Opinion ID: 403701
Heading Depth: 3
Heading Rank: 2

Heading: return of royalties paid by the licensee

Text: 21 Bristol Locknut argues that it is entitled to a refund of royalties paid under an invalid, and therefore void patent. We reject the argument. 22 In St. Regis Paper Co. v. Royal Industries, 552 F.2d 309, 314 (9th Cir.), cert. denied, 434 U.S. 996, 98 S.Ct. 633, 54 L.Ed.2d 490 (1977), we held that a licensee was not entitled to a refund of royalties paid before it challenged the patent's validity. St. Regis involved the typical situation in which a license agreement was entered into after the patent was issued. After four years, the licensee stopped paying royalties. Nine months later, it filed an action contesting the patent's validity and sought a return of royalties paid under the agreement. We found that the federal policy in favor of the prompt and early adjudication of the validity of patents, as articulated in Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), 5 overrode countervailing state laws: 23 (T)he possibility of a royalty refund might delay such a determination (of a patent's validity). The possibility of obtaining a refund of all royalties paid might induce a manufacturer to accept a license based on a patent of doubtful validity, derive the benefits of suppressed competition which the patent affords, and challenge validity only after the patent's expiration. The licensee would have a chance to regain all the royalties paid while having enjoyed the fruits of the license agreement. Therefore, if a refund were permitted, licensees who were only recently unmuzzled by Lear would again be silenced by economic self-interest rather than by state law. 24 St. Regis, 552 F.2d at 314. 25 Other circuits have also read Lear to deny a refund of royalties paid by a licensee. E.g., American Sterilizer Co. v. Sybron Corp., 614 F.2d 890 (3d Cir.), cert. denied, 449 U.S. 825, 101 S.Ct. 88, 66 L.Ed.2d 29 (1980); USM Corp. v. Standard Pressed Steel Co., 524 F.2d 1097 (7th Cir. 1975); PPG Industries, Inc. v. Westwood Chemical, Inc., 530 F.2d 700 (6th Cir.), cert. denied, 429 U.S. 824, 97 S.Ct. 76, 50 L.Ed.2d 86 (1976). 26 Bristol Locknut argues that it is entitled to a reimbursement of all royalties because the district court found both patents not infringed, as well as invalid. Unlike patent validity questions, infringement is a question of fact, not law. Bristol Locknut contends that since both parties were operating under a mutual mistake of fact, the licensing agreement should therefore be rescinded and all royalties returned. We understand but reject the argument. We affirm the holding of invalidity and need not review the finding of noninfringement, Schwinn Bicycle Co. v. Goodyear Tire & Rubber Co., 444 F.2d 295, 301 (9th Cir. 1970), since noninfringement here would not affect our holding that Bristol Locknut is not entitled to a reimbursement of royalties. Because an invalid patent cannot be infringed, Wham-O-Mfg. Co. v. Paradise Manufacturing Co., 327 F.2d 748, 751 (9th Cir. 1964), Bristol Locknut's logic would permit every licensee who successfully challenged the validity of a patent to demand a reimbursement of royalties because of the consequent noninfringement of that patent. Such a result would undermine the stated policies of Lear and St. Regis, and would also promote an injustice where, as here, both issues of invalidity and noninfringement rest on the same asserted technical defects in the patents. 6 27 Bristol Locknut's argument is novel and, under these facts, unpersuasive. Here, Bristol Locknut fully enjoyed the fruits of the license agreement. St. Regis, 552 F.2d at 314. We do not decide whether in a different situation involving a valid but not infringed patent, the argument would also fail. 28