Application of the Patent Misuse Doctrine

• Pages: 37-61

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CHAPTER II

APPLICATION OF THE PATENT MISUSE

DOCTRINE

Patent misuse is an affirmative defense to an action for patent

infringement or for royalties under a license. The burden of establishing

misuse lies with the alleged infringer or defaulting licensee. If misuse is

found, the patent is rendered unenforceable until the misuse is “purged.”

A finding of misuse precludes prospective injunctive relief and eliminates

any damage award (either lost profits or reasonable royalties) for the

period during which the misuse occurred. A party asserting the defense

need not have been affected by the conduct constituting misuse in order

to assert the defense. Essentially, the patent becomes unenforceable

against the world until and unless the misuse is deemed to have been

purged. By disavowing the contract provision constituting the misuse and

taking other steps, the patentee may reinstate the enforceability of its

patent.

This chapter is designed to give practitioners a practical guide to

applying the misuse doctrine to particular conduct. It summarizes the

elements of misuse, the relevant antitrust law principles for applying the

anticompetitive effects requirement, and practical issues such as standing

and remedies.

A. Elements of Patent Misuse

There are two elements to patent misuse: (1) a “leveraging” or “use”

of the patent in suit to impermissibly broaden the physical or temporal

scope of the patent; and (2) an anticompetitive effect resulting from the

conduct.1 The anticompetitive effect prong includes, but is not limited to,

conduct that would constitute an antitrust violation. Under Federal Circuit

precedents, certain conduct is deemed to meet the second element without

proof of actual anticompetitive effects.2 The burden of establishing

misuse lies with the alleged infringer or defaulting licensee,3 but applying

1. Princo Corp. v. ITC, 616 F.3d 1318, 1328 (Fed. Cir. 2010) (en banc).

2. Virginia Panel Corp . v. MAC Panel Co., 133 F.3 d 860, 869 (Fed. Cir.

1997).

3. Princo, 616 F.3d at 1338.

38 Intellectual Property Misuse

the anticompetitive effects element may require the patent holder to offer

legitimate, procompetitive justifications for its conduct.4

1. The Leveraging Requirement

The patent misuse doctrine is meant to prevent intellectual property

holders from using the valid, government-sanctioned exclusivity right of

a patent “to derive a benefit not attributable to use of the patent’s

teachings.”5 The Federal Circuit has explained that patent misuse consists

of a patent holder “leverag[ing]” its patent to “impose overbroad

conditions on the use of the patent in suit that are ‘not within the reach of

the monopoly granted by the Government.’”6 The court must also

“determine if [the challenged] practice is ‘reasonably within the patent

grant, i.e., that it relates to subject matter within the scope of the patent

claims.’ If so, the practice does not have the effect of broadening the scope

of the patent claims and thus cannot constitute patent misuse.”7

“Leveraging” the patent means conditioning access to the patent on a

demand outside the patent grant, typically but not always through a patent

license.8 Such demands are “overbroad”—i.e., outside the patent grant—

4. Id. See also Arkansas Carpenters Health & Welfare Fund v. Bayer AG,

604 F.3d 98, 104 (2d Cir. 2010), as corrected (June 17, 2010) (“Rule of

reason analysis proceeds in three steps. First, the plaintiff bears the initial

burden of showing that the defendant’s conduct ‘had an actual adverse

effect on competition as a whole in the relevant market.’ If plaintiff

satisfies this burden, the burden then shifts to defendant to offer evidence

that its conduct had pro-competitive effects. If defendant is able to offer

such proof, the burden shifts back to plainti ff, who must prove that a ny

legitimate competitive effects could have been achieved through less

restrictive alternatives.” (internal citations omitted)).

5. Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 136 (1969).

6. Princo, 616 F.3d at 1331 (quoting Zenith, 395 U.S. at 136-138).

7. Virginia Panel, 133 F.3d at 869 (internal citations omitted) (sending

notices of suspected infringement and intention to sue were acts

reasonably within the scope of the patent grant); Mallinckrodt, Inc. v.

Medipart, Inc., 976 F.2d 700, 708 (Fed. Cir. 1992) (if patentee’s conduct

“relates to subject matter within the scope of the patent claims, that ends

the inquiry”); Monsanto Co. v. McFarling, 363 F.3d 1336, 1341 (Fed. Cir.

2004) (“In the cases in which the restriction is reasonably within the patent

grant, the patent misuse defense can never succeed.”).

8. Princo, 616 F.3d at 1331; Altana Pharma AG v. Teva Pharm. USA, Inc.,

2013 WL 12158369 at *5 (D.N.J. 2013) (no misuse where plaintiff did not