Specific Practices That Have Been Challenged as Misuse

• Pages: 63-102

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CHAPTER III

SPECIFIC PRACTICES THAT HAVE BEEN

CHALLENGED AS MISUSE

Patent misuse occurs when a patentee imposes conditions on the use

of its patent that “impermissibly broaden[] the physical or temporal scope

of the patent grant” in a manner that produces anticompetitive effects.1

But courts, most notably the U.S. Court of Appeals for the Federal Circuit,

have applied the doctrine narrowly because it is “a judge-made doctrine

that is in derogation of statutory patent rights against infringement.”2

Therefore while in theory patent misuse could cover a wide variety of

conduct, in practice it has generally been limited to a few discreet

categories of behavior.

The judge-made doctrine defining patent misuse is limited by Section

271(d) of the Patent Act, which now identifies five categories of activity

that are not patent misuse:

(1) deriving revenue fro m acts that, if perfor med by another witho ut the

patentee’s consent, would constitute contributory infringe ment of the

patent;

1. Princo Corp. v. ITC, 616 F.3d 1318, 1328 (Fed. Cir. 2010) (en banc).

Conversely, “[w]here the patentee has not leveraged its patent beyond the

scope of rights granted by the Patent Act, misuse has not been found.” Id.

(citing Monsanto Co. v. McFarling, 363 F.3d 1336, 1341 (Fed. Cir. 2004)

and Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860, 869 (Fed. Cir.

1997)). Some actions, such as post-patent royalty provisions, have been

held to constitute patent misuse per se and not to require a showing of

anticompetitive effect. See Kimble v. Marvel Entm’t, 135 S. Ct. 2401

(2015).

2. Princo Corp., 616 F.3d at 1321; L-3 Commc’ns Corp. v. Jaxon Eng’g &

Maintenance, 2013 WL 1231875, at *5 (D. Col. 2013) (observing that

“[t]he doctrine is an extremely narrow one, confined to ‘a handful of

specific practices’ that have been found to constitute misuse” (quoting

C.R. Bard Inc. v. M3 Systems, 157 F.3d 1340, 1373 (Fed. Cir. 1998)));

see also Ill. Tool Works v. Independent Ink, 547 U.S. 28, 41-42 (2006)

(noting that Congress had “narrow[ed] the patent misuse defense” with the

enactment of 35 U.S.C. § 271(d)(5)).

64 Intellectual Property Misuse

(2) licensing or authorizing another to perform acts that, if performed

without the patentee’s consent, would constitute co ntributory

infringement of the patent;

(3) seeking to enforce his p atent rights against infringement or contributory

infringement;

(4) refusing to license or use any rights to the patent; or

(5) conditioning the lice nse of any rights to the p atent or the sale of the

patented product on the acquisition of a license to rights in another

patent or purchase of a separate product, unless, in view of the

circumstances, the patent owner has market power in the relevant

market for the patent or patented product on which the license or sale is

conditioned.3

The final two categories—Section 271(d)(4) and (5)—were added in

1988, when Congress passed the Patent Misuse Reform Act.4 This

amendment was intended to narrow the scope of patent misuse, to ensure

that it did not punish or impede procompetitive arrangements and

licensing practices.5

Against this backdrop, this chapter will discuss 18 specific practices

that have been challenged—successfully or unsuccessfully—as patent

misuse and the key cases that have shaped the law in this area.

A. Refusal to License

Section 271(d) of the Patent Act states that “[n]o patent owner

otherwise entitled to relief for infringement or contributory infringement

of a patent shall be denied relief or deemed guilty of misuse or illegal

extension of th e patent right b y reason of his havi ng . . . (4) refuse d to

license or use any rights to the patent.”6

Accordingly, in In re Independent Services Organizations Antitrust

Litigation,7 the Federal Circuit held that a refusal to sell patented products

3. 35 U.S.C. § 271(d).

4. 102 Stat. 4674.

5. See, e.g., id. at 1329-30 (collecting statements in t he legislative history);

see also Ill. Tool Works v. Independent Ink, 547 U.S. 28, 41-43 (2006)

(discussing “Congress’ most recent narrowing of the patent misuse

defense. . . .”).

6. 35 U.S.C. § 271(d)(4).

7. 203 F.3d 1322 (Fed. Cir. 2000).

Specific Practices Challenged As Misuse 65

or license a patent falls “within the statutory patent grant” and generally

cannot constitute patent misuse or an antitrust violation.8

B. Tying Arrangements (Patent to Product)

In a typical “tying” or “tie-in” case, the patentee leverages a patent to

insist that its licensees also purchase, lease, or license unpatented goods

or services.9 An example of tying would be a patentee selling a patent ed

machine with the condition that the buyer also purchase supplies,

maintenance services, or parts from the patentee.10 Early decisions held

that such arrangements impermissibly extended the scope of a patent to

include products or services that are not covered by the patent.11 They did

not require “any analysis of actual market conditions,” because it was

“assumed that, by tying the purchase of unpatented goods to the sale of

the patented good, the patentee was restraining competition or securing a

limited monopoly of an unpatented material.”12

After Congress passed the Patent Misuse Reform Act in 1988, tying

analysis in the patent misuse context is guided by Section 271(d)(5) of the

statute.13 To constitute misuse, a tying arrangement requires a showing

8. See id. at 1328 n.2 (“Having concluded that Xer ox's actions fell within the

statutory patent grant, we need not separately consider CSU’s allegations

of patent misuse and they are rejected.”).

9. Princo Corp. v. ITC, 616 F.3d 1318, 1333 (Fed. Cir. 2010) (en banc); see

also Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942); Northern

Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6 (1958).

10. See, e.g., Carbice Corp. of Am. v. American Patents Dev. Corp., 283 U.S.

27 (1931) (conditioning the grant of a license for a patented refrigerating

transportation apparatus upon the purchase of unpatented dry ice was an

improper attempt to extend the “patent monopoly”); see also Morton Salt,

314 U.S. 488 (finding that requiring a lessee of a patented salt canning

machine to purchase unpatented salt tablets used in the machine only from

the patentee was misuse).

11. See, e.g., Senza-Gel Corp. v. Seiffhart, 803 F.2d 661, 667 (Fed. Cir. 1986)

(finding that patent misuse was established based on evidence of tying a

patented process to the leasing of a non-patented machine to carry out the

patented process).

12. Ill. Tool Works v. Independent Ink, 547 U.S. 28, 38 (2006) (citing Morton

Salt, 314 U.S. at 490; Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S.

661, 664 (1944); Carbice, 283 U.S. at 31-32) (internal ci tations omitted).

13. 35 U.S.C. § 271(d)(5).