Patent Challenge Clauses: A New Antitrust Offense?

Patent licensing contracts frequently bar licensees from challenging the validity of the patents at the basis of the contract or penalize such challenges. There is a considerable debate as to whether courts should enforce these clauses. We argue that unenforceability is not enough: Challenge clauses should be illegal under antitrust law. Our argument is based on two grounds. The first, doctrinal route, argues that this new antitrust offense is a natural extension of the logic of the Supreme Court's landmark case of Federal Trade Commission v. Actavis, Inc., decided nearly four years ago. The second, normative route, shows that a welfare-enhancing foundation exists for recognizing this antitrust offense. We propose three cumulative conditions that should exist for a new antitrust offense to be realized, and show that they are met in the case of challenge clauses. Our conclusion challenges the existing laws and draws a new line between contract law and antitrust law, which is applicable to other cases as well.