14

A Comparative Analysis on the No-Challenge Obligation in
the Patent Licensing and Assignment Agreement between
Korea, Japan, the US and Germany(*)
Invited Researcher: Hyojil Ahn(**)

There is a lot of debate both in the inside and outside of Korea about the possibility of invalidity
claims made by either the licensee or the assignor of the patent rights. Most controversial areparticularly the problems whether including "no-challenge" provision in license agreement is amisuse of the patent right or constitutes an anti-competitive behavior under the antitrust law andwhether the licensee or the assignor is, based on the principle of trust and good faith, prohibitedfrom challenging the validity of the licensed or assigned patent, even if there is no such provision.
This issue consists fundamentally of conflicts between general principles of the contract law such as
the principle of trust and good faith or the principal of estoppel and the purpose of the patent
system to promote industrial development. The research will compare and analyze how the laws,
judicial precedents and theories of Korea, Japan, the US and Germany inclusive of EU are
implemented, applied and interpreted regarding such conflicts and conclusively will suggest areasonable standard as to how to deal with these problems.

I

Introduction

trust and good faith or the principle ofestoppel, and the purpose of the patent
system to promote industrial development.
In practice, the no-challenge obligation
generally means the obligation not tochallenge the validity of a patent or
know-how. That is, in a patent license
agreement,
it
means
the
“licensee’s
obligation not to challenge the licensor interms of the validity of the patent subject tothe agreement,” while in a know-how license
agreement,
it
means
the
“licensee’s
obligation not to challenge the licensor interms of whether the know-how subject to theagreement has been publicly known.” (*1) In
actual practice, it is common to insert aprovision on such a no-challenge obligation –that is, a “no-challenge provision” – in alicense agreement. (*2) In addition, many
conflicts relating to the infringement or

There is a continuous debate, not only in
Korea but also in many other countries,
about whether a person who has assigned apatent right through a technology transfer
agreement or a licensee may claim theinvalidity of the relevant patent right. Thereis the issue of whether imposing a
no-challenge obligation so as to prevent a
person who has concluded a license
agreement from challenging the licensee interms of the validity of the patent rightsubject to the agreement falls under violationof the principle of trust and good faith, amisuse of the patent right or an act of unfair
trade under the antitrust law. This issue
fundamentally arises from conflicts between
doctrines based on the general principles of
the contract law, such as the principle of
(*)

(**)
(*1)

(*2)

This is an English translation of the Korean summary of the report published under the Industrial Property Research
Promotion Project FY2007 entrusted by the Japan Patent Office. IIP is entirely responsible for any errors in
expressions or descriptions of the translation.
Associate Professor of Law, College of Law, Korea University
Japan Fair Trade Commission, “Guidelines for Patent and Know-How Licensing Agreements under the
Antimonopoly Act” (1999.7.30) 4-3-(4) and Japan Fair Trade Commission, the “Guidelines for the Use of Intellectual
Property under the Antimonopoly Act” (2007.9.28), 4-4-(7).
Masahiko Amemiya, “Kenrifusōgimu ni tsuite” (Concerning the no-challenge obligation), Tokkyo Kanri, vol.36, no.8
(1986),p.991, 996.
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IIP Bulletin 2008112 ●patent assigned or to make a defense ofinvalidity thereof in an infringement lawsuit
if the assignee institutes a lawsuit against
the assignor on the grounds of infringementof the patent in the case where an inventor(in many cases, an employed inventor)
continues to use his/her patented invention
even after he/she has assigned his/her rightto a third party.
If emphasis is placed on the principle ofthe freedom of contract and the principle oftrust and good faith, it will be necessary toallow the no-challenge obligation based on
the validity of a no-challenge provision andthe relationship of trust. On the other hand,
there is the issue of the need to guarantee
free competition to the maximum possible
extent in the interest of the general public, byeliminating patents that are not worthy ofprotection. The validity of a no-challenge
provision and the issue of the degree to which
the no-challenge obligation based on theprinciple of trust and good faith is allowed
are closely related to each country’s laws andlegislative policy regarding its patent system
as well as competition policy. In countries
where the effective means of claiming theinvalidity of a patent are sufficiently
guaranteed for third parties other thanlicensees and assignors, concern aboutdamage to the public interest will not groweven if a no-challenge provision orcompliance with the no-challenge obligation
based on the principle of trust and good faithis allowed to a certain extent. In addition, if apatent is regarded as an exclusive rightmainly in the sense that it inhibits freecompetition, no-challenge provisions and the
no-challenge obligation based on theprinciple of trust and good faith will have to
be allowed only to a very limited extent. This
research first considers, through comparison,
how the laws of Korea, Japan, the UnitedStates, Germany and Europe stipulate
no-challenge
provisions
includedinagreements and how judicial precedents andtheories in each country deal withinvalidity of a patent are solved throughsettlement or granting of a cross-license. In
such a case, it is considered ordinary for theparties
concerned
to
agree
to
the
(*3)
no-challenge obligation.
The no-challenge
provision is subject to certain restrictions
under the antitrust law of each country since
it enables technology and know-how that do
not have legitimacy worthy of legal
protection to be protected as a patent or trade
secret for quite a while and thereby restricts
free competition. In addition, the provisionlies outside the purpose of patent law andtrade secret protection law, namely topromote industrial development by granting
exclusive rights for technology and know-howthat fulfill certain requirements.
Even if an agreement does not include a
no-challenge provision, the no-challenge
obligation may arise in some cases from therelationship of trust between the parties
concerned. For example, when a licensee isusing the relevant technology without any
risk of patent infringement while eliminatingcompetitors and subsequently claims theinvalidity of the patent to escape paying
license fees due to a change in thecircumstances, such a claim can be regarded
as being against the principle of trust andgood faith or the principle of estoppel.
However, if the claim of invalidity by alicensee is prohibited, there will be concern
about damage to the public interest for freecompetition to be guaranteed throughelimination of unfair patents. Therefore, thepropriety of finding the no-challenge
obligation based on the principle of trust andgood faith has become subject to numerous
debates in both judicial precedents andtheories in each country. The no-challenge
obligation based on the principle of trust andgood faith also becomes an issue in relation to
the assignor of a patent. For example, thereis the question of whether an assignor ispermitted, in terms of the principle of trustand good faith or the principle of estoppel, tofile a request for a trial for invalidation of a(*3) Katsuyuki Izumi, “Tokkyo raisensu keiyaku ni okeru fusōgimu to dokusenkinshihō” (No-challenge obligation in apatent license agreement and the antitrust law), I.P. Annual Report 2006, Bessatsu NBL, no. 116, p.239, 240.
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113 ●IIP Bulletin 2008

is still not dealt with independently but
rather in association with whether the
licensee is eligible to be a person who
requests a trial for patent invalidation as aninterested party. According to judicial
precedents, an interested party who may
request a trial for invalidation refers to aperson who is subject to assertion of a rightby the right holder or has the risk of
becoming subject to such an assertion andhas a direct and realistic interest that can bedamaged by it. (*5) Judicial precedents define
a licensee, in general, as a person who does
not have the risk of becoming subject to theassertion of a right by the patentee, and do
not recognize that a licensee has any
interest.(*6)
However,somejudicial(*7)
precedents recognize this;
therefore, it is
impossible to learn the determined attitudeof judicial precedents. However, in theories,
theprevailing
opiniondeniestheno-challenge obligation stipulated under the
principle of trust and good faith while giving
preference to the public interest throughelimination of unfair patents over the
relationship of trust between the parties
concerned. (*8) There has been neither judicial
precedent nor theory regarding the assignor’s
no-challenge obligation.
With regard to no-challenge provisions,the validity thereof has been found inprinciple both in judicial precedents andtheories. (*9) However, this does not apply tocases where the antitrust law is violated. The
antitrust law still does not mention whether
to allow a no-challenge provision. However,
Article 3, item 15 of the “Types andStandards of the Acts of Unfair Trade underan International Agreement” (*10) in 1997 andArticle 3, item 16 of the “Examination

no-challenge provisions and the no-challenge
obligation based on the relationship of trust,and then presents a reasonable standard set
by the author for the solution of this issue.

II

Trends in Each Country

1

Korea

Firstly, looking at the means of claiming
the invalidity of a patent, under Korean law,
it is possible to do so by filing a request with
the Korean Intellectual Property Office(KIPO). In addition, though only aninterested party or an examiner may inprinciple request a trial for invalidation,anyone may request such a trial during theperiod from the date of registration of
establishment of a patent right to within
three months after the publication ofregistration (Article 133 of the Korean Patent
Law). However, it has been allowed to make adefense of misuse (invalidity) of a right in
infringement lawsuits since the Supreme
Court of Korea’s(*4) holding in 2004 to theeffect that a court examining a patent
infringement lawsuit may determine whether
it is obvious that the relevant patent has
grounds for invalidation. The no-challenge
obligation was questioned in association withrequests for a trial for invalidation in thepast. However, it seems that the presence ofthe no-challenge obligation has also come tobe questioned in association with a defense ofinvalidity in an infringement lawsuit since
the Supreme Court decision in 2004.
However, in terms of the structure of thesystem of trial for patent invalidation, in
judicial precedents and theories in Korea, theissue of the licensee’s no-challenge obligation(*4) Supreme Court decision of 2004.10.28, 2000Da69194 (Publication 215 (2004.12.1), 1915).
(*5) Supreme Court decision of 1980.6.24, 79Fu92 (Publication 638 (1980.8.15), 12973); Supreme Court decision of
1981.4.14, 79Fu90 (Publication 657 (1981.6.1), 13906).
(*6) Supreme Court decision of 1981.7.28, 80Fu77 (Publication 665 (1981.10.1), 14265); Supreme Court decision of
1983.12.27, 82Fu58 (Publication 722 (1984.2.15), 264); Supreme Court decision of 1977.3.22, 76Fu7.
(*7) Supreme Court decision of 1980.3.25, 79Fu78 (Publication 633 (1980.6.1), 12789); Supreme Court decision of
1980.5.13, 79Fu74; Supreme Court decision of 1984.5.29, 82Fu30 (Publication 733 (19848.1), 1188).
(*8) Song Yeong-sik, Lee Sang-jeong and Hwang Jong-hwan, Intellectual Property Law (1), 9th ed., (Yuk Phub Sa, 2005),
p.343; Yun Seon- hui, Patent Law, (Bob Mun Sa, 2003), p.588.
(*9) Song Yeong-sik, Lee Sang-jeong and Hwang Jong-hwan, supra note 8, 343; Yun Seon- hui, supra note 8, p.588; Hwang
Jong-hwan, “Consideration of the licensee’s no-challenge obligation,” Industrial Property Right, no. 27 (1989.1): p.47,
51-52.
(*10) Korea Fair Trade Commission, Examination No. 1997-23.
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IIP Bulletin 2008114 ●

party. However, the 2003 revision of the
Patent Act made it possible for anyone to filea request for a trial for invalidation (Article
123(2) of the Japanese Patent Act), and it has
become unnecessary to associate thelicensee’s no-challenge obligation with theissue of whether the licensee is an interested
party. In addition, in the “Kilby” decision(*16)
in 2000, the Supreme Court allowed making adefense of invalidity of a patent in an
infringement lawsuit, and the propriety offinding the no-challenge obligation wasquestioned in relation to a defense ofinvalidity. However, in contrast with theUnited States and Germany, there seems to
be no judicial precedent in Japan regarding
the licensee’s no-challenge obligation basedon the principle of trust and good faith
between the parties concerned or the
principle of estoppel.
Before the 2003 revision of the Patent
Act, an interested party who may file arequest for a trial for invalidation was
defined as “a person who suffers direct
disadvantage for any reason due to thepresence of a patent right that shall be
invalidated,” (*17) and those who actually
exploit or are preparing to exploit technologythat is identical or equivalent to the relevant
patented invention and those who havereceived a warning fell under such a
definition. (*18) According to this, licensees do
not fall under interested parties since they
are in a position that receives benefits fromthe survival of the relevant patent right.
Therefore, they are not allowed to file arequest for a trial for invalidation.
Consequently, the no-challenge obligation
has to be affirmed. However, in judicial
precedents, the court ultimately denied thelicensee’s no-challenge obligation by holdingthat a licensee has an interest in filing a

Guidelines for the Unfair Exercise ofIntellectual Property Rights” (*11) in 2000
explicitly prohibit right of rescission
provisions by stipulating that “the casewhere a third party challenges the validity or
public knowledge of technology subject to anagreement and the case where a provider
may terminate an agreement” fall under actsof unfair trade. However, taking into accountthat a no-challenge provision restricts
competition more than a right of rescission
provision, it shall be deemed to fall under an
act of unfair trade. In theories, (*12) the sameunderstanding is adopted. On the other hand,since the Supreme Court decision in 2004, (*13)
it has been allowed to make a defense ofinvalidity in an infringement lawsuit.
Therefore, there seems to be the possibility
that judicial precedents regarding thepresence of the no-challenge obligation basedon the principle of trust and good faith willarise in Korea in the future.

2

Japan

Despite the deletion of restrictive
requirements for eligibility for a demandantof a trial for invalidation through the 1959
revision of the Patent Act (Article 123(1) of
the said Act), it has been understoodthereafter in many theories(*14) and judicial
precedents(*15) in Japan that a person may filea request for a trial for invalidation if he/she
has an interest. This idea is in accordancewith the principle of civil procedure to theeffect that “no profits from proceedings, noright to proceed.” Consequently, with regard
to the licensee’s no-challenge obligation, past
judicial precedents in Japan have focused
mainly on whether the licensee is eligible tofile a request for a trial for invalidation –that is, whether the licensee is an interested(*11) Korea Fair Trade Commission, 2000.8.30.
(*12) For example, see Yun Seon-hui, supra note 8, 588.
(*13) Supreme Court decision of 2004.10.28, 2000Da69194 (Publication 215 (2004.12.1), 1915).
(*14) Regarding this, see Nobuhiro Nakayama, Kogōshoyūkenhō (jō) tokkyohō, dainihanzōhoban (Industrial property law(1) patent law, 2nd enlarged edition) (Kobundo,2000), p.240, and documents cited therein.
(*15) Tokyo High Court decision of 1966.9.27 – “Sealed Stirring Device” ( Gyōshū, vol. 17, no. 9: 1,119).
(*16) Supreme Court decision of 2000.4.11, 1998(O)364.
(*17) Tokyo High Court decision of 1963.1.31 – “Synthetic Resin Decorative Laminate” ( Gyōshū, vol. 14, no. 1: 95).
(*18) See Nobuhiro Nakayama, supra note 14, p.240.

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contributes to stimulating competition byfacilitating technology transactions and isunlikely to lessen competition directly.
However, said act is deemed to fall under the
category of unfair trade practice in
exceptional cases where it impedes faircompetition as the use of technology
associated with the right that should beinvalidated is restricted due to the survival ofthat right. Said guidelines consider that theright of rescission provision does not fallunder the category of unfair trade practice inprinciple. (*24)

request for a trial for invalidation. (*19) In
addition, many theories adopt a view denying
the licensee’s no-challenge obligation inprinciple, in consideration of the purpose of
the patent system and the situation at thetime of conclusion of a license agreement. (*20)
In some such theories, interest and the
no-challenge obligation are seen as separate
issues, and it is considered undesirable tofind the no-challenge obligation based on theprinciple of trust and good faith even inconsideration of the situation at the time of
conclusion of a license agreement, since alicensee also has an interest, as he/she
suffers disadvantage, such as the payment oflicense fees, due to the survival of therelevant patent right. Contrary to this, there
has been neither judicial precedent nor
theory regarding the assignor’s no-challenge
obligation.
With regard to no-challenge provisions,the effect thereof is generally recognized
unless there is a situation such as theoccurrence of an act against public order andmorality in the process of concluding anagreement
andthemisuseofanadvantageous position. (*21) In terms of
judicial precedents, the court held that arequest for a trial for invalidation shall bedismissed in the case where there has been asettlement between the parties concerned,
though this is not related to the no-challenge
provision itself. (*22) With regard to whether a
no-challenge
provision
violatestheAntimonopoly Act, the “Guidelines for the
Use of Intellectual Property under the
Antimonopoly Act” (*23) in 2007 allow the act ofadding the no-challenge obligation on thepremise that a no-challenge provision

3

United States

The methods of claiming the invalidity ofa patent in the United States are the “exparte reexamination” (Sections 302-307 of
the U.S. patent law) and “inter partes
reexamination” (Sections 311-318 of the U.S.
patent law) procedures. However, theseprocedures are actually not widely used due
to restrictions on the participation of a third
party in the reexamination procedures andrestrictions on appeal to the court. (*25)
Consequently,inmanycases,
theno-challenge obligation becomes an issue,
particularly in infringement lawsuits inassociation with a defense of invalidity.
In the past, U.S. judicial precedents haveadopted the view that a licensee cannot claim
the invalidity of a licensed patent due tolicensee estoppel. However, the no-challenge
obligation has been denied since the holdingin the Lear case(*26) in 1969 to the effect that alicensee may claim the invalidity of alicensed patent for the public interest. At thesame time, mainstream judicial precedents(*19) Tokyo High Court decision of 1963.1.31 – “Synthetic Resin Decorative Laminate” (Gyōshū, vol. 14, no. 1: 95); Tokyo
High Court decision of 1985.7.30 – “Faucet Splice Fitting Design” (Gyōshū, vol. 17, no. 2: 344).
(*20) Nobuhiro Nakayama, supra note 14, p.438-439; Katsuyuki Izumi, supra note 3, p.243, and Ryuichiro Sengen,
Tokkyohō kōgi (Lecture on patent law), 4th ed. (Yuyusha, 2003), 201, cited therein.
(*21) Nobuhiro Nakayama, supra note 14, p. 242 and 439 and note 6.
(*22) Tokyo High Court decision of 1980.12.23 (Torikeshisoshoshu, 15); Tokyo High Court decision of 1983.3.30(Torikeshisoshoshu, 186).
(*23) Japan Fair Trade Commission, “Guidelines for the Use of Intellectual Property under the Antimonopoly Act”
(2007.9.28), 4-4-(7).
(*24) Id.
(*25) “Amerika tokkyohō seido bunseki oyobi jijiten ni kansuru kenkyū” (Analysis of U.S. patent law and system andresearch on topical issues), Japan Patent Office Research Report , 2006.9.8: 191 and 199 -.
(*26) Lear, Inc. v. Adkins, 395 U.S. 653 (U.S. 1969).
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IIP Bulletin 2008116 ●

seem to find the no-challenge obligation
based on assignor estoppel. As one of thereasons why U.S. judicial precedents havecome to deny the licensee’s no-challenge
obligation, some cite the point that, under
the U.S. patent system, a third party is
unlikely to be able to claim the invalidity of apatent in reality. (*27)
Firstly, in relation to the licensee’s
no-challenge
obligation,
U.S.
judicial
precedents have mostly found the licensee’s
no-challenge obligation based on the principleof estoppel up to the Hazeltine decision(*28) in
1950. As seen in the Sola Electric decision(1942),(*29) the Katzinger decision (1947)(*30)
and the MacGregor decision (1947),(*31) the
courts eliminated the application of theprinciple of estoppel in exceptional cases
where there is a violation of the antitrust law,such as a binding provision on price. However,since the Lear decision in 1969, the courts
have allowed licensees to claim the invalidityof inventions that are not worthy ofprotection, putting more emphasis on the
public interest nature of the patent systemthan the principle of estoppel, which is acontractual principle. In the Lear decision,
the Supreme Court of the United States did
not apply the principle of estoppel to thelicensee and allowed the licensee to attack
the validity of the relevant patent. However,as the prerequisites, the licensee was
required to have violated the license
agreement and to have failed to pay license
fees. The MedImmune decision(*32) in 2007 is
significant for the point that the court heldthat a licensee who does not violate thelicense agreement may also challenge thevalidity of the relevant patent. That is, owing
to the MedImmune decision, it has become
possible for licensees to file lawsuits for adeclaratory judgment in which the validity of
the relevant patent is contested, while paying
license fees under protest to retain therelevant right. This is obviously moreadvantageous to the licensees’ side in thatlicensees may attack the validity of therelevant patent rights without worrying about
having infringement lawsuits filed by thepatentees.
In relation to the assignor’s no-challenge
obligation, both in the Westinghousedecision(*33) in 1924 and in the Scott Paper
decision(*34) in 1945, the court essentiallyfound assignor estoppel but allowed a defenseof publicly known art, thereby virtually
narrowing the scope of application of theestoppel. After this, with regard to licensee
estoppel, the Lear decision was rendered in1969. Some lower court decisions rendered
immediately after said decision showed anattitude denying assignor estoppel under the
influence of the Lear decision. However, thecourt has found assignor estoppel again in
decisions rendered after the Diamond
Scientific decision(*35) of the United States
Court of Appeals for the Federal Circuit(CAFC) in 1988. It is obvious that the CAFC
did not totally leave the public interest
emphasized in the Lear decision – that is,guarantee of free competition – out ofconsideration(*36) but put more emphasis on
the trust and good faith of the parties
concerned. If the CAFC intended to protect
the interests of the general public to the
maximum possible extent, it would have tocompletely deny the no-challenge obligationof licensees and assignors. There is the viewthat a reason why the Supreme Court of theUnited States and the CAFC reached different
conclusions though they considered the public
interest and the private interest together is(*27) Bodewig, “Nichtangriffspflichten des Veräußerers im US-amerikanischen Patentrecht”, GRUR Int. 2004, 918, 919.
(*28) Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U.S. 827 (U.S. 1950).
(*29) Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173 (U.S. 1942).
(*30) Edward Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U.S. 394 (U.S. 1947).
(*31) MacGregor v. Westinghouse Electric & Mfg. Co., 329 U.S. 402 (U.S. 1947).
(*32) MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007).
(*33) Westinghouse Electric & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342 (U.S. 1924).
(*34) Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249 (U.S. 1945).
(*35) Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988).
(*36) 848 F.2d 1220, 1224-1225 (Fed. Cir. 1988).

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settlement agreement or a consent judgment.
In the Flex-Foot decision(*45) in 2001, thecourt cited, as one of the reasons, the pointthat a settlement agreement has beenconcluded after the institution of the lawsuit
and after the discovery procedures, though
there was neither a settlement order nor
consent judgment. On the other hand, it ispossible to say that the conclusions in theGolden State decision(*46) in 1971 and the
Hemstreet decision in 1988 and subsequentdecisions were different, since the former was
rendered immediately after the Lear decisionin 1969 but the latter were rendered by the
CAFC at a time when the pro-patent policy
was being enforced.
With regard to the issue of the obligation
to pay unpaid license fees in the case where apatent turned out to be invalid, in the SGK
decision(*47) in 1997, the CAFC put
restrictions on the Lear decision of 1969 byholding that the licensee cannot claim thesuspension of payment of license fees until
he/she suspends the payment of license fees
and notifies the licensor of the fact thathe/she is suspending that payment since therelevant patent is invalid.

found in the pro-patent attitude of thelatter.(*37) The Supreme Court of the UnitedStates has not rendered any decision finding
the assignor’s no-challenge obligation since
the Diamond Scientific decision. However,
although the Supreme Court has had
opportunities to present an opinion contrary
to that of the CAFC in many cases, it has yet
to render a decision to such effect.
Consequently, it would be safe to say atpresent that U.S. judicial precedents findassignor estoppel in a determined way. (*38)
There is no cut-and-dry explanation of
the attitude toward no-challenge provisions
that is taken in U.S. judicial precedents.
Firstly, in the past, the Supreme Court of theUnited States did not generally invalidate
no-challenge provisions included in license
agreements, but adopted the idea thatlicensees may still claim the invalidity of therelevant patent because such provisions are
not enforceable agreements.(*39) In judicial
precedents after the Lear decision in 1969,
the court considers no-challenge provisions tobeinvalid.(*40)
Regardingsettlementagreements or no-challenge provisions
included in settlement agreements, U.S.
judicial precedents consider no-challenge
provisions based on an extra-judicial
settlement agreement to be unenforceable(*41)
but consider those based on a judicial
settlement agreement to be enforceable. (*42)
Analyzing reasons for finding the validity
and enforceability of no-challenge provisions
based on a judicial settlement agreement, inthe Hemstreet decision(*43) in 1988 and Foster
decision(*44) in 1991, the court dismissed aninvalidity claim on the grounds of the res
adjudicata of a settlement order based on a4

GermanyFirstly, looking at the methods ofclaiming the invalidity of a patent, under theGerman Patent Act, there are invalidation
proceedings (Sections 22 and 81 of the Act)and opposition procedure (Section 59 of theAct). Although any person may lodge either ofthem, an opposition must be lodged within
three months of the publication of granting ofa patent. Neither invalidation proceedings(*37) Bodewig, supra note 27, S.922.
(*38) Id., S. 922-923.
(*40) Pope Mfg. Co. v. Gormully, 144 U.S. 224 (U.S. 1892); Edward Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U.S. 394(1947).
(*40) Bendix Corp. v. Balax, Inc., 471 F.2d 149 (7th Cir. 1972).
(*41) Massillion-Cleveland-Akron Sign Co. v. Golden State Adver. Co., 444 F.2d 425 (9th Cir. 1971).
(*42) Hemstreet v. Spiegel, Inc., 851 F.2d 348 (Fed. Cir. 1988); Foster v. Hallco Mfg. Co., 947 F.2d 469 (Fed. Cir. 1991);
Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir. 2001).
(*43) Hemstreet v. Spiegel, Inc., 851 F.2d 348 (Fed. Cir. 1988).
(*44) Foster v. Hallco Mfg. Co., 947 F.2d 469 (Fed. Cir. 1991).
(*45) Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir. 2001).
(*46) Massillion-Cleveland-Akron Sign Co. v. Golden State Adver. Co., 444 F.2d 425 (9th Cir. 1971).
(*47) Studiengesellschaft Kohle, M.B.H. v. Shell Oil Co., 112 F.3d 1561 (Fed. Cir. 1997).

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118 ●

were also regarded as valid in principle, andthis validity was recognized especially in thecase of a judicial or extra-judicial settlement
or a gratuitous license.(*50)
In the German Act against Restraints ofCompetition, revised in 2005, the provision ofSection 17, paragraph 2, sentence 3 of the old
Act deeming no-challenge provisions to bevalid was deleted. Thereby, no-challenge
provisions have come to be deemed invalid inprinciple. This is understood as being in linewith the spirit of the European Community
Law, which is aimed at guaranteeing freecompetition to the maximum possible extent.
On the other hand, it is unclear to what
extent the implicit no-challenge obligation isfound based on the duty of loyalty arisingfrom a special relationship between theparties concerned. However, in this regard, itwould also be necessary to take into accountthe European Competition Law, which is
aimed at guaranteeing free competition to
the maximum possible extent, and the
purpose of the revision of the German Act
against Restraints of Competition. That is, itis necessary to pay attention to the fact thatthe legislative policy was changed to put
greater importance on the guarantee of freecompetition than the trust and good faith ofthe parties concerned. In the end, it would benecessary to say that the scope within which
the implicit no-challenge obligation can befound was narrowed down compared to thepast.

nor opposition will be accepted if there is a
no-challenge agreement between the parties
concerned or if a no-challenge obligation isfound due to a special relationship between
the parties concerned.(*48) In Germany, theseparation of authority between the patentoffice and court is relatively rigorously
maintained. It is thus not allowed to make adefense of invalidity in an infringement
lawsuit, and only “Einwand des freien Standder Technik (Formstein-Einwand) (defense of
free technical level)” is permitted. Therefore,in Germany, the no-challenge obligation does
not become an issue in association with adefense of invalidity in an infringement
lawsuit.
In past judicial precedents and theories
in Germany, invalidation proceedings lodged
by any of the following persons were notaccepted on the basis of the principle of trustand good faith: (i) an assignor of a patent, (ii)a member of an association who has offered
the patent to the association, (iii) an
employeewhohasassigned
his/her
employee’s invention to his/her employer (thesame applies to cases where the employment
relationship has been terminated), (iv) a
licensee in the case where there is a license
agreement on cooperative work based on
deep-seated belief, for example, where thecontractual relationship between the parties
concerned has characteristics similar to an
association, and (v) a party concerned who
has agreed on close cooperative work withanother party concerned in association withthe use of the patented invention of that
other party.(*49) That is, in judicial precedents
in Germany, the court widely recognized the
no-challenge obligation based on theprinciple of trust and good faith in the casewhere a special relationship of trust, such as
the relationship between a licensee and alicensor, between an assignor and an
assignee of a patent or between union
members, is recognized between the parties
concerned. Explicit no-challenge provisions

5

European Union

On the European Union level, neither
patent invalidation proceedings nor patent
infringement lawsuits exist. Therefore, it
becomes an issue whether a no-challenge
provision explicitly set by the parties
concerned in an agreement violates thecompetition law of the European Union. On
the premise that elimination of all obstacles
to economic activities that arise from unfairly(*48) BGH GRUR 1987, 900, 901 - “Entwässerungsanlage”; BGH GRUR 1971, 243, 244 - “Gewindeschneidvorrichtungen”;
BGH GRUR 1965, 135, 137 - “Vanal-Patent.”(*49) BGH GRUR 1989, 39, 40 - “Flächenentlüftung.”(*50) BPatG GRUR Int. 1997, 631, 634 - “Nichtangriffspflicht.”●

119 ●IIP Bulletin 2008

time of the Lear decision in 1969, the UnitedStates shifted from a positive attitude toward
the licensee’s no-challenge obligation to anegative attitude toward it, and this attitude
has been firmly maintained in U.S. judicial
precedents up until now. At the same time,
the assignor’s no-challenge obligation has
been found on the grounds of the principle ofestoppel. The effect of a no-challenge
provision is recognized in principle only
where it is included in a judicial settlement.
In Germany, no-challenge provisions
were deemed valid under the antitrust law
before the 2005 revision of the Act against
RestraintsofCompetition,andtheno-challenge obligation based on therelationship of trust was also relatively
widelyrecognized.
However,due
toapplication of the competition law of theEuropean Union through the revision of said
Act, no-challenge provisions in agreements
are expected to be prohibited in the future,and the scope of finding the no-challenge
obligation based on the principle of trust andgood faith is also expected to be narrowed,
taking into account the competition policy of
the European Union, which is aimed at
guaranteeing free competition to the
maximum possible extent. In the case of theEuropean Union, no-challenge provisions areprohibited in principle, but those relating toknow-how, a settlement or joint research anddevelopment are permitted as exceptions.
Right of rescission provisions are consideredvalid in the United States, Germany and theEuropean Union.
In Japan, prior to the 2003 revision of the
Patent Act, both judicial precedents andmajor theories required the demandant of atrial for invalidation to have an interest.
Therefore, discussions about the no-challenge
obligation were focused on whether licensees

granted patent rights contributes to the
public interest, the Court of Justice of theEuropean Communities (EuGH) stated asfollows: Protection from attack against thevalidity of a patent is not included in theinherent nature of patent rights, and thus,
no-challenge provisions do not fall under thescope of patent rights; such provisions areprohibited in accordance with the Treaty
establishing the European Community, as
they unfairly restrict competition between
business operators. (*51)
In addition, according to the Commission
Regulation (EC) No 772/2004, (*52) revised in
2004, and the Commission Regulation (EC)No 2659/2000 of 2000, (*53) the competition lawof the European Union is applicable tono-challenge
provisions
withoutany
restrictions.
Therefore,
no-challenge
provisions are prohibited in principle.
However, no-challenge provisions relating toknow-how, (*54) a settlement, (*55) or joint
research and development(*56) are permitted
as exceptions. In addition, provisions forright of rescission are considered to bepermitted. (*57)

III Evaluation by a Comparative Method
With regard to the validity of the
no-challenge obligation based on therelationship of trust between the parties
concerned and no-challenge provisions inagreements, their handling by law differs
depending on the competition policy of thecountry in question. In the United States andGermany, there were once many judicial
precedents regarding the no-challenge
obligation of the licensee and assignor basedon the principle of trust and good faith or the
principle of estoppel. There were also active
theoretical discussions thereon. Around the(*51) EuGH GRUR Int. 1986, 635, 641 - “Windsurfing International.”(*52) Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty tocategories of technology transfer agreements, OJ L 123, 27/04/2004, p.11.
(*53) Article 5(1)(b) of Commission Regulation (EC) No 2659/2000 of 29 November 2000 on the application of Article 81(3) of
the Treaty to categories of research and development agreements (OJ L 304, 05/12/2000, p.7).
(*54) No. 112 in the Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements (OJ C
101, 27/04/2004, p.2).
(*55) Id. No. 209.
(*56) Contrary interpretation of Article 5(1)(b) of Regulation No 2659/2000.
(*57) Article 5(1)(c) of Regulation No 772/2004.
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perspective of contract law, it is necessary to
perform said obligation in accordance withthe principle of trust and good faith, incompliance with an agreement reached
between the parties concerned. On the other
hand, from the perspective of antitrust law,
it is necessary to guarantee free and faircompetition by eliminating patents that are
not worthy of protection. It is possible to say
that, in the past, the laws and court decisionsof each country respected the relationship oftrust and contractual agreements between theparties concerned and strongly affirmed thevalidity of the no-challenge obligation andno-challenge provisions. However, since theLear decision(*58) in 1969 in the United States,
the laws and practices of each country havemostly come to give priority to the public
interest through elimination of unfair patents.
In judicial precedents in Japan, the court
stated that a licensee may, in principle, file arequest for a trial for invalidation, ultimately
putting more emphasis on the public interest
than the private interest. In judicial
precedents in Germany, the court, in principle,
did not find the licensee’s no-challenge
obligation except when there is a special
relationship of trust between the parties
concerned. With regard to no-challenge
provisions, the U.S. court denies theenforceability and validity thereof except
when such a provision is based on a judicial
settlement of which res adjudicata is found,and thereby gives priority to the public
interest through elimination of unfair patents.
Meanwhile, Regulation No 772/2004 of theEuropean Union shows the most radical
attitudebyessentiallyprohibiting(*59)
no-challenge provisions.
In short, thesecountries are thought to tend to find claims ofinvalidity of unfair patents extensively on thepremise that the presence of unfair patents is
contrary to the public interest. However, if thevalidity of the no-challenge obligation andno-challenge provisions is denied, patentees’
positions and patent rights will be vulnerable,
which will ultimately work against patentees

fall under interested parties. The same canbe said for Korea. However, in the Supreme
Court decision in 2000, making a defense ofinvalidity in an infringement lawsuit wasallowed. The Patent Act, revised in 2003,
clearly specified that any person may file arequest for a trial for invalidation. Due tothese, it is expected that there will be court
decisions regarding the propriety of finding
the no-challenge obligation based on theprinciple of trust and good faith in the future.
Under
the
Japanese
antitrustlaw,
no-challenge provisions, not to mention rightof rescission provisions, are considered to bepermitted in principle.
In the case of Korea, a person is required
to have an interest in order to file a request
for a trial for invalidation. There is no
judicial precedent regarding the propriety offinding the no-challenge obligation set basedon the principle of trust and good faith, inassociation with a request for a trial forinvalidation. However, after the Supreme
Court decision in 2004, it is allowed to makea defense of invalidity in an infringement
lawsuit. Therefore, it is expected that there
will be court decisions regarding the
no-challenge obligation based on theprinciple of trust and good faith in the future.
In Korea, right of rescission provisions are
considered to fall under the category of unfair
trade practice under the antitrust law, andno-challenge provisions are understood in thesame manner. Therefore, in this regard,
Korea takes an opposite stance to Japan, theUnited States, Germany and the European
Union.

IV Conclusion
Debateabout
theno-challenge
obligation relating to patented inventions or
know-how based on the principle of trustand good faith and no-challenge provisions
in agreements arises from conflicts between
contract law and antitrust law or the
purpose of the patent system. From the(*58) Lear, Inc. v. Adkins, 395 U.S. 653 (U.S. 1969).
(*59) Article 5(1)(c) of Regulation No 772/2004.

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who intend to exploit their technologies in theindustry through licensing. That will reducethe incentive for technological development
and will also impede industrial development
and technological innovation in the longterm.(*60)
It is interesting fact that the fact thatthe no-challenge obligation and no-challenge
provisions play the role of facilitatingcompetition in the ultimate sense is cited as areason in all positive and negative views on
their validity. The no-challenge obligationand no-challenge provisions function as
patentees’ motive for licensing theirtechnologies, and they promote competition
by facilitating the granting of licenses fortechnologies. (*61) On the other hand, if thevalidity of the no-challenge obligation or
no-challenge provisions is denied, licensees
will be less reluctant to conclude license
agreements, and the parties concerned willconclude license agreements more easily,
thereby promoting competition. (*62) In short,these cases resemble each other in terms of
the ultimate goal – namely, promotion ofcompetition – but different methods aretaken to achieve that goal. In the market,
new technology is always being developed,
and companies can be at once licensors andlicensees. Therefore, neither affirmation nor
denial of the no-challenge obligation by the
antitrust
authorities
isnecessarilyadvantageous to specific companies. As bothaffirmation and denial of the no-challenge
obligation function to facilitate competition
to a certain extent, it is considered
undesirable to adopt a policy that affirms ordenies the no-challenge obligation without
exception. It is desirable to flexibly manage
the scope of exception while essentiallyaffirming or denying the no-challenge
obligation, in consideration of the economic
conditions and the level of technologicaldevelopment at that given moment.

(*60) Ulmer-Eilfort/Boulware, “Challenging Licensed Intellectual Property Rights Under U.S. and European Laws. The U.S.
Supreme Court Abandons the Principle of Licensee Estoppel,” IIC 2007, p.759, 764.
(*61) Jones, “Licensee estoppel: an overview of the position under English and European law,” Journal of Intellectual
Property Law & Practice, 2007, Vol.2, No.11, p.750, p.754.
(*62) See id.

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