Patent misuse

Patent misuse that restrains economic competition substantially can also violate United States antitrust law.

[8] This inherent-right doctrine was expressly rejected a few years later, however, in Motion Picture Patents Co. v. Universal Film Mfg.

It explained: [T]he argument [is] that, since the patentee may withhold his patent altogether from public use, he must logically and necessarily be permitted to impose any conditions which he chooses upon any use which he may allow of it.

The defect in this thinking springs from the substituting of inference and argument for the language of the statute, and from failure to distinguish between the rights which are given to the inventor by the patent law and which he may assert against all the world through an infringement proceeding, and rights which he may create for himself by private contract, which, however, are subject to the rules of general, as distinguished from those of the patent, law.

While it is true that, under the statutes as they were (and now are), a patentee might withhold his patented machine from public use, yet, if he consented to use it himself or through others, such use immediately fell within the terms of the statute, and, as we have seen, he is thereby restricted to the use of the invention as it is described in the claims of his patent, and not as it may be expanded by limitations as to materials and supplies necessary to the operation of it, imposed by mere notice to the public.

Dick case, in Bauer & Cie. v. O'Donnell,[12] the Supreme Court began to shift its perspective by holding that, although patentees could control manufacturing, use, and sale of patented products with license agreements, they could not use license agreements to control the resale price of patented products the patentee sold.

The patent law furnishes no warrant for such a practice, and the cost, inconvenience, and annoyance to the public which the opposite conclusion would occasion forbid it.

The sales agreement for the machines required customers to purchase salt tablets exclusively from Suppiger.

Upon purchase, Brulotte accepted a licensing agreement which required annual royalty payments beyond the duration of the Thys patent.

When Brulotte realized that the terms of the contract exceeded the duration of the patent, he stopped paying the royalties.

[21] In Zenith Radio Corp. v. Hazeltine Research, Inc.[2] the Supreme Court established that demanding a percentage of a licensees patented and non-patented product sales in exchange for a license was misuse.

The court ruled that this license requirement was patent misuse,[8] even though it might not be an antitrust violation because the anticompetive impact may have been too slight.

Other forms of patent misuse recognized by courts of appeals decisions but not addressed in detail as yet by the Supreme Court include: Windsurfing v. AMF[28] held that a patent misuse defense must show that the patentee's behavior hurts competition.

This case also clarified that if the Supreme Court had already held a particular licensing arrangement was misuse, the infringer did not have to establish that it was anticompetitive.

Philips, Sony and other manufacturers developed patented technology to create CDs that could be rewritten multiple times (CD-RWs).

Princo Corp., one of the licensees, stopped paying royalty fees to Philips, but continued to manufacture readable discs using Phillips technology.

[8][14] In Kimble v. Marvel Entertainment, LLC,[33] on June 22, 2015, the Supreme Court refused to overrule Brulotte v. Thys Co., because of stare decisis.

[35] The precedents on which the Brulotte Court relied, like other decisions enforcing a patent's cutoff date, remain good law.

"[37] In addition, the Court rejected Kimble's arguments that the Brulotte doctrine should be overturned because the practice it outlaws is not anticompetive and it does not violate the antitrust laws.

[46] Use of this doctrine to contest patent infringement suits by non-practicing entities may require the courts to challenge precedent set in Continental Paper Bag Co. v. Eastern Paper Bag Co.[47] The Supreme Court rejected some of this criticism in Kimble v. Marvel, which reaffirmed Brulotte v. Thys Co. and asserted that misuse is governed by patent policy rather than antitrust policy.

Bruce Wilson, then a Deputy Assistant Attorney General in the Justice Department's Antitrust Division, gave a speech in Boston that came to be known as the "Nine No-No's.

"[48] Wilson repeated the "No-No's" speech several more times,[49] and an impression was created that it reflected the Antitrust Division's litigation policy.

[52] Thus, in 2003 the official then heading the Antitrust Division spoke out strongly against the No-No's as valid enforcement guidelines.