U.S. Philips Corp. v. International Trade Commission

United States Philips Corporation (Philips) (plaintiff) owned patents disclosing technology used to create recordable and rewritable compact discs. Philips licensed the patents in packages, charging a uniform royalty for each disc a licensee manufactured using any patent in the patent pool. The same royalty applied even if the licensee used only some of the patents in the license package. Philips did not offer individual patent licenses. Philips licensed patent packages to a number of compact-disc manufacturers (defendants), including Princo Corporation and Princo America Corporation (Princo), GigaStorage Corporation Taiwan and GigaStorage Corporation (USA) (GigaStorage), and Linberg Enterprise, Inc. (Linberg). The compact-disc manufacturers stopped paying the licensing fees. Philips filed a complaint with the International Trade Commission (ITC), contending that the compact-disc manufacturers imported infringing discs into the United States. The compact-disc manufacturers argued that the Philips patents were invalid because Philips misused the patents by offering only patent packages. In particular, the compact-disc manufacturers claimed that the packages included licenses for patents inessential to manufacturing compact discs. The administrative law judge found the licensing packages to be illegal tying arrangements and held the patents unenforceable. Philips appealed. The ITC affirmed, finding that the licensing package arrangements were per se misuse, or alternatively invalid under a rule-of-reason analysis. Philips appealed.