it, a strong presumption arose that the claim of patent invalidity was made to avoid payment of the agreed upon royalties." This rationale was present also in the majority opinion by Justice Holmes in United States v. Harvey Steel Co.," where it was found unjust to allow the licensee to use the process introduced to him by the patentee and permit him later to claim invalidity, thereby allowing an escape from royalty payments. Similarly, in Faulks v. Kanıp,2 when an assignor attempted to assert invalidity of the patent after assignment, the Court in order to reach a just result, found an implied warranty that the assignor had title to what he conveyed." Since they were primarily concerned with the equities of the contracting parties, these Courts neglected the public policy considerations inherent in the federal law of patents.

Several exceptions to the estoppel doctrine arose." As stated previously, the licensee was not estopped if he was "evicted." Another exception permitted an assignor being sued by his assignee for infringement to narrow the claims of the patent in question by evidence tending to show the state of the art, so long as this narrowing did not nullify the patent in an attempt to deny infringement. The Supreme Court, in Westinghouse Electric & Manufacturing Co. v. Formica Insulation Co.," reasoned that if the state of the art was not examined, courts would be deprived of the best means of measuring what the patent included."

18. Eureka Co. v. Bailey Co., 78 U.S. (11 Wall.) 488, 491-92 (1870). But see Handler, Antitrust: 1969, 55 CORNELL L. REV. 161, 186-88 (1970).

19. 196 U.S. 310 (1905). The patent holder entered into a contract with the government for the use of his patented process and later brought suit for royalties. The government asserted invalidity as a defense even though there had been no prior determination of patent invalidity.

20. Id. at 318-19.

21. 3 F. 898 (C.C.S.D.N.Y. 1880).

22. "[1]n justice [assignors] ought not to be heard to say that they had it not and did not sell it, and to be allowed to derogate from their own grant by setting up that it did not pass." Id. at 904. St. Paul Plow Works v. Starling, 140 U.S. 184 (1890), is often cited to support the same proposition, but in that case the lower court admitted evidence concerning the novelty of the patent, and this admission was not held to be error by the Court.

23. See Cooper, Estoppel to Challenge Patent Validity: The Case of Private Good Faith vs Public Policy, 18 W. RES. L. Rev. 1122, 1138-54 (1967).

24. See note 17 supra and accompanying text.

25. 266 U.S. 342, 351 (1924).

26

[But] the result proved to be an anomaly: if a patent had some novelty Formica permitted the old owner to defend an infringement action by showing that the invention's novel aspects did not extend to include the old owner's products; ... if a

Courts further limited the estoppel doctrine where counter veiling public policy considerations warranted protection. In Sola Electric Coy Jefferson Electric Co" a licensing agreement, stipulated that the prices, terms, and conditions of sale throughout the licensed territory should not be more favorable to the licensee's customers than those set by the patentee. The patentec sought recovery. of unpaid royalties and an injunction to restrain subsequent sales not made in accordance with the contract. The Supreme Court held that the doctrine of estoppel was in conflict with the prohibitions against price fixing of the Sherman Act and refused to apply estoppel since the invalidity of the patent would necessarily render the agreement illegal. Similarly, the Court has also held that it would be against the policy of the patent laws to estop an assignor from asserting in an infringement suit the defense that the assigned patent was a copy of an expired one, since a patent becomes part of the public domain upon its expiration. Furthermore, the Supreme Court has declined to grant injunctive relief to enforce a contract wherein the licensee agreed not to contest the validity of the patent, reasoning that the public interest in eliminating worthless patents was as important as the patentee's interest in protecting his monopoly." These numerous

patent had no novelty at all, the old owner could not defend successfully since he would be obliged to launch the direct attack on the patent that Formica seemed to forbid. Lear, Inc. v. Adkins, 395 U.S. 653, 665 (1969).

But see Casco Prods. Corp. v. Sinko Tool & Mfg. Co., 116 F.2d 119 (7th Cir.), cert. denied, 312 U.S. 693 (1940) (scope can be narrowed even if patent reduced to a nullity). See also Ball & Socket Fastener Co. v. Ball Glove Fastening Co., 58 F. 818, 823 (1st Cir. 1893).

27. 317 U.S. 173 (1942).

28. "Local rules of estoppel which would fasten upon the public as well as the petitioner the burden of an agreement in violation of the Sherman Act must yield to the Act's declaration that such agreements are unlawful, and to the public policy of the Act which in the public interest precludes the enforcement of such unlawful agreements." Id. at 177. See also MacGregor v. Westinghouse Elec. & Mfg. Co., 329 U.S. 402 (1947); Edward Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U.S. 394 (1947). Here the licensors sought only to collect royalties but the Court held that the existence of the price fixing clause was enough to bring the validity of the patent into question.

29. See Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249 (1945). The assignee acquired a patent from the assignor who later made use of the patent. As a defense to the assignee's suit for infringement, the assignor asserted that the patent was a copy of an expired patent and therefore a part of the public domain at the time he allegedly infringed. Interpreted narrowly, the case establishes another exception to the doctrine of estoppel which arises when the patent allegedly infringed was based on a prior-expired patent. Interpreted broadly, however, the case could have been read to overrule estoppel in that all invalid patents are part of the public domain, whether they are invalid because they are copies or otherwise. The same policy that warranted another exception to the doctrine of estoppel also would seem to have warranted repudiation of the doctrine.

30. See Pope Mfg. Co. v. Gormully, 144 U.S. 224 (1892). The patentee-plaintiff licensed

exceptions had so eroded the estoppel doctrine that the next step. complete repudiation, was a logical one." Consequently, in Icar, Incy. Adkins” the Supreme Court explicitly renounced the doctrine of licensee estoppel."

Lear, Inc. v. Adkins: The Court's Holding

In 1953, John Adkins, an employee of Lear, agreed to grant the company a license on all ideas that he might develop during the term of his employment on a mutually satisfactory royalty basis. In 1955, he applied to the Patent Office for a patent on improvements on a gyroscope and then entered into a detailed contract with Lear concerning royalties. The contract could be terminated if the Patent Office refused to grant a patent on the "substantial claims" of Adkins' original application or if the patent issued but was subsequently held invalid. After Adkins' application had been rejected twice, Lear, believing that a patent would never be granted, notified Adkins that it would no longer pay royalties on the gyroscopes produced at Lear's Michigan plant." In 1960, upon narrowing his claims considerably, Adkins received a patent. After two conflicting lower court determinations,” the California Supreme

his bicycle patent to the defendant on condition that he manufacture only certain types of bicycles and that he agree not to challenge the validity of the plaintiff's patent. Alleging that the licensee breached the latter provision, the patentee prayed for an accounting for the machines made in violation of the agreement and for an injunction from further manufacture. The licensee defended on the grounds of patent invalidity. See also Mercoid Corp. v. MidContinent Inv. Co., 320 U.S. 661, 666 (1944).

31. In 1947 Justice Frankfurter exclaimed: "If a doctrine that was vital law for more than ninety years will be found to have now been deprived of life, we ought at least to give it decent public burial." MacGregor v. Westinghouse Elec. & Mfg. Co., 329 U.S. 402, 416 (1947) (dissenting). For an argument that the precedent to Lear did not point to the complete repudiation of licensee estoppel see Dodds, After Lear v. Adkins - What?, 51 J. Pat. Off. Soc'Y 621, 623-29 (1969).

32. 395 U.S. 653 (1969).

33. Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U.S. 827 (1950) was the last express approval of the doctrine and was the specific case overruled in Lear.

34. Payments were continued for two more years on the gyros produced in Lear's California plant, which were apparently closer in design to the device described in Adkins' patent application, before Lear notified Adkins that it was terminating the agreement.

35. See Adkins v. Lear, Inc., 52 Cal. Rptr. 795, 801 (Ct. App. 1966). The trial court directed a verdict of $16,000 for Adkins on the gyros manufactured in California, holding that Lear was estopped by its licensing agreement from questioning the validity of the inventor's patent. Because Lear claimed the Michigan gyros were developed independently of Adkins' invention, the trial judge directed the jury to award the inventor a recovery only if it were satisfied that the invention was novel within the meaning of the federal patent laws. The jury returned an $888,000 verdict for Adkins, but Lear was granted judgment notwithstanding the

Court held that the 1955 contract had not been properly terminated and consequently the doctrine of estoppel barred Lear from questioning the validity of the patent. The state court also rejected Lear's contention that the Michigan gyros, as opposed to others manufactured in California, were a natural extension of the prior art and found at least partial reliance on Adkins' invention, whether or not this invention met the standards required for the issuance of a patent, and therefore reinstated the jury verdict below."

Since interpretation of specific provisions of the licensing agreement was held to be uniquely a matter of state law the United States Supreme Court considered only the state court's reliance on the doctrine of estoppel which barred Lear from proving that the patent was invalid." In deciding the estoppel question, the Court first noted that past efforts to accommodate the common law of contracts with federal patent law had failed." Analyzing the "typical" licensing situation where a patent is licensed after issuance rather than while the application is pending," the Court found the equities of the patentee-licensor to be weak when weighed against the public's interest in the free access to ideas that are part of the public domain." The public right to the use of inventions not the subject of valid patents had to be safeguarded in spite of traditional contract law requirements. Since the licensee often is the only one with sufficient economic incentive to contest the patent's validity, the Court viewed him as the most appropriate person to champion the public interest." The licensor would not be unduly burdened by verdict on the basis that Adkins' invention had been completely anticipated by prior art. Both sides appealed to the California Court of Appeals where it was held that Lear was within its contractual rights in terminating the royalty obligations in 1959 and that if Adkins desired to recover damages after that date he had to bring an infringement action in the federal courts. The court held further that Lear had to pay pre-1959 royalties on both the Michigan and California gyros under the contract regardless of the validity of the patent. Both parties again appealed.

36. Adkins v. Lear, Inc., 67 Cal. 2d 882, 435 P.2d 321, 64 Cal. Rptr. 545 (1967).

37. Id. at 907-15, 435 P.2d at 336-41, 64 Cal. Rptr. at 560-65.

38. 395 U.S. at 661-62.

39. Id. at 668.

40. Id. at 669-71.

41. Id. at 670-71. As used in this note "public domain" refers generally to those ideas in which there are no protected private interests. It has been suggested that the Lear Court's use of the phrase would not include ideas not generally known and that this use raised but did not answer the issue of state law protection of unpatented secret ideas. See Adelman & Jaress, Inventions and the Law of Trade Secretes After Lear v. Adkins, 16 WAYNE L. Rev. 77, 8283, 85 (1969); notes 84-106 infra and accompanying text.

42. 395 U.S. at 670. See also Brief for Petitioner at 36.

allowing the licensee to contest validity, the Court reasoned, since his case would be buttressed by the presumption that the Patent Office's ex parte legal conclusion of patentability was correct." Consequently, in order to enable the licensee to contest validity and rid the public of worthless patents, the licensee estoppel doctrine was overruled."

The Court then addressed itself to the particular fact situation of the Lear case where the licensing agreement was consummated four years prior to the granting of the patent. Adkins' claim to royalties for the full patent term of 1960 to 1977 was rejected as overbroad." Applying the policy of the patent laws despite the limiting contract term, the claim to royalties until such time as the patent was held invalid as required by the 1955 agreement was also rejected by the Court." If the collection of royalties was allowed until an adjudication of the patent's validity, the licensor would have a strong economic incentive to use dilatory court tactics. Moreover, use of such delaying tactics might deter licensees from challenging patent validity and thereby protecting the public interest, especially in an area where extended legal proceedings could last longer than the actual useful life of a patent. The Lear decision thus makes it clear that a licensee will be permitted to avoid royalties after the issuance of the patent from the time he stops payment, provided he is successful in proving patent invalidity."

Prior to Lear, any party with standing, other than the estopped assignor or licensee, could contest the validity of a patent.50 By looking to the policy behind the patent and antitrust laws in order

43. 35 U.S.C. § 282 (1964).

44. 395 U.S. at 671.

45. Id. at 671-75.

46. Id. at 672-73.

47. Id. at 673-74.

48. Id.

49. Id. at 674. The Lear decision is to be retroactively applied since the public's interest in the elimination of specious patents would be significantly prejudiced if the retroactive effect of today's decision were limited in any way." Id. n.19.

50. A party sued for patent infringement may raise the defense of invalidity. 35 U.S.C. § 282 (1964). Similarly, a party being threatened or charged with infringement by a patentee may seek a declaratory judgment of invalidity under 28 U.S.C. § 2201 (1964). See. e.g.. Welch v. Grindle, 251 F.2d 671 (Sà Cir. 1957); Tuthill v. Wilsey, 182 F.2d 1006 (7th Cir. 1950); E.J. Brooks Co. v. Stoffel Seals Corp., 160 F. Supp. 581 (S.D.N.Y. 1958); I-T-E Circuit Breaker Co. v. McGraw Elec. Co., 121 F. Supp. 435 (E.D. Pa. 1954).