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The Federal Trade Commission will require Honeywell International Inc. to license patents critical to the manufacture of two-dimensional (2D) bar code scanners, under a settlement resolving FTC charges that Honeywell’s acquisition of rival scan engine manufacturer Intermec Inc. would be anticompetitive.

The proposed FTC consent order preserves competition in the market for 2D scan engines by requiring Honeywell to license its and Intermec’s patents for 2D scan engines to Datalogic IPTECH s.r.l for the next 12 years.  Scan engines are used in products such as retail store scanners to translate an image (often a UPC barcode) into a digital format that can be interpreted and analyzed by a computer.

“Although divestiture of assets is the preferred remedy in merger cases, licensing requirements can preserve competition in markets where access to needed technology is the main barrier to entry,” said Deborah Feinstein, Director of the FTC’s Bureau of Competition.  “By requiring Honeywell to license its technology, the proposed order gives Datalogic access to the patents it needs to enter the U.S. market immediately and restore the competition lost due to the merger.”

Honeywell is a New Jersey-based diversified technology and manufacturing company with worldwide operations.  It develops 2D scan engines and related devices through its subsidiaries Hand Held Products, Inc. and Metrologic Instruments, Inc., the latter of which does business as Honeywell Scanning and Mobility.

Intermec, headquartered in Everett, Washington, is a leading manufacturer of scan engines and other automated identification and data capture equipment, including barcode scanners and printers.  Under an agreement signed on December 9, 2012, Honeywell proposes to acquire Intermec for approximately $600 million.

According to the FTC’s complaint, Honeywell, Intermec, and a third competitor, Motorola, are the only 2D scan engine makers in the United States that have broad enough intellectual property portfolios to insulate them, and their customers, from potential patent-infringement lawsuits.  Accordingly, Honeywell’s acquisition of Intermec would leave two companies – Honeywell and Motorola – with control of more than 80 percent of the already highly concentrated U.S. market for 2D scan engines and increase the likelihood of post-acquisition coordination between Honeywell and Motorola.          

The most significant barrier to entry into the U.S. market from 2D scan engine manufacturers active outside the United States is lack of access to the relevant U.S. intellectual property.  Datalogic markets 2D scan engines similar to those made by Honeywell and Intermec outside of the United States, but it currently lacks the necessary patent rights to compete in the United States.  In order to preserve competition, the proposed consent order requires Honeywell to license its own 2D scan engine patents as well as those held by Intermec to Datalogic.  In addition to the licensing requirements, the proposed consent order bars Honeywell from filing patent infringement actions against Datalogic for 2D scan engine products, and from transferring the patents in the license to anyone who does not commit to abide by the terms of the order.

The Commission vote to accept the consent agreement containing the proposed consent order for public comment was 4-0.  The FTC will publish a description of the consent agreement package in the Federal Register shortly.  The agreement will be subject to public comment for 30 days, beginning today and continuing through October 15, 2013, after which the Commission will decide whether to make the proposed consent order final.  Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.  Comments also can be submitted electronically.

NOTE:  The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.  Each violation of such an order may result in a civil penalty of up to $16,000.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.