Federal Circuit Limits Patent Misuse Defense In Standard-Setting Context


On August 30, 2010, the United States Court of Appeals for the Federal Circuit, sitting en banc, issued its long-awaited decision in Princo Corp. v. International Trade Commission. Princo involved, among other things, a patent misuse challenge to certain licensing arrangements associated with the patent pools underlying recordable and rewriteable compact discs. The majority, in an opinion by Judge Bryson, joined by Chief Judge Rader and Judges Newman, Lourie, Linn and Moore, held that the doctrine of patent misuse did not prevent U.S. Philips Corporation from enforcing patent rights against a licensee (Princo) despite an alleged horizontal agreement between two patent owners (Philips and Sony Corporation) of a multi-member patent pool to impede competing technology. That alleged horizontal agreement, the majority held, did not constitute the “leveraging” conduct that concerns misuse. The majority held misuse inapplicable for the separate, independent reason that Princo did not carry its burden under antitrust laws’ rule of reason to demonstrate anticompetitive effects. Princo thus appears to confine patent misuse in the licensing context to “leveraging” practices, giving patent holders greater freedom to enter into ancillary restraints in standard setting that concern nascent technologies.

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