Practical Aspects of the Law of Misuse: Misuse in the Licensing Context

Licensing intellectual property rights to third parties in a position to
exploit such rights promotes many of the objectives underlying both the
intellectual property and antitrust laws. Licensing revenues stimulate
initial expenditures for innovation and authorship by enabling the licensor
to recover research and development costs. Licensing also accelerat es
follow-on inventions and expressions by permitting licensees to become
familiar with the licensed intellectual property. Finally, by placing new
creations and inventions into the hands of companies that can
commercialize, expand upon, and publicize them, licensing ensures the
dissemination of intellectual property to the public.
Licensing, when voluntarily agreed upon by the patent owner, also
supports the objectives of the antitrust laws. Courts, commentators, and
enforcement agencies have all recognized the significant procompetitive
benefits of licensing in introducing new products, furthering the
development of new technologies, and realizing efficiencies from some
combinations of complementary components of production.1
1. Licensing, cross-lice nsing, or otherwise transferring intellectual property
(hereinafter licensing’) can facilitate integration of the licensed property
with complementary factors of production, which include manufacturing
and distribution facilities, workforces, and other ite ms of intellectual
property rights. This integration can lead to more effic ient exploitation of
the intellectual property, benefiting consumers through the reduction of
costs and the introducti on of new products. Such a rrangements increase
the value of intellectual property to consumers and to the developers of
the technology. By po tentially increasing the expected returns from
intellectual property, licensing also can increase the incentive for its
creation and thus promote greater investment in research and
development. Licensing also may promote the coordinated development
of technologies that are in a blocking relationship.U.S. DEPT OF JUST ICE
INTELLECTUAL PROPERTY § 2.3 (2017); see also Princo Corp. v. ITC, 563
F.3d 1301 (Fed Cir. 2009) (noting procompetitive efficiencies of package
licenses); U.S. Philips Corp. v. ITC, 424 F.3d 1179, 1192-93 (Fed. Cir.
2005) (discussing pr ocompetitive benefits of package lice nsing).
104 Intellectual Property Misuse
In fact, licensing is playing a larger role in an increasingly connected
world. Interoperability standards requiring technical input from entire
industries have contributed to advances such as wireless
telecommunications. Even in more traditional industries where licensing
may remain the exception, the cost and scale of new product development
and other forces may demand joint projects with associated licensing.
While intellectual property licenses typically enable these objectives,
they also have the potential to discourage innovation or distort the
competitive process. And licenses may be used to exert some degree of
control over a licensees activities beyond the scope of the licensed
intellectual property. The law of misuse deters certain conduct involving
patent rights. When a licensor leverages its patent to impose conditions
beyond the scope of its patent rights, an accused infringer may seek to
render the “misused” patent unenforceable.
This chapter provides practical guidance to help licensors avoid
misusing their patents. It first discusses general considerations applicable
to the misuse analysis. It then proposes negotiation and drafting
techniques for limiting the risk of a misuse finding when licensing
A. General Misuse Considerations in Patent Licensing
Courts recognize that patents confer substantial rights on the patent
holder, including for example, to grant or refuse licenses, charge whatever
royalties the market will bear,2 and to limit the scope of the license to a
particular field of use.3 These rights, while expansive, are limited in part
by the doctrine of misuse—a patentee may not leverage the patent to
impose licensing conditions that broaden the patent’s physical or temporal
scope with anticompetitive effect.4 Thus, to avoid a finding of misuse,
2. See, e.g., Kimble v. Marvel Entm’t, 135 S. Ct. 2401, 2407 (2015) (“[T]he
patentee possesses exclusive rights to the patented articlerights he may
sell or license for royalty payments if he so chooses.”); Brulotte v. Thys
Co., 379 U.S. 29, 33 (1964) (“A patent empowers the owner to exact
royalties as high as he can negotiate with the leverage of that monopoly.”);
Princo Corp. v. ITC, 616 F.3d 1318, 1327 (Fed. Cir. 2010) (en banc)
(citing Brulotte, 379 U.S. at 33).
3. See, e.g., Princo Corp., 616 F.3d at 1328 (citing General Talking Pictures
Corp. v. Western Elec. Co., 304 U.S. 175, 181 (1938)).
4. See Princo Corp., 616 F.3d at 1327 (quoting Transparent-Wrap Mach.
Corp. v. Stokes & Smit h Co., 329 U.S.637, 643 (1947)).

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT