Patent Misuse and Innovation

Competition Policy and Antitrust, Patents and Intellectual Property

Article Snapshot

Author(s)

Marshall Leaffer

Source

Journal of High Technology Law, Vol. 10, pp. 142-167, 2010

Summary

The constant threat of patent litigation hinders innovation. This paper explains how courts could use the doctrine of “patent misuse” to challenge patent licensing practices that inhibit innovation. Patent misuse is quite different from antitrust law.

Policy Relevance

Courts should restrict current patent licensing practices that harm innovation.

Main Points

  • Past courts described attempts by a patent owner to allow the use of a patented product only if the user bought another product as “patent misuse.”
     
  • In the 1980s, the courts and the Patent Misuse Reform Act restricted the “patent misuse” doctrine to cases in which the patent owner’s conditions violated antitrust law.
     
  • Antitrust liability is hard to establish, because the courts require proof that the patent owner has market power, and that the anticompetitive effects of its conduct outweigh the benefits.
     
  • Patent misuse differs from antitrust in several ways. For example:
     
    • The winner of a patent misuse claim gets an injunction against the enforcement of the patent, not damages.
       
    • Antitrust limits market power, but patent misuse stops patent owners from undermining patent law, which gives them very limited exclusive rights.
       
  • Critics of patent misuse argue that it creates uncertainty, but current patent law favors patent owners, and the doctrine of patent misuse will correct the imbalance.
     
  • In patent misuse cases, courts should ask if the patent owner imposes conditions that expand the scope or duration of a patent; if so, the owner should prove the conditions have a business justification.
     
  • Current patent licensing practices will often violate the patent misuse doctrine. These include:
     
    • “Grant-back” clauses that require licensees to give the licensor exclusive rights to innovations based on the patented product.
       
    • Package licensing, the obligation to license many patents when only one is needed.
       
    • Attempts to enforce a patent after it has been used in setting industry standards.
       

 

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