In County Materials Corp. v. Allan Block Corp., No. 06-2857, 2007 U.S. App. LEXIS 22216 (7th Cir. Sep. 18, 2007), the Seventh Circuit found that a post-termination covenant not to compete in an exclusive patent and know-how license constituted patent misuse. Eric E. Bensen discusses the case and the Seventh Circuit’s emphasis on the license’s value beyond the patent and on the absence of competitive restraint. Mr. Bensen writes:
In rejecting County Materials’ misuse claim, the Seventh Circuit focused on these two factors: Licensee Received Value Beyond the Patent. The supporting technical, marketing and strategic services provided by Allan Block had considerable value independent from the patents. Because the nonpatented subject matter of the license agreement would have had value to anyone in the business of making and selling the products in question, there was nothing to suggest that Allan Block had to leverage its patents to get County Materials to agree to the covenant not to compete. Competition was Not Negatively Impacted. County Materials was prohibited from competing only for 18 months, during which it could sell two other products, and only in the northwest section of Wisconsin . In the court’s view, while County Materials may not have been able to compete as aggressively as it wanted, there was no indication that competition was adversely affected.
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