Field-of-use limitation

A field-of-use limitation is a provision in a patent license^[1] that limits the scope of what the patent owner authorizes a manufacturing licensee (that is, a licensee^[2] that manufactures a patented product or performs a patented process) to do in relation to the patent, by specifying a defined field of use—that is, a defined field of permissible operation by the licensee. In addition to affirmatively specifying the field of use, the license may negatively specify a field or fields, by specifying fields of use from which the licensee is excluded.

By way of example, such a license might authorize a licensee to manufacture patented engines only for incorporation into trucks, or to manufacture a chemical only for sale to farmers (as contrasted with home gardeners). If the licensee exceeded the scope of the licensee, it would commit patent infringement. More generally, this kind of license permits the licensee to use the patented invention in some, but not all, possible ways in which the invention could be exploited. In an exclusive field-of-use license the licensee is the only person authorized to use the invention in the field of the license.

Field-of-use limitations in patent licenses may raise antitrust issues when such arrangements are used to allocate markets or create cartels.

USA case law

The US Supreme Court held such arrangements legitimate in General Talking Pictures Corp. v. Western Electric Co.^[3] By way of example, such a license might authorize a licensee to manufacture patented engines only for incorporation into trucks (the "truck field"), or to manufacture such engines only for sale to farmers (the "field of distribution to farmers").^[4] If the licensee exceeded the scope of the licensee, it would commit patent infringement.

The doctrine of the General Talking Pictures case does not apply to a patent owner's sale (or its licensee's sale) of a product to a customer that imposes a restriction on what the customer may subsequently do with the product. Such sales are governed by the “exhaustion doctrine,” rather than the General Talking Pictures doctrine. Enforced with fines and often much bad publicity.^[5]

Furthermore, when field-of-use licensing is used to create a horizontal cartel by which product markets are allocated among what would otherwise be competitive licensees, the General Talking Pictures doctrine does not shield the arrangement from the antitrust laws. In Hartford-Empire Co. v. United States,^[6] such a cartel based on patents was condemned as an antitrust violation. In United States v. Ciba Geigy Corp.,^[7] the court found an antitrust violation as to patent licenses that restricted use of purchased drug chemicals but no violation as to licenses that limited the use of the same chemicals by licensees manufacturing them.

Free software licences

It has been argued that field-of-use limitations are inconsistent with W3C standards and with the GNU General Public License.^[8]

See also

• Exhaustion doctrine

References

1. A patent license is a legal document in which a patent owner authorizes another person to use the invention that the patent claims.
2. A licensee is a party that a patent owner authorizes to practice the invention that a patent claims.
3. 304 U.S. 175, 182 (1938), affirmed on rehearing, 305 U.S. 124 (1938).
4. For an example of an actual license of this type, see UC Regents License – Exclusive field-of-use patent license between the Regents of the University of California and Cepheid.
5. See Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109 (2008).
6. 323 U.S. 386 (1945).
7. 508 F.Supp. 1118 (D.N.J.1976).
8. See FSF's Position on W3 Consortium “Royalty-Free” Patent Policy.