The “Right” to Challenge a Patent

by Dennis Crouch

The Supreme Court in Lear, Inc. v. Adkins (1969) held that a licensee can challenge a patent’s validity — overruling the prior presumption of licensee estoppel found by Automatic Radio Mfg. v. Hazeltine Research (1950).

In his recent article, Antitrust Economist (and lawyer) Erik Hovenkamp argues that the “right to challenge a patent” should also be an important consideration in antitrust analysis.  Hovenkamp defines these “challenge rights” as “the (statutory) rights of third parties to challenge patents as invalid or uninfringed.” Antitrust comes into play when a license or settlement agreement includes challenge restraints that would contractually prevent the exercise of the challenge rights.

There are obvious collateral problems with the way that Hovenkamp identifies the ability to challenge a patent as a “right” – especially if we call it a property right. However, for antitrust-contract consideration, forbearing the ability-to-challenge at least fits the definition of a legal detriment incurred by the promisee.

Although patent licenses are entitled to substantial safe harbor from antitrust regulations, Hovenkamp argues that challenge restraints should not be so entitled “but rather exist within antitrust’s domain” and barred when impermissible anticompetitive.

A problem with the argument is the way that Hovenkamp lumps-together validity and non-infringement challenges as roughly equivalent.  However, I see the two as substantially distinct.

Read the Paper: Challenge Restraints and the Scope of the Patent

The contractual waiver of challenge rights has risen in importance since the Supreme Court’s decision in MedImmune (2007) (licensee retains right to challenge patent without breaching) and creation of the Inter Partes Review system following enactment of the AIA (2011).  Prior to the availability of IPRs (and CBM/PRG), settlement of an infringement lawsuit would effectively preclude later validity challenges even without specific contractual terms. (Res Judicata).  However, those estoppel principles do not apply the same way in AIA proceedings.

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

47 thoughts on “The “Right” to Challenge a Patent

  1. Re: “Prior to the availability of IPRs (and CBM/PRG), settlement of an infringement lawsuit would effectively preclude later validity challenges…”
    Not since reexaminations, including anonymous reexamination requests, became available [since 1980]. There was even a Fed. Cir. decision blessing that. It even lead to a considerable reduction in “running royalty” settlements and other “running royalty” licenses.

  2. Greetings Dennis

    The related concept of assignor estoppel preventing a challenge to validity (a form of contractual waiver) is still fairly solid but is not very useful in most instances because new employers of the inventor are rarely bound to such restrictions. I’m curious what you think of the viability of a different form of public waiver, or what I would refer to as “PTO estoppel,” which would arise when Company A tries to patent X (and submits oaths that they are the first to invent so is patentable) only to find out that Company C has already obtained a patent. Should A be precluded from arguing validity of X when C asserts based on their representation to the PTO?

    Its an interesting theory I’ve not seen raised before. Part of me says, if you tell the PTO something is patentable to obtain a benefit from the government, you shouldn’t be allowed later on to go back on your representation. OTOH, if you did not know about C before you should not be penalized for an innocent mistake.

    1. What is the “innocent mistake?” That you thought you were the first with something deemed patentable or that the item itself is to be deemed patentable?

      A mistake of “not the first” is very different from a mistake of “that really shouldn’t be patentable.”

      If you want the second just because of the first, then I think there is a problem with that – “innocent” mistake or not.

    2. “PTO estoppel,” which would arise when Company A tries to patent X (and submits oaths that they are the first to invent so is patentable) only to find out that Company C has already obtained a patent. Should A be precluded from arguing [in]validity of X when C asserts based on their representation to the PTO?

      The paramount public interest in eliminating junk patents would strongly suggest otherwise. It’s not a two way street because — you’ll recall — a patent restricts the rights of far more entities than just the two parties who choose to fight over it. Company A made a mistake and they didnt get a patent. We don’t want to discourage company A from learning from its mistake and applying that knowledge to eliminate the junk patents of others.

      On the flip side, now that you’ve begun to recognize estoppel issues, entities should absolutely be bound by every statement made about the prior art during the prosecution of every patent they own. If they own a first patent that was obtained with a statement disparaging X, then they should not be able to assert a second patent whose validity hinges on X absent a disclaimer of that first patent. That’s basic logic and I’d be shocked if the Supremes would disagree with this proposition.

      It’s one of the many reasons that companies like Antilectual Ventrolls are just massive piles of g@rbage that need to be eliminated from the system.

      1. “Paramount”….

        Um, sure. Does that ride along with the presumption of validity, or are you simply ig noring that (again)…?

      2. As for any non-prosecuted, later obtained property (as per the entity you wish to disparage), you are aware of course that they are (most always) NOT the ones doing the prosecuting, right?

        1. you are aware of course that they are (most always) NOT the ones doing the prosecuting

          That’s nice. If you don’t like the prosecution history, then don’t buy the patent.

          See how easy that is? Thanks for playing.

      3. Wouldn’t the statement disparaging X be admissible as a statement against interest? Probative value toward validity of the second patent?

    3. I have heard of that argued as relevant evidence (which I would think would be interesting to a jury), but not as estoppel. Also, should a Corporation be bound by a later-determined-to-be-erroneous validity declaration in signing a patent application of a non-attorney, non-agent, employee? Also, rarely are two sets of independently filed application claims so identical as to be for identical inventions.
      Also, as I recall, the PTAB has held that even classic assignor estoppel, being an equitable litigation defense, does not apply in an IPR.

    4. PTO estoppel could have a short shelf life because the law/doctrine has changed so strongly over the past half decade that was reasonable then would be laughed out of court now.

      Also, the art or area of endeavor pertinent at prosecution may not relate much to later litigation; deciding which art(s) are involved or important viz the actual purported infringement can be very fuzzy.

      The Markman procedure really needs to expand to what amounts to an equity decision on eligibility and the dimensions of PHOSITA prior to anything going to a jury. Method patents especially should be construed as to the nature of the result somewhere early in the litigation.

  3. There are obvious collateral problems with the way that Hovenkamp identifies the ability to challenge a patent as a “right” – especially if we call it a property right.

    I pointed this out previously that there are several patent doctrines that “all of a sudden” are in serious trouble if patents are not deemed property, and instead are deemed to be a type of “public right.”

    1. Lear, Inc. v. Adkins (1969) is hardly “all of a sudden.” Nor are reexamination post-grant proceedings, first enacted back in 1980, and expanded thereafter. Even the AIA is now several years old.
      What, specifically, are the “several patent doctrines” actually newly in “serious trouble”?

      1. I think his broader point is that observers are finally coming to terms with the legal ramifications of the CAFC’s labeling of patents as public rights – not property rights.

        1. You got it annoy – although the “proper” larger point is that most people still have not realized the fallout.

          Take for example, exhaustion.

          Exhaustion is subsumed in the notion that the patent right – as a stick in the bundle of any actual property – is exhausted upon sale of an item of actual property.

          Remove the property connection and you (necessarily) remove the exhaustion principles for the patent rights.

          1. Look at the sort of causes of action the Court has identified as “public rights” and then lump patent validity in with them.

            It’s utterly ludicrous, and a clear example of very bad facts of making for very bad law.

            Pesticide data sharing requirements?

            The validity of an issued patent for intellectual property?

            The CAFC and SCOTUS will oversee the PTAB for only as long as Congress permits it.

            Lobby$$$lobby$$$lobby$$$!

            1. Look at the sort of causes of action the Court has identified as “public rights” and then lump patent validity in with them.

              It’s utterly ludicrous,

              What’s ludicrous is the idea that you can’t eliminate an improvidently granted restriction on the public’s right to freely make and use something by filing a complaint with the incompetent agency who screwed it up in the first place. What’s even more ludicrous is when the reason for that prohibition is “it’s kinda like this thing that England did in the 16th century because lookie similar words.”

              1. What’s even more ludicrous is when the reason for that prohibition is “it’s kinda like this thing

                translation: “Bah, who needs reason in law – just do as I feel and I will be happy”

                1. Any cause of action can be labeled a public right and delegated to an administrator in the name of pragmatics.

                  A specialized, well-resourced administrative court will always be more efficient than the Article III district courts.

                  This is why Roberts and others have editorialized ad nausem about the need for stringent barriers and high walls.

                  After the Cooper and MCM denials, however, it is clear that the Justices were merely giving lip service to an ideal that may now unfortunately be behind us as a nation.

                  We are becoming a third world country.

                  The fed gov is becoming all powerful.

                  The top ten percent has more than the bottom 90 percent.

                  Etc.

                2. liberty is lost.

                  Those kinds of silly platitudes might impress your Federalist Boys Club members but otherwise they’re worth squat on a rock.

                  Try to remember, at least, that we now live in a country where a r@cist fascist ign 0ramus narcissist and his team of like-minded incompetents is busy throwing the “rule of law” and everything else out the window while they gleefully line their pockets.

                  Pragmatism will be critical to preserve what little bit of sanity remains at the margins (literally) in this country.

              2. What’s ludicrous is the idea that you can’t eliminate an improvidently granted restriction on the public’s right to freely make and use something

                Sometimes you say things that indicate that you lack a basic understanding of what a patent is.

                Here, you assume the very thing that needs to be proven (and once again, you clench tight your eyes to the statutory presumption of validity).

                That presumption sinks your premise that the item IS in the public to “freely make and use.”

                That you insist on cloaking your error in a misplaced sense of righteousness (no doubt stemming from your self-appointed role of watcher over the children playing in the fields of rye) only emphasizes your elevation of your own feelings over any objective view of the pertinent law.

              1. Didn’t vote.

                Generally apoltical; however, my pro separation of powers stance in the patent world appears to cut on the conservative side of the equation, though The Economist would disagree.

          2. anon, not so.

            Any attempt to impose post sale restrictions on use or sale of a chattel is void. link to patentlyo.com

            Both patent law and copyright law are tracking this general requirement.

            The Federal Circuit’s assumption that one can enforce post sale restrictions under contract law is completely wrong. The only way that can be legal is if the purported sale was not a sale, but a lease, whereby it was made clear that the chattel is only lent, and must be returned.

            1. Sorry Ned / that line of thought only applies if the item being constrained is one of the sticks in the bundle of property rights that attaches to some definite property.

              You are confusing the notion that such patent aspects are sticks in the bundle of property (and may be referencing law that ALSO “confuses” this notion).

              You do point out an interesting wrinkle though – a possible fallout of the “patent rights are not personal property” to the sister realm of copyright law. Big Hollywood would no doubt cheer on the aspect that such rights are not exhausted with sales of actual goods (although some of the other nuances may not be as pleasant).

          3. Why? patent exhaustion, aka the “first sale doctrine” goes back more than a 100 years in old Sup. Ct. decisions [back to the era of cases cited by Ned for patent property rights] and is based on the common law prohibition on restraints of alienation of chattels [personal -not real – property] which by statute patents have. I.e., it has nothing to do with any recent Fed. Cir. decisions.

            1. Paul – you keep on saying the “p” word (property) without realizing that if patents are not property, that whole line of thought is what exactly goes away.

              Yes, Ned DOES refer to those old cases for his “patent is property” arguments but if he “loses” then those cases too MUST lose.

              As I stated, many have not realized what must happen to a whole bunch of doctrines if patents are determined to be NOT property.

        2. observers are finally coming to terms with the legal ramifications of the CAFC’s labeling of patents as public rights

          Most reasonable people came to terms with the public rights aspect of patents a long time ago.

          Just because the perpetually whining entitled patent maximalists didn’t “get it” doesn’t mean that nobody else did.

          You guys continually delude yourselves with the myth that subject matter eligibility was created “suddenly” out of thin air. That’s not what happened at all.

          Use your br@ins for a change.

          1. Subject matter…?

            You are not even on the right page here, Malcolm.

            Of course, that does not stop you from your usual rant of ad hominem.

            Yay ecosystem!

            1. Subject matter…?

              Just another point on the long well-documented curve. It’s silly to pretend that the Born Yesterday patent maximalist crowd’s methods are limited to just one aspect of patent law (or patent law itself, for that matter).

              Your bff “anony” didn’t vote. Can we accurately predict other aspects of his behavior? Of course we can. We’ve been doing it for years.

      2. Paul, let’s not pretend that re-exams are equivalent, as we have pointed out every time that you bring that up that they were “sold” on the basis as being used by the property owner, surrender was only on completion, and there was a path to an Article III court (based on property aspects).

        1. Anon, they are certainly equivalent for your repeated argument that even the institution of any PTO post grant proceeding removes sticks from your “bundle of sticks” by greatly impacting patent enforceability.
          Nor do reexams differ from other AIA post-grant proceedings in not actually removing claims from a patent until the decisions is final – i.e., after any appeal to the Fed. Cir.
          Yes, reexaminations previously allowed a D.C. civil action contest before that, but that was not often successful in reversing the PTO , and Ned fully argued that distinction all the way to the Sup. Ct. without success. That was not the reason reexaminations are not as useful for defendants as IPRs. It is because reexaminations are two-stage, run way to slow for patents already in suit, and run totally ex parte for patent owners after the initiation stage.

          1. Paul – my arguments that you mention are in fact premised on the notion that patents are property.

            In case you haven’t noticed, I have been quite vocal that any legal view that patents are not property CANNOT be correct.

            The point here though is what happens if – IF – patents are held to be NOT property.

            There is a very large avalanche that will – that must – follow from such a legal understanding. Most people (and I include most legal people) have not thought through the consequences that must follow.

            1. Love the complete failure to address Paul’s point. But we could have predicted that.

              When you don’t have any argument, just pound some sand and cry about some “avalanche” without providing any specifics.

              Patents undoubtedly share attributes (<-abstract attributes) with traditional forms of property. But they're not identical to traditional forms of property and they shouldn't be treated that way.

              Basic stuff.

              1. That’s hilarious that you cannot recognize statutory aspects and then want to come in all coc k eyed into a conversation (getting things wrong of course) dealing with property.

                Maybe pay more attention to what is actually being discussed and less eager to v0m1t your ad hominem because you see a post by anon.

  4. But IPRs DO have effective validity challenge estoppel restraints, specifically 35 U.S.C. 315 (e) “Estoppel-
    (1) PROCEEDINGS BEFORE THE OFFICE- The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
    (2) CIVIL ACTIONS AND OTHER PROCEEDINGS- The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review. ”
    [Of course since IPRs are limited to only patent or publication prior art challenges, so is their estoppel scope. ]
    ————–
    The article author alleges that there are license and other contractual agreement terms to preclude [reexamination or other] patent validity challenges that the courts have not struck down. But to extent they may actually exist in recent times they are widely regarded as simply unenforceable as against public policy, and that does not require meeting other antitrust requirements.

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