Licensee Patent Challenges

41 Pages Posted: 9 Sep 2015  

Alan D. Miller

University of Haifa - Faculty of Law; University of Haifa - Department of Economics

Michal S. Gal

University of Haifa - Faculty of Law

Date Written: December 31, 2014

Abstract

We analyze contractual clauses which limit the ability of licensees to challenge patents at the basis of their licensing agreements. In particular, we study no-contest clauses, which prohibit licensees from contesting the validity of the patent, and challenge-penalty clauses, which penalize licensees for doing so. We develop a model that we use to compare three legal regimes: “No Restriction,” in which the patent holder is given complete contractual freedom, “Partial Restriction,” in which no-contest clauses are forbidden but challenge penalties are allowed, and “Total Restriction,” in which neither no-contest nor challenge penalty clauses are enforced. We show that No Restriction is unlikely to be optimal, and further, we provide necessary and sufficient conditions under which Total Restriction is optimal. The rule we suggest differs significantly from the one currently applied by most courts.

Keywords: Patents, Licensing, Antitrust, Challenges, Contracts

JEL Classification: K11, K21, O30

Suggested Citation

Miller, Alan D. and Gal, Michal S., Licensee Patent Challenges (December 31, 2014). Yale Journal on Regulation, Vol. 32, No. 1, 2015. Available at SSRN: https://ssrn.com/abstract=2658323

Alan D. Miller (Contact Author)

University of Haifa - Faculty of Law ( email )

Mount Carmel
Haifa, 31905
Israel
+972-52-503-9259 (Phone)

HOME PAGE: http://econ.haifa.ac.il/~admiller

University of Haifa - Department of Economics ( email )

Haifa 31905
Israel
+972-52-503-9259 (Phone)

HOME PAGE: http://econ.haifa.ac.il/~admiller

Michal S. Gal

University of Haifa - Faculty of Law ( email )

Mount Carmel
Haifa, 31905
Israel

HOME PAGE: http://weblaw.haifa.ac.il/en/faculty/gal/pages/home.aspx

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