After receiving a patent, a significant number of patentees license their invention to others. Sometimes, patentees attempt to extract more and more out of the licensee. However, when the patentee attempts to expand the scope of the patent too far then the licensee can assert the defense of patent misuse which can render the license or patent unenforceable. As such, it is important to understand the scope of patent protection afforded under the patent grant.
The Federal Circuit has opined that the defense of patent misuse should be a narrow doctrine and limited only to those situations where the patentee attempts to impermissibly broaden the scope of patent protection beyond the physical or temporal scope of patent protection afforded under the patent grant. For example, the defense of patent misuse was successfully raised when the patentee attempted to force a licensee to purchase salt tablets from the patentee/licensor on a patent directed to a machine for adding salt to canned food. In another example, the defense of patent misuse was successfully asserted when the patentee attempted to collect royalties beyond the term of the patent.
Princo v. ITC was a case related to the Orange Book standard for manufacturing CD-R and CD-RW. Princo v. ITC 2007-1386 (Fed. Cir. August 30, 2010). The Orange Book standard is the universally accepted standard for CD manufacture. In order to manufacture an Orange Book compliant CD, one must take a license for a pool of patents administered by Philips.
This pool of patents included a series of patents issued to Raaymaker. The Raaymaker line of patents are directed to the accepted mode of encoding the CD. The parties agreed that the Raaymaker patents are necessary to make an Orange Book complaint CD. However, the pool of patents also included a patent invented by Lagadec which is directed to a different “competing” method of encoding the CD compared to the Raaymaker patents. The license offered by Philips allows the licensee to make CDs that are only Orange Book compliant. In other words, the licensee couldn’t utilize the Lagadec technology even if it wanted to. As such, the Lagadec patent did not need to be included in the patent pool. The story behind the Lagadec patent is that the Lagadec patent is owned by Sony. Sony receives a substantial royalty from the patent licensing activities of Philips for the Orange Book standard. The defendant alleged that Philips is paying Sony to suppress competing technology (i.e., the Lagadec technology) in exchange for royalties based on the Orange Book standard.
The sole issue under appeal is whether an agreement by Philips and Sony (i.e., concerted action) to suppress the Lagadec patented technology would constitute patent misuse and would be a defense to Philips claim of infringement against Princo. The Court held that the defense of patent misuse is a narrow doctrine. The Court did not extend it to the type of “tying” arrangement illustrated in this case.
I invite you to contact me with your patent questions at (949) 433-0900 or [email protected]. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.