The Impact of Princo on Patent Misuse As a Defense

Patent misuse is a long-recognized judicially created equitable defense to an action of patent infringement. If a patent owner is found to have misused a patent, the patent is unenforceable until such time as the misuse is corrected or “purged.” The controlling inquiry is whether the patentee “impermissibly broadened the 'physical or temporal' scope of the patent grant with anticompetitive effect.” Princo at *7. The Federal Circuit in Princo explained that “what patent misuse is about, in short, is patent leverage, i.e., the use of the patent power to impose over-broad conditions on the use of the patent in suit that are not within the reach of the monopoly granted by the Government.” Id. at *10. This “patent leverage” test requires a connection between the patent right and the misconduct in question “such that the patent in suit must itself significantly contribute to the practice under attack. Patent misuse will not be found when there is 'no connection' between the patent right and the misconduct in question ' or no 'use' of the patent.” Id. Applying this test, the court concluded that the required connection was missing between the patents asserted against Princo and the alleged misconduct arising from the purported horizontal agreement. The court further concluded that Princo failed to carry its burden of demonstrating an “actual adverse effect on competition in the marketplace” and did not show that the suppressed technology had technical or commercial prospects. Id. at *16-17. Given the Federal Circuit's exclusive appellate jurisdiction over patent infringement cases, the decision will likely serve to limit the availability of misuse as a defense in such cases and have an impact on patent licensing practices going forward.

Background