Basics of Intellectual Property Laws for the Antitrust Practitioner

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CHAPTER I

BASICS OF INTELLECTUAL PROPERTY LAWS

FOR THE ANTITRUST PRACTITIONER

Issues of antitrust liability arise in patent cases most commonly,

though not exclusively, when the alleged infringer claims that the patent

asserted was procured by fraud,1 or the party knowingly asserts baseless

claims of patent infringement.2 Antitrust issues also may arise in

connection with other activities such as licensing pools and tying

arrangements involving patents or other types of intellectual property

such as copyright, trademark and trade secrets.

In order to understand the contexts in which these antitrust issues

may arise, this chapter provides antitrust practitioners with some

background on various forms of intellectual property, focusing primarily

on utility patent laws and procedures. It seeks to acquaint the reader with

matters relevant to antitrust claims, such as those bearing on the validity,

enforceability, interpretation and scope, infringement, implied license,

exhaustion, waiver, and estoppel.

A. Overview of the United States Patent Laws

1. The Constitutional Foundations of Patent Protection

The United States Constitution provides, “Congress shall have power

. . . to promote the progress of science and useful arts by securing for

limited times to authors and inventors the exclusive right to their

respective writings and discoveries.”3

Congress passed the first United States Patent Act in 1790 (“An act

to promote the Progress of Useful Arts”), then replaced it with the Patent

1. Walker Process Equip. v. Food Mach. & Chem. Corp., 382 U.S. 172,

176–77 (1965) (holding that enforcement of a patent obtained through

fraud on the Patent Office may be the basis of an action under § 2 of the

Sherman Act); Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d

1059 (Fed. Cir. 1998); Atari Games Corp. v. Nintendo of Am., Inc., 897

F.2d 1572, 1576 (Fed. Cir. 1990).

2. Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1305 (Fed. Cir.

2004); Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282 (9th Cir. 1984);

Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir. 1979).

3. U.S. Const. art. 1, § 8, cl. 8.

2 Antitrust Counterattack in Intellectual Property Litigation Handbook

Act of 1793, largely shaped by then-Secretary of State Thomas

Jefferson.4 The Act’s definition of patentable subject matter has been

unchanged since it was enacted: “any new and useful art, machine,

manufacture or composition of matter, and any new and useful

improvement on any art, machine, manufacture or composition of

matter.”5 As of December 31, 2009, 7,640,591 patents had been issued.6

2. Policies behind Patent Laws

The patent laws seek to foster invention, including investment and

risk taking, and promote innovation.7 By granting inventors the right to

exclude others from making, using, or selling a patented invention for a

limited period of time, patent law encourages innovation and its

byproducts, such as new jobs, new industries, new consumer goods, and

trade benefits.8 A corollary benefit arises out of the incentive to design

around a competitor’s patent, thus providing a continual flow of

innovation into the marketplace.9 Patent law also encourages the public

disclosure of knowledge through publication of patents upon issuance.10

4. Act of April 10, 1790, c.7, 1 Stat. 109; Act of Feb. 21, 1793, § 1, 1 Stat.

319; DUMAS MALONE, JEFFERSON AND THE RIGHTS OF MAN 285 (1951).

5. Act of Feb. 21, 1793, § 1, 1 Stat. 319; accord 35 U.S.C. § 101 (“Whoever

invents or discovers any new and useful process, machine, manufacture,

or composition or matter, or any new and useful improvement thereof,

may obtain a patent therefore, subject to the conditions and requirements

of this title.”).

6. Patent number 7,640,591 “Image display device” was issued December

29, 2009. See U.S. Patent and Trademark Office, www.uspto.gov.

7. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480 (1974); Brenner v.

Manson, 383 U.S. 519, 534 (1966) (“The basic quid pro quo

contemplated by the Constitution and the Congress for granting a patent

monopoly is the benefit derived by the public from an invention with

substantial utility.”); Paulik v. Rizkalla, 760 F.2d 1270, 1276 (Fed. Cir.

1985).

8. Diamond v. Chakrabarty, 447 U.S. 303, 307 (1980); Kewanee Oil,

416 U.S. at 484; Paulik, 760 F.2d at 1276.

9. State Indus. v. A.O. Smith Corp., 751 F.2d 1226, 1235–36 (Fed. Cir.

1985).

10. 35 U.S.C. § 10; Brenner v. Manson, 383 U.S. 519, 533 (1966).

Basics of Intellectual Property Laws for the Antitrust Practitioner 3

3. Statutory Scheme of United States Patent Laws

Title 35 of the United States Code contains the statutes governing

most aspects of patent practice, including the establishment of the United

States Patent and Trademark Office (PTO), the types of patents available,

patentable subject matter, the requirements for a patent, the application

and examination process, the rights that accompany a patent, and the

remedies available to one whose patent has been infringed.11

Implementing federal regulations are located in Title 37 of the Code of

Federal Regulation.12 A brief overview of the key requirements for

obtaining a patent, along with a description of the rights associated

therewith, follows.

a. Requirements for Obtaining a Patent

In the United States, an invention may be patented only if it satisfies

certain conditions. Specifically, an invention may be patented if the

subject matter of the invention is deemed to be (1) patentable subject

matter, and the invention is (2) useful (there is a practical use for the

invention), (3) novel (the exact combination of elements of the invention

are not found in prior art), and (4) nonobvious.13

Patentable subject matter includes processes, machines, articles of

manufacture, and compositions of matter. Naturally occurring products

are not patentable, nor are abstract principles, pure mathematical

formulae or principles of nature such as the law of gravity.14

Prior art, which is the focus of much attention in patent prosecution

and litigation, is knowledge that exists in other patents or patent

applications or is otherwise publicly available. A patent may be invalid

if it is found in the prior art or if the prior art makes it obvious at the time

11. See 35 U.S.C. §§ 1–376.

12. 37 C.F.R. Ch. 1.

13. 35 U.S.C. §§ 101–103.

14. J.E.M. Ag Supply v. Pioneer Hi-Bred Int’l, 534 U.S. 124, 130 (2001);

Diamond v. Diehr, 450 U.S. 175, 185 (1981); Diamond v. Chakrabarty,

447 U.S. 303, 309 (1980); Funk Bros. Seed Co. v. Kalo Inoculant Co.,

333 U.S. 127, 130 (1948). In In re Bilski, 545 F.3d 943, 965–66 (Fed.

Cir. 2008) (en banc), cert. granted sub nom. Bilski v. Doll, 2009 U.S.

LEXIS 4103 (June 1, 2009), the Federal Circuit rejected processes as

unpatentable under § 101 unless (1) they are tied to a particular machine

or apparatus (except an ordinary computer), or (2) they transform a

particular article into a different state or thing.