Supreme Court Leaves Potential Void Regarding Licensee Validity Challenges to Patents

On Monday, the Supreme Court denied Rates Technology Inc.’s petition for writ of certiorari to hear whether a pre-litigation no-challenge provision is void under Lear, Inc. v. Adkins, 395 U.S. 653 (1969) as the Second Circuit found. We previously discussed the petition, the Second Circuit’s holding, and the no-challenge clause which prevents a licensee from challenging the validity of a patent.

The import of this denial is that at least in the Second Circuit’s jurisdiction, patentees will possibly negotiate through the courts rather than before litigation to improve the chances that a no-challenge clause will be found valid. That is, patentees may file first and ask questions later. Additionally, if patentees do in fact negotiate licenses before filing, they may seek higher royalties given the licensees will still have a valuable defense at its disposal or may seek other provisions to offset or slow down licensees from challenging the validity of a patent.