United States: Federal Circuit Limits Patent Exhaustion Doctrine For Complementary Technology

In its 2013 decision in Keurig, Inc. v. Sturm Foods, Inc., the Federal Circuit held that a purveyor of coffee cartridges did not infringe Keurig's coffee brewing patents because Keurig had already made an unrestricted sale of its brewing machines to end users, such that any further use of those machines was protected by the doctrine of patent exhaustion. Yet, in its February 10, 2015 decision in Helferich Patent Licensing, LLC v. The New York Times Company, et al., the Federal Circuit held that, under certain circumstances, purveyors of media content to users of handheld mobile devices could be found liable for infringement even where the mobile device manufacturers had already paid for a license under the asserted patents. In reaching this conclusion, the Federal Circuit purported to harmonize long-standing principles of patent exhaustion, but many observers will likely view the Helferich decision as narrowing the scope of the defense. In particular, the Federal Circuit has now held that in the context of complementary technology – such as a machine and one of its components, or a computer and its software – the patent exhaustion defense only operates to protect so-called "authorized acquirers" of the technology, while leaving out in the cold any third parties who provide complementary components or services that are separately patented.

Why Helferich Is Different Than Keurig

The key to the Helferich decision was the fact that the asserted patent claims were specifically directed to a method by which a third party content provider delivers media content to a handheld mobile device. The Federal Circuit observed that under the traditional application of the patent exhaustion defense, the patent owner would have been precluded from asserting patent claims directed to the design of the handset itself, or to the end user's use of the handset, because the equipment had been fully licensed to the handset manufacturers, and the end users were "authorized acquirers" of those licensed handsets who were free to use them as they wished. The court held, however, that the doctrine of patent exhaustion did not preclude assertion of the claims at issue against the content providers because the claims were directed solely to the actions of the content providers, who were not authorized acquirers of the handsets. The patent claims that covered methods of providing content thus constituted distinct complementary inventions that were separately infringed.

In the Keurig case, by contrast, the asserted patent claims covered a method of brewing coffee to be performed by the end user (i.e., an authorized acquirer). The defendant, Sturm, was accused only of inducing the end user's infringement, rather than engaging in any separate acts of direct infringement. In ruling in favor of Sturm, the Federal Circuit explained that "Keurig is attempting to impermissibly restrict purchasers of Keurig brewers from using non-Keurig cartridges by invoking patent law to enforce restrictions on the post-sale use of its patented product." Thus, the emphasis was on protecting the authorized acquirer who had compensated the patent owner (either directly or indirectly) for the right to use the technology, with Sturm being an incidental beneficiary of that protection.

The defendants in Helferich urged that whether the patent claims were directed to the actions of the content providers or the actions of the handset users amounted to "semantics" and "artful claim drafting." The Federal Circuit disagreed, however, noting that the Patent Office had granted Helferich separate patent claims to methods performed by the content providers and methods performed by the handset users without issuing a double patenting rejection. The court also noted that the handset user claims were not simply the mirror images of the content provider claims, and that infringing one did not necessarily mean infringing the other. Thus, the content provider claims constituted separate inventions that were separately infringed. Under the Federal Circuit's logic, it was as if Helferich had patented both a car and its wheels, and the defendants were trying to sell wheels to the car owners.

Authorized Acquirers Are Not Guaranteed Maximum Utility

An important consequence of the Federal Circuit's holding in Helferich is that the doctrine of patent exhaustion will not guarantee that an authorized acquirer of a patented technology will be able to realize the maximum benefit of that technology. The district court – which had ruled against Helferich – had reasoned that "[t]here would be little value to the handset manufacturers (or their end users) to have purchased licenses to [Helferich's] patents to receive content from a third-party content provider if the content provider, like Defendants, could not send the message to the licensed handset device without infringing the patent." The Federal Circuit disagreed with this utility theory, however. The court drew an analogy to the owner of a patented walkie talkie who, quite naturally, would like to speak with other walkie talkie users. The court reasoned that the doctrine of patent exhaustion would not allow third parties to use the walkie talkies without a license, even though the licensed user (i.e., the authorized acquirer) arguably would receive little benefit from owning a walkie talkie with no one else to talk to. The court explained that:

there is evident value in obtaining a product (and permission to use it)...whose value depends on other people obtaining complementary products, even when the latter must themselves obtain a patent license. This is a commonplace phenomenon, and what the initial product licensees obtain is not just immediate value, which might be limited, but the potential for increasing value as the rights owner acts on its incentive to license the complementary sales.

Marginalization of the "Double Recovery" Test

Patent practitioners are accustomed to explaining the doctrine of patent exhaustion as a means to prevent patent owners from obtaining a "double recovery" by suing multiple parties in the chain of distribution over the same infringing item. The defendants in Helferich invoked this theory in their appeal, but to no avail. The Federal Circuit found that:

[the] principle [of avoiding double recoveries] has never served as an independent test for determining whether exhaustion applies. It is hard to see how it could do so unless courts first established the dollar value of the proper reward to determine when the patentee had received it and therefore had to stop seeking additional recoveries. Exhaustion doctrine has never required such an inquiry, which would present difficulties akin to those recognized in other areas where the judicial determination of a proper price has been avoided.

Thus, the significance of preventing "double recoveries" is now of diminished importance to the patent exhaustion analysis, and practitioners would do well to instead frame exhaustion arguments in terms of protecting the rights of authorized acquirers.

The Ramifications of Helferich

Absent reversal, the Helferich decision will be of significant importance to companies that supply components or complementary software to end users of patented technology. As can be seen from the comparison of Keurig and Helferich, infringement may turn on whether the patent owner has claims that are separately directed to such components or software. If, as in Keurig, the patent claims are directed only to the activities of the licensed end user, the doctrine of patent exhaustion protects third parties who merely "induce" the end user's actions. But, if there are patent claims that separately cover the third party's own conduct, infringement might be found. Helferich also provides unambiguous guidance to patent applicants: it pays to pursue separate claims for complementary technology.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions