Thursday, April 28, 2016

Two New Papers on Postexpiration Royalties

1.  Wei-Lin Wang has published an article titled A Study on the Legality of Royalty Collection Clauses after Expiration of Patent Rights, 15 J. Marshall Review of Intellectual Property Law 213 (2016).  Here is a link to the article, and here is the abstract:
Whether a contract clause may permit a patent owner to continuously collect royalty payments from a licensee after the expiration of its patent rights is a highly controversial issue in practice. Some believe that because patent rights are a kind of monopoly granted by the government, it shall not be extended after expiration; otherwise, it shall be regarded as patent misuse and/or unfair competition as the case may be. Nonetheless, others believe that this kind of clause is actually beneficial to a licensee because the licensee is allowed to make royalty payments throughout the whole patent term and even after expiration, which is helpful in terms of innovation. Regarding such debate, the Supreme Court of the United States adopts the view of the former, strongly opposing the collection of royalties after a patent’s expiration. Recently in Kimble v. Marvel, the Supreme Court reviewed this issue all over again. The Supreme Court reasoned that, although its former judgment might have certain flaws, there are no special justifiable reasons to correct such former judgment, and according to the doctrine of stare decisis, a court must abide by its former judgment in order to maintain the reliability of judicial decisions. The Supreme Court leaves such issues to the hand of Congress, waiting for future amendments to the law. Hence, this issue has not yet been settled and needs further clarification by the judicial and legislative branches of the United States. The author believes that such clauses might be simultaneously good and bad for innovation and economic efficiency depending upon the circumstances and, therefore, the correct approach is to examine such clauses based on the “rule of reason” principle. The author offers suggestions regarding this issue after comparing different views and approaches adopted by the relevant authorities of the United States and Taiwan.
Note that, although the abstract refers to "relevant authorities of the United States and Taiwan," I don't see anything in the article referencing Taiwanese authorities.
2.  Richard H. Stern has published an article titled Kimble:  Patent Misuse Through the Lens of Patent Policy, Not Antitrust Policy, 38 European Intellectual Property Review 182 (2016).  (For those of you with Westlaw accounts, this journal is available on Westlaw under "International Materials > European Union > European Union Journals".)  Here is the abstract:
In its first important patent misuse decision in more than four decades, the Kimble case, the US Supreme Court rejected several decades of efforts in the Federal Circuit and other lower courts to limit the scope of the patent misuse doctrine. That doctrinal counter-movement had sought to confine assertion of a misuse defence to cases where the practice challenged as misuse had severe anti-competitive effects in a relevant market that were comparable to those required to support a conclusion of antitrust violation. In addition, the Federal Circuit had carved out of the misuse and exhaustion doctrines all "conditional" sales by patentees (sales that the patentee had made subject to conditions such as limitations on use), drastically curtailing the application of those doctrines. Yet the Supreme Court had, early in the 20th century, held that patentees could not lawfully impose conditions on products they sold, expressly overruling cases upholding that practice. In its Kimble decision, the Supreme Court rejected the application of antitrust policies to the analysis of patent misuse. Misuse is based on patent policy, the Kimble court held, not antitrust policy, and it seeks to further the accomplishment of goals of the patent system, not those of the antitrust laws. Kimble thus calls for a return to the patent misuse doctrines that the Supreme Court declared during the first half of the 20th century and a rejection of the later contrary movement in the last part of the 20th century. The reasoning of the court not only rejects any requirement of anti-competitive market effects for making a misuse holding, but it undercuts any use of "conditional" sales for imposing restrictions.
I'd note only that the Federal Circuit's recently-decided en banc decision in Lexmark Int'l, Inc. v. Impression Products, Inc. (see my post here) doesn't read Kimble or other Supreme Court case law as preventing conditional sales (a possibility Mr. Stern himself foresaw, see p.189).  There is a cert petition pending in that case, though.  For my own (negative) view of Kimble, see my post here.

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