The following article appears in the journal JOM, 44 (8) (1992), p. 54. JOM is a publication of The Minerals, Metals & Materials Society

Patent Misuse: Limitations on a Patentee's Rights

Under U.S. law, a patentee has the right to exclude others from making, using, or selling a protected invention. The patentee may choose to obtain sole benefit of the patent by withholding the practice of the invention from others or may license one or more parties to practice the invention. In the latter case, the patentee may or may not opt to retain rights to practice the invention as well. The patentee's rights, however, are not unlimited.

Under certain circumstances, one being sued for patent infringement may assert, as a defense, that the patentee is guilty of "patent misuse." If the defense is sustained, the defendant will not be liable for patent infringement even if the patent was, in fact, valid and infringed.

Patent misuse has its origins in judicial interpretation of equitable concepts regarding what would be fair under the circumstances. There is a general equitable standard employed by the courts that the plaintiff cannot come into the court with "unclean hands"; this generally precludes the plaintiff from prevailing even though the action might otherwise be meritorious. The patent misuse concept, in its broader aspects, is a type of unclean hands.

In general, misuse exists when the patentee has either engaged in conduct involving the patent that amounts to a violation of the antitrust laws or has improperly sought to expand the scope of the patent (either in a physical or temporal sense).

It is clear that as long as one remains within the legitimate confines of a patent, there is a shield that precludes liability under the antitrust laws. There are, however, many instances where the conduct goes beyond the limits of patent protection and may be objected to under the antitrust laws. For example, if one initiates litigation seeking to enforce a patent that is known by the patentee to be invalid, such action can be an unlawful attempt to monopolize under section two of the Sherman Act. In the United States, one cannot obtain a valid patent if a patent application is filed more than one year after an invention is placed "on sale." If a patentee knows that this condition has not been met but still files an application, what was previously known as "fraud on the Patent and Trademark Office" results; it is currently referred to as "inequitable conduct." Having obtained such a patent, initiation of litigation to enforce the patent could violate the antitrust laws. Since there would be no valid patent to serve as a shield against the antitrust laws, the conduct would have to be measured under basic antitrust principles. As a result, the defendant not only could enter a counterclaim seeking relief under the antitrust laws but also could assert the defense of patent misuse.

In a case involving hydraulic pumps for use in oil wells, one company purchased 72 dominant patents in the field; the court ruled that it was not possible for someone else to make a competitive product without infringing one of the patents. The court stated that while there was nothing inherently wrong with purchasing a patent and enforcing it against an infringer, the intent and underlying purpose of accumulating such a large number of patents amounted to a violation of antitrust laws and patent misuse.

Among other antitrust violations involving patents are attempts to, by agreement, control the resale price of a patented product and the use of a patent on one product as a means to coerce the sale of another product or the sale or license of another patent.

While violations of the antitrust laws involving patents also involve patent misuse, there can be misuse without violating antitrust laws. When one improperly attempts to expand the physical or temporal scope of a patent, the requirements of antitrust laws (e.g., anticompetitive effect of the conduct and individual harm) need not be proven. For example, coercing someone to sign a license agreement that calls for royalty payment on unpatented products or royalty payments beyond the expiration of the patent would be patent misuse. Similarly, seeking to enforce a patent obtained through inequitable conduct might also be patent misuse but not a violation of antitrust laws.

Throughout the years, the line of demarcation between lawful patent conduct and antitrust violations and patent misuse have varied with changes in statute, judicial opinion, and concepts of what is equitably proper. In the 1988 Patent Reform Act, the position of the patentee was clarified and strengthened. It was made clear that a patentee is not guilty of patent misuse or illegally extending the patent right by seeking to obtain relief for conduct by a third party that would otherwise be deemed "contributory infringement" (i.e., the sale of a component uniquely suited to be used in infringing a patent). It was also made clear that a patentee is not liable for patent misuse by refusing to grant a license to the third party or by refusing to use the patented invention. Also, conditioning the license or sale of a patented product to the acquisition of another license or product (generally referred to as "tying") is not misuse unless the patent owner has power in the market for the patent or the patented product on which the license or sale is conditioned. This is interpreted as meaning that in the specific situation there cannot be patent misuse unless there is also an antitrust violation.

In certain instances, one may purge a patent misuse and, thereby, reestablish the right to enforce the patent prospectively. For example, if a provision in a patent license agreement caused the patent misuse, elimination of the clause would enable the patent owner to enforce the patent subsequently. The patent owner would not, however, be entitled to any judicial relief for conduct prior to the effective date of the purge.

While the expression "patent monopoly" is frequently employed, a patent does not provide a monopoly; rather, it provides a right to keep others from making, using, and selling the patented invention so long as the patentee does not go beyond the antitrust shield or otherwise engage in patent misuse.