Patent Misuse - LAW OFFICES OF WILLIAM MARKHAM, P.C.

Patent Misuse

If your company has been sued for patent infringement, it might avoid any liability if it can prove that it has been harmed because the patent holder (called the “patentee”) has misused its patent in a manner that has caused quantifiable harm to your company. This affirmative defense is called “patent misuse.”  If successful, it can serve as a complete defense to a claim of patent infringement.

Many patented products are necessary inputs that lack reasonable substitutes. The purchasers of these products require them in order to make their own products or operate their own businesses, and they must therefore purchase these products. They have no other choice. This is particularly true where the patent in question covers a technology that has become an “essential standard” that has been adopted by a private standards-setting agency.

The patentees of these products, mindful of their value, sometimes overreach by making their products available only under licenses whose duration exceeds the remaining term of the patent. The customer must therefore pay for a license to use the patentee’s product for a longer time than it would otherwise be required to purchase the patented product only from the patentee. The patent would expire at a date certain, after which the customer could purchase the product from the patentee or any other company that decided to make the same product, whose manufacture by competitors would no longer be forbidden by the expired patent. But if the patentee forces the customer to accept a license to use the patented product, and if the duration of the license exceeds the remaining term of the patent, then the patentee has extended its exclusive right to sell the product in question for a longer period than the patent laws allow. Where this occurs, the patentee is said to misuse its patent in order to oblige its customer to accept a licensing agreement that has the effect of unlawfully prolonging the patentee’s exclusive right to make its patented product available to the customer.  This practice constitutes patent misuse.

Another kind of patent misuse arises when the patentee sells its patented product only on condition that the purchaser also buy other, non-patented products. Since the purchasers typically require the patented product, they have no choice but also to purchase the other, non-patented products from the patentee. Once again the patentee has misused its patent in order to become the compulsory seller not only of the patented product, but also of other, non-patented ones. This practice likewise constitutes patent misuse, and it can also give rise to an antitrust claim called an unlawful tie-in agreement, which can sometimes constitute an unlawful restraint of trade under Section 1 of the Sherman Act and California’s Cartwright Act at Sections 16720 and 16726 of the California Business & Professions Code.

If your company has been sued for patent infringement, it may establish a complete affirmative defense that absolves it of liability by prevailing on the ground of patent misuse. If you wish to confer with us about this matter, contact us in complete confidence to do so.

Mr. Markham's Articles on Antitrust Law

AN OVERVIEW OF ANTITRUST LAW (By William Markham, ©2000)

"Antitrust law is the law of competition and is perhaps the least understood law of all. This article provides an overview and explanation of the essential principles of antitrust law."

ANTITRUST EXEMPTIONS AND IMMUNITIES (By William Markham, ©2022)

"Over the years, Congress and the federal courts have established various immunities from federal antitrust law, removing from its reach specified commercial activities and even entire lines of commerce."

HOW THE CONSUMER-WELFARE STANDARD TRANSFORMED CLASSICAL ANTITRUST LAW (By William Markham, ©2021)

"Since the late 1970s, antitrust law in the United States has been transformed out of recognition and rendered largely toothless by consumer-welfare jurisprudence....,"

ANTITRUST AND FREE MARKETS (BY William Markham, © 2022)

“Some critics of antitrust law treat it as mere governmental overreach and an unwelcome infringement upon the ordinary operations of our free markets. (….) That criticism betrays a fundamental misunderstanding of the very term ‘free markets,’ which refers to markets that are free of any undue restraint, whether public or private.”

UNLAWFUL PRICE DISCRIMINATION (By William Markham, © 2013)

“In this article I take up the obscure, problematic doctrine of illegal price discrimination, which was codified by the Robinson-Patman Act during the Great Depression, and which the modern, conservative Supreme Court has severely limited.”

WHY ANTITRUST LAWS MATTER (By William Markham, © 2006)

“The antitrust laws are supposed to promote and protect competition, or, if you will, competitive processes in distinct ‘lines of commerce’ or ‘relevant markets.’ This alone is their proper purpose.

Mr. Markham's Articles on
Trial Procedure and Contract Law

MAKING SENSE OF THE RULES OF EVIDENCE AND PRESENTING YOUR EVIDENCE AT TRIAL (By William Markham, ©2011)

"I try in this article simply to set forth a list of simple rules to explain the key points of the law of evidence. I also offer several pointers on organizing evidence in order to present it competently at trial."

ANATOMY OF A LAWSUIT (By William Markham, ©2007)

"This article is written for non-lawyers, young litigators, and non-litigator attorneys who wish to understand how a lawsuit works in practice from start to finish."

AN OVERVIEW OF CONTRACT LAW (By William Markham, ©2002)

"Contract law lies at the heart of our system of laws and serves as the foundation of our entire society.... Our society depends upon free exchange in the marketplace at every level. Contract law makes this possible."