Revisiting the Patent Misuse Doctrine

Posted by Social Science Research Network

Revisiting the Patent Misuse Doctrine Daryl Lim (The John Marshall Law School)

Abstract: Expiration of a patent terminates the patentee’s right to collect post-accrual royalties on that patent, even if the license says otherwise. The ultimate goal of the patent system is to provide incentives to innovate as a means to facilitate the disclose of inventions and the dissemination of technology. Kimble’s affirmation of the rule against post-expiration royalties helps ensure unrestricted access to inventions by prohibiting the patentee from leveraging on its patent to charge royalties indefinitely. The opinion also clarified that harm to competition was a relevant but not a necessary condition to the analysis.

Like a ‘one-two’ punch, Actavis and Kimble spells the death knell for the Federal Circuit’s formulation of patent misuse. Federal Circuit jurisprudence immunized the patentee from scrutiny under patent misuse if the offending conduct or restraint fell within the scope of the patent. If the offending conduct or restraint fell outside the scope of the patent, then courts had to apply a rule of reason analysis.

The first blow comes from Actavis. The Supreme Court had earlier recognized that patentee conduct which constituted misuse would constitute an antitrust violation as well. Since the threshold for liability is lower under patent misuse, it must follow that the immunity from patent misuse conferred under the Federal Circuit’s formulation has now been debunked by Actavis. The second blow comes from Kimble, which rejected the rule of reason formulation that the patentee in that case had attributed to Federal Circuit jurisprudence. It follows that the approach based on patent policy as laid down in Morton Salt has been implicitly reinstated as the correct approach to misuse analysis.