Patents encourage ingenuity by rewarding the disclosure of an invention to the public. In exchange, a patentee acquires a limited monopoly to exclude others from exploiting the invention for a defined period of time. When the patent expires, the invention passes into the public domain to be freely used by all.
Without doubt, patents may confer considerable market power upon a patentee and/or its licensees. A handful of strategic patents can alter the competitive landscape and define the products that are made available to the public. After all, patents are exceptional, creating a lawful monopoly in circumstances where free market competition is otherwise held most dear.
To reap its rewards, a patentee may choose to exploit the invention itself deriving profit from making, using and/or selling products and processes encompassing the invention. Alternately, it may merely hold it. It may sell the patent or grant a license permitting others to exploit the invention.
A patentee choosing to license may possess considerable bargaining power since a patent is enforceable with a variety of statutory remedies. In Canada, in addition to damages or the accounting of an infringer's profits, infringement remedies include an injunction and the delivery up or destruction of infringing goods. Disruption to business operations and the cost and inconvenience of defending an infringement suit are significant motivating factors for license negotiations.
Such power carries the concern that patents may potentially be used to extract license terms to the public's prejudice.
In the United States, the doctrine of patent misuse is a judicially created defence that can be used to render a patent unenforceable as against an alleged infringer. Typically, it is raised in connection with a patentee's licensing practices. As recently discussed by the U.S...
