The Anti-clone Wars: Towards a Reinvigoration of the Doctrine of Patent Misuse and the Per Se Illegality of Anti-cloning Provisions

• Jurisdiction: United States,Federal
• Publication year: 2015
• Citation: Vol. 10 No. 3

Washington Journal of Law, Technology and Arts Volume 10, Issue 3 Winter 2015

The Anti-Clone Wars: Towards A Reinvigoration Of The Doctrine OF Patent Misuse And The Per Se Illegality Of Anti-Cloning Provisions

Patrick Holvey(fn*) © Patrick Holvey

ABSTRACT

Patent misuse, a once-valuable doctrine used to remove anticompetitive actions enabled by patent grants from the marketplace, has been relatively disfavored by the courts for some time. Recent licensing practices by certain major players within the high-technology marketplace, however, provide an excellent opportunity for the doctrine to be reinvigorated and applied. Apple, Inc., through its attempts to prevent competitors from "cloning" its products, has become an anticompetitive force that appears to have impermissibly leveraged its patent portfolio in order to extract contractual protections of non-patented subject matter through "anti-cloning" provisions, improperly broadening the scope of its patent grants. This Article argues that this improper broadening of the patent grant constrains competition in unpatented subject matter, harms competition, and should be considered by the courts to constitute per se patent misuse or, in the alternative, patent misuse under a rule of reason analysis. As a result, Apple's patents that are tainted by the anti-cloning provision's misuse should be held to be unenforceable at least as long as agreements that contain the offending provision are still in force.

TABLE OF CONTENTS

Introduction .................................................................................. 155

I. Background on the Anti-Cloning Wars ................................ 156

A. A Brief Summary of the Smartphone Wars and their Casualties ....................................................................... 156

1. Apple/Samsung ...................................................... 158

B. Anti-Cloning Provisions .................................................. 159

1. Conceptual Framework of the Provisions .............. 160

2. Recent Examples of these Provisions ..................... 165

a. Apple/Microsoft settlement agreement ........... 165

b. Apple/HTC settlement agreement ................... 167

3. Comparison between the Apple/Microsoft and Apple/HTC Settlement Agreements ....................... 170

II. A Brief Survey of Misuse ..................................................... 170

A. Patent Misuse Jurisprudence ............................................ 171

1. Motion Picture Patents to Mercoid ......................... 171

2. Modern Misuse: Extension of the Physical or Temporal Scope of the Patent Grant ...................... 172

B. Copyright Misuse Jurisprudence ...................................... 176

C. Contrasting Approaches and Restraints Within Misuse ..181

1. Statutory Restraints on Patent Misuse .................... 181

D.The Intersection of Misuse and Antitrust ........................ 184

1. Anticompetitive Effects .......................................... 185

2. Anticompetitive Settlement of IP Disputes ............ 187

a. Hovenkamp's framework for the analysis of settlements ....................................................... 188

III. Analysis/Proposal ................................................................. 190

A. Anti-Cloning Provisions Unlawfully Extend the Patent Grant .............................................................................. 190

1. This Extension is Broader and More Flagrant than Term Expansions .................................................... 194

B. Anti-Cloning Provisions are Anticompetitive .................. 195

C. Anti-Cloning Provisions are More Pernicious than Reverse Engineering Clauses ...................................................... 196

1. Reverse Engineering is a Matter of Copyright Law that May Be Restrained by Contract ...................... 196

2. Differentiation between Anti-Reverse Engineering and Anti-Cloning Restrictions ................................ 198

D. Anti-Cloning Provisions Should be Found to be Per SeIllegal and Should Result in Equitable Remedies ......... 201

Conclusion ................................................................................... 203

INTRODUCTION

As perhaps the most notable conflict in the so-called "technology patent wars,"(fn1) the "smartphone wars" continue to rage on. The battlefield is comprised of multiple smartphone manufacturers attempting to leverage various intellectual property protections and regimes against their competitors through litigation and trade complaints. Both the ultimate outcome of the smartphone wars and how the individual skirmishes play out in front of the court of public opinion will have lasting effects on the wider struggle over whether stronger or more restricted intellectual property regimes should be adopted to serve the economies of the present and future.

The results of smartphone skirmishes can be evaluated for clues as to developing trends in patent litigation, licensing, and settlements. This Article will examine a settlement license clause that has troubling implications for innovation not only in smartphones but also in software and industrial design in general: "anti-cloning provisions." These provisions prohibit patent licensees from practicing licensed patents in ways that produce "clones" that are identical or substantially similar copies of products or functions. This work will argue that Apple's decision to require Microsoft and HTC to acquiesce to anti-cloning provisions in the Apple/Microsoft and Apple/HTC settlement agreements sets a dangerous precedent for future patent licenses or settlement agreements and should be found to be per se illegal under the doctrine of patent misuse. As such, this Article will argue that that this pattern of misuse, especially given Apple's demands for the inclusion of such a provision in any settlement with Samsung, should result in a finding of patent misuse in future litigation and provide an affirmative defense to any allegation of infringement.

Part I will set out the background of the smartphone wars; discuss cross-licensing as a potential tool to bring about settlement; and conclude with an analysis of the anti-cloning provisions, their conceptual framework, and recent examples of these provisions in agreements to which the public has access. Part II will delve into an analysis of misuse, beginning with patent misuse, continuing with copyright misuse, later focusing on the restraints on the misuse doctrine and the differences between the two regimes' doctrines, and concluding with a look at the intersection of antitrust and the misuse doctrine. Part III lays out the present work's central argument: anti-cloning provisions should be per se illegal under the doctrine of patent misuse because they impermissibly extend the patent grant and are unacceptably anticompetitive.

I. BACKGROUND ON THE ANTI-CLONING WARS

A. A Brief Summary of the Smartphone Wars and their Casualties

As one of the main battlefronts in the ongoing technology patent wars, the smartphone wars continually dominate mainstream media attention, particularly in technology-oriented reporting. They command attention as a result of not only the major players in the continual offensive, of which notable names include Google, Apple, Samsung, Sony, Microsoft, Nokia, Motorola, and HTC, but also the huge sums of money demanded and awarded. Indeed, some award amounts are larger than the nominal gross domestic product of small sovereign nations.(fn2)

Beginning in earnest in 2009 with Nokia's infringement suit(fn3) and International Trade Commission (ITC) complaint(fn4) against Apple, the smartphone wars have comprised of more than 50 suits; countersuits; and ITC complaints involving well over 200 patents, thousands of patent acquisitions between various parties, and massive settlement agreements and verdicts.(fn5) Of course, every litigation carries potential risks for both sides: the patentee risks a finding of invalidity, instantly rendering a perceived asset worthless, while the alleged infringer risks a finding of infringement, becoming suddenly responsible for unanticipated damages and forced to the bargaining table in an extremely disadvantageous position.

Because of this, it is not uncommon for patent litigants to attempt to find common ground in settlement agreements. An extensively utilized tool in high-tech patent settlements (and patent settlements in general) is cross-licensing, wherein the parties agree to trade intellectual property for intellectual property (among other covenants) and each party walks away from the table with additional freedom to operate and fewer litigation concerns.

As such, many of these litigations have concluded with settlement agreements, notably the litigations involving Apple/Nokia (in favor of Nokia), Apple/HTC (in favor of Apple), and Nokia/HTC (in favor of Nokia).(fn6) Virtually no public information regarding the Apple/Nokia or Nokia/HTC agreements is available (and will not be a focus of this work), but a redacted version of the Apple/HTC Settlement Agreement sheds some light on the current state of smartphone licensing agreements.(fn7) One notable aspect of the Apple/HTC...