Lear and its Progeny
BY
D. PATRICK O’REILLEY
FINNEGAN
PRESENTED AT
LICENSING & MANAGEMENT OF IP ASSETS
AIPLA ANNUAL MEETING
OCTOBER 26, 2012
Lear, Inc. v. Adkins
395 U.S. 653 (1969)
 Adkins licensed Lear under patent
application
 Lear
to pay royalties
 Lear could terminate if no patent issued or if
patent was held invalid
 Believing no patent would issue, Lear
stopped paying royalties
 Patent issued
 Adkins sued under contract for royalties
California State Court Decisions
 State courts refused to allow Lear to assert patent
invalidity under licensee estoppel rule

“so long as a licensee is operating under a license
agreement he is estopped to deny the validity of his
licensor’s patent in a suit for royalties under the
agreement.”
 Supreme Court granted certiorari in view of
 “recent decisions emphasizing the strong federal policy
favoring free competition in ideas which do not merit
patent protection”

Sears and Compco decisions
Supreme Court Decision
 Supreme Court held public interest in free
competition in use of ideas in public domain
prevails over licensee estoppel
 “Licensees
may often be the only individuals with
enough economic incentive to challenge the
patentability of an inventor’s discovery. If they
are muzzled, the public may continually be
required to pay tribute to would-be monopolists
without need or justification.”
Supreme Court Decision
 Supreme Court also rejected arguments
 That
royalties were payable as consideration for
disclosure and license of invention before patent
issuance
 But
consider later decision in Aronson v. Quick Point
 That
royalties should be paid under contract
until patent finally declared invalid
 “enforcing
this contractual provision would undermine
the strong federal policy favoring the full and free use
of ideas in the public domain”
Lear Principles
 Licensees may be only ones with incentive to
challenge “patentability of an inventor’s
discovery”
 Contract law principle – licensee estoppel –
“must give way before the demands of the
public interest”
 Contract provisions, such as royalty
payments, that, if enforced, would frustrate
overriding federal policy are unenforceable
Progeny of Lear v. Adkins
7
 Effect of express no-challenge clause
 Not
enforceable
Massillon-Cleveland-Akron
Sign v. Golden
State Advertising, 444 F.2d 425 (9th Cir. 1971)
 Not
patent misuse
Panther
Pumps & Equip. Co. v. Hydrocraft,
Inc., 468 F.2d 225 (7th Cir. 1972)
Lear Does Not Apply
8
 To Assignments



Possible exception based on post-assignment events
Shamrock Tech. v. Medical Sterilization, 903 F.2d 789 (Fed.
Cir. 1990) (assignor estoppel); Earth Resources v. United
States, 44 Fed. Cl. 274 (1999) (assignor-licensee is assignor for
estoppel)
Roberts v. Sears & Roebuck Co., 573 F.2d 976 (7th Cir. 1978)
(assignee estoppel)
 To consent judgments disposing of litigation



Consent as to validity and infringement
Public interest in res judicata more compelling than free
competition in public domain
Foster v. Hallco, 947 F.2d 469 (Fed. Cir. 1991)
Lear Does Not Apply
 To agreements in settlement of litigation
 Public
interest in settlement of litigation and res
judicata greater than public policy of Lear
 “No challenge” provision enforceable
 Flex-Foot Inc. v. CRP Inc., 238 F.3d 1362 (Fed.
Cir. 2001); Interspiro USA Inc. v. Figgie Int'l, 18
F.3d 927 (Fed. Cir. 1994); Hemstreet v. Spiegal,
851 F.2d 348 (Fed. Cir. 1988)
Lear Applies
10
 To exclusive and nonexclusive licenses
 Beckman
Instruments v. Technical Dev.
Corp., 433 F.2d 55 (7th Cir. 1970)
 To agreements in settlement of disputes
in advance of litigation
 Rates
Tech., Inc. v. Speakeasy, Inc., 685
F.3d 163 (2d Cir. 2012); Massillon–
Cleveland–Akron Sign Co. v. Golden State
Adver. Co., 444 F.2d 425 (9th Cir. 1971)