IP Misuse as Foreclosure
| Author | Christina Bohannan |
| Position | Professor of Law, The University of Iowa College of Law |
| Pages | 475-527 |
475
IP Misuse as Foreclosure
Christina Bohannan
I. INTRODUCTION ...................................................................................... 476
II. HISTORICAL DEVELOPMENT OF MISUSE DOCTRINE ............................... 479
III. CURRENT APPROACHES TO MISUSE ....................................................... 486
A. MISUSE DEFINED BY SUBSTANTIVE ANTITRUST PRINCIPLES ................. 487
1. Apparent Dominance of the Antitrust Model of Misuse ..... 487
2. Critique of the Antitrust Model ............................................ 490
B. MISUSE AS AN ATTEMPT TO OBTAIN RIGHTS “BEYOND THE SCOPE”
OF A STATUTORY IP RIGHT ............................................................... 495
IV. TOWARD COHERENCE IN MISUSE DOCTRINE: MISUSE AS
FORECLOSURE OF COMPETITION, INNOVATION, OR THE PUBLIC
DOMAIN ................................................................................................. 497
A. TYING AND QUASI-TYING CLAIMS ...................................................... 501
1. Tying as an Antitrust Violation and the Leverage Theory
of Tying ................................................................................... 501
2. Tying as Foreclosure of Competition ................................... 503
3. Tying as Foreclosure of Innovation or Access to the
Public Domain ........................................................................ 505
4. Package or Blanket Licensing of Patents and Copyrights ... 507
B. LICENSES RESTRICTING THE USE OR DEVELOPMENT OF NEW
TECHNOLOGIES OR PRODUCTS: RESTRAINTS ON INNOVATION AND
NONCOMPETITION AGREEMENTS ....................................................... 511
C. EXTENSION OF PATENT OR COPYRIGHT ROYALTIES BEYOND
EXPIRATION OF THE IP TERM ............................................................ 515
D. APPROPRIATING DOWNSTREAM VALUE: REACH-THROUGH ROYALTY
AGREEMENTS AND RELATED PRACTICES ............................................ 518
E. LICENSES RESTRICTING ACCESS TO PUBLIC-DOMAIN INFORMATION .... 523
V. CONCLUSION ......................................................................................... 525
Professor of Law, The University of Iowa College of Law. Th anks to Tom Cotter, Robin
Feldman, Tom Gallanis, and Herb Hovenkamp for providing helpful comments. Thanks also to
the Ewing Marion Kauffman Foundation for providing valuable research support.
476 IOWA LAW REVIEW [Vol. 96:475
I. INTRODUCTION
It is both curious and deeply troubling that, in an age of intellectual
property (“IP”) expansionism,1 the one doctrine explicitly concerned with
limiting IP overreaching has no coherent basis in IP policy. Although courts
generally agree that the misuse doctrine relates to the use of IP licenses and
other arrangements to obtain rights beyond the scope of a statutory IP right,
the doctrine lacks coherence and certitude in determining the types of
practices that should be condemned and why. Perhaps as a result, much of
the case law has embraced an antitrust standard for misuse, which may be
coherent, but is less faithful to the core IP values of promoting innovation
and protecting access to the public domain. The result is a schizophrenic
doctrine that vacillates between IP and antitrust law.2
The misuse doctrine evolved first in patent law. The classic case
involved the tying of patented and unpatented goods—that is, the seller’s
requirement that one could not purchase or lease the patented product
without also taking unpatented products or services as well.3 Several courts
held that such tying violated federal patent policy by attempting to expand
the statutory monopoly to include a second product not covered by the
patent claims.4 Since then, misuse has expanded into other practices and
1. See, e.g., Christina Bohannan & Herbert Hovenkamp, IP and Antitrust: Reformation and
Harm, 51 B.C. L. REV. 905 (2010).
2. On the divide between antitrust and IP approaches to misuse generally, see 1 HERBERT
HOVENKAMP ET AL., IP AND ANTITRUST: AN ANALYSIS OF ANTITRUST PRINCIPLES APPLIED TO
INTELLECTUAL PROPERTY LAW ch. 3 (2d ed. 2010), and Thomas F. Cotter, Misuse, 44 HOUS. L.
REV. 901 (2007). For arguments that patent misuse should not be limited to antitrust violations,
see Robin C. Feldman, The Insufficiency of Antitrust Analysis for Patent Misuse, 55 HASTINGS L.J.
399 (2003), and Robert J. Hoerner, The Decline (and Fall?) of the Patent Misuse Doctrine in the
Federal Circuit, 69 ANTITRUST L.J. 669 (2001). For arguments that copyright misuse should not
be defined exclusively by antitrust law, see Ilan Charnelle, The Justification and Scope of the
Copyright Misuse Doctrine and Its Independence of the Antitrust Laws, 9 UCLA ENT. L. REV. 167
(2002), Brett Frischmann & Dan Moylan, The Evolving Common Law Doctrine of Copyright Misuse:
A Unified Theory and Its Application to Software, 15 BERKELEY TECH. L.J. 865 (2000), Ramsey
Hanna, Note, Misusing Antitrust: The Search for Functional Copyright Misuse Sta ndards, 46 STAN. L.
REV. 401 (1994), and Kathryn Judge, Note, Rethinking Copyright Misuse, 57 STAN. L. REV. 901
(2004).
3. E.g., Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942) (articulating the
modern misuse doctrine for the first time and applying it to a tie of a patented salt-injection
machine to unpatented salt), overruled by Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28
case involving tying of a patented process for installing asphalt emulsion on roads to the
unpatented emulsion); Carbice Corp. v. Am. Patents Dev. Corp., 283 U.S. 27 (1931) (same,
involving tying of a patented refrigeration box and dry ice); Motion Picture Patents Co. v.
Universal Film Mfg. Co., 243 U.S. 502 (1917) (same, involving tying of a patented film
projector and unpatented film); Henry v. A.B. Dick Co., 224 U.S. 1 (1912) (same, involving
tying of a patented mimeograph machine and unpatented stencils, paper, and ink), overruled by
Motion Picture Patents, 243 U.S. 502.
4. See, e.g., Morton Salt, 314 U.S. 488.
2011] IP MISUSE AS FORECLOSURE 477
into copyright law.5 Courts have considered the doctrine’s applicability to a
variety of practices including tying,6 package licensing of related patented or
copyrighted goods,7 restraints on a licensee’s ability to produce competing
technologies,8 and requiring royalty payments beyond the expiration of the
patent or copyright term.9
From the beginning, courts have stated that the purpose of the misuse
doctrine is to provide a remedy against attempts to expand the IP holder’s
statutory “monopoly.” Although some of these early cases indicated that
such an expansion of the IP “monopoly” is a concern of antitrust law,10 they
relied primarily on federal IP policy to justify the doctrine. Over time,
however, courts have begun to judge many cases of alleged misuse by
antitrust standards, probably because antitrust law provides courts with a
well-developed set of rules by which to judge the complexities of effects on
competition. This merger of antitrust and misuse has provoked a great deal
of confusion and criticism. The relationship between misuse and antitrust is
not well understood, and it is unclear why IP misuse should be defined as a
breach of antitrust policy rather than as a breach of IP policy. After all,
misuse is a creature of IP law. In addition, antitrust law does not reach all of
the conduct that has been deemed to constitute misuse.
The incoherence in misuse doctrine is particularly problematic given
the nature and severity of the penalty. Misuse is not an affirmative cause of
action but, subject to a few exceptions, is raised as a defense in an IP-
infringement claim.11 Thus, the doctrine benefits primarily infringers,
5. See infra notes 47–54 and accompanying text.
6. See infra text accompanying notes 59–73.
7. See discussion infra Part IV.A.4.
misuse in computer-aided design (“CAD”) licensor’s restriction forbidding licensee fro m
developing any CAD program); see discussion infra Part IV.B.
machine requiring royalties to be paid past the expiration date of patents); see discussion infra
Part IV.C.
10. See, e.g., Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 517
(1917) (noting the relevance of the Clayton Act’s anti-tying provision, currently codified at 15
U.S.C. § 14 (2006), which had been passed in 1914 and which “confirmed” its resolution of the
case); see also Mercoid Corp. v. Minneapolis-Honeywell Regulator Co. (Mercoid II), 320 U.S. 680,
684 (1944) (“The legality of any attempt to bring unpatented goods within the protection of
the patent is measured by the anti-trust laws not by the patent law.”).
11. One exception, which is rarely invoked, applies in br each-of-contract claims for
violation of a license agreement, where courts have also recogniz ed an equitable defense of
patent misuse when the misuse occurs in the license subject t o the breach. The leading case is
Brulotte, which went up to the Supreme Court from a state-law breach-of-contract claim when
the licensee stopped paying royalties on a contract that called for the royalties to b e paid after
the patent expired. See Thys Co. v. Brulotte, 382 P.2d 271 (Wash. 1963), rev’d, Brulotte, 379 U.S.
that parties can bring declaratory-judgment actions to determine whether an IP holder has
committed misuse. See, e.g., Allan Block Corp. v. Cnty. Materials Corp., 512 F.3d 912 (7th Cir.
To continue reading
Request your trial