Princo Corp. v. ITC, 616 F.3d 1318 (Fed. Cir. 2010) was a 2010 decision of the United States Court of Appeals for the Federal Circuit, that sought to narrow the defense of patent misuse to claims for patent infringement. Princo held that a party asserting the defense of patent misuse, absent a case of so-called per se misuse, must prove both "leveraging" of the patent being enforced against it and a substantial anticompetitive effect outside the legitimate scope of that patent right. In so ruling, the court emphasized that the misuse alleged must involve the patent in suit, not another patent. The majority opinion substantially "entangle[d] patent misuse jurisprudence with antitrust concepts." The Supreme Court's subsequent opinion in Kimble v. Marvel Entertainment, LLC, however, points strongly in the opposite direction, rejecting the conflation of misuse and antitrust and insisting that they embody different policies.
Background The US International Trade Commission (ITC) conducted an investigation of Princo's alleged infringement of U.S. Philips Corporation's patents by the importation of optical discs—recordable compact discs ("CD-Rs") and rewritable compact discs ("CD-RWs") (collectively "CD-R/RWs"). Those devices and related technology were developed in the 1980s and 1990s, principally by Philips and Sony, working in collaboration. These companies also developed technical standards to ensure that CD-R and CD-RW discs made by different manufacturers would be compatible and playable on new machines and also preexisting machines that were designed to read the earlier generation of compact discs ("CDs") and "read-only" compact discs ("CD-ROMs"). The standards for CD-Rs and CD-RWs were collected in a publication known as the "Orange Book." In developing the CD-R/RW standards, Sony and Philips engineers developed different solutions for the problem of how to encode position information in the disc so that a consumer's CD reader/writer could maintain proper positioning while writing data to the disc, which were claimed in their respective patents—Sony's Lagadec patent and Phillips's Raaymakers patents. The engineers from both companies agreed that the Raaymakers approach "was simple and . . . worked very well." The ITC found that by contrast the Lagadec approach was "prone to error" and would have been "very difficult" to implement. Philips and Sony therefore agreed to incorporate the Raaymakers approach in the Orange Book as the standard for manufacturing CD-R/RW discs. Sony and Phillips pooled the patents needed to implement the standards, and Phillips was designated the administrator to make licenses available to the industry. Philips offered several different "package" licenses to the Philips and Sony patents (and those of several other patent holders). Philips included in the patent packages those patents that it regarded as potentially necessary to make Orange-Book-compliant CD-R or CD-RW discs, including the Raaymakers and Lagadec patents. The package licenses contained a "field of use" restriction, limiting the licensees to using the licensed patents to produce discs according to the Orange Book standards. After 2001, Philips offered additional package options, grouping the patents into two categories, denominated "essential" and "nonessential," for producing CDs. In the late 1990s, Princo (a Taiwanese manufacturer, also known as Princo Corp or Princo Corporation) sought to manufacture discs and import them into the US, and it entered into a package license agreement with Philips. Soon afterwards, however, Princo stopped paying the licensing fees required by the agreement. Philips then filed a complaint with the ITC, alleging that Princo was violating section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, by importing CD-Rs and CD-RWs that infringed Philips's patents. Princo asserted patent misuse as an infringement defense. The ITC rejected the theory that Philips improperly tied the Lagadec patent to the pool license because that patent was not essential to Orange Book-compliant discs. It also rejected the theory that the Lagadec and Raaymakers patents covered potentially competing technologies, and that Philips and Sony foreclosed potential competition between them by agreeing that the Lagadec patent would be available only through package licenses for Orange Book-compliant discs.
Federal Circuit ruling After several preliminary decisions, the case came before the Federal Circuit en banc. The court concluded (6–2–2) that the conduct alleged was not patent misuse and therefore affirmed the ITC's orders granting relief against Princo. Two judges concurred in the judgment; two judges dissented.
Majority opinion Judge Bryson wrote for the majority. In his analysis of the patent misuse doctrine, he began by characterizing "the basic rule of patent misuse: that the patentee may exploit his patent but may not use it to acquire a monopoly not embraced in the patent." He then turned to the Federal Circuit's characterization of misuse "as the patentee's act of impermissibly broaden[ing] the physical or temporal scope of the patent grant with anticompetitive effect." He then summarized Federal Circuit case law on misuse:
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