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Licensee Estoppel And Patent Invalidity

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What is Licensee Estoppel?

Licensee estoppel is the doctrine that if you contract with a patent holder for a license, you are barred from contesting the validity of the patent. Patent law has typically refused to enforce licensee estoppel.

Why Would I Want to Contest the Validity of a Patent that is Licensed to Me?

When you set up a licensing agreement with an inventor, you agree to pay him royalties for the right to manufacture and sell his product. However, if the patent is not valid, then the inventor has no right to bar others from manufacturing and selling it and your exclusive license is worthless. If the patent is invalid, you should not have to pay royalties to the person who licensed the invention to you.

Can I Challenge the Validity of a Patent at any Point in Time?

You can challenge the validity of a patent at almost any time. It is probably in your best interest to challenge it as soon as possible so you can avoid paying a lot of money in royalties. However, there are some limitations regarding when you can challenge patent validity, such as:

  • You cannot cease paying royalties and then wait for the patent holder to sue you for failing to pay royalties before you challenge the validity of the patent.
  • You generally cannot challenge the validity of a patent if you signed a decree that was submitted to a court admitting the validity of the patent.

How Do I Challenge The Validity of a Patent?

If you choose to challenge the validity of the patent that has been licensed to you, you have several options.

  • You may seek a declaratory judgment from a court stating that the patent is invalid.
  • You may raise patent invalidity as a defense if the patent holder sues you for infringement.
  • If you wish to avoid court action, you can seek reexamination of the patent by the USPTO. You will need to submit a sizable fee and evidence of other patents or publications that raise questions about the patent's validity.

Do I Have to Continue to Pay Royalties after I Challenge the Validity of the Patent?

Generally, you will not have to pay royalties while challenging patent validity. So, once you challenge the validity of the patent, you have a variety of options regarding royalty payments:

  • You may be able to stop royalty payments altogether.
  • You may be able to put them in a court escrow account that will be refunded to you later if the patent is found invalid.
  • You may choose to continue paying royalties and then collect them back from the patent holder if the patent is declared invalid. This may protect you from a suit for breach of contract.

Can I Recover Royalties that I Paid before I Challenged the Validity of the Patent?

No. You can only collect the royalties you paid after you challenged the patent's validity.

Should I Contact a Patent Attorney?

If you have questions about the validity of the patent that was licensed to you, or if you are involved in a dispute over a license, you should definitely consider contacting a patent attorney. An experienced patent attorney can let you know if you should contest the validity of a patent and offer you guidance through the complicated patent law system.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 02-15-2012 02:03 PM PST

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