Today, the Supreme Court issued its decision in Impression Products v. Lexmark Int’l that draws a bright line for triggering the patent exhaustion doctrine when products are sold and leaves post-sale activity restrictions subject to any contractual rights between the parties, not patent law.  This decision is sure to have patent owners and licensees reviewing their existing licensing agreements and tweaking future ones.   The decision also provides another reason why patent owners may license their patents at an end product level, rather than a component level, to ensure that they have direct patent law remedies against the end product manufacturer that otherwise may be exhausted and unavailable if the patent is licensed at a component level.

The Supreme Court summarized its decision as follows:

This case presents two questions about the scope of the patent exhaustion doctrine:

First, whether a patentee that sells an item under an express restriction on the purchaser’s rights to reuse or resell the product may enforce that restriction through an infringement lawsuit.

And second, whether a patentee exhausts its patent rights by selling its product outside the United States, where American patent laws do not apply.

We conclude that a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.

Importantly, the decision focuses on whether patent rights exist after an authorized sale.  The decision does not mean that the sale extinguishes other non-patent law remedies that a patent owner may have after the sale, such as remedies under contract law.

Continue Reading Supreme Court puts teeth into patent exhaustion (Impression Prods. v. Lexmark)

Today the U.S. Supreme Court decided to review the Federal Circuit’s decision regarding international patent exhaustion in Impression Products, Inc. v. Lexmark Int’l, Inc.   Things to look for in whatever decision the Supreme Court ultimately reaches in this case is not only the mechanical aspect of applying the patent exhaustion doctrine generally, but whether the Supreme Court agrees with, strengthens or weakens the Federal Circuit’s en banc view that there are extraterritorial limits on the ability of foreign countries to control U.S. patents and access to U.S. markets. Continue Reading Supreme Court will review international patent exhaustion doctrine (Impression Prod. v. Lexmark)

Last week, the Federal Circuit en banc ruled that the sale of a product abroad by a U.S. patent holder (or others) does not exhaust the patent owner’s U.S. patent rights, such as the right to exclude sale or importation of that product within the United States.  Further, the Federal Circuit ruled that, when a U.S. patent holder sells a product with expressed restrictions on resale or reuse of that product, the patent exhaustion doctrine does not preclude the patent owner from exercising its right to exclude resale or reuse of that product.  The Federal Circuit summarized its ruling as follows:

We hold that, when a patentee sells a patented article under otherwise-proper restrictions on resale and reuse communicated to the buyer at the time of the sale, the patentee does not confer authority on the buyer to engage in the prohibited resale or reuse.  The patentee does not exhaust its § 271 rights to charge the buyer who engages in those acts–or downstream buyers having knowledge of the restrictions–with infringement.  We also hold that a foreign sale of a U.S.-patented article, when made by or with the approval of the U.S. patentee, does not exhaust the patentee’s U.S. patent rights in the article sold, even when no reservation of rights accompanies the sale.  Loss of U.S. patent rights based on a foreign sale remains a matter of express or implied license.

This is a lengthy decision that provides insight into the Federal Circuit’s view of not only the patent exhaustion doctrine, but the fundamental patent right to exclude and extraterritorial limits that preclude U.S. law from reaching into other countries and, importantly, that precludes laws of other country’s from limiting U.S. patent rights. Continue Reading Federal Circuit rules sale abroad does not exhaust U.S. patent rights (Lexmark v. Impression)

When Judge Robart issued his summary judgment order last week in the Microsoft-Motorola case, we noted that he ordered the parties to submit further briefing on Microsoft’s allegation that Motorola breached its RAND obligations to Microsoft (at least in part) by failing to offer a RAND license to Microsoft’s WiFi chip supplier, Marvell Semiconductor:

As the court understands it, Microsoft will argue to the jury that Motorola failed to grant a license to Marvell, and if Motorola had granted such a license, Motorola would then be precluded from seeking a license from Microsoft for the SEPs at issue. This argument requires a legal basis. The argument is premised on the notion that, legally, Motorola’s ability to seek a license from Microsoft would be exhausted by granting a license to Marvell. This issue is not explored in the parties’ summary judgment briefing. Thus, the parties may provide three-page letter briefs no later than August 16, 2013, on the legal grounds for Microsoft’s assertion that a Motorola-Marvell license would preclude Motorola from seeking a license from Microsoft. Additionally, no later than August 16, 2013, the parties may propose jury instructions on this issue.

On Friday, the parties submitted letter briefs in response to this order (links below).  As we alluded to in last week’s post, this issue raises some interesting questions on what types of behavior and licensing restrictions are proper during FRAND licensing negotiations — questions that we’ll get into after the jump.

Continue Reading FRAND licensing, chip suppliers, and the interplay of patent exhaustion / defensive suspension clauses

Plug

  • Shameless plug alert – this past Friday saw us quoted in media reports about patent litigation:
    • The Wall Street Journal‘s article “ITC Clears Microsoft’s Xbox in Patent Case,” which discussed recent goings-on in the Motorola-Microsoft ITC case, featured a quote from David Long.  You may recall that this case, which is part of the worldwide Microsoft-Motorola dispute, used to involve several standard-essential patents, but Motorola withdrew them from the case in January after entering into the consent decree with the FTC.
  • Last week we noted the Supreme Court’s decision in Kirsaeng v. John Wiley & Sons and the potential effect it could have on the patent exhaustion doctrine.  As noted by Patently-O and others, then, it was somewhat of a surprise to see the Court yesterday deny a petition for a writ of certiorari in Ninestar Tech Co. v. U.S. Int’l Trade Comm’n, where Ninestar was challenging the Federal Circuit’s denial of patent exhaustion in the international context.  Many had expected the Supreme Court to either grant certiorari outright or to grant, vacate, and remand the case to the Federal Circuit.  (For some background on international patent exhaustion, see this article by Hal Wegner.)
  • Application developers are increasingly being targeted in patent infringement suits, particularly by non-practicing entities.  As reported by TechDirt, the Application Developers Alliance is putting together a series of app developer patent summits, which will take place over the next several months in various locations around the country.
  • Yesterday was quite the day for patent-related issues at the US Supreme CourtSupreme Court.  The Court held oral arguments in Bowman v. Monsanto, where the justices are tasked with deciding whether the patent exhaustion doctrine extends to self-replicating technologies (here, Monsanto’s patented Roundup Ready soybeans).  For more info on these cases, see these recaps from Patently-O and Groklaw.  Early speculation seems to be that Monsanto will win in a unanimous or near-unanimous decision. 
  • Also yesterday, the Supreme Court released its opinion in Gunn v. Minton.  Here, the Court held that while lawsuits for patent litigation-related malpractice may involve federal patent issues, they do not “arise under” the patents laws, and therefore do not implicate federal courts’ exclusive patent jurisdiction.  Dennis Crouch at Patently-O provides a good summary
  • The Computer & Communications Industry Association is holding a panel discussion on non-practicing entity activities and their effects on the economy here.  The event will take place on February 28th here in Washington, DC, and is free and open to the public. (via Patent Progress)
  • Ben Lee, head of litigation and IP at Twitter, writes in Wired about Twitter’s “Innovator’s Patent Agreement” — a new approach to the traditional assignment agreement between an employee-inventor and his or her company.
  • The Pittsburgh Post-Gazette reports that in the wake of a couple of large damagesmillion dollar bill settlement
    awards in patent infringement cases brought by universities, more higher education institutions are beginning to think about flexing their IP muscles. (via The Blog of Legal Times)
  • On February 19, the Supreme Court will hear arguments in Bowman v. Monsanto, a case that involves the applicability of the patent exhaustion doctrine to patented, self-replicating plant seeds (Bowman had purchased these seeds but replanted them without a license from Monsanto, creating later generations of the patented seeds).  The U.S. Government recently filed an amicus brief supporting Monsanto, taking the position that exhaustion only applies to the seeds purchased by Bowman, and not to subsequent generations, which represent infringing “makings” under the patent laws.  More from Dennis Crouch at Patently-O.
  • Some provisions in the America Invents Act were thought to to limit infringement suits brought by non-practicing entities.  But did the AIA just turn NPEs’ litigation focus to startups?  (via Forbes)