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Are “No challenge clause” enforceable in patent agreements?
A patent is a safety cover for owners of inventions against infringement by third parties without the consent of the inventor for their personal gain. However, in case of patent, the protection or right over inventions are for a limited period only and after such period, the details and right to use with regard to such patented invention gets disseminated in public domain and hence everyone is free to access such details without requiring prior consent of the patent holder.
In cases where the patent period has not expired and a third party wants to access the patented inventions in a legal manner, the patent holder may provide a license to access such inventions in exchange for an amount of Royalty. In licensing agreements of patents, it is crucial to specify which and how many rights have been transferred to licensee and what the amount has been determined for royalty. In such agreements, a “No Challenge Clause” may also be inserted.
A “No Challenge Clause” is a clause of an agreement between patent holder and licensee wherein it is agreed that the licensee will not in any manner challenge the validity of the patent time being as well as in future. This clause is added to protect the patent against misuse or malicious intention of the licensee, revoke his license in such cases and make his challenge to validity of the patent as infructuous.
The mention of No-Challenge-Clause can be found from a case of 1969 of US Federal Court where a company namely Lear Inc. which had challenged the validity of patent of US for which they have took license from inventors namely John Adkins. Despite there was no legal provision for such a case, the court overruled the prior doctrine and allowed the challenge and justified the same stating that challenging patents is an important step in order to know whether the patent is illegal due to lack of patentability on the first place and also added further that to permit competition in ideas and innovations shall be permissible which is freedom to the general public. However, the court ignored that most of the people who are challenging the patent are licensees having enough economic incentives to challenge the patent. The concept of No-challenge-clauses has since then gone under a lot of legal agreements and covenants. This was the case that had called for the revision of enforceability of No-challenge-clause.
Different nations have different views on allowing the enforceability of No-challenge-clause, however most of the jurisdictions are in favour of the enforcement of the No-challenge-clause. This practice of inserting No-challenge-clause has become popular in practice and used widely in order to protect the validity of the patents against the false and malicious claims of licensee and prevent the misuse of the license.
Conclusion
The question whether No-challenge-clause is enforceable depends upon the jurisdiction in which such dispute has arisen. Different nations have different say in the validity and enforceability of this clause but most of the nations have approved and allowed the enforceability of the No-challenge-clause.