What are the Elements for a Defense to Patent Misuse?
Patent law gives the inventor of a new machine, design, or process the exclusive right to use their invention, and to license its use by others. It provides a critically important protection for businesses that invest enormous sums of money in developing new technologies. During the term of the patent, the patent owner has something similar to a monopoly on the patented design or device, allowing them—hopefully—to recoup their investment and make a profit.
The rights conferred by a patent have limits under U.S. law, however, and courts have developed the doctrine of “patent misuse” to allow challenges to certain acts by patent owners. Individuals or businesses accused of patent infringement can claim patent misuse as an affirmative defense.What Is Patent Misuse?
The U.S. Supreme Court first recognized patent misuse as a legal claim in Motion Picture Patents Co. v. Universal Film Manufacturing Co., decided in 1917. The Court held that a patent did not authorize the patent owner to restrict the use of licensed products containing the patented mechanism. This established patent misuse as an affirmative defense to patent infringement, although subsequent legislation, Supreme Court decisions, and decisions from the Court of Appeals for the Federal Circuit have modified the nature of the claim.
By claiming patent misuse, a defendant in a patent infringement lawsuit is alleging that the patent owner has engaged in certain types of prohibited behavior that exceed the authority granted to them by the patent. The remedies for a defendant that meets their burden of proof can range from dismissal of the infringement lawsuit to invalidation of the entire patent.What Are the Elements of a Patent Misuse Claim?
The laws and court decisions addressing patent misuse have gone through numerous changes in the past few decades. As a result, it is difficult to provide a succinct list of elements that a defendant in a patent infringement lawsuit must prove to establish patent misuse. Two common types of patent misuse claims involve alleged anti-competitive practices, including antitrust violations, and acts that allegedly attempt to extend a patent owner’s rights beyond the scope or duration of the patent. The Supreme Court has ruled that these acts may constitute per se patent misuse.
Congress has created a “safe harbor” for some acts that the court might consider unlawful. From Congress’ point of view, it is easier to describe what patent misuse is not instead of what it is.Anti-Competitive Practices
The Federal Circuit’s 1986 decision in Windsurfing Int’l v. AMF held that, in the absence of a Supreme Court ruling finding that a particular act is per se patent misuse, a defendant must show that the patent owner’s alleged conduct “tends to restrain competition unlawfully in an appropriately defined relevant market.” In 2010, however, the Court held in Princo Corp. v. Int’l Trade Comm’n that not all violations of antitrust law also constitute patent misuse. A defendant must show not only that the patent owner’s actions have had “anti-competitive effects,” but also that those actions were outside the “broad scope of the patent grant.”
Courts have found that a practice known as “patent tying” often rises to the level of anti-competitive patent misuse. This involves a patent owner requiring licensees to purchase other specific products as a condition of the license agreement. The dispute in Motion Picture Patents Co. involved a license agreement that required the licensee to sell film projectors subject to a restriction on their use. The projectors, according to the patent owner, could be used only to display films that used other technology owned by the patent owner.
There is, of course, an antitrust claim for illegal tying, which you can read about here and here.
The Patent Misuse Reform Act of 1988 created several safe harbors for patent owners against patent misuse claims. Patent tying is not patent misuse under 35 U.S.C. § 271(d)(5) when the patent owner does not have “market power in the relevant market” for either the patent itself or the product that the licensee is expected to buy.
Other acts that could be characterized as anti-competitive in some circumstances, but that are deemed by statute not to be patent misuse, include:
- Enforcing the right to exclusive use of the patented materials;
- Refusing to license the patent to others; and
- Refusing to use the patent at all.
A patent owner may not claim royalties for a patent license for longer than the duration of the patent itself. This was the core of the Supreme Court’s 1964 decision in Brulotte v. Thys Co. Once the last patent incorporated into a machine or device has expired, no more royalties are payable by a licensee.
Brulotte is notable—and controversial in some circles—because it does not focus on antitrust law and anti-competitive behavior. It is about a patent licensing agreement that extended past the life of the patent. The Supreme Court rejected an effort to overturn Brulotte in 2015 in Kimble v. Marvel Entertainment.
Antitrust and patent law often intersect. If you have an intellectual property or antitrust issue that you want to discuss, please contact Bona Law.