Federal Circuit Limits Patent Exhaustion
A recent decision by the Federal Circuit, Helferich Patent Licensing LLC v. The New York Times Co., has held that the applicability of the patent exhaustion defense may be limited to a claim-by-claim determination depending on the nature of the licensed rights granted.
In Helferich, the patent owner held rights to a portfolio of patents with claims relating to providing content to wireless handsets and relating to methods for updating content stored on the wireless handsets. Prior to bringing the present litigation, Helferich had licensed handset manufacturers under the patents with the license grants being directed specifically to the handset claims. Subsequently, the patent owner brought suit against The New York Times Company and others asserting infringement of the content claims.
The defendants, however, responded by filing a motion for summary judgment alleging that the patent owner’s rights were exhausted because their users acquired handsets that were licensed by the patent owner. The district court agreed.
On appeal, the Federal Circuit reversed the district court’s ruling and held that the doctrine of patent exhaustion did not apply because the handset and content claims were separate inventions that were not jointly licensed. Also, handset users would not necessarily practice the inventions of the content method claims when they purchased the handsets. As a result, the defendants and the handset users were not authorized to practice the content method claims and consequently were not entitled to rely on the doctrine of patent exhaustion.
Additionally, the Court rejected the defendants’ request to extend the doctrine to complementary goods. The defendants argued that the content claims contemplate the use of the handset claims and that patent owner’s rights terminated when it licensed the handset claims to the handset manufacturers alleging that the two sets of claims were “complementary.” Here, the Court disagreed and first provided that “[defendants’] approach would extend exhaustion far beyond the doctrine’s traditional scope ….” Second, the Court rejected the notion that complementary goods are implicitly licensed. It noted, “even though an authorized buyer of product X was free of the patent owner’s patent on that product, the buyer could not, by virtue of his purchase, prevent the patent owner from enforcing his patent as to product Y, even though Y was specifically designed to be used with X and, at a minimum, made X more useful than it otherwise would be and, indeed, was essential to X’s utility.” Therefore, the Court rationalized that “a patentee owning multiple patents covering complementary goods produced by different producers has the freedom to negotiate different licenses ….” Thus, the Court concluded that since the patent owner maintained its rights in the content claims, it could enforce these claims against the defendants.
Gibbons will continue to monitor developments on this matter.