Contracting for a Return to the USPTO: Inter Partes Reexaminations as the Exclusive Outlet for Licensee Challenges to Patent Validity

Abstract

Licensing of patents is an important route for socially valuable transfers of rights in intellectual property. The continuing value of patent licenses, however, has been called into doubt in view of the Supreme Court’s recent MedImmune, Inc. v. Genentech, Inc. decision. That case held that licensees do not have to repudiate their licenses in order to have Article III standing to seek a declaratory judgment on the validity of licensed patents. MedImmune furthers the federal policy, announced in earlier Supreme Court cases such as Lear, Inc. v. Adkins, of helping licensees police the public domain by eliminating contractual and state-law restrictions on their ability to challenge patent validity. This Article seeks to reconcile the tension between societal interests in getting rid of “bad” patents on the one hand, and in promoting the practice of patent licensing on the other. It argues that licensing parties should contract for, and courts should enforce, clauses that require licensees seeking to challenge patent validity to pursue an inter partes reexamination in the U.S. Patent and Trademark Office. This procedure provides an adequate alternative to district court declaratory judgment actions because it retains adversarial features, but does not subject licensees and licensors to the high cost of litigation. The proposed solution is thus desirable as a matter of licensing policy because it would likely help reduce the costs of licensing. More importantly, reexamination-only clauses are probably enforceable in spite of Lear if they are tailored to allow validity challenges prohibited by the reexamination statute to proceed in district courts.

Keywords: MedImmune, patent, licensing, declaratory judgment, inter partes reexamination

JEL Classification: O30, O31, O34