patent policy

Second Circuit Holds No-Challenge-To-Patents Clauses Unenforceable

In July 2012, the Second Circuit ruled in Rates Technology Inc. v. Speakeasy, Inc., 685 F.3d 163 (2012) that a provision in a pre-litigation settlement agreement precluding a party from challenging the validity of a patent was unenforceable as against the public policy announced in Lear, Inc. v. Adkins, 395 U.S. 653 (1969). 

The opinion calls into question a number of standard clauses which patent owners have used to control validity challenges by licensees and settling parties. 

When combined with the Supreme Court’s decision in MedImmune, Inc. v. Genentech Inc., 549 U.S. 118 (2007) (holding that licensees need not repudiate their license before challenging patent validity), licensees are now in a prime position to challenge patent validity.  Patent owners are advised to factor in an increased risk of challenges to patent validity in their settlement positions.

Non-Compliance with Bayh-Dole Leads to Army Getting Patent Title

Among the many incentives used by the federal government “To promote the Progress of Science and useful Arts,” are: (1) providing direct funding to researchers; and (2) through the Bayh-Dole Act, 35 U.S.C. § 200 et seq., allowing researchers at small businesses and nonprofit organizations to apply for and to receive patent rights arising out of inventions that are developed with this funding.  Thus, recipients of federal grants can reap the benefits of a limited property right against the public, even though the public, through its tax dollars, funds the development of the inventions that give rise to those rights.

When an inventor receives federal funding, in order to avail himself of potential patent rights, he must agree to abide by a number of strict requirements.  These requirements are designed to protect the public’s investment in the research.  Unfortunately, historically, recipients have not fulfilled their obligations, and the funding agencies have not mandated compliance.  GAO/RCED-99-242, Reporting Requirements for Federally Sponsored Inventions Need Revision (Aug 1999). 

However, a recent action by the U.S. Army, which was affirmed by the Court of Appeals for the Federal Circuit, may signal an increased concern of funding agencies to force recipients to honor those obligations.  In Campbell Plastics v. Brownlee, 389 F.3d 1243 (Fed. Cir. 2004), the Court of Appeals for the Federal Circuit held that failure of a recipient of federal funds to meet certain requirements of its funding agreement can cause the recipient to lose its patent rights even absent any particularized harm to either the funding agency or the public.