"[2] The Supreme Court's subsequent opinion in Kimble v. Marvel Entertainment, LLC,[3] however, points strongly in the opposite direction, rejecting the conflation of misuse and antitrust and insisting that they embody different policies.
"[4] In developing the CD-R/RW standards, Sony and Philips engineers developed different solutions for the problem of how to encode position information in the disc so that a consumer's CD reader/writer could maintain proper positioning while writing data to the disc, which were claimed in their respective patents—Sony's Lagadec patent and Phillips's Raaymakers patents.
Philips and Sony therefore agreed to incorporate the Raaymakers approach in the Orange Book as the standard for manufacturing CD-R/RW discs.
After 2001, Philips offered additional package options, grouping the patents into two categories, denominated "essential" and "nonessential," for producing CDs.
The court concluded (6-2-2) that the conduct alleged was not patent misuse and therefore affirmed the ITC's orders granting relief against Princo.
He then turned to the Federal Circuit's characterization of misuse "as the patentee's act of impermissibly broaden[ing] the physical or temporal scope of the patent grant with anticompetitive effect.
was the claimed horizontal agreement between Philips and Sony to restrict the availability of the Lagadec patent—an entirely different patent that was never asserted in the infringement action against Princo.
No precedent so holds, he insisted, and it did not fit within the requirement for misuse that the Philips-Sony agreement "have the effect of increasing the physical or temporal scope of the patent in suit."
That is incorrect, Judge Bryson argued: Princo's real grievance is just that "the Lagadec patent has not been made available for non-Orange-Book uses.
The court insisted that the proper rule for finding misuse is that "to sustain a misuse defense involving a licensing arrangement not held to have been per se anticompetitive by the Supreme Court, a factual determination must reveal that the overall effect of the license tends to restrain competition unlawfully in an appropriately defined relevant market.
"[17] In addition to arguing misuse, Princo argued that the "agreement between Philips and Sony not to license the Lagadec technology for non-Orange-Book purposes was a naked restraint of trade with no procompetitive justification, and that Philips's conduct in entering into that agreement should render its Orange Book patents unenforceable."
This all grew out of a joint venture between Philips and Sony to develop standards for and commercialize CD-R/RW technology, with "significant procompetitive features," so that it must be analyzed under the rule of reason rather than as a "naked restraint.
They agreed that "Princo failed to meet its burden of showing that any agreement regarding the Lagadec patent had anticompetitive effects."
Pointing to Zenith Radio Corp. v. Hazeltine Research, Inc.,[21] Judge Prost said that whether the patentee had violated antitrust law could indicate that patent misuse occurred.
They began by challenging the majority's view that existence of an antitrust violation did not require finding misuse: The critical question is whether the existence of an antitrust violation in the form of an agreement to suppress an alternative technology designed to protect a patented technology from competition constitutes misuse of the protected patents.
"[30] The dissent next challenged the majority's ruling that Princo had to show anticompetitive effect "even if Philips and Sony engaged in an agreement not to license the Lagadec patent."
"[31] The dissent argues, first, "The agreement to suppress the Lagadec patent, a competing technology, surely falls within" the principle that such agreements are "inherently suspect," so that showing their existence creates a prima facie case and shifts the burden to Philips to "come...forward with some plausible (and legally cognizable) competitive justification for the restraint" or show that the restriction was not anticompetitive.
[32] Second, even where the rule of reason applies, the burden is on the proponent of a restriction to show justification, despite the fact that a research joint venture is involved.
In Kimble, the question was whether to reaffirm or overrule a patent misuse precedent holding agreements for post-patent-expiration royalties unenforceable.
The precedent, Brulotte v. Thys Co.,[34] had been heavily criticized because it was inconsistent with modern antitrust policy, which generally requires a showing of substantial anticompetitive effects before courts condemn a practice.
Therefore, "in deciding whether post-expiration royalties comport with patent law, Brulotte did not undertake to assess that practice's likely competitive effects."
The rationale of Kimble is contrary to that of the Federal Circuit in Princo, which requires a showing of anticompetive effects and determines whether conduct is misuse on the basis of antitrust policies.
"[36] Zain says that the court's requirement of "but for" proof of effect is anomalous: But for" analysis is commonly applied to calculate damages in antitrust cases.
To require such a substantial evidentiary showing to successfully prove an equitable defense seems excessive and contrary to the public policy arguments set forth in Supreme Court misuse cases.
[37] Zain argues that this "bizarre and onerous" requirement imposes such a heavy burden on those asserting misuse that it can "grant patentees misuse immunity for potentially anticompetitive conduct in cases where evidence of the anticompetitive effects may be extremely difficult to obtain—possibly due to the success of the very conduct being challenged.
"[38] Furthermore, he observes, "Princo creates the rather odd possibility that it may be more difficult to successfully assert misuse—an equitable defense—than an affirmative treble damages antitrust claim.
"[39] • Camille Barr maintains that "the Federal Circuit erred in Princo by drastically narrowing the patent misuse doctrine.
"[45] • Brian Hill asserts, "The overall effect of the Princo decision will likely be that courts will become increasingly unable to discourage anticompetitive joint venture activity.
Requiring defendants to establish actual commercial potential may frequently be impossible when the technology being suppressed is so new or experimental that its market value cannot be demonstrated.
[47]Accordingly, he maintains, the Princo opinion sends the message "that suppressing nascent and unproven technology without a clear market potential does not have the requisite anticompetitive effect necessary to establish patent misuse.