UPDATING THE PRIVATE LAW OF PATENT CONTRACTING.

Patents are hybrid instruments: as publicly granted property rights, they are the creature of statutes designed to maximize social welfare and further other public policies. But they are also private entitlements that serve as the centerpiece to numerous economically important private orderings. I begin this paper by carefully separating out these two dimensions of patent rights, the public-regarding and the private-facing: patents as public grants, but also private entitlements. Understanding the dual nature of patent rights leads to a novel critique of the Supreme Court doctrine of patent misuse that originated in the 1940s and continued through the 1970s. Misuse doctrine in this era largely ignored the private entitlement side of patent law. The Court repeatedly found that certain bilateral contracts "extend" the stategranted patentright in various ways that upset the legislative balance behind the Patent Act. These cases, as with cases on preemption of state IP law, championed the supremacy of federal policy. The Court was not shy about finding incursions into that supremacy, but in the case of state contract law, this was a mistake. Contracts are a natural complement to IP entitlements, which must often be transferred, aggregated, bundled, etc., in the course of the modern economy. The Court muddled important conceptual issues as well: while a private contract can, of course, affect third parties in important ways, a patent, as property, cannot be "extended" by contract in a way that binds third parties. The Patent Misuse doctrine is also not needed as an adjunct to antitrust law. Potentially anticompetitive patent contracts can be looked at using conventional antitrust law as well as judicious application of the longstanding "void as against public policy" doctrine within contract law. This is an especially auspicious time for patent law to shift from its tradition of hostility toward licensing to a much more appreciative and supportive stance. A wave of contemporary research shows how important licensing and other patent-centered transactions are, especially for new entrants and specialized input supplier firms-crucial parts of an effective innovation ecosystem. With this research, armed with a more analytically defensible understanding of patent contract doctrine, I make some normative suggestions designed to encourage and support patent licensing. Specifically, I argue that (a) private parties should be able to bargain over whether a licensee has the right to challenge licensed patents (i.e., overrule Lear v. Adkins (1969)), and (b) private parties should usually be permitted to agree to pay royalties after a patent expires or is invalidated (i.e., overrule Brulotte v. Thys (1964)). [ABSTRACT FROM AUTHOR]