“Patent misuse” is perhaps one of the most “misused” phrases in patent law. When faced with a patent lawsuit or even just a cease-and-desist letter, accused infringers who disagree with the patent holder’s actions often ask whether they can counter the infringement accusation with a claim of patent misuse.
Which leads to the question: what exactly is “patent misuse” in U.S. patent law?
Patent misuse can occur when a patent holder improperly tries to expand the scope of the patent in a way that has an anti-competitive effect. (See B. Braun Med., Inc. v. Abbott Labs, 124 F.3d 1419, 1426 (Fed. Cir. 1997).) Patent misuse requires more than just aggressive litigation tactics or disagreement as to whether or not an accused product actually infringes: “the defense of patent misuse is not available to a presumptive infringer simply because a patentee engages in some kind of wrongful commercial conduct.” Princo Corp. v. International Trade Commission and U.S. Philips Corp.616 F.3d 1318, 1329 (Fed. Cir. 2010) (en banc). Because patent misuse typically requires an anti-competitive effect, courts give the doctrine a “narrow scope.” Id. Even a finding of anti-competitive effect may not be sufficient to find that patent misuse occurred.
One situation that courts have considered to be patent misuse is that in which a patent holder forced customers to buy un-patented products in exchange for a patent license (also known as “patent tying”). Another example is where a patent holder forced customers to pay royalties even though the patent was expired, although this example may be short-lived based on the Supreme Court’s recent decision to hear an appeal that challenges this long-standing example of patent misuse.
The Patent Act does not define patent misuse. Instead, it’s a judicially-created, equitable doctrine that finds roots in a Supreme Court decision from 1917. However, Section 271(d) of the Patent Act does list a number of activities that are not patent misuse. These include:
- seeking to enforce patent rights against infringement or contributory infringement;
- refusing to license or use any rights to the patent; or
- conditioning a license or sale 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).
A question remains as to whether patent misuse can be raised as a claim in an independent action, or whether it is merely a defense to infringement. A recent court decision from Northern District of Illinois highlighted how even U.S. courts don’t always answer this question in a consistent manner. In Continental Automotive GmbH et al v. iBiquity Digital Corporation, the plaintiff held a license from the patent holder. The plaintiff stopped paying royalties under the license agreement and filed the suit to seek a declaratory judgement of non-infringement. The suit also raised several other claims, including patent misuse and sought damages associated with the claim.
The court dismissed the claim of patent misuse. However, the court acknowledged that the law governing patent misuse is not entirely settled: “courts disagree on whether patent misuse can constitute a claim, not just a defense. . . . Some courts view [the B. Braun opinion] as allowing an affirmative claim of patent misuse so long as the plaintiff does not seek damages. . . . Others read B. Braun as rejecting patent misuse as an affirmative claim regardless of whether it seeks a declaratory, injunctive, or compensatory relief.” In this case, however, the court dismissed the claims and stated that “there is no disagreement among the courts that patent misuse doctrine cannot be asserted for monetary relief.”
It’s interesting to see that patent misuse is not clearly defined by the Patent Act. Is there a reason for this? Of course it’s good to see that there are things that are not patent misuse, but it seems like things would be simpler if we had a common definition of what misuse is. I suppose this is one of the benefits of meeting with an attorney who has experience in these matters. Thanks for the interesting read!