ACM
Transactions on
Reconfigurable
Technology and
Systems
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covers reconfigurable technology,
systems, and applications on reconfigurable computers. Topics include
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on its side. Indeed, the opening sentence of the Quanta decision states:
“For over 150 years, this Court has applied the doctrine of patent exhaustion
to limit the patent rights that survive
the initial authorized sale of a patented
item.” The Court reviewed several cases in which exhaustion defenses had
succeeded, including the Univis case,
which, like Quanta, involved method
claims.
Univis owned patents pertaining to
eyeglass lenses. It licensed certain firms
to make blank lenses; it also licensed
wholesalers to grind the blanks to make
finished lenses and retailers to sell the
finished lenses to consumers. U.S. antitrust authorities challenged Univis’ effort to control the downstream market
as an unreasonable restraint on trade.
In 1942, the Supreme Court ruled that
Univis’ patent rights had been exhausted by its authorization of the manufacture and sale of blank lenses. Even
though the blanks did not embody the
whole of Univis’ invention, they embodied essential features of the invention
and the intended use of the blanks was
to practice the invention. This sufficed
to exhaust Univis’ patent rights.
The Court in Quanta observed: “Just
as the lens blanks in Univis did not fully
practice the patents at issue because
they had not been ground into finished
lenses…the Intel products cannot practice the LGE patents—or indeed function at all—until they are combined
with memory and buses in a computer
system.” All that stood between the
Intel components and completion of
LGE’s patented processes was the addition of standard components, such as
main memory.
The Court observed that the exhaustion doctrine would be a “dead letter unless it is triggered by the sale of
components that essentially, even if
not completely, embody an invention.”
The “dead letter” danger was especially
keen because of how simple it would
be for “[p]atentees seeking to avoid the
patent exhaustion doctrine [to] simply
draft their patent claims to describe a
method rather than an apparatus.”
The CAFC’s ruling would allow patentees to intrude deeply into the stream
of commerce and upset settled expectations about the consequences of
purchasing authorized products from
licensed manufacturers. The Supreme
Court could not accept this “end run”
around the exhaustion doctrine.
implications of Quanta
Quanta will certainly protect downstream customers from LGE-like attempts to enforce license restrictions
as to goods embodying the whole or
material parts of patented inventions.
However, the Supreme Court in
Quanta “express[ed] no opinion on whether
contract damages might be available
[to patent owners] even though exhaustion operates to eliminate patent
damages.”
Left unresolved was an important
set of questions as to whether (or to
what extent) contractual restrictions
on customer uses or distributions of
products embodying the invention are
consistent with patent law’s exhaustion
doctrine.
Of particular significance is whether
conditional sales of goods embodying
patented inventions fall outside the
exhaustion rule, as the CAFC opined in
Mallinkrodt, Inc. v. Medipart, Inc. Mallinkrodt’s patents were for inventions
embodied in medical devices. It sold
these devices inscribed with a legend
that they were “for single use only.” Ignoring this legend, certain customers
(hospitals) contracted with Medipart
to prepare the devices for reuse. When
Mallinkrodt sued Medipart for patent
infringement, Medipart asserted that
the patent exhaustion doctrine shielded it from liability.
In Mallinkrodt, the CAFC treated
exhaustion as a default rule that could
be, and had been, overridden by sales
made conditional on the purchaser’s
acceptance of single-use-only terms.
(The CAFC has also enforced restric-
Quanta won its
appeal to the
supreme court
in large part
because history
was on its side.
