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

• Pages: 127-191

127

CHAPTER V

PRACTICAL ASPECTS OF THE LAW OF

MISUSE: MISUSE IN THE LITIGATION

CONTEXT

The effect of a wel l-founded misuse defense on an intellectual

property lawsuit can be significant. If the alleged infringer prevails on

misuse, it may have a complete defense to a suit for royaltie s.1 The alleged

infringer also may be able to enjoin the intellectual property owner’s

challenged conduct, even if it is not affected by that conduct. This chapter

discusses the procedural issues implicated by misuse claims.

A. Pleading Misuse

1. Misuse as an Affirmative Defense or Counterclaim

Misuse is an affirmative defense to infringement.2 Like other

affirmative defenses,3 if not pleaded, it may be waived.4 Courts have

1. Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, 1025 (Fed. Cir. 2008)

(“When used successfully, [the patent misuse] defense results in rendering

the patent unenforc eable until the misuse i s purged.” (quoting B. Braun

Med. v. Abbott Labs., 124 F.3d 1419, 1427 (Fed. Cir. 1997)).

2. U.S. Philips Corp. v. ITC, 424 F.3d 1179, 1184 (Fed. Cir. 2005) (“Philips

I”) (“Patent misuse is an equitable defense to patent infringement.”); cf.,

Leviton Mfg. Co. v. Pass & Seymour, Inc., 264 F. Supp. 3d 421, 423–25

(E.D.N.Y. 2017) (concluding that settlement and licensing agreement’s

release of claims did not bar subsequent assertion of affirmative defense

of patent misuse).

3. See generally 5 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL

PRACTICE AND PROCEDURE § 1278 (3d ed. 2004). The patent misuse

defense is analogous to defenses such as estoppel, fraud, and illegality, all

of which must be pleaded under Rule 8(c) of the Federal Rules of Civil

Procedure. FED. R. CIV. P. 8(c). See, e.g., My Pie Int’l v. Debould, Inc.,

687 F.2d 919 (7th Cir. 1982) (estoppel); Stanish v. Polish Roman Catholic

Union of Am., 484 F.2d 713 (7th Cir. 1973) (illegality); Ramada Franchise

Sys. v. Royal Vale Hosp. of Cincinnati, 2004 WL 2966948, at *6 (N.D.

Ill. 2004) (fraud).

4. See Bio-Rad Labs. v. Nicolet Instrument Corp., 739 F.2d 604, 617-18

(Fed. Cir. 1984) (defense of patent misuse to patent infringement action

128 Intellectual Property Misuse

discretion, however, to deny a patentee injunctive relief based on patent

misuse even where the defendant failed to raise that defense in an earlier

action involving the same parties and patents, such that res judicata

otherwise would apply.5

In addition to pleading misuse as an affirmative defense, most courts

that have considered the issue have allowed infringement defendants to

plead misuse as a counterclaim.6 As one court explained, pleading misuse

waived as to patent owner’s alleged refusal to sel l its product without

purchase of a license under the patent where that defense was not pleaded

in the answer or presented to the jury); Trio Process Corp. v. L.

Goldstein’s Sons, 461 F.2d 66, 74 (3d Cir. 1972) (failure of an alleged

infringer to raise misuse defense in its answer resulted in waiver). See also

Cummins, Inc. v. TAS Distrib. Co., 700 F.3d 1329, 1337-38 (Fed. Cir.

2012) (affirming summary judgment that res judicata barred patent misuse

declaratory judgment claim because plaintiff could have asserted misuse

defense in prior suit between the parties concerning same operative facts

and resulting in final j udgment on the merits); Glitsch, Inc. v. Koch Eng’g

Co., 216 F.3d 1382 (Fed. Cir. 2000) (affirming dismissal of declaratory

judgment claim based on patent misuse where lower court denied leave to

amend to assert patent misuse defense in earlier case involving the same

parties and same patent). But see U.S. Philips Corp. v. Infodisc Tech.

USA, Inc., 2005 WL 6141291, at *5 (C.D. Cal. 2005) (because defendant

disclosed reliance on misuse defense in interrogatory response, it did not

waive that defense by failing to plead it in answer); CMI, Inc. v.

Intoximeters, Inc., 866 F. Supp.342, 347 (W.D. Ky. 1994) (misuse

defense is properly before the court when the court accepts proof of patent

misuse despite defendant’s failure to plead it).

5. Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661, 669–70 (1944)

(res judicata does not restrict court’s discretion to deny injunctive relief

based on public interest in restricting patent misuse b ecause private

“parties cannot foreclose the courts from the exercise of that discretion by

the failure to interpose the same [patent misuse] defense in an earlier

litigation”); Glitsch , 216 F.3d at 1385 (“On the issue of res judicata [in

Mercoid], [the Supreme Court] held that principles of public policy

required that the issue of patent misuse be available to [the defendant] in

the second case even though it had not been raised as a defense in the

first.”); Leviton Mfg. Co., 264 F. Supp. 3d at 425 (“[T]he Supreme Court

has exempted the defe nse of patent misuse from the usual rules of res

judicata on the ground of what was then called equity and is now called

public policy.”).

6. See, e.g., Moss v. Moss, 2014 WL 4669302, at *6 (N.D.N.Y. 2014)

(“[G]enerally, patent misuse is not an affirmative claim but merely a

Misuse in the Litigation Context 129

as both an affirmative defense and a counterclaim “serves a useful

purpose because, without the counterclaim the plaintiff might withdraw

the suit and leave the rights of the parties in uncertainty.”7 This is

particularly important in the context of misuse, where the defendant

“represents not only itself, but, in a sense, also the public which is likewise

excluded from the field of monopoly that an in-force patent grants to the

holder.”8

defense or counterclaim.”); Procter & Gamble Co. v. CAO Grp., 2013 WL

5353281, at *5 (S.D. Ohio 2013) (rejecting argument that patent misuse

counterclaim should be dismissed because “because patent misuse is an

affirmative defense and not an independent cause of action”); Marchon

Eyewear, Inc. v. Tura LP, 2002 WL 31253199, at *9 (E.D.N.Y. 2002)

(same); Internet Pipeline v. Aplifi, Inc., 2011 WL 4528340, at *3 (E.D.

Pa. 2011) (patent misuse counterclaims are permissible in the appropriate

case); Otsuka Pharm. Co. v. Apotex Corp., 143 F. Supp. 3d 188, 196–97

(D.N.J. 2015) (concluding that defendant stated a plausible patent misuse

counterclaim); In re Gabapentin Patent Litig., 649 F. Supp. 2d 340, 349

(D.N.J. 2009) (same); Miotox LLC v. Allergan, Inc., 2015 WL 2084493,

at *6 (C.D. Cal. 2015) (same); Apple Inc. v. Psystar Corp., 2009 WL

303046, at *3 (N.D. Cal. 2009) (rejecting copyright owner’s “argument

that [copyright] misuse may never be asserted as a counterclaim”). But see

Too Marker Prod. v. Shinhan Art Materials, Inc., 2010 WL 786041, at *5

(D. Or. 2010) (“[M]ost courts have held that a defense of patent misuse

may not be converted to an affirmative claim for damages simply by

restyling it as a declaratory judgment counterclaim.”); Cummins, Inc. v.

TAS Distrib. Co., 676 F. Supp. 2d 701, 705 n.2 (C.D. Ill. 2009), aff’d, 700

F.3d 1329 (Fed. Cir. 2012) (“It appears that patent misuse is only a defense

to a patent-infringement claim, not an affirmative basis for relief.”); PSN

Ill., Inc. v. Ivoclar Vivadent, Inc., 2005 WL 2347209, at *3 (N.D. Ill.

2005) (dismissing counterclaim for patent misuse); Depuy Inc. v. Zimmer

Holdings, 343 F. Supp. 2d 675, 684 n.4 (N.D. Ill. 2004) (“[P]atent misuse

is an affirmative defense, not a counterclaim.”); Bernhardt LLC v.

Collezione Europa USA, Inc., 2002 WL 1602447, at *2 (M.D.N.C. 2002)

(“[P]atent misuse is not an affirmative claim, b ut rather a defense . . .”).

See also Amaretto Ranch Breedables, LLC v. Ozimals, Inc., 790 F. Supp.

2d 1024, 1033 (N.D. Cal. 2011) (“There is no consensus on whether

copyright misuse can be brought as an independent claim (as opposed to

as an affirmative defense) and district courts come down on both sides of

the issue.”) (collecting cases).

7. Procter & Gamble, 2013 WL 5353281, at *5 (citation and quotation marks

omitted).

8. Id.