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.