Intellectual Property Directions

If you are like me and maybe 28, 999,999 other US sports fans, you probably were watching the men’s marathon the other night from Beijing. Through the miracle of HDTV you could see the look of exhaustion on the faces of all but the very top finishers. Like most of the runners, patents get exhausted too.

Just as a runner’s legs get exhausted when their owner tries to push them too far, so too a patent is exhausted when the owner tries to claim rights beyond the first sale of the patented invention. In a June 2008 decision, the Supreme Court extended this concept even further, explicitly extending it to methods claims as well as apparatus claims.

The basic concept of patent exhaustion is straight forward; if you, the patent owner, authorize the sale of a product incorporating your patented invention, you no longer have control of the further use or sale of that product. While there are complicating details, the logic of the doctrine is clear; once you’ve gain the benefit of your patent “monopoly” by selling the patented product you’re not allowed to double-dip by, for example, collecting another royalty when your customer resells your product as part of his product.

The particular case involved LG Electronics patents that had been licensed to Intel, who in turn made chipsets that were sold to Quanta Computer. LG had stipulated in its license to Intel that the chipsets were NOT to be combined with non-Intel parts and required Intel to inform chipset buyers of that requirement, which they did. However, LG did not require Intel to explicitly license each purchase with that restriction.

When Quanta combined the Intel chipsets with non-Intel parts, LG sued Quanta. The case progressed through both district court and the CAFC, ending up in the Supreme Court. That Court decided that, by virtue of its license to Intel, LG had authorized the sale of the chipsets to Quanta and that the principle of patent exhaustion applied to both the apparatus and the methods claims in LG’s patents. That the lower courts had felt the principle did NOT apply to the methods claims is hard to understand; however, the Supreme Court has now said explicitly that it does apply.

So if your goal is to have your patent go the extra mile for you, you will have to write explicit licenses to cover your expectations covering the secondary sales and uses of your patent, both apparatus claims and method claims.

This entry was posted on Thursday, August 28th, 2008 at 12:31 pm and is filed under infringement, method claims. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.