Editor’s Note: José Cortina is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A.
RESEARCH TRIANGLE PARK, N.C. – A grant of a patent in the United States is often discussed as being a grant of a monopoly power. This is a misstatement because a patent only grants the owner of the patent the right to exclude others from making, using, selling, offering for sale and importing the invention defined in the claims of the patent.
A patent owner does not obtain an absolute right to practice his/her invention because, for example, there may exist patents owned by others that would be infringed by the “practice” of the invention claimed in the owner’s patent.
In contrast, the term “monopoly” is one more appropriate to the realm of antitrust law where certain conduct, when a party has sufficient market power or a “monopoly”, is considered illegal. However, it is clear that ownership of a patent sometimes will permit certain kinds of conduct that would otherwise be considered an antitrust violation.
The difficulty in understanding the interplay between patents and antitrust law is that some antitrust cases in the past have assumed that every patent holder has a dominant market position even if there are other patented technologies that compete effectively. In short, this assumption in the past was wrong and a patent owner defendant in an antitrust case should not have to bear the burden of being presumed to have an economic monopoly simply because he/she owns a patent.
Patent Misuse a Broader Wrong Than Antitrust Violation
Traditionally, a patent was considered misused when its owner used it in violation of the antitrust laws or used it to illegally expand the scope of the patent right with anticompetitive effects. In this context, patent misuse is a broader wrong than an antitrust violation, but is closely related. Thus, to the extent changes in antitrust law occur, they will create changes in the law of patent misuse.
The Supreme Court has held that certain practices are per se patent misuse. For example, requiring payment of royalties after a patent has expired constitutes misuse.
On the other hand, many acts are considered reasonable within the patent grant. Such acts include notification of patent infringement, threats of suit, calculation of royalties based in part on revenue derived from unpatented components, etc.
For acts that are not per se approved or condemned, to determine if the conduct constitutes misuse, the courts undergo a two-step inquiry. First, a court must determine whether the act is reasonably within the patent grant. Second, if the act is not reasonably within the patent grant, does the act have an anticompetitive effect under what the court defines as the “rule of reason.”
Tying Arrangements in Flux
A tying arrangement where the purchase of unpatented components is tied to the purchase of a patented product is an example of conduct that in the past was often found to constitute a misuse. However, even this area is in flux as evidenced by the recent U.S. Supreme Court decision in Illinois Tool Works, Inc. v. Independent Ink, Inc.
In that case the Court held unanimously that neither the patent nor the antitrust law should be interpreted to create a per se rule of illegality whenever the purchase of a non-patented good (in that case ink) is tied to the purchase of a patented good (printheads).
The Court found that even though a party owns a patent, its conduct must be analyzed under traditional antitrust principles. The Court reached the conclusion that in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product. Thus, the case was returned to the District Court to allow the complaining party the fair opportunity to develop and introduce evidence on that issue.
In short, conduct outside the four corners of the right granted in a patent may not always constitute an antitrust violation. However, the greater the market power of the patent owner, the more likely that conduct outside the rights granted by the patent, and utilizing the patent to support that conduct, will be found to be an antitrust violation. In order to avoid the antitrust trap, patent owners, to the extent possible, should limit their actions to those rights granted by the patent. If conduct is to fall outside the grant of the patent, then closer legal scrutiny is required to ensure the conduct is legal. Otherwise one risks loss of the right to enforce the patent.
A. José Cortina is a registered patent attorney with the law firm of Daniels, Daniels & Verdonik, P.A. He focuses his practice on the intellectual property needs of small to large technology companies, including providing patent, trademark, copyright, counseling, licensing, conflict resolution and transactional services. He is experienced in a broad range of technologies, including electronics, communications, computer hardware and software, biomedical, materials, and selected chemical and chemical engineering technologies.
