

The Uncertain Effects of Patent Bundling Drive Current Policy Decisions

Patents are commonly licensed in 'packages' or 'bundles.' For example, a license may include several distinct patents relating to a particular product for a single royalty rate. Courts have previously held mandatory package licensing of patents to be objectionable, however, because such an arrangement prevents the 'goods from competing directly for the consumer choice on their merits.' Jefferson Parish Hosp. Dist. No. 2 v. Hyde , 466 U.S. 2, 13 (1984). The rationale is that by tying a desired product (the 'tying product') with unwanted products (the 'tied products'), market power of the tying product may be exploited thereby deterring innovation and diminishing competition in the tied product market. See Phillip Areeda & Louis Kaplow, Antitrust Analysis 686 (5th ed. 1997); Franklin M. Fisher & Daniel L. Rubinfeld, U.S. v. Microsoft ' An Economic Analysis, 46 Antitrust Bull. 1, 12 (2001).

Conversely, patent bundling also provides significant pro-competitive efficiencies that may justify its existence. The bundled license is thought to be efficient because of the savings in distribution, marketing and consumer transaction costs, including economies of scale and the ability to price discriminate. See, e.g., Microsoft, 253 F.3d at 87. In addition, when two components are used together in a system, a tying arrangement can provide quality assurance. The tie-in allows the monopolist in one product to ensure that lower quality versions of another product do not lower the first product's performance. Robert Bork, The Antitrust Paradox 375-401 (1978).

Coupled with these pro-competitive efficiencies is the economic theory that patent bundling cannot extract more than a single monopoly rent. See Scheiber v. Dolby Labs., Inc. , 293 F.3d 1014, 1019-20 (7th Cir. 2002) (stating that any 'monopoly power in the tied-product market comes at the expense of losing it in the tying-product market'); Bork, id. at 373-75 ('The tying arrangement, whatever else it may accomplish, is obviously not a means of gaining two monopoly profits from a single monopoly.'); Roger D. Blair & David Kaserman, Antitrust Economics 403 (1985) ('A seller cannot get two monopoly profits from one monopoly.'). In other words, a monopolist cannot gain any extra competitive profits from tying a monopolized product to a product in a competitive market. This position, espoused by the 'Chicago School' of law and economics theorists, reasons that a rational monopolist would only tie products if there were some pro-competitive advantage to doing so. Whatever a particular monopolist's motivations, the Chicago School theory concludes: 'suppression of competition is the one function not accomplished by ' [tying] arrangements.' Bork, id. at 365.

Because of this uncertainty of true anti-competitive effects and the existence of reasonably certain pro-competitive efficiencies, the law surrounding patent bundling has been moving away from the per se liability and toward a 'rule of reason' test. See, e.g., Jefferson Parish, 466 U.S. at 33-38 (O'Connor, J., concurring) (arguing the rule of reason should replace the per se rule as the dominant legal antitrust test for tying arrangements). The rule of reason test is market based and requires a showing of actual anti-competitive effects that outweigh any pro-competitive benefits of the licensing practice.

Legal Doctrines Surrounding Patent Bundling Have Developed in Tandem

The patent misuse doctrine and antitrust laws govern the legality of package licenses. From the beginning, these legal doctrines have developed side by side into similar tests of liability. Evidence of this concurrent development comes from the Patent Misuse Reform Act (PMRA) of 1988 that exempts many patent licenses from a defense of patent misuse in response to an infringement action. 35 U.S.C. ' 271(d); see Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176, 201 (1980) (construing an earlier version of ' 271(d)). The exempt licenses have a patent (or patented product) as the tying product and a non-staple item as the tied product. (A non-staple item is a product with no substantial market apart from use with a patent, while a staple item has a market outside the patent.) See Scheiber, 293 F.3d at 1019-20 (stating that ' 271(d) covers tying and bundling and that a patent (as opposed to a patented product) may be the tying product). Therefore, since the inception of the PMRA, a potential infringer may only claim a patent misuse defense for tying or bundling arrangements where a patent (or patented product) is the tying product and a staple article is the tied product.

Courts have also construed ' 271(d) of the PMRA as eliminating antitrust claims relating to the refusal to license patents. See Data Gen. Corp. v. Grumman Sys. Support Corp. , 36 F.3d 1147, 1187 (1st Cir. 1994) ('Section 271(d) clearly prevents an infringer from using a patent misuse defense when the patent owner has unilaterally refused a license, and may even herald the prohibition of all antitrust claims and counterclaims premised on a refusal to license a patent'); but see Image Tech. Servs. v. Eastman Kodak Co. , 125 F.3d 1195, 1215 (9th Cir. 1997) (arguing that ' 271(d) does not eliminate all antitrust claims for refusing to license a patent).

Further evidence of the parallel development of the patent misuse doctrine and related antitrust laws is their similar form of 'per se' liability. Historically, three elements were required: 1) the tying and the tied goods are separate products; 2) the availability of the tying item is conditioned on the licensing of the tied item(s); and 3) the licensor has the market power to coerce the licensee to accept the tie. See Microsoft, 253 F.3d at 85 (citing the elements for a per se antirust tying violation); Virginia Panel Corp. v. Mac Panel Co., 133 F.3d 860, 868-69 (Fed. Cir. 1997) (citing the elements for a per se patent misuse violation). The relevant antitrust doctrine, called the 'per se rule,' requires one additional element: 4) a substantial volume of commerce is impaired in the tied market. Jefferson Parish, 466 U.S. at 13. What is significant about this per se rule is that a package license could be rendered unenforceable absent any inquiry into the actual market effects of the license. Recently, the courts have been increasingly reluctant, however, to strike down package licenses under this per se rule under either a patent misuse or antitrust theory. Rather, these two doctrines have continued to develop together and have moved forward into the more modern rule of reason test.

The Early Per Se Rule is Fading in the Face of the Market-Based Rule of Reason

Although the per se rules of patent misuse and antitrust law are the traditional legal tests for tying claims, the rule of reason analysis is the emerging legal doctrine for judging the legality of package licenses. See, e.g., Microsoft, 253 F.3d at 94-95 (antitrust law); Virginia Panel, 133 F.3d at 869 (patent misuse); Department of Justice (DOJ)/Federal Trade Commission (FTC) Antitrust Enforcement Guidelines for the Licensing of Intellectual Property ' 3.4 (1995). The rule of reason asks what the likely anti-competitive effects of the package license are, and whether that licensing arrangement is reasonably necessary to achieve pro-competitive benefits that outweigh these anti-competitive effects. Microsoft, 253 F.3d at 95-96. By necessity, this rule requires careful scrutiny of the surrounding circumstances of each transaction and the resulting competitive effects on relevant markets.

Several relatively recent cases confirm the movement away from the per se test and toward the rule of reason with regard to patent misuse. In fact, two district courts have gone so far as to find that the rule of reason is the only appropriate test because ' 271(d)(5) of the PMRA eliminated per se patent misuse liability for patent licensing cases. Texas Instruments, Inc. v. Hyundai Electronics Indus., 49 F. Supp.2d 893, 909-12 (E.D. Tex. 1999); In re Recombinant DNA Tech. Patent and Contact Litig., 850 F. Supp. 769, 775 (S.D. Ind. 1994).

In Texas Instruments, the court cited legislative history of the PMRA and the language within ' 271(d)(5), where market power is analyzed 'in view of the circumstances,' as evidence strongly suggesting that a rule of reason and not a per se analysis applies in all patent licensing cases alleging patent misuse. Texas Instruments, 49 F. Supp.2d at 909-12. The court pointed to specific formal statements by members of the House and Senate that made it clear that ' 271(d)(5) was attempting to abolish the per se rule in patent licensing cases, and that showings of unreasonableness and anti-competitive effect would be required before misuse would be found. Id.

Moreover, in the most pivotal package license antitrust case in recent years, Microsoft, the D.C. Circuit refused to apply the per se rule in favor of the rule of reason. In that case, the court reasoned that markets for software platforms involve efficiencies never encountered in the case law, and noted that for these types of industries, the court does not have enough empirical evidence regarding the market effects of package licensing to call it a per se violation. Microsoft , 253 F.3d at 93-94; see also White Motor Co. v. United States , 372 U.S. 253, 263 (1963). The court's main concern was that many package licensing arrangements have 'very real' efficiencies that 'have been ignored in the calculations underlying the adoption of a per se rule for tying' and 'that these efficiencies are common in technologically dynamic markets where product development is especially unlikely to follow an easily foreseen linear pattern.' Microsoft, 253 F.3d at 94. With the existence of these efficiencies, the D.C. Circuit could not comfortably say that bundling had so little 'redeeming virtue' and 'that there would be so very little loss to society from its ban, that an inquiry into its costs in the individual case [could] be considered unnecessary.' Id. (citations omitted). Instead, by applying the rule of reason, the court is able to account for the possibility of significant pro-competitive benefits that may outweigh the anti-competitive effects of the licensing agreement. Id. ; see also Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc. , 411 U.S. 1, 16-24 (1979) (declining to apply a per se analysis to package arrangement that produced significant efficiencies).

Further, evidence of the emerging dominance of the rule of reason includes the DOJ/FTC policy to use it exclusively in their antitrust enforcement of package licenses. DOJ/FTC Antitrust Enforcement Guidelines for the Licensing of Intellectual Property ' 3.4 (1995). Given recent case law and DOJ/FTC policy in place, it seems very likely that courts will undergo a rule of reason analysis in cases involving emerging technologies. In this current technological economy, it is arguable that almost any patent bundle includes technology that will fall into this category. If, however, the industries and licensing practices involved have been well tested, then the court may still use the per se rule.

Per Se Violations Still Have Their Place

For example, in Virginia Panel, the Federal Circuit stated that the rule of reason should only be used if the practice is neither a per se violation nor a misuse specifically excluded by ' 271(d). Virginia Panel, 133 F.3d at 869. By implication, there may be certain practices, such as conditioning the purchase of a license on a separate staple good or extending the term of the patent with post-expiration royalties, that may still be considered per se violations. Id.; see also Scheiber, 293 F.3d at 1019-21 (condemning a patent bundle license requiring post-expiration royalties).

The reason for keeping the existing per se violations is that they have been extensively analyzed by the courts and have been conclusively determined to be anti-competitive. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc. , 395 U.S. 100, 136 (1969); International Salt Co. v. United States , 332 U.S. 392, 395-96 (1947). In these limited situations, the courts have found the licensing practice to impose too great a restraint on the free market by impermissibly extending the grant of the patent monopoly. The character of the per se violation itself 'is considered a sufficient basis for presuming unreasonableness without the necessity of any analysis of the market context in which the arrangement may be found.' Jefferson Parish, 466 U.S. at 9, 16 n.25. Thus, it is irrelevant whether the licensing practice has significant pro-competitive efficiencies. See Scheiber, 293 F.3d at 1019-21 (arguing that although it may be irrational to condemn per se a patent license arrangement having royalties extending past the patent term, the courts are bound to follow Supreme Court precedent directly on-point).

But outside this narrowing field of circumstances where the per se rule may still apply, the existence of these significant pro-competitive efficiencies is the very policy rationale why the rule of reason will most likely dominate as the legal test for the vast majority of package licenses. As previously discussed, bundling results in significant efficiencies, including extensive savings in distribution and consumer transaction costs. This is particularly true for technologies in the computer and electronics industry where products most likely integrate a multitude of elements, each covered by intellectual property. See Cal. Computer Prods., Inc. v. IBM Corp., 613 F.2d 727, 744 n. 29 (9th Cir. 1979); Microsoft, 253 F.3d at 87. Recognizing these important pro-competitive efficiencies offered by package licensing, the courts would most likely look to the 'competitive fringe' and see if they engage in the same type of package licensing. Microsoft, 253 F.3d at 88. If all of the competitive firms bundle, there most likely will be an implication of strong net efficiencies resulting in an almost certain application of the rule of reason. Id.

Conclusion

Microsoft is the leading case on license bundling that applies the rule of reason analysis instead of the per se rule. It is possible that this case marks the emergence and future dominance of the rule of reason for testing the legality of patent bundles and package licenses. This is because many technology markets involve efficiencies that the courts have not taken into account in the per se rule. It is in these industries that the courts may not have enough empirical evidence regarding the market effects of package licensing to call it a per se violation. When attempting to gauge how the law will be applied to future cases that present issues similar to those in Microsoft, it is a noteworthy and important development that current DOJ/FTC policy is to use the rule of reason in antitrust enforcement of package licenses. If this policy is any indication of future trends, the law appears to be heading in a direction where the courts will apply a rule of reason analysis in cases involving challenges to patent license bundles unless the licensing practice involved has been conclusively tested as anti-competitive.

Nathaniel Durance, J.D., 2003, University of California at Berkley, School of Law (Boalt Hall) is clerking for the Hon. Marilyn Huff, Chief Judge of the U.S. District Court for the Southern District of California during the 2003-2004 term and for the Hon. M. Margaret McKeown, U.S. Court of Appeals for the 9th Circuit during the 2005-2006 term. The opinions in this article are those of Mr. Durrance and do not reflect the views of the judges or courts for whom he will be clerking.