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In re Recombinant DNA Technology Patent & Contract Litigation

Case: In re Recombinant DNA Technology Patent & Contract Litigation, pp. 1240-1243 of casebook

Citation: 850 F. Supp. 769, 774, 30 U.S.P.Q.2d 1881, 1895-97 (S.D. Ind. 1994)


Plaintiff Lilly entered into an agreement with Defendant Genentech re: L’s use of recombinant insulin produced by Genentech. The terms of agreement provided termination of the agreement if Lilly sold recombinant insulin that came from any other product which did not result in royalties to Genentech; the exception to this term was if this kind of sale was beyond Lilly’s control.

Non-party KabiGen also had an agreement with Genentech re: similar terms as above—agreement would be terminated if KG sold human growth hormone, or any other forms of it, produced from any microorganism in which Genentech would not receive royalties.

Procedural History:

Lilly brought Genentech to court on grounds that Genentech’s right to terminate presents a “continual inchoate threat”; in court:
--Lilly points out that this threat is contrary to public policy
because it stifles competition and innovation and illustrates
Genentech’s attempt to have an unlawful monopoly of the
aforementioned products
--Lilly further asserts that Genentech’s agreements involve
“tie-out” arrangements and that the 1988 Patent Misuse Reform Act
only speaks of limiting misuse rulings on “tie-in” arrangements


1. Did Genentech engage in misuse of a patent with Lilly and KabiGen?
2. Should the 1988 Patent Misuse Reform Act be interpreted to include both “tie-in” and “tie-out” arrangements?

Applicable Rules/Definitions:

--1988 Patent Misuse Reform Act has limitations on finding patent misuse in tying arrangements; for a court to rule patent misuse, a plaintiff must show first that the patentee has a market power in the relevant market for the patent involved in the tying arrangement
--tying arrangements = those that condition a patent license on
the purchase of an unpatented product
--“tie-in” arrangements = where a license is conditioned upon the use of some specific unpatented product
--“tie-out” arrangements = where a license is conditioned upon NOT using products or devices of the patentee’s competitors


1. No; the Court disagrees with Lilly’s belief that the Act only pertains to “tie-in” arrangements
2. Yes; the Act should be read to include both kinds of tying arrangements


Where statutory language is unclear, courts refer to legislative history—here, pertinent legislative history shows that the Act is meant to include both types of tying arrangements. For instance, the Congressional Record of the Senate notes that patent misuse should only be sanctioned against those who truly engage in anticompetitive conduct, regardless of the method used to do so.

The Court here finds that Genentech has not been shown to act anticompetitively and therefore, patent misuse is not found in G’s agreements with Lilly and KabiGen.

--This case mainly centers on the analysis of “tie-in” and “tie-out” arrangements re: their involvement in patent misuse disputes, rather than the analysis of whether or not misuse occurred in Genentech’s agreements with Lilly and KG.
--This case is helpful in understanding tying arrangements as a form of patent misuse; the prerequisite is that the patentee is shown to have market power as a result of his or her licensing agreement with a business, company, etc.

Aimee Lim, 11.25.07
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