Meaning
A strategy where an entity asserts intellectual property rights and demands royalties despite knowing the underlying patent is invalid or the target does not infringe. Use of bad faith licensing typically involves aggressive litigation threats designed to coerce settlements from manufacturers who cannot afford protracted legal battles. This practice disrupts fair competition by imposing costs that have no basis in actual innovation or technical contribution.
Intentional Malpractice
Proof of this behavior requires evidence that the licensor acted with knowledge of the defect in their legal position. When a firm engages in bad faith licensing, it often conceals prior art or misrepresents the scope of its claims to the licensee. Courts look for patterns of behavior where the licensor refuses to provide technical specifications or refuses to negotiate in good faith.
Contractual Liability
Agreements signed under these conditions are often voidable under the civil code provisions regarding fraud or duress. Once bad faith licensing is established, the licensee may seek the return of paid royalties and additional compensation for business disruption. This remedy acts as a deterrent against entities that treat the patent system as a tool for extortion rather than technology transfer.
Regulatory Oversight
The State Administration for Market Regulation monitors such activities to protect the integrity of the market.
