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This Troutman Pepper Locke memo reviews the DOJ’s recent settlement of litigation involving the merger between HPE and Juniper Networks. The settlement requires HPE to divest a business line to a pre-approved buyer and requires at least one license of certain Juniper technology to DOJ approved licensees.   This excerpt from the memo discusses the DOJ’s willingness to use licensing as part of the remedy:

The settlement also assures that any winning licensee will have the right to any improvements to and derivatives of the licensed technology and the right to grant rights of use to the technology to its end users and service providers as reasonably needed. If the auction results in multiple bids exceeding $8 million, Juniper will be required to license to at least one additional bidder. This novel approach by the Justice Department reflects a commitment to solving unique challenges in mergers.

While not routine, license remedies have been used previously. For example, in 2017, the Federal Trade Commission (FTC) accepted a license remedy for its challenge to a pharmaceutical company’s acquisition of the U.S. rights to the drug Synacthen. The FTC alleged there that the acquisition would prevent the development of a U.S. competitor to the buyer’s monopoly. In another instance, a licensing remedy was approved in a post-consummation merger challenge.

While the licensing arrangement represents a key component of the settlement, the memo says that it is unlikely that it would have been sufficient to resolve the litigation without the accompanying divestiture, and cautions companies against assuming that a license alone will satisfy regulators.

The memo also points out that this represents the third time in the last month that the Antitrust Division has signed off on structural remedies to settle a lawsuit challenging a merger, and that its willingness to resolve merger challenges in advance of litigation should be considered when assessing the risks associated with a transaction, designing clearance strategies, and negotiating risk allocation provisions in acquisition agreements.

– John Jenkins