Chapter §19.03 Absence of Liability for Infringement

JurisdictionUnited States

§19.03 Absence of Liability for Infringement

Asserted in accordance with 35 U.S.C. §282(b)(1) (eff. Sept. 16, 2012), this category of defenses covers situations where there cannot be liability as a matter of law; for example, the patent in suit has been expired for more than six years before the filing of the infringement action.8 It also can be viewed as encompassing the defenses of license, prior user right, experimental use, laches, equitable estoppel, state sovereign immunity, and temporary presence in U.S. territory. Each is discussed below.

[A] License

Absence of liability for infringement under §282(b)(1) encompasses the defense of license. As discussed below, a patent license may be express or implied; it may also be exclusive or nonexclusive.

The simplest type of license, a nonexclusive license, is simply an agreement or covenant between the patentee and the licensee that the patentee will not sue the licensee for acts that would otherwise constitute infringement.9 A nonexclusive license is not a transfer of ownership of the patent (i.e., an assignment).10

On the other hand, an exclusive license may or may not be tantamount to an assignment. For example, an exclusive license may grant "all substantial rights" in a patent and thus give the exclusive licensee standing to sue in its own name without the participation of the patent owner.11 Contrariwise, the holder of an exclusive license that transfers less than all substantial rights must join the patent owner if the licensee seeks to sue for infringement.12

In accordance with the language of 35 U.S.C. §271(a), if an accused infringer believes that it is a licensee, either expressly or impliedly, it will assert that it does not infringe because its acts were not "without authority" as required by the statute. In other words, the accused infringer will argue that it acted with the authority or permission of the patentee when it made, used, sold, offered to sell, and/or imported into the United States the patented invention or its substantial equivalent, and therefore cannot be liable for infringement.

Express and implied patent licenses are considered separately below.

[1] Express License

An express license is formed when the parties agree, either in writing or orally,13 that the patent owner (licensor) will not sue the other party (licensee) for its acts of using, making, selling, offering to sell, or importing the claimed invention. A license is express if created by the actions of the parties themselves rather than implied by operation of law. Patent licensing is a complex subspecialty of patent law; a number of reference works provide detailed guidance.14

Express licenses may be exclusive or nonexclusive. An exclusive license is one in which the patent owner agrees to grant a license to the licensee only, and to no other third parties. Moreover, an exclusive license usually presumes that the patentee will not compete with the exclusive licensee in making or selling the licensed product(s).15 In contrast, a nonexclusive license does not give the licensee any right to control competition within the scope of the license; rather, it simply protects the licensee from being sued for infringement.16

[2] Implied License

The existence of an implied license is a legal conclusion that the patent owner has impliedly waived its statutory right to exclude another from making, using, selling, offering to sell, or importing the claimed invention. The Supreme Court has stated the following with respect to implied licenses:

No formal granting of a license is necessary in order to give it effect. Any language used by the owner of the patent, or any conduct on his part exhibited to another from which that other may properly infer that the owner consents to his use of the patent in making or using it, or selling it, upon which the other acts, constitutes a license and a defense to an action for a tort. Whether this constitutes a gratuitous [i.e., royalty-free] license, or one for a reasonable compensation, must of course depend upon the circumstances; but the relation between the parties thereafter, in respect of any suit brought, must be held to be contractual and not based on unlawful invasion of the rights of the owner. 17

The Federal Circuit recognizes that an implied license may arise in at least four different circumstances: by acquiescence, by conduct, by equitable estoppel (i.e., estoppel in pais), or by legal estoppel.18 Wang Labs. v. Mitsubishi Elecs. Am.19 illustrates a successful assertion of the implied license defense under a theory of equitable estoppel, a recognized but rarely established defense in U.S. patent law.20 Wang developed Single In-Line Memory Modules (SIMMs) in the 1980s and encouraged Mitsubishi to make 256K chips incorporating the SIMMs. Wang succeeded in its campaign to have an electronics industry standards organization, Joint Electronics Devices Engineering Council (JEDEC), adopt SIMMs as a standard, without informing JEDEC that it was seeking to patent the SIMMs technology.

When Wang thereafter sued Mitsubishi for infringement of Wang's SIMMs patent, the Federal Circuit affirmed a district court's holding that Mitsubishi was entitled to an irrevocable, royalty-free implied license based on six years of interaction between the parties. These interactions led Mitsubishi to reasonably infer Wang's consent to its use of the invention. Although Wang did not itself make SIMMs and had to buy them from other manufacturers such as Mitsubishi, Wang benefited from Mitsubishi's reliance in the form of lowered prices as the market for SIMMs grew. The Federal Circuit acknowledged that its imposition of an implied license in Wang was "in the nature of" equitable estoppel, but determined "a formal finding of equitable estoppel [was not required] as a prerequisite to a legal conclusion of implied license."21

Another variety of implied license disputes arises when one who purchased a patented device makes repairs so extensive that the patentee construes them as an infringing reconstruction of its claimed invention. Importantly, the "use" contemplated by 35 U.S.C. §271(a) as actionable infringement is limited by the statute to use "without authority." In contrast, use of a patented device that has been legally purchased is not infringement. A purchaser is deemed to have an implied license to use the patented device she purchased, which includes a right to repair it.22 For example, replacement of a spent part is a fundamental example of permissible repair.23 When that repair expands to become reconstruction or a new making of the patented device, however, such acts are no longer considered within the scope of the purchaser's implied license.24 Federal Circuit case law has not clearly distinguished between permitted repair and prohibited reconstruction; the cases are, by necessity, extremely fact-specific and merit careful scrutiny.25

Anton/Bauer, Inc. v. PAG, Ltd.26 illustrates another variation of an implied license. The patent in suit covered a battery pack connection that joined a battery pack to a portable television video camera. The patent's claims recited a connection comprising both a male plate and a female plate that would be fitted together to form a mechanical and electrical connection. In use, the female plate would be attached to a television camera or other electrically operated device and the male plate would be attached to the housing of a battery pack. Neither the male plate nor the female plate was separately patented, however. Notably, the patentee did not sell the patented combination of male and female plates but rather sold only the female plates to firms in the portable television video camera industry. These firms in turn sold the cameras with female plates attached to the public.

The accused infringer sold battery packs incorporating the male plate (only) of the claimed invention. The patentee theorized that direct infringement occurred when end-users connected their video cameras (incorporating the female plate) with the male plate of the accused battery pack. The patentee further contended that the battery pack manufacturer induced or contributed to the direct infringement by selling the battery pack for use with the female plate and by urging end-users to employ it in that fashion.

The Federal Circuit in Anton/Bauer rejected the patentee's infringement theory and held that the end-users possessed an implied license that precluded liability. The appellate court observed that a patentee grants an implied license to a purchaser when (1) the patentee sells an article that has no noninfringing uses and (2) the circumstances of the sale plainly indicate that the grant of a license should be inferred.27 In the case at bar, the female plate had no noninfringing uses. The sale by the patentee of the unpatented female plate as a stand-alone item effectively extinguished the patentee's right to control the use of the plate, because the female plate could only be used in the patented combination and that combination had to be completed by the purchaser.28 With regard to circumstances of the sale, the Federal Circuit stressed that the patentee had placed no restrictions on the use of the female plates it sold.29 "By the unrestricted sale of the female plate, [the patentee] grants an implied license to its customers to employ the combination claimed in the [] patent." Thus there was no direct infringement to support the patentee's claim of inducing and/or contributory infringement by the battery pack manufacturer.

The Federal Circuit in Anton/Bauer rejected the patentee's argument that finding an implied license existed would "obviate the applicability of contributory infringement in every case." The key fact was the involvement of the patentee, the court emphasized; its implied license holding in this case "merely limits a patentee's ability to assert contributory infringement where the patentee has chosen to sell part, but not all, of...

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