A LICENSEE IS NOT ESTOPPED FROM CHALLENGING THE VALIDITY OF THE PATENT: IPAB

While deciding Enercon India Ltd. v. Aloys Wobben, responding affirmatively to the a question whether a licensee of a patent who had used the patented technology under the license issued by the Patentee for more than a decade may be allowed to challenge its validity, the Intellectual Property Appellate Board (IPAB) held that owing to the costs of the litigation and the very special nuances of the technology, it may very well be that the licensee alone is capable of challenging the patent. The invention in question in Enercon India Ltd. v. Aloys Wobben was “An inverter for producing an alternating or three phase current from a DC voltage”.    The object of the invention is to eliminate harmonics so that only current with very low and if possible, no harmonics at all is fed in the public supply net work. The applicant, Enercon India had been using patent in question under a licence issued by the respondent for twelve years till December, 2008.

S. 140 of the Indian Patent Act tells us that it is not lawful to insert in a licence to manufacture or use a patented article or to work any process protected by a patent, any condition of prevention to challenges to the validity of a patent. This condition will govern all licences which relate to or are in relation to a patented article or a process protected by a patent.

In Lear Incorporated v. John S.Adkins [395 U.S.653, 89, S.Ct.1902], it was held that the contractual rights give way to public interest in a challenge to a patent and therefore, even a licensee can attack an unworthy patent. The U.S. Supreme Court said that the present federal policy favoured free competition in ideas which do not merit patent protection, and  that the licensee estoppels had an uncertain status and it is a product of judicial efforts to accommodate the competing demands of the common law of contract in the federal law of patents.  It observed that instead of a creative compromise, there has been a chaos of conflicting case law. It also observed as under:

“Surely the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain.  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.  We think it plain that the technical requirements of contract doctrine must give way before the demands of the public interest in the typical situation *671 involving the negotiation of a license after a patent has issued.”

The U.S. Supreme Court also held that the overriding federal policies would be significantly frustrated if licensees are required to continue to pay royalty during the time they are challenging the patent’s validity.  The Court observed that enforcing this contractual provision would undermine the strong federal policy favouring full and free use of ideas in the public domain.  Considering his opinion of the U.S. Supreme Court explaining why a licensee is entitled to invalidate the patent and the restriction imposed under S. 140 of the Patent Act, the Board held that, while the law shall protect the rights of the property owner, it will not restrict the rights of the interested person to challenge the grant, so that unworthy patents are restored to the public domain. Because of the costs of the litigation and the very special nuances of the technology, it may very well be that the licensee alone is capable of challenging the patent. He has the funds and the knowledge to launch the attack on the subject matter of the invention. This is why the U.S. Supreme Court held that it would be inequitable to restrict him from attacking the patent by any condition in the contract. Observing that the Parliament has specifically introduced this provision in our Patents Act which is a special enactment as far as patents are concerned and hence it will prevail over the general rules relating to contract the Board held that no licensee can be estopped from challenging the patent.

Question on delayed application of amendments of claims

Denying to allow any amendments to the claims under considerations, the Board observed that, the materials had all along been both before this Board till the date of the amendment, and before the US PTO and the EP office and hence cannot be allowed to amend it now. The Board relied upon the observation made in Matbro Ltd. v. Machingan (GB) Ltd. [(1973) RPC 823] in relation to belated amendments wherein it was held that,

“ a clear distinction between instances where a patentee knows of prior art which he genuinely, and quite properly in the circumstances, thinks is irrelevant, and other instances where, though he learns of or has been warned of objections which are available against his patent as a result of prior art, yet he takes no steps to put his specification right by way of amendment, or still worse, knowingly persists in retaining it in the unamended and suspect form. In the latter cases delay is culpable because potential defendants and the general public are entitled to plan their activities on the assumption that the patentee, though warned, has decided not to amend. If the patentee, by his conduct, lulls the public into a false sense of security he cannot thereafter be allowed to change his mind and ask for amendment, or at any rate without adequate protection being granted to the public.”

Question of Inherent Disclosure

 The Board held that a patent is invalid for anticipation if a single prior art reference discloses each and every limitation of the claimed invention. Regarding the question of inherency, it was held that, the prior art reference may anticipate without disclosing a feature of the claimed invention if that missing characteristic is necessarily present, or inherent, in the single anticipating prior art. Citing the decision in Schering Corporation, v. Geneva Pharmaceuticals, Inc and Others [339 F.3d 1373] it was held that it is not necessary that inherent anticipation requires that a person of ordinary skill in the art at the time would have recognized the inherent disclosure. But it is necessary that the result is a necessary consequence of what was deliberately intended in the invention.