The Effect of Annulment of Patent on ContractsConsidering Requirements of Patent Law

An invention that meets novelty, inventive step, and industrial application is patentable. After the registration of an invention, a patent is granted and, as an official document, implies the ownership of the holder. Due to some grounds, such as not meeting one of the substantive requirements, the patent might become invalidated by a court order.  According to the Article 18 of the Patents, Industrial Designs and Trademarks Act of Iran, patent invalidation has retroactive effect and invalidates all contracts which have been concluded based on patented inventions. Invalidity of the contract indicates that the invalidated contract has never been existing, and parties’ rights and obligations have never been in existence; consequently, the other party of the contract, such as licensee, could recoup the whole paid consideration. The adoption of this idea is inconsistent with the purposes of Patent Law, including incentivizing, encouraging to resort to patent system, protection of inventors, commercialization of inventions, stability of contracts, and trust in the market; and it could be deemed as a serious obstacle to these matters. In this research, by taking the necessities of  Patent Law, including the need to facilitate innovation and commercialization of inventions and to create a climate free of bad patents, into consideration, this legislator’s approach is criticized, and its contradiction to the public interest, the dissemination of knowledge, the process of commercialization, and transfer of technology will be demonstrated. Finally, the amendment of the mentioned act and not perceiving contracts as void will be proposed in order to foster the process of innovation.