License/Exhaustion

  • BASICS: There is no infringement if the accused activity is licensed or otherwise authorized by the patent owner or its agent. Cf. 35 U.S.C. 271(a) (“whoever without authority” performs certain acts “infringes”). This authority may constitute an implied license, which may depend on patent owner intent. Nor is there infringement if the patent owner has exhausted its patent rights in the allegedly infringing item: “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta (U.S. 06/09/2008); Motion Picture (U.S. 04/09/1917) (under the patent statute, “the right to vend is exhausted by a single, unconditional sale, the article sold being thereby carried outside the monopoly of the patent law and rendered free of every restriction which the vendor may attempt to put upon it,” and a patent owner may not “send its machines forth into the channels of trade of the country subject to conditions as to use or royalty to be paid to be imposed thereafter at the discretion of such patent owner.”); Impression Products (U.S. 05/30/2017) (“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”), rev’g, Lexmark (Fed. Cir. 02/12/16) (en banc) (10-2) (“The doctrine of patent exhaustion (or ‘first sale’ doctrine) addresses the circumstances in which a sale of a patented article (or an article sufficiently embodying a patent), when the sale is made or authorized by the patentee, confers on the buyer the ‘authority’ to engage in acts involving the article, such as resale, that are infringing acts in the absence of such authority. . . . [Under this doctrine] a patentee-made or patentee-authorized sale of a patented article (without distinction) [is treated] as presumptively granting “authority” to the purchaser to use it and resell it.”) Also, a patent-owner-authorized sale (or authorization to sell), in U.S., of an article substantially embodying patented invention, exhausts patent rights as to post-sale uses/dispositions of that article, under exhaustion (aka “first-sale”) doctrine. Quanta (U.S. 06/09/2008). Parties’ intent with respect to post-sale uses is irrelevant to exhaustion. Transcore (Fed. Cir. 04/08/09). Exhaustion is an affirmative defense. Keurig (Fed. Cir. 10/17/13).
  • Exhaustion Restricts A Patent Owner’s Rights In Order To Avoid Restraints On Trade: “Exhaustion does not arise because of the parties’ expecta­tions about how sales transfer patent rights …. Exhaustion occurs because, in a sale, the patentee elects to give up title to an item in exchange for payment. Allowing patent rights to stick remora [suckerfish]-like to that item as it flows through the market would violate the principle against restraints on aliena­tion. Exhaustion does not depend on whether the patentee receives a premium for selling in the United States, or the type of rights that buyers expect to receive. As a result, restrictions and location are irrelevant; what mat­ters is the patentee’s decision to make a sale.” Impression Products (U.S. 05/30/2017), rev’g, Lexmark (Fed. Cir. 02/12/16) (en banc) (10-2) “Congress has not altered patent exhaustion at all; it remains an unwritten limit on the scope of the patentee’s monopoly.” Id. “The exhaustion doctrine is not a presumption about the authority that comes along with a sale; it is instead a limit on ‘the scope of the patentee’s rights.” Impression Products (U.S. 05/30/2017).