ACI FOUNDATION ANTITRUST AND INTELLECTUAL PROPERTY COMPLIANCE POLICY AND GUIDELINES
May 21, 2002 (Adopted)
I. ANTITRUST COMPLIANCE POLICY AND GUIDELINES
A. Preface
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 CIC 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 CIC performs valuable and legitimate functions in encouraging
research
and development relating to concrete. Because it brings together
competitors in several industries, the CIC’s activities
also carry inherent antitrust risk. To minimize this risk, CIC Members, Member representatives and consortia must strictly
adhere to the following antitrust guidelines.
B. Associations and the Antitrust
Laws (Background)
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 CIC:
1. Price
fixing and market division.
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.
2. Group
boycotts.
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.
3. Membership
exclusions or restrictions.
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 CIC, 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.
4. Standardization.
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.
5. Data
Dissemination.
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.
C. Application of the Rules
to the CIC
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 CIC 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.
D. Intellectual Property
Licenses and Supply Agreements
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.
E. Joint Ventures
Consortia
formed through CIC 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 Ventures
1.
To be “legitimate,” a joint venture
must:
Involve
a substantial pooling of assets or sharing of risk,
or
Create a new product or service none of the
partners could produce individually (for example,
an interbank
credit card).
To the extent consortia formed through the CIC
generally satisfy these criteria, they will be
entitled to the maximum protections available under
the antitrust laws.
2.
Ancillary Restraints
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:
Closely
related (“reasonably ancillary”)
to the subject matter and scope of the venture,
and
Reasonably necessary to its success.
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.”
3.
National Cooperative Research and Production Act
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.
4.
Membership in Consortia and Access to Technology
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.
F. Scope Of Antitrust
Law
This
Policy is designed to help the CIC, 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.
CIC Antitrust
Compliance Guidelines
Agendas
and minutes should be prepared for all meetings of
the CIC, 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 CIC or the consortia, whether
formal or informal, it is imperative that Participants
and Participant representatives:
-
Do
not
discuss current
or future prices (be very careful of discussions
of past prices).
-
Do
not
discuss what is a fair profit level.
-
Do
not
discuss an increase or decrease in prices.
-
Do not discuss
standardizing or stabilizing prices.
-
Do not discuss
pricing procedures
.
-
Do not discuss
cash discounts.
-
Do not discuss
credit terms.
-
Do not discuss
controlling sales.
-
Do not discuss
allocating markets.
-
Do not complain
to a competitor that its prices constitutes unfair trade practices.
-
Do not discuss
refusing to deal with a company because of its pricing or
distribution practices.
-
Do not otherwise
exchange any information relating to cost, sales, profitability,
prices, marketing, or distribution of any product, process or
service that is not reasonably required to conduct the research
and development that is the purpose of the consortium.
If a Participant feels discussion at any meeting is improper, the
Participant should state his or her objection to the lawyer or Chair 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 executive Staff 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 CIC 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 CIC 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 CIC-approved Participant Certificate
indicating that the Participant/decision-maker has read the
ACI Foundation CIC Antitrust Compliance Policy (this document). Prior to
conduct of any Consortium meeting, an CIC-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.
II. INTELLECTUAL PROPERTY POLICY AND GUIDELINES
A. Preface
In carrying out
their activities, CIC consortia may develop technology that would
warrant intellectual property protection. Further, CIC 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 CIC 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. CIC consortia
should also include disclaimers of liability in work product so
as to protect CIC 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.
B. CIC Intellectual Property
Guidelines
At the inception
of their participation in a consortium, CIC 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, CIC 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.
CIC
consortia work product such as papers, articles, and software shall
include an appropriate disclaimer limiting CIC’s liability
resulting from the use of the work product.
Each
consortium will grant CIC (and/or ACI Foundation) 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 CIC 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 CIC work.
No
Consortia Participant shall use the name of ACI Foundation, American Concrete
Institute (“ACI”), or the Concrete Innovation Council
(“CIC”) in any form of publicity without first obtaining
written permission from ACI or ACI Foundation Executive Staff.