Historical Development of the Misuse Doctrine

• Pages: 1-35

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CHAPTER I

HISTORICAL DEVELOPMENT

OF THE MISUSE DOCTRINE

The misuse doctrine has been subject to substantial scrutiny in the

courts and academic literature. Nevertheless, confusion and disagreement

remain over its roots, rationales, and the role it should play in

contemporary intellectual property law. Various aspects of the doctrine

are explored more fully in later chapters. This chapter provides a basic

overview of the historical development of the patent misuse doctrine,

which is the genesis of the modern-day misuse doctrine that today also

encompasses misuse of copyrights and trademarks.1

A. Patent Misuse Generally

“Patent misuse” is an affirmative defense to an action for patent

infringement or for royalties under a license that arises when the patentee

engages in certain anticompetitive conduct, or conduct contrary to public

policy, using the patent in suit. Conduct found to be patent misuse

typically has involved imposing conditions on access to a patent that

extend beyond the physical or temporal scope of the patent—thereby

improperly “extending” its effective scope—and occasionally other

violations of the antitrust laws. For example, requiring a licensee of patent

A to license an unrelated patent B as a condition of the license may

constitute misuse of patent A. A finding of patent misuse generally

renders the patent unenforceable until the conduct is ended and its effects

are purged. As discussed in further detail below and in later chapters,

some efforts to extend the scope of the patent have been condemned as

misuse per se, while others require a further showing that the conduct

causes anticompetitive effects.

1. Chapter VI contains a separate discussion of the development of t he

copyright and trademark misuse doctrines.

2 Intellectual Property Misuse

Although many recent misuse decisions have borrowed heavily from

antitrust principles in shaping the doctrine,2 the concept of misuse

emerged not from antitrust law, but from the patent law doctrine of

contributory infringement. In fact, courts almost universally rejected early

attempts at developing a defense to patent infringement claims based on

alleged antitrust violations by the patent holder.

This chapter reviews these early “antitrust defense” cases, charts the

development of the misuse defense from the doctrine of contributory

infringement, and discusses more recent case law and legislative

developments emphasizing antitrust principles in misuse analysis.

B. The Early Cases

Early efforts to develop a defense to patent infringement suits based

on the patent holder’s conduct relied primarily on the antitrust laws.

Almost immediately after the passage of the Sherman Act in 1890, alleged

infringers began trying to use this new statute as a defense to patent

infringement suits. Patent infringement defendants would plead that the

plaintiff was an illegal trust, that the plaintiff acquired title from an illegal

trust, or that the patent infringement suit was part and parcel of a

conspiracy to restrain trade, the terms of which were often said to include

price stabilization agreements. With rare exception, these efforts at

developing an antitrust-based defense to patent infringement claims

failed.3

2. Chapter VII discusses the intersection between the policies behind

antitrust and misuse.

3. See, e.g., Edison Elec. Light C o. v. Sawyer-Man Elec. Co., 53 F. 592, 598

(2d Cir. 1892); Strait v. Nat’l Harrow Co., 51 F. 819, 820 (C.C.N.D.N.Y.

1892); American Soda Fountain Co. v. Green, 69 F. 333 (C.C.E.D. Pa.

1895); Bonsack Co. v. Smith, 70 F. 383, 385-87 (C.C.W.D.N.C. 1895);

Columbia Wire Co. v. Freeman Wire Co., 71 F. 302, 306-07 (C.C.E.D.

Mo. 1895); Brown Saddle Co. v. Troxel, 98 F. 620 (C.C.N.D. Ohio 1899);

Nat’l Folding-Box & Paper Co. v. Robertson, 99 F. 985 (C.C.D. Conn.

1900); Otis Elevator Co. v. Geiger, 107 F. 131, 132 (C.C.D. Ky. 1901);

Cimiotti Unhairing Co. v. American Fur Ref. Co., 120 F. 672, 673

(C.C.D.N.J.), rev’d on other grounds, 123 F. 869 (3d Cir. 1903), aff’d, 198

U.S. 399 (1905); Johns-Pratt Co. v. Sachs Co., 176 F. 738, 739-40 (C.C.D.

Conn. 1910); Motion Picture Patents Co. v. Ullman, 186 F. 174, 175

(C.C.S.D.N.Y. 1910); U.S. Fire Escape Counterbalance Co. v. Joseph

Halsted Co., 195 F. 295 (N.D. Ill. 1912); Western Elec. Co . v. Wallerstein,

48 F.2d 268, 269 (W.D.N.Y. 1930); Western Elec. Co. v. Pacent

Historical Development of Misuse Doctrine 3

For example, Strait v. National Harrow Co.4 involved an action by an

alleged infringer to enjoin the patent holder from instituting an

infringement suit. The alleged infringer asserted that the patent holder had

entered into an improper combination for the purpose of acquiring a

monopoly in the market for spring-tooth harrows and, as an incident to

this combination, had acquired all the relevant patent rights from other

manufacturers. The court rejected this assertion, observing that “[e]ven a

gambler, or the keeper of a brothel, cannot be deprived of his property

because he is an obnoxious person or a criminal; and it is no defense to

the trespass upon it . . . that it was used in carrying on the unlawful

occupation.”5

Similarly, in Brown Saddle Co. v. Troxel,6 a direct infringement case,

the defendant alleged by way of an affirmative defense that the patent at

issue was being used as part of an illegal combination. The trial court

struck these allegations as impertinent. Then Circuit Judge Taft upheld

the trial court’s action, holding that the manner in which a patent is used

is immaterial in a suit to enforce it: “[The plaintiff] is merely seeking by

its bill to preserve its rights in its own property. What it may do with that

property . . . cannot deprive it of its right to invoke the protection of the

court against trespass and infringement.”7

Perhaps the most explicit rejection of a defense based on the patent

holder’s use of the patent is found in United States Fire Escape

Counterbalance Co. v. Joseph Halsted Co.8 There, the court stated that an

alleged attempt to extend the patent “monopoly” to cover unpatented

products—conduct that would become the very epitome of patent

misuse—was not a defense to an infringement action, even though it was

possibly an antitrust violation:

The sole value of patent property resides in monopoly. Within certain

limits this monopoly may be made to extend to nonpatentable property

Reproducer Corp., 53 F.2d 639, 640 (S.D.N.Y. 1930); Radio Corp. of Am.

v. Duovac Radio Tube Corp., 6 F. Supp. 275 (E.D.N.Y. 1931); Radio

Corp. of Am. v. Majestic Distribs., 53 F.2d 641, 642-44 (D. Conn. 1931);

Radio Corp. of Am. v. Hygrade Sylvania Corp., 10 F. Supp. 879, 881

(D.N.J. 1934).

4. 51 F. 819 (N.D.N.Y. 1892).

5. Id. at 820-21.

6. 98 F. 620 (C.C.N.D. Ohio 1899).

7. Id. at 621.

8. 195 F. 295 (N.D. Ill. 1912).