Chicago-Kent Law Review

Volume 90 Issue 2 LatCrit Symposium Toward Equal Article 14 Justice in Law, Education and Society

4-10-2015

When Is a Exhausted? Licensing on a Claim-By- Claim Basis

Lucas Dahlin IIT Chicago-Kent College of Law

Follow this and additional works at: https://scholarship.kentlaw.iit.edu/cklawreview

Part of the Intellectual Property Law Commons

Recommended Citation Lucas Dahlin, When Is a Patent Exhausted? Licensing Patents on a Claim-By-Claim Basis, 90 Chi.-Kent L. Rev. 757 (2015). Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol90/iss2/14

This Notes is brought to you for free and open access by Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion in Chicago-Kent Law Review by an authorized editor of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contact [email protected], [email protected]. 36219-ckt_90-2 Sheet No. 207 Side A 03/25/2015 13:32:44 ENT -K HICAGO . 237, 237–38 (2009). (2009). 237–38 . 237, * DVOC A AHLIN RIAL D 757 757 .J.T M UCAS NTRODUCTION I L , No. 10-CV-4387, 2013 WL 6354209, at *1 (N.D. at *1 Ill. Dec. 4, 6354209, WL , No. 10-CV-4387, 2013 , 33:2 A ) 3/5/2015) 12:45 PM Recently, courts have inexplicably the expanded Battling the Patent Troll: Tips for Defending Patient Infringement Battling the Patent Troll: Tips for Defending 1 ELETE D OT 2 N WHEN IS A PATENT EXHAUSTED? A WHEN IS PATENT EXHAUSTED? O (D DOCX . for their comments and feedback regarding this article. Helferich Patent Licensing, L.L.C. v. N.Y. Times Co., 965 F. Supp. 2d 971 (N.D. Ill. AHLIN LICENSING LICENSING A CLAIM-BY-CLAIM PATENTS ON BASIS See 3 order clarified on reconsideration clarified order EVIEW 13P-D In our story,owner of system the A comes to Joe and asks to In a world of increasingly complex technology, patent law is often at we shall dub Inventor whom To illustrate, imagine that an engineer, R AW AW 2013). 2013). as a “meth- patents, such multiple patent into scenario, to split the in this is possible, it could argue that 3. “a patent for an external system” and a separate A to be able to interact with system for od modifying one view on patents, and paper. It is a simplistic the This hypothetical will be used throughout The logistics of inde- B with an external system.” to be able to interact system for method modifying pendent and distinct being split into separate patents is discussed later in this Article. 2. 2. 2013), * 2015 JD Candidate, Chicago-Kent College of Law. The author wishes David to thank Professor College of Law. Chicago-Kent JD Candidate, * 2015 the C Schwartz, James Heather Collinet, Konstantopoulos, from and the various editors L Patentees Claims by Non-Manufacturing 1. Caroline Coker Coursey, defense of patent exhaustion to an untenable degree in their inquisition to to in their inquisition exhaustion to an untenable degree defense of patent “trolls.” punish these license Inventor Joe’s the owner of patent; however, systemonly A wants pay for A. He does not want to to system that apply to license the claims This eco- never infringe. claimsand could that his system will not embody the forefront of legal reform. Further, few legal quandaries have received as legal quandaries have received as Further, few reform. the forefront of legal of as the problem the media courts, legislators, and attention from much “patent trolls,” companies that assert patent rights without actuallyproduc- ing any products. relevant “A” and for “B” a way systems Joe, has invented and patented to modify efficient could involve a com-another. This more with one communication systems, on both to be installed physical upgrades for eachputer program patent in- Joe’s Further, Inventor both. or some combination system, of cludes some claims relating A and other to system to the modifications claims relating to the modifications to system B. Finally, to complete our hypothetical,and B are owned by A different corpora- systems imagine tions. 36219-ckt_90-2 Sheet No. 207 Side A 03/25/2015 13:32:44 A 03/25/2015 207 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 207 Side B 03/25/2015 13:32:44 5 Courts have strug- 7 [Vol 90:2 90:2 [Vol , Inventor Joe would have , Inventor Joe would have ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D OT N O (D DOCX . This exemplifies two longstanding principles of patent law: two longstanding principles of This exemplifies The doctrine of patent exhaustion states that after an author- of The doctrine 8 6 Under the expanded doctrine of patent exhaustion, enumerated Under the expanded doctrine 4 965 F. Supp. 2d at 980–81. Adams v. Burke, 84 U.S. 453, 457 (1873). Adams (1873). v. Burke, 84 U.S. 453, 457 AHLIN See Id. See 13P-D As a next logical step, Inventor Joe takes his patent to the owner of the owner to his patent Joe takes logical step, Inventor As a next Patent exhaustion is an affirmative defense to a claim of patent in- defense to a claim Patent exhaustion is an affirmative 9 Helferich v. New YorkPatent Licensing Times in no recourse and could no longer realize the full value of his . realize the full value no longer no recourse and could ized sale of a patented product, all patent rights in the product terminate, soized sale of a patented product, all patent rights in the product terminate, long as the product “sufficiently the patent.” embodies gled to define this terminology, but have ultimately decided that a product a product decided that ultimately but have gled to define this terminology, a patent when it contains the patent’s“sufficientlyembodies” “essential of features” and “its only the terms and intended use is to be finished under the patent.” 9. 9. Mfg., 144 U.S. 248, Jeffery & v. Gormully Mfg. rights, see Pope on licensing in depth discussion more 4. 251 (1892). For a bring an action for infringement. Only an exclusive licensee or assignee has standing to 5. 2008). 6. ExcelStor 1376 (Fed. Cir. Tech., Inc. v. Papst Licensing GMBH & Co. KG, 541 F.3d 1373, 8. 7. Inc. v. LG Elecs., Quanta Computer, Inc., 553 U.S. 617, 628 (2008). 758 758 rationale creates Joe and Inventor sense, makes nomic non- a special license agreementexclusive the “system-A that only covers claims.” system B to create a similarand offers that license him will enable for him Inventor Joe’s on without infringing claims” the “system-B to practice of system the owner patent. However, B claims that he can incorporate because a license or the fear of litigation without invention Inventor Joe’s Inventor Joe has already through licensing “system-A exhausted his patent claims” B’s A. System system to the owner of owner argues that, because overarching invention for the work in collaboration the two systems must to one system to be fully realized, and without modifications modifications the license only Joe can product, Inventor an unfinished other creates to the or patent to either A his rights. Nor could Inventor Joe B before exhausting Companypatent from and expect his A to receive the full value of attempt suit against Company to then bring an infringement because the B them license to Company exclusive and Company A was not the A lacks stand- ing to sue. (1) that there should be no restriction on the use of a product after an au- (1) that there should be no restriction should not be overcompensated holder thorized sale, and (2) that the patent by royaltiesevery receiving purchaser of a licensed prod- from subsequent uct. fringement. 36219-ckt_90-2 Sheet No. 207 Side B 03/25/2015 13:32:44 B 03/25/2015 207 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 208 Side A 03/25/2015 13:32:44 , LDRIDGE &A Helferich This is a a This is 11 In ONG , L.L.C. 29, (Aug. L 10 Quanta Computer, ENNA ICENSING K C L , some patent holders , M ATENT P 759 759 Helferich ruling and analyzes the resulting ELFERICH , H ruling, which essentially barred the li- barred ruling, which essentially Helferich which will be discussed below, with the fol- PATENT LICENSING ) 3/5/2015) 12:45 PM 14 , Helferich ELETE D OT N The O 13 (D , 965 F. Supp. 2d at 980. DOCX . AHLIN at 980–81. at 980–81. LLP (Sept. 10, 2013), http://www.mckennalong.com/publications-advisories-3389.html. LLP (Sept. 10, 2013), http://www.mckennalong.com/publications-advisories-3389.html. See Helferich See HPL to Appeal Exhaustion Order Id. Claim-by-Claim Patent Licensing: Mind your Ps and Qs 12 13P-D First, the court should determine whether there is anFirst, the court should determine economic chain Part I of this Article discusses the history ex- of the defense of patent As patents become increasingly there will be it is likelyAs patents become that complex, However, under the recent ruling in ruling the recent under However, DVISORIES problems. Part problems. III explains a possible allowing solution to the problem, censing of patents on a claim-by-claim on a claim-by-claim censing of patents basis, will create a number of prob- regarding efficiency courts, of patent licensing, the the economics of lems should of courts as a of science. Therefore, policy, matter progress and the claim-by-claimallow patents to be licensed on a basis by replacing the that was first enumerated in test “sufficientlyembodies” Inc. v. LG Electronics, Inc. can no longer receive full compensation for their inventions. for receive full compensation can no longer 2013), http://www.hpl-llc.com/news/13879121/. 14. Inc. v. LG Elecs., Quanta Computer, Inc., 553 U.S. 617, 628 (2008). 10. 10. A 2015] 2015] devastating ruling for companies for companies devastating ruling wish to license their patentswho on a claim-by-claim basisfor either efficiency create field-restricted or to li- censes. 13. 13. 11. 11. `the Northern District of Illinois`the Northern essentially a single that licensing even held to third- with respect patent, even that exhaust will a patent from claim claims infringe separate parties who third- so long as the within the patent, party product. with the licensed in conjunction product works 12. 12. lowing two-step inquiry. inquiry. lowing two-step alleged infringer back to a license. An economic chainconnecting the either a license or a licensed purchased would exist if the alleged infringer to a license, infringer chainproduct. If there is not an linking the economic If there is anbe available. not exhaustion should of patent then the defense to the deter- second inquiry: move chain, court should economic then the licensed product as intended would finishing the mining whether using or defense shouldinfringe the patent. The patent exhaustion be available only to a party patent owner, either it has economically if contributed to the directly or indirectly,if it is using its purchase and according to the prod- purpose. normal and ucts intended haustion. Part II examines the manypatents two industries, where that lie at the fault lines between more an invention to must receive licenses in order for distinct parties multiple to fruition. come 36219-ckt_90-2 Sheet No. 208 Side A 03/25/2015 13:32:44 A 03/25/2015 208 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 208 Side B 03/25/2015 13:32:44 sole XHAUSTION E [Vol 90:2 90:2 [Vol Therefore, a patent holder can ATENT 18 P Even if an end-user purchases a product purchases a Even if an end-user product After all, a patentee “may grant licenses to The court reasoned that “when the patentee, 16 ISTORY OF 19 15 H ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE RIEF D OT N Therefore, there is still an economic chain connecting O that a patent could not be used to restrict the uses of an be used to restrict the not that a patent could 17 I. A B (D DOCX . (emphasis added). (emphasis at 456–57. AHLIN Id. Id. Id. Id. 20 13P-D However, the Court differentiated between post-sale restrictions,However, the Court differentiated This doctrine is founded in sound logic and public policy. A licensedlogic This doctrine is founded in sound The policy behind the patent exhaustion doctrine dates back to com- doctrine dates exhaustion behind the patent The policy Adams v. Burke Adams v. which were held to be illegal, and pre-sale restrictions, held to which were be within the rights of the patent holder. craft a license what to limit a manufacturer create and wheremay he may uses of the the ordinary limit cannot holder the patent sell the product, but by the end purchaser. product the parties who benefit from the invention, running from the end-user to the running from the invention, the parties who benefit from licensed manufacturer to a potential assignee of the patent and finally back to the inventor. 17. 17. 18. 19. 20. Gasoline Corp. v. Ethyl United States, 309 U.S. 436, 456 (1940). 16. 15. 456 (1873). 453, 84 U.S. v. Burke, Adams 760 760 claim-by-claim by cases in some licenses end-users protecting while still patent. a embody” to “sufficiently what it means redefining a product for Finally, IV will respond Part and criticisms weaknesses of the to potential solution. proposed make, use or vend, restricted in point of space or time, or with any other or time, or with of space point make, use or vend, restricted in granted privilege, save only that by restriction upon the exercise of the to his license he mayattaching a condition and not enlarge his monopoly did not and patent together other which the statute thus acquire some give.” through a licensed manufacturer, the original patent holder has received his the original patent holder through a licensed manufacturer, with he originally negotiated the sale through the license consideration for the manufacturer. or the person having his rights, sells a or the person having whose machine or instrument value is in its use, he receivesvalue is in its use, with consideration for its use and he parts the that use.”the right to restrict manufacturer, by the patent owner, can negotiate his privity virtue of with not required and is that he wishes to exploit within the patent for the rights to license the entire breadth of the patent holder’s property rights. The end- mon law but was fully enumerated in 1873, when the Supreme Court held Court Supreme law but was fully enumerated in 1873, when the mon in item after an item authorized sale. 36219-ckt_90-2 Sheet No. 208 Side B 03/25/2015 13:32:44 B 03/25/2015 208 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 209 Side A 03/25/2015 13:32:44 As the 27 Thus, once Thus, once 21 Thus, the patent 25 761 761 , where the Supreme Court held , where the Supreme , a patent owner licensed the, a patent owner pro- 22 Univis The Supreme Court rejected this The Supreme attempt 26 In PATENT LICENSING 23 ) 3/5/2015) 12:45 PM ELETE D OT N O (D DOCX . The patent owner then tried to control the finishing of the then tried to control the finishing The patent owner 24 UnitedLens States v. Univis Co. 28 at 244–45. at 244–45. AHLIN at 250–51. at 250–51. Id. Id. Id. Id. Id. Id. 13P-D The patentee had received consideration for his invention and could for his invention and The patentee had received consideration Another major case that doc- helped carve out the patent exhaustion [W]here one has sold an uncompleted article which, because it embodies it embodies because article which, uncompleted an has sold [W]here one his the protection of within is invention, patented his essential features of con- purchaser in the by to be finished the article destined has patent, and be is or may it far as so his invention sold has he to the patent, formity and re- has demanded he in that particular article. The reward embodied ceived is forthe article and the invention which it embodies and which as- his right to with thus parted his vendee is to practice upon it. He has free to con- it and is no longer to with respect monopoly patent sert the or finished either in its unfinished be sold trol the price at which it may form. no longer restrict the post-sale use of the product. Further, the product’s product’s Further, the of the product. no longer restrict the post-sale use patent, leaving use would infringe the only the purchaser with and intended if not for the defense an essentially worthless item of patent exhaustion. Court stated: lenses, claiming that its patent also that process. covered 24. 23. (1942). 250–51 United States v. Univis Lens Co., 316 U.S. 241, 22. 21. 549 (1852). 539, 55 U.S. v. McQuewan, Bloomer 2015] 2015] even and powers not may negotiating no such has other hand, on the user, of be aware uponany the manufacturer. imposed restrictions owner attempted to obtain royaltiesowner attempted from the lens not only manufacturers but also from the lens grinders. and held that the patent was exhausted after the first sale and that the patent the patent was exhausted after the and held that holder could not obtain secondary royalties if the only use of the incom- patent. and infringe the would be to finish them plete products 25. 25. 26. 27. 28. 28. duction of unfinished lenses that could later be ground into specific shapes later be ground into specific lenses that could duction of unfinished and sizes. the licensed product becomes the personal property of the end-user, or the end-user, of property the personal becomes product the licensed whosomeone purchases it from the licensed the product manufacturer, his to research him expect of the product or his use to limit unfair would be is the purchase price all, included in the product. After rights in a share of granted by patent. the the monopoly trine was that a patent after the patent owner licensed was exhausted an unfinished become a use would be to eventually only its product where version of a product. finished, infringing 36219-ckt_90-2 Sheet No. 209 Side A 03/25/2015 13:32:44 A 03/25/2015 209 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 209 Side B 03/25/2015 13:32:44 Quan- 758, 772 758, Y ’ OC .S FF O is a and im- recent 29 36 The court responded to The court responded to RADEMARK 35 [Vol 90:2 90:2 [Vol .&T every within its claim patent , Intel was creating , Intel was creating micropro- AT 34 33 , 90 J. P Quanta Intel, within their rights, began to sell to sell rights, began within their Intel, 31 In 30 ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D The New Patent Exhaustion Doctrine of Quanta v. LG: It Means for of What The New Patent Exhaustion Doctrine OT N The court found this to be a post-sale restriction on the the be a post-sale restriction on this to The court found O 32 (D DOCX . , 553 U.S. at 623–24. , 553 U.S. at 623–24. at 630. at 630. at 628. at 628–29. AHLIN Quanta Id. Id. Id. Id. 13P-D Quanta Computer, Inc. v. LG Electronics, Inc. Quanta Computer, Inc. To determine whether the computer chips “embodied” the additional the additional chips “embodied” whether the computer To determine However, LGE argued that the computer chips alone, without being chips alone, without However, LGE argued that the computer , the law permitted patentowners and permitted , the law to control their customers operation portant case defining the patent exhaustion defense exhaustion patent portant case because defining the “[u]ntil this argument by explaining that the authorized products “embodied” the “embodied” products this argument by that the authorized explaining additional claims, even the computer-implemented method claims, because the chips and processors had in no other reasonable use that would result the end-user not infringing the claims—the computer chips were essentially worthless without authorized sale of the Thus, the a computer. computer be that couldn’t even claims additional claims, chips had exhausted the computer. practiced by chips without a connected the use of the chips after an authorized sale and held that the patent exhaustion sale and held that use of the chips after an authorized and anydoctrine protected Quanta purchasers of Quan- Computer, eventual from ta claimsmachines, of infringement. the computer chips and microprocessorsthe computer Inc. (Quan- Computer, to Quanta ta). However, processors incorporating Intel chips and after Quanta began had infringed LGEmachines, they that sued Quanta, claiming into Quanta on LGE’s patent. 29. Inc. v. LG Quanta Computer, Elecs., Inc., 553 U.S. 617 (2008). 30. Schlicher, W. John Patent Owners, Licensees, and Product Customers Patent Owners, Licensees, and Product 762 762 here the products, of licensed purchasers the protected exhaustion Patent the purchase in to use their legitimate allowing them lens grinders, intended way of infringement. without fear (2008). (2008). 31. 32. 32. 33. 35. 34. if it element of the claim. A product “practices” a claim every meets 36. and therefore not every claim had been exhausted. claims, the court made two inquiries. The first inquiry was determining two inquiries. The first inquiry was determining claims, the court made connected to a computer, could not practice connected to a computer, ta doctrine byof the exhaustion could sell the rule that a patent owner and license with on the patent conditions, restrictions or limitations express received.”rights the purchaser cessors and computer chips under a license from LG Electronics (LGE), from chips under a license cessors and computer be were not to processors the chips and that condition which included the combined products. with non-Intel 36219-ckt_90-2 Sheet No. 209 Side B 03/25/2015 13:32:44 B 03/25/2015 209 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 210 Side A 03/25/2015 13:32:44 . 42 39 40 NTELL .I EV R ARSHALL , 7 J. M 763 763 Indeed, the court found that the com- found that Indeed, the court 38 PATENT LICENSING ) 3/5/2015) 12:45 PM ELETE D Post-Quanta, Post-Sale Patentee Controls OT reasonable being incorporated into a uses other than N O (D no DOCX . 37 at 631. at 631. at 632. added). at 633 (emphasis AHLIN Thus, although the chips and processors alone, without the rest of a of a alone, without the rest and processors the chips Thus, although Id. Id. Id. Id. Id. 41 13P-D After its success in Quanta, patent exhaustion became After its success in an importantQuanta, patent exhaustion became As to the second inquiry, the court held that the chips “substantially that the chips the court held As to the second inquiry, As to the first inquiry, the court found that the computer court found were chips first inquiry,As to the the .” . 683 (2008). 682, L. ROP puter chips had computer, could not practice the could not practice methodcomputer, the patent, they claims of embod- patent. of inventiveness found in the ied the entirety of the creative spark defense in modern patent litigation. Some experts believe that an increase in complex technology, notably in machines that incorporate many differ- scienc- as well as in areas such biotechnology and plant as ent components, es, will lead widespread. exhaustion defense becoming patent to the computer and if the method claims were not held exhausted, an end-user exhausted, an claims were not held and if the method computer for infringement. without being liable product use the could not possibly 38. Wegner, 38. C. 39. 40. Harold 41. 42. 37. 37. Further, as more inventions cover the divide between complex industries, it between complex cover the divide Further, as more inventions will becomecommon more to describe multiple patent applications for within the same patent. inventive components In order to protect the end-users fromIn order to protect the claims being liable for infringing byproducts theyhad legitimately simply using the purchased—one of the patent exhaustion doctrine in the the for implementing historical reasons first place—the initial sale court held that the chips and pro- of computer cessors to Quanta LGE’s had exhausted the additional claims from patent. 2015] 2015] the chips’whether to fully was use” and intended “reasonable the practice while the second claims, the method patent, including inquiry deter- was patented of essential features [the] “embodie[d] the chips mining whether invention.” P embod[ied] the patent because the onlystep necessaryembod[ied] practice the patent to of standard parts. processes or the addition is the application of common Everything inventive Intel Prod- about each patent is embodied in the ucts reasonably intended to be used in computers, and thus an end-user, reason- an end-user, and thus used in computers, to be reasonably intended in LGE’s claims ably would infringe upon the additional using the product, not exhausted.patent if they were 36219-ckt_90-2 Sheet No. 210 Side A 03/25/2015 13:32:44 A 03/25/2015 210 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 210 Side B 03/25/2015 13:32:44 43 Some of Some of ruling is ruling 48 ROBLEMS Helferich Patent New York Times P Helferich A cell phone user can 45 [Vol 90:2 90:2 [Vol ESULTING R ND For example, one of the patents at For example, A 47 ULING R , however, has expanded the defense of patent defense of patent has expanded the , however, A. The Helferich Ruling A. The Helferich Ruling ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D ELFERICH OT N H O (D 44 HE DOCX . II. T at 973. at 973. In order for the invention to come to fruition, however, required In order for the invention to come at 977. at 977. AHLIN 46 Id. See id. Id. Id. 13P-D The Helferich patents at issue are similar are hypothetical presentedThe Helferich patents at issue to the The Northern District of Illinois’ recent holding in recent holding Illinois’ District of The Northern The Helferich (Helferich) Patent Licensing patents dealt with the de- Licensing v. New York TimesLicensing The degree. to an untenable exhaustion ruling essentiallyCourt’s the bars of complementarylicensing claims within on a claim-by-claim a patent precedential First, there are of problems. a number basis, which creates as problems, contradicts over a centurythe ruling of legal rationale. Sec- the such as over-or-under compensating problems, are economic ond, there patent holder. Finally, such there are problems, market as creating an inef- ficient and uncertain and possiblymarket hold-ups in the imple- creating the resulting problems technology. However, before mentation of patented look at the nuanced can be fullymore understood, a both that the cell phone manufacturers the devices theymodify were creat- those who would send the alerts to the us- ing, and that content providers, ers, systems their modify and methods. 44. 43. N.Y. Times Co., 965 973 (2013). Licensing, L.L.C. v. Helferich Patent F. Supp. 2d 971, The patents had a number of claims that cell-phone were directed solely at of claims The patents had a number systems and were directed at claims), methods (device while other claims systems and methods for such as the providers, content 764 764 (content claims). 45. 45. 47. 48. Patent U.S. 2005). No. 7,280,838 (filed Mar. 18, 46. 46. then click on the link sent to the phone to retrieve the content found at a content found at a phone to retrieve the to the then click on the link sent website. issue, U.S. Patent No. 7,280,838 (‘838 patent)—titled “Content Provision issue, U.S. Patent No. 7,280,838 (‘838 96 claims. to Subscribers via Wireless Transmission”—includes above regarding a patent on modifications to systems A and B. Helferich’s A to systems above regarding a patent on modifications of sending alerts containingpatents deal and with the systems methods Internet links to cell phone users over Service (SMS) or Short Message Messaging Service (MMS)Multimedia protocols. required. livery of content, such as alerts containing hyperlinks, livery of content, such as alerts containing to cell phones. 36219-ckt_90-2 Sheet No. 210 Side B 03/25/2015 13:32:44 B 03/25/2015 210 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 211 Side A 03/25/2015 13:32:44 50 The the 53 commu- Id. the content provider receiv- provider content the the content provider causing 765 765 the content provider initiating provider the content Elecs., Inc., 553 U.S. 617, 638 (2008)). 553 U.S. 617, 638 (2008)). Elecs., Inc., 49 51 PATENT LICENSING ) 3/5/2015) 12:45 PM 52 ELETE D OT N O note 49. (D supra , 965 F. Supp. 2d at 977–78. 965 F. 2d at 977–78. , Supp. , 965 F. Supp. 2d at 977–78. 965 F. 2d at 977–78. , Supp. DOCX , . In determining whether the devices substantially embodied the substantially whether the devices the In determining embodied at 979 (quoting Quanta Computer, Inc. v. Inc. LG Quanta Computer, at 979 (quoting Claim 9 of the states: ‘838 Patent AHLIN 54 Id. Helferich See id. See, e.g. Helferich Id. a request message that is wirelessly transmitted from that is wirelessly transmittedthe wireless communication a request from message device 13P-D Returning to our simplistic analogy,simplistic Returning to our like the cell phone devices are to license its Like in our hypothetical, Helferich claims re- attempted The court held, however, that after held, however, The court device claims licensing to cell [a] method that communicates data from a content provider through a mobile radiotelephone radiotelephone provider through a a data from mobile content that communicates [a] method having network to a wireless system communication utilizing an content notification device, location registry comprising: home an interface with a ing in- to the the request network as a reply message, message radiotelephone over the mobile identifier” added). (emphasis cluding at least a portion of the information nication of data intended for the wireless communication device, the data including an infor- an including the data device, communication wireless for the data intended nication of and provider the content stored by that is associated with information identifier mation in the is not included wherein the information information, of the stored identifies the location data and is not stored in the wireless device; communication the to suitable for transmission message a the data into to: process system content notification and identifier, includes the information wireless communication device, which message device; and wireless communication to the the transmit message 49. 49. 2015] 2015] claims,these content as Claim such onlypertain to ‘838 patent, 9 in the other by not be exhausted should licensing therefore and methods, provider claims to cellular device manufacturers. could incorporate the system providers and methods enumer- Thus, content either directlymoney, patents without contributingated in Helferich’s any holder. patent to the or indirectly, The content provider performs every step in this method, and the entire claim is written to only encom- and the entire claim is written every to only performs in this step The content provider method, a provider’s actions. Therefore, pass the content device communication of a wireless manufacturer interest no have in licensing it. and would likely this claim could not infringe 50. 50. 51. 52. court held that because Helferich had court held that because Helferich had already licensed its device claims to the cell phone manufacturers, its patents would be exhausted with respect pa- [the] embodie[d] “substantially cell phones if the to content providers tent[s].” system A, andlike systemthe content providers systems are B; the inven- tion deals with and requires that the two systems the interaction between Helferich ideas embodied in the the inventive implement both systems the patents in order for end result, the comecell phone alerts, to to fruition. However, or sys-many to the inventive methods of the claims are limited and could not be providers devices or content for only cell phone tems enforced against the other. lating to the devices to the cell phone manufacturers and its claims relating systems and methods to the content providers. to content provider phone manufacturers, and could no its patent Helferich had exhausted phone manufacturers, providers. content to third-party content claims its distinct longer license 53. 53. 54. 36219-ckt_90-2 Sheet No. 211 Side A 03/25/2015 13:32:44 A 03/25/2015 211 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 211 Side B 03/25/2015 13:32:44 , LARA C Quanta Helfrich ANTA (Aug. 31, 2012), 31, (Aug. , 23 S . 2014), 20, (Aug. IME ITIG , T Therefore, under the the Therefore, under .L 59 AT P [Vol 90:2 90:2 [Vol and was presented as such and was 62 ETAIL , R , this Note argues that where single , this Note argues that where single 55 Judges Panel Helferich ) 3/5/2015) 12:45 PM , 553 U.S. at 638). interpreted this to mean that “that the sale of a interpreted this to CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D practices a patent its entire- exhausts that patent in practices Thus, it likely did not help Helferich that the compa- it likely did Thus, OT Quanta New York Times Tangles With Patent Troll Times Tangles With New York 61 N O . 159, 163 (2006) L.J. (D Helferich ECH , the Court held that a product substantially embodies a pa- embodies substantially that a product Court held , the T Simply reading the news headlines regarding the reading the news headlines regarding Simply partially , 965 F. Supp. 2d at 979. 965 F. 2d at 979. , Supp. , 965 F. Supp. 2d at 980 (emphasis , 965 F. added). Supp. 2d at 980 (emphasis DOCX . 63 , 553 U.S. at 633. (any claim in a patent is going to at least partially practice the patent simply by virtue by (any claim practice the patent simply is going to at least partially in a patent IGH Plaintiff’s Brief in Opposition to Defendant’s Motion to Dismiss or Transfer at n.1, to Defendant’s Motion to Dismiss Plaintiff’s Brief in Opposition R. David Donoghue, at 630–32. at 630–32. AHLIN at 980 (quoting at 980 (quoting &H Quanta 60 Helferich Quanta See Id. Helferich See id. Id. See Further, the Court held that, as a principle, patent exhaustion ap- patent exhaustion as a principle, held that, the Court Further, 56 According to the court, licensing even a single According to the claim from a patent 13P-D This holding will only increase uncertaintywill This holding inefficiency, and and could Of course, often try litigators to “tell a story” rather than just present In 58 The court in OMPUTER ty.” JetBlue Airways Corp.JetBlue Airways Licensing, L.L.C., 960 F.Supp. 2d (E.D.N.Y. 2013) (No. 12- v. Helferich Patent Roberts, CV-05847); Jeff tent if “[e]verything inventive about each patent is embodied in the [prod- is embodied each patent about tent if “[e]verythinginventive uct].” http://www.retailpatentlitigation.com/2014/08/20/judges-panel/ (recommending tell athat attorneys http://www.retailpatentlitigation.com/2014/08/20/judges-panel/ story in their briefs as “stories . . . help the court follow you ‘deep’ into arguments”). practiced.” Jason Rantanen, practicing and in cases never most practicing and have no intention of 62. are not off a patent that they a lot of who tries to money make A “patent troll” is “somebody Threats Strategy Against Patent Effective an Troll: Litigation As Slaying the to the court. will mean that the authorized product will, to some degree, partially degree, prac- to some will, that product will the authorized mean tice the patent be exhausted. patent will and thus the applies when a product’s only reasonable and intended use would practice only intended use would reasonable and a product’s applies when practice the patent. the product itself did not completely the patent, even if http://business.time.com/2012/08/31/new-york-times-tangles-with-patent-trolls/. http://business.time.com/2012/08/31/new-york-times-tangles-with-patent-trolls/. C which was brieflywhich was described above. 55. 56. 766 766 in ruling Court Supreme the recent to court looked the patents, 57 63. 63. 57. 57. 58. 59. of being part of the patent). of being part of the 60. 61. 61. ny is widely troll,” considered to be a “’s stringent holding on what “substantially embodies” a patent, the a patent, “substantially embodies” on what holding court’s stringent licensing of any a from will exhaust that patent to all third parties. device which even disincentivize inventors from conceivingeven disincentivize inventors from new patentable inventions. Therefore, in situations like patents contain separate in distinct inventive components covering claims to be li- be allowed classes, the patents must industries or two or more censed on a claim-by-claim basis so that can license both industries the the patent holder. over- or under-compensating technology without facts. the bare bones 36219-ckt_90-2 Sheet No. 211 Side B 03/25/2015 13:32:44 B 03/25/2015 211 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 212 Side A 03/25/2015 13:32:44 , . 677, 677, . EV ruling is 360 (April 14, .L.R AW (Aug. 22, 2013), 2013), 22, (Aug. AND , L Some experts Some experts 64 Helfrich , 65 V DVISOR Unfortunately, some Unfortunately, some L. A 66 Setback for Patent Troll Under Helferich Patent Licensing, L.L.C. v. AYMENT See 767 767 , P 65 Can you Patent a Hyperlink? Patent Trolls Sure Hyperlink? Patent a Patent Can you Costly Intellectual Property Separate Patents Separate Patents PATENT LICENSING Thus, until a similar a similar case arises, it is unclear Thus, until ) 3/5/2015) 12:45 PM 67 ELETE but at least the had to company but would not have . (Aug. 21, https://www.eff.org/deeplinks/2013/08/judge-sticks- 2013), D Judge Sticks Troll Up for End Users, Rules Against Text Message 69 OT N As noted above, this holding conflicts with the history with the history holding conflicts this As noted above, (Aug. 30, AM),2012, 9:30 http://www.extremetech.com/computing/135267- OUND O 68 note 64. F ruling was accepted for reconsideration by the district court but only because the district court but only because ruling was accepted for reconsideration by (D Texting Patents in CBS Case not Exhausted, Fed. Circ. Told Case not Exhausted, Texting Patents in CBS ECH T supra , CBS Interactive Inc. v. Helferich Patent Licensing, L.L.C., , CBS Interactive Inc. v. Helferich Patent Licensing, No. IPR2013-00033 DOCX . RONTIER Helferich , Adi Kamdar, F AHLIN XTREME B. Why the Distinctive Helferich Claims B. Why the Distinctive Helferich Claims Were Not the Subject of See, e.g. E.g. , E 13P-D Helferich could have saved itself a lot of headaches by simply filingHelferich could have saved Helferich appealedHelferich the decision to of Illinois’ Northern District the LECTRONIC all of its claims as separate patent applications. This of course would be costly and inefficient, the original opinion failed to mention one of the patents at issue. The reconsideration ruling one of the patents makes clear failed to the original opinion mention be changed. will not opinion of the original that the substance 2013). Dec. 4, Ill. at *1 (N.D. 6354209, WL 2013 10-CV-4387, No. Co., Times N.Y. 69. & Jonathan S. Masur, David Fagundes 68. The of That these specific patents as obvious). claims (B.P.A.I. patent cancelling Mar. 3, 2014) (Paper 122: to exhaustion. the question of patent is immaterial claims obvious were found to contain 68. “Patent Exhaustion” Doctrine Liberates Mobile Technology Doctrine Liberates “Patent Exhaustion” have even completely misread the opinion, believing that this case was a that this the opinion, believing completelyhave even misread “patent trolls” battle between even thoughand “end-users,” not the case did all. at or their rights, “end-users,” implicate of the patents at issue were found invalid after a review by after a PTO and the the were found invalid of the patents at issue case has stalled, to address the district the Federal Circuit unable leaving court’sdoctrine. use of the of the patent exhaustion doctrine and the history of licensing patents claim- patents licensing doctrine and the historyexhaustion of of the patent and market inefficien- problems while alsoby-claim leading to economic cies. 2014), http://www.law360.com/articles/527903/texting-patents-in-cbs-case-not-exhausted-fed-circ-told. 67. 685 (2012) (“[t]heobtain a patent”). 685 (2012) patent applicant will pay average than $20,000 to more how other courts, especiallyhow other courts, Circuit, will react to the the Federal Northern District of Illinois’ and unless the decision. For now, 64. 64. 2015] 2015] thisclear that the way influences troll” of “patent label makes ruling in the company. people view reasonable which intelligent, can-you-patent-a-hyperlink-patent-trolls-sure-think-so; Erica Wilson, end-users-rules-against-text-message-troll; Ed Oswald, Think So 65. Kamdar, Kamdar, http://www.paymentlawadvisor.com/2013/08/22/setback-for-patent-troll-under-patent-exhaustion- doctrine-liberates-mobile-technology/. 65. Federal Circuit Court of Appeals, arguing that the decision was an decision Federal Circuit the arguing that unprec- Court of Appeals, of the patent exhaustion doctrine. edented expansion E revisited, this expansion of the patent exhaustion doctrine should be a con- doctrine should exhaustion the patent of revisited, this expansion cern for licensors. 66. Ryan Davis, Ryan 66. 36219-ckt_90-2 Sheet No. 212 Side A 03/25/2015 13:32:44 A 03/25/2015 212 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 212 Side B 03/25/2015 13:32:44 possible However, However, (Oct. 21, 2007, 70 any Others have Others 79 RTICLES A 745 (2002). 745 (2002). ELL Y ’ B distinct. OC or [Vol 90:2 90:2 [Vol require the application to .S LATT It may be simple to deter- be simple to It may FF P such as in the Helferich pa- such as in the Helferich 73 note 71, § 802.03(I). O may what they really meant is that 74 78 It is well accepted that “[m]any It is well accepted that “[m]any supra OBERT , § 803(I)(a) (2014). 76 , R RADEMARK distinct,” .&T ROCEDURE ROCEDURE P P AT and ) 3/5/2015) 12:45 PM Further, many patent examiners need to meet to meet need many patent examiners Further, 71 , 84 J., 84 P CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE XAMINING XAMINING D E E 77 Some Comments on “Independent and Distinct” Inventions of 35 USC § USC 35 Distinct” Inventions of and Some Comments on “Independent OT Restriction Requirements N O ATENT ATENT (D note 73, at 748. P P note 70. DOCX , U.S. Patent No. 7,155,241 (filed Feb. 7, 2005). 2005). 7, Feb. (filed 7,155,241 Patent No. U.S. , . supra supra Jon W. Henry, Henry, Jon W. at 748. at 748. AHLIN ANUAL OF ANUAL OF 72 Id. See, e.g. See 75 13P-D In fact, even the PTO has had trouble with the statute and has con- had trouble with the statute and has In fact, even the PTO has It can often be extremely to determine difficult a whether claimed in- little guidance.121, gives § relevant statute, 35 U.S.C. Further, the questioned the wisdom of allowing the Manual of Patent Examining Proce- Examining Manual of Patent allowing the of wisdom questioned the to supersede the statutedure definition and wondered how putting too many distinct inventions in a single application can be a serious can application a single in many distinct inventions putting too examiner. on the burden 74. 74. quotas on applications reviewed and thus issuing a restriction requirement, requirement, reviewed and thus issuing a restriction quotas on applications applica- into two or more his application to split which forces the applicant the expense of patent ap- at examiners individual help the tions, can often plicants. 75. 75. 77. Henry, 77. M 76. added). § 121 (2011) (emphasis 35 U.S.C. 79. 78. added). 121 (emphasis 35 U.S.C § tents. 70. Platt Bell, Robert 768 768 simplyworry claims their content exhausting by about their de- licensing vice claims. in an effort to minimize of business, course the normal In costs, patent claimsdistinct as holders often file many in a single as patent patents. multiple out over them rather than spreading possible, 72. Bell, 72. 73. 73. 121 and Unity of Invention (Part I) Unity of Invention (Part 121 and patent examiners and patent practitioners are confused by and patent practitioners restriction prac- patent examiners practice in the United States Patent and Trade- tice and unityof invention mark Office [(PTO)].” 71. M 10:26 AM), http://robertplattbell.blogspot.com/2007/10/restriction-requirements.html. 71. inventions must be split if they are independent if inventions must be split mine the number of inventions when the is for “a is for “a patent application when the of inventions mine the number jelly and sandwich,” which are clearlybutter sepa- and a peanut computer are difficult to determine when there can be but it rate and unrelated, a of closelynumber yet related, distinct ideas, cluded that although Congress stated that patent applications must only be only Congress stated cluded that although that patent applications must split if they are “independent vention should be split into separate patents. into split be vention should distinct inventions independent and two or more The statute states that “[i]f Director are claimedthe in one application, be restricted to one of the inventions.” 36219-ckt_90-2 Sheet No. 212 Side B 03/25/2015 13:32:44 B 03/25/2015 212 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 213 Side A 03/25/2015 13:32:44 it it 85 it is clear that that it is clear , from claims of 81 the two classes of claims claims the two classes of 83 note 71, § 802.01. note 71, § 802.01. 769 769 New York Times then the claims should probably should probably then the claims supra , 84 Helferich likely fil- most believed 82 ROCEDURE P PATENT LICENSING ) 3/5/2015) 12:45 PM note 75. note 75. ELETE XAMINING supra D E OT N Referring to the opening hypothetical to the opening Referring O 80 ATENT (D note 73, at 753. P note 3. DOCX , ‘241 Patent, , ‘241 . supra AHLIN ANUAL OF See supra See, e.g. Exhaustion Doctrine and of Licensing Patents Claim-by-Claim Claim-by-Claim and of Licensing Patents Exhaustion Doctrine C. How the Helferich Ruling Conflicts with the History of the Patent with the History of the Patent C. How the Helferich Ruling Conflicts 13P-D However, because the PTO alreadygranted the Helferich patents, As for the Helferich patents, “the PTO issued at least 17 ‘restriction “the PTO issued Helferich patents, As for the Expanding the defense of non-licensing, patent exhaustion to protect be split into separate patents. be split into separate do not need to be split into separate be split into do not need to However, if one defines “inde- patents. as the PTO does, pendent and distinct” ing so many applications to be unnecessarying so many to be applications inefficient, and economically but clearlyHelferich patents the had distinct claims: some relating to the relatingdevices and some these inven- to the content providers. Further, tions are clearly but related and distinct cannot be said to be independent. to the United States Code, Thus, if one adheres (N.D. Ill. Apr. 16, Co., 2013 WL 2434922 v. N.Y. tion at 4, Helferich Patent Licensing, L.L.C. Times 82. Judgment of Patent Exhaus- Summary Joint Motion for to Defendants’ Opposition Plaintiff’s M 2013). 84. 83. § 121. 35 U.S.C. 80. Henry, 80. 81. 2015] 2015] either independent into be broken not could parts multiple with inventions pieces. or distinct 85. 85. should not have mattered whether the patents should have been split into phase. The PTO granted these separate applications during the application claims and the propertyrights that accompany to Helferich, them and it Helferich’sshould be within power to monetize the entirety patent as of the for a single product. do not receive double royalties long as they there are a number of inventions that could be thought of as one invention one of as a numberthere are be thought that could of inventions is negligible. the difference inventions. Sometimes more or or as two of identifying at least and distinct’ classes 100 ‘independent requirements’ patentably to be the process, holding content inventions inventions, and in the handset inventions.” distinct from non-purchasing third parties, such as the non-purchasing third doc- reasoning conflicts with the historical the behind direct infringement to: (1) protect exhaustion doctrine was trine. Historically, patent meant the a licensed from those who bought products unwittinglymanufacturer from simplyby purchase, (2) ban post-sale re- infringing patents using their 36219-ckt_90-2 Sheet No. 213 Side A 03/25/2015 13:32:44 A 03/25/2015 213 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 213 Side B 03/25/2015 13:32:44 90 . . In how- 87 Quanta and de- and Quanta New York New York Helferich Quanta The 88 , could not be con- , could not [Vol 90:2 90:2 [Vol , the court looked to the most most , the court looked to the held the patent exhaustion defense held the patent exhaustion defense New York TimesNew York Helferich Quanta the Recent Precedent of Misapplied Expanding the defense of patent exhaustion Expanding the defense 89 86 . ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D Helferich OT 91 N O (D , the court applied the test enumerated in , the court applied the test enumerated Part I. , 965 F. Supp. 2d at 980–81. 965 F. 2d at 980–81. , Supp. DOCX , Quanta Computer, Inc. v. 553, Quanta LG Elecs., Inc., U.S. 617, 633 (2008); United StatesComputer, . , 553 U.S. at 631. New York Times Helferich Patent Licensing, L.L.C. v. N.Y. (N.D. F. Supp. 2d 971, 973 Co., 965 Times Ill. , the accused infringer,, the accused the AHLIN Helferich Helferich Quanta See supra See See, e.g. , as a content provider, did not purchase any products from the li- purchase any from products not did provider, , as a content 1. The Court in 1. The Court 13P-D To rationalize its decision in In The reasoning enumeratedThe reasoning cases noted above, in the string of 2013). 2013). However, there are no and systems. other device owners by utilizing Helferich’s patented methods 89. to content providing separate system, a through that purchaser was also, Unless of course acts that by a purchaser using their cellpossible infringing could perform simply phone according to its not cover end-user actions. claims do intended purpose—the 90. 91. v. Univis Lens Co., 316 U.S. 241, 250–51 (1942); Adams v. Burke, 84 U.S. 453, 456–57 (1873). 84 U.S. 453, 456–57 v. Burke, v. Univis Lens Co., 316 U.S. 241, Adams 250–51 (1942); 87. 88. recent patent exhaustion precedent from the Supreme Court in cided that even “partially” practicing a patent, such as bycided that even “partially”practicing a practicing a claim the patent to sufficiently embody a product the patent, was enough for from ever, does not hold when compared to the fact pattern of the fact pattern to compared not hold when ever, does requires the court to make two inquiries. The first inquiry is determining is determining The first inquiry two inquiries. requires the court to make whether the licensed product’s “reasonable and intended use” is to fully while the second inquiry claims, method any practice the patent, including essential features of [the] whether the products “embod[y] is determining patented invention.” 86. As noted above, the court in As noted above, the court 770 770 not are patent owners that sure make and (3) items, licensed on strictions over-compensated. under- or Times censed device Nor was manufacturers. a patent holderit the case that was sale; an authorized a product after post-sale restrictions on place trying to cell his purchased could do with nothing that an end-user in fact, there was content claims upon the was asserting that Helferich phone to infringe against the to non-purchasing third parties to non-purchasing are infringing a patent who makes little sense; the third party has not, directly or indirectly, compensated the inven- restrict against them case of infringement a nor would tor for his creation, by the end-user. the uses of a cell phone nected back to the inventor through an economic chain. economic through an to the inventor nected back Helferich 36219-ckt_90-2 Sheet No. 213 Side B 03/25/2015 13:32:44 B 03/25/2015 213 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 214 Side A 03/25/2015 13:32:44 New is not Quanta 96 practicing of a Thus 95 This is a surprising This is 93 de minimis , No. 10-CV-4387, 2013 WL 6354209 6354209 WL 2013 10-CV-4387, No. , 771 771 Quanta, 553 U.S. at 617. with , where the end-users would be implicat- , where the end-users that the court made it out to be. that the court made That the content claims patenta- were found claims That the content note 48 (“A method that communicates data from a content data from communicates that 48 (“A method note PATENT LICENSING ) 3/5/2015) 12:45 PM 94 The court held that the cell phone devices car- devices cell phone that the court held The Quanta , 553 U.S. at 634). 92 supra ELETE D order clarified on reconsideration order OT , 965 F. Supp. 2d at 973, Quanta Helferich N O (D , 965 F. Supp. 2d at 980–81. , 965 F. Supp. 2d at 980–81. , ‘838 Patent, DOCX . , that were not embodied within the cell phone devices and are and are cell phone devices within the , that were not embodied would not infringe on the content claims of the Helferich patents court reasoned that: AHLIN at 979 (quoting at 979 (quoting See Helferich Compare Helferich Id. See, e.g. 13P-D Further, in contrast to Further, in contrast As justification for this expansion of the exhaustion doctrine, the the exhaustion doctrine, As justificationfor this expansion of [a] claim in a patent can only be carved out if it becomes the subject of a carved out if it becomes be [a] claim in a only patent can distinctseparate, patent, relying on the Supremeholding Court’s that the is if anything out—’[f]or be parceled cannot patent claim of a elements only the patent covers that the combination law, it is patent settled in the patent in an authorized device to “sufficientlyauthorized device to patent in an the patent embody” means from claim will exhaust the entire pa- a patent a single that licensing even tent. simply pur- of their reasonable use of the byed for infringement virtue chased computer the end-users in (in computers), chips and processors Helferich by the reasonable use of their purchased cell phones. ble in the first place is evidence that the PTO did not find them to describe not find them place is evidence that the PTO did ble in the first merely “standard they but rather found components,” in- described an ventive design worthy of protection. Allowing 2013), 14, Aug. Ill. at *6 (N.D. 92. Patent Helferich Licensing, L.L.C. 4401378 v. N.Y. Times Co., No. 10-CV-4387, 2013 WL 2015] 2015] of exhaustion. point to the 96. 96. provider through a mobile radiotelephone a wireless communication a network to provider through mobile device, utilizing an registry comprising: location having an interface with a the content system home content notification for the wireless communication of data intended device, the dataprovider initiating communication the content provider stored by that is associated with information identifier information including an is not included in the data wherein the information information, stored of the and identifies the location notifi- the content provider causing the content device; the wireless communication stored in and is not to the wireless communica- suitable for transmission to: process the data into a cation system message the to the wireless identifier,message and transmit information includes the tion device, which message transmit- that is wirelessly message a request receiving provider content device; and the communication to the radiotelephone network as a reply the wireless communicationmobile device over the ted from identifier.”). a portion of the information including at least the request message, message 95. holding, given that a number of claimsgiven that a number holding, patents discussed in the Helferich as the such content providers, required by processes the inventive York Times not “standard components.” ried out “all the inventive processes [of the patent] when combined, accord- when combined, processes [of the inventive ried out “all patent] the components.” design, with standard ing to their the exact analogy to Helferich (N.D. Ill. Dec. 4, 2013). 4, 2013). Dec. Ill. (N.D. 93. 94. 94. 36219-ckt_90-2 Sheet No. 214 Side A 03/25/2015 13:32:44 A 03/25/2015 214 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 214 Side B 03/25/2015 13:32:44 be New could control a In fact, the In fact, the , held that a 98 does 103 Therefore, while Therefore, while Markman v. In- Westview 100 with [Vol 90:2 90:2 [Vol , the cellular phone device device , the cellular phone Helferich The Court said that while a patent 101 97 ) 3/5/2015) 12:45 PM Regardless of there has been an whether author- Claim-by-Claim Basis CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW 99 ELETE D Thus, applied to OT N O 102 , 365 U.S. at 344 (rights of a patent cover “only the totality of the elements in elements patent cover “only of the the totality , 365 U.S. at 344 (rights of a (D note 98. note 98. , 144 U.S. at 252. DOCX . , while Helferich itself could still sue, as it did. Helferich Patent Licensing, L.L.C. v. N.Y. Times (N.D. Co., 965 F. Supp. 2d 971, 973–74 at 977 (quoting Aro Mfg. v. Convertible Top Replacement Co., 365 U.S. 336, 344 (1961)). Co., 365 U.S. 336, 344 (1961)). Aro Mfg. v. Convertibleat 977 (quoting Top Replacement AHLIN . Id. Compare Aro See See supra See Pope Id 2. The Court Ignored Precedent That Allows Licensing of Patents on a Licensing of Patents That Allows Ignored Precedent 2. The Court 13P-D In several circumstances, the courts have made clear that each claim This analogy is, forgive the pun, patently invalid, and it is puzzling and it pun, patently is, forgive the This analogy invalid, withinWhile single elements are clearly a claim not protected by pa- totality of the elements in the claim and that no element, separately separately no element, that and in the claim elements of the totality grant.’ within the viewed, is Pope Manufacturing v. Gormully & Gormully Jeffery Manufacturing & Pope Manufacturing v. manufacturers would be unable to sue content providers, such as the sue content providers, manufacturers would be unable to York Times Ill. 2013). assignee could sue on his own behalf, or pass along his rights to another, a another, his rights to or pass along own behalf, assignee could sue on his not. licensee could Supreme Court has realized “it is sometimes said that each claim said that each claim realized “it is sometimes Supreme Court has pa- of a tent is a separate patent.” 98. 98. 103. 97. 97. separatelythe claim” and “no element, viewed, is within the grant”), 772 772 monopoly over products that fall within its patented claims. The within its patented claims. products that fall over monopoly patent law, is an essential aspect of claim/element re- where, dichotomy spectively, not. the first is protected while the latter is of a patent should be treated separately. in considering the For instance, issue of licensing only claims Court, specific the Supreme within a patent, in patent could not be assigned on a claim-by-claim basis, but rather patent could Helferich could not license an individual element from one of their claims,Helferich could element individual not license an as it does not possess a monopoly over the individual elements, Helferich patents as it its to license specific claims from should be able ized sale of a licensed product, elements within a claim are virtually are never within a claim product, elements ized sale of a licensed a patent “define the [very] while claims within a patent, within the scope of grant” and are expresslyscope of a patent protected. why the court conflated elements within a claim to claims within a patent. within a patent. to claims a claim elements within conflated whythe court tent law, a single withinis expressly claim a patent protected. 101. 101. 102. struments, struments, 517Inc., covers and secures U.S. 370, 373 (1996)a process, a a (“[a] claim machine, manu- or a design . . of a patent grant”). . of define[s] the scope facture, a composition . A claim matter, 100. 99. 252 (1892). 248, 144 U.S. Mfg., Jeffery & Gormully v. Pope Mfg. licensed on a claim-by-claim basis. 36219-ckt_90-2 Sheet No. 214 Side B 03/25/2015 13:32:44 B 03/25/2015 214 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 215 Side A 03/25/2015 13:32:44 , dealt Univis Lucent Quanta , 42 F.3d 1411 (Fed. (Fed. 1411 42 F.3d , Cyrix Corp. v. In- aff’d , like 106 . court “echoed Cyrix Pope courts were forced to courts were forced con- Cyrix , have shown that the doctrine 773 773 . L.J. 643, 651 (2004) (citing Cyrix Corp., Pope ECH The T , that licensing a single claim within, that licensing a single claim 108 Quanta IGH , where the court held that: court held that: , where the nor the &H 104 Helferich PATENT LICENSING ) 3/5/2015) 12:45 PM 105 Lucent OMPUTER C ELETE , 144 U.S. at 252). D OT A Coherent View of Patent Exhaustion: A Standard Based on Patentable A Coherent View of Patent Exhaustion: A Standard Based on Patentable LARA N C Pope O (D ANTA But of course, as discussed above, the cell phones of the But of course, as discussed above, , 144 U.S. at 252. DOCX . 109 and to eventually leading , 20 S , case do not meet this definition. case do not at 721 (citing AHLIN 107 Id. See Pope Id. 13P-D However, a recent line of cases, more starting with Of course, neither the This reasoning has been applied in recent cases as cases as in recent applied has been reasoning This well, as such a sin- such as transferring rights to the court reasoned, Anything less, Therefore, the ruling in when it held that ‘[t]he patent exhaustion patent doctrine is when it so strong that it held that ‘[t]he the right of the patentee to assign his monopoly was limited to: (1) the to: (1) the limited was monopoly his assign to patentee of the the right the and vend use, to make, right exclusive the comprising whole patent, of share part or an undivided (2) States; United the throughout invention the patent within and right under exclusive right; or (3) the that exclusive throughout a specified territory. of patent exhaustion, as a defense to claim-by-claim licenses, is on the rise, and will likely be litigated often in the near future. tel Corp. Technologies, Inc. v. Gateway, Inc. Inc. v. Gateway, Technologies, sider the patent exhaustion doctrine, as it was not relevant to those fact doctrine, as it was not sider the patent exhaustion in allowing a claim-by-claim li- would be no purpose patterns, but there if such a practice censing of patents would exhaust the entire patent. If claim exhaustedlicensing a single the patent, then it be tantamount would patent,to licensing the entire every including single claim, as either way the patent would Such a result is illogical and does not be exhausted. com- in enumerated Court the Supreme port with what 846 F. Supp. at 540). 104. 105. Lucent Techs., Inc.,Inc. v. Gateway, (Fed. Cir. 2008). 543 F.3d 710, 720 2015] 2015] Helferich par- to non-purchasing third patent with regards a patent will exhaust that 106. 106. 107. 1994), Tex. (E.D. 524 522, Supp. 846 F. Corp., Intel v. Corp. Cyrix Cir. 1994). 108. 109. Distinctiveness Osborne, John W. with the patent holder licensing computer components without licensing without components computer licensing with the patent holder effectively components, computer other standard in combination with them leaving the licensed components as worthless parts that could never be used without causing . Lens than product that has no substantial use other applies even to an incomplete infring- allegedly patented and manufactured into a completed to be further ing article.’” gle claim, “did not convey title in the patent and the right to sue; instead, it title in the patent “did not convey gle claim, merelyconveyed a license.” 36219-ckt_90-2 Sheet No. 215 Side A 03/25/2015 13:32:44 A 03/25/2015 215 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 215 Side B 03/25/2015 13:32:44 Ruling 111 110 Helferich [Vol 90:2 90:2 [Vol ruling inefficiencies will create economic ruling diverging from historical reasoning and historical reasoning from ruling diverging ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW patents, need to be assured that they will receive ELETE Helferich D . OT N Helferich note 30. O (D D. How the Helferich Ruling Creates Problems Creates Problems Helferich Ruling D. How the . art. I, § 8, cl. 8. Thus, inventors whose designs lay two industries, Thus, inventors between Helferich supra 112 DOCX . ONST AHLIN 1. Possible Economic Inefficiencies Created by Inefficiencies the 1. Possible Economic 13P-D As doctrine should have three exhaustion a matter of policy, patent the On top of the of the On top Initially, the patent exhaustion doctrine must not conflict with the con- not conflict with must patent exhaustion doctrine Initially, the and possibly even market even market and possiblyhold-ups. precedent, it also creates a number of practical issues, which will become of practical issues, createsprecedent, it also a number increasingly problematic as the use of defense be- the patent exhaustion widespread. The comes 111. Schlicher, (1873). 456–57 453, 111. 112. U.S. C such as in the 110. U.S. v. Burke, 84 Adams (2008); 635 617, Inc. v. LG Elecs., Inc., 553 U.S. Quanta Computer, 774 774 from end-users protecting directlyties, of grounds the historical contradicts recent prece- conflicts with the ruling also restrictions. Further, post-sale states that a patentdent, which product if the authorized exhausted is only essentially all of embodies of the patent. the inventive parts economic goals in mind: first, to promote the advancement of science by the advancement to promote first, goals in mind: economic inventors to invent; second, to incentive for make an economic providing sure that the for his patent patent holder is not over- or under-compensated sure that a licensee is not paying for through licenses; and finally, to make or less than his product will utilize. It has intellectual propertymore rights operate license doctrines should implied been said that the “exhaustion and and patent owners between to facilitate sales and licensing transactions dictate the terms of those transactions.” their customers and not to full and fair economic value for their designs and will not be limited to value for their designs full and fair economic licensing to a single company patent. If such inven- before exhausting their will have the same rights and tors cannot be assured that their inventions exist solely value as those inventions the purview of a within that economic which will hinder invent, to be a loss of incentive single industry, there will the progress of science stitutional reasoning behind the totality of patent law—to “promote the “promote of patent law—to the totality behind stitutional reasoning byProgress of Science and useful Arts, Times to Au- securing for limited Right to their respective Writingsthors and Inventors the exclusive and Discoveries.” 36219-ckt_90-2 Sheet No. 215 Side B 03/25/2015 13:32:44 B 03/25/2015 215 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 216 Side A 03/25/2015 13:32:44 , 117 Helferich ruling, the inventor will will ruling, the inventor 775 775 Helferich And in a scenario like in ruling, licensing a patent that sits be- that a patent licensing ruling, 115 114 Thus, the result is either: (1) the patent patent Thus, the result is either: (1) the 116 PATENT LICENSING ) 3/19/2015) 3:18 PM Helferich ELETE D OT N O (D note 3. DOCX . Helferich Patent Licensing, L.L.C. v. N.Y. (N.D. Co., 965 F. Supp. 2d 971, 973 Times Ill. at 973–74. at 973–74. AHLIN Id. See supra See 13P-D As a second option, the inventor may, as Helferich did, try to license license to did, try as Helferich inventor may, As a second option, the However, under the under However, attempt can the inventor As a first option, to license the patent, in full, To assist with a demonstration, will once again we to return the fic- 113 2013). 2013). 117. tional scenario of companies A and B and a patent with “system-A claims” patent with “system-A A and B and a companies tional scenario of and separate “system-B claims.” tween two industries will involve either under compensating the patent- the under compensating involve either industries will tween two allowed to only is If the inventor pay. the licensee to over forcing holder or to whom choose he will have to industry, patents to a single license his intellectual proper- his the value of be uncertain as to and may license to ty. where Helferich was licensing its patents to multiple cellular device manu- where Helferich to multiple was licensing its patents facturers (Company the hypothetical), A in instead an assignment of a li- cense would be impractical. find the second industry unwilling to pay for the claims relevant to them, claims relevant to them, as for the find the second industry unwilling to pay holder is under-compensated, as Companyholder is under-compensated, A will only the claims pay for it will utilize and the patent is then exhausted, or (2) the licensee overpays for thatneeds as it will claims the intellectual property neither it be paying for could ever possibly infringe. it nor its end-users relevant industry, respectively. each patent to its from the relevant claims 115. or exclusive licensees sublicense).may assignees (Fed. Cir. 2008) (only Lucent Techs., Inc., 543 F.3d 710, 720–21 Inc. v. Gateway, 116. 113. has the value of the whether the patent standpoint, or whether the value is of the entirety of the relevant claimsIt would be unclear, from to the industry an economic claims. 114. If allowed, this would lead to the patent holder being compensated holder being once for patent If allowed, this would lead to the B essentiallyevery split the A and Company as Company utilized claim, license. However, after the cost of a full 2015] 2015] to one of the two companies;to one of the presumably lucrative of the two.the more there would likelyUnder this scenario, impedancebe some to a licensing patent holderagreement as the would want to receivethe the full value of patent in the license but the licensee would only want to payfor the rele- Company of the would embody. that his product patent vant bits, or claims, have no interest in payingA would clearly a licensing fee for “system-B as claims.” Further, a mere non-exclusive licensee, Company be A would claims”unable to enforce the “system-B against company B even if they did license those claims,only an assignee has standing to sue. Therefore, as if Company “system-B claims” loss of paying for A could not recover the Companyrefused a sub-license. B 36219-ckt_90-2 Sheet No. 216 Side A 03/25/2015 13:32:44 A 03/25/2015 216 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 216 Side B 03/25/2015 13:32:44 [Vol 90:2 90:2 [Vol Ruling Could Lead to a Market Hold-Up Ruling Could Lead to a Market Hold-Up ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D OT Helferich N O (D If licensing “system-A claims” to Company A will exhaust note 3. DOCX . 119 118 at 980–81. at 980–81. AHLIN 2. How the Id. See supra 13P-D Beyond the purely economic concerns resulting from being unable to unable being Beyondpurely economic concerns resulting from the To illustrate, let us return to the opening hypothetical of a patent cov- As an unlikely third option, the patent holder could attempt to license could attempt holder the patent third option, As an unlikely doctrine will have real the expanded patent exhaustion Accordingly, ering modifications to systems A and B, owned by companies A to systems A and ering B modifications respectively. 118. 118. 776 776 they in patent claim the will will the inventor case, in this Thus, exhausted. and of the claims some is getting paid only as he be undercompensated for invention. 119. 119. the patent, Company B will not buy a license until Company A has ex- A Company buy license until not a B will the patent, Company hausted the patent by licensing “system-A claims.” However, if “system-B claims” were first licensed to Company A would be able to B, Company produce their part of the patented technology to purchase a without having would have an incentive to not license the license. Thus, both companies technology and the first, This invention would languish in conception. have the advantage of the the public, who does not would obviously harm license a patent claim-by-claim, there is a concern that there will be a race license a patent claim-by-claim, between different companies to license the patent where the prize of a free license goes a to the loser. market This will create hold-up where the pa- tented technologybeing licensed because companies is not will wait for others to license a technology taking advantage of an exhausted before patent. But who will pay a license if it frees others to practice the for patent economic patents, there is less of an freely?when nobody is licensing And humanity and loss of useful inventions. suffers the incentive to invent the entirety of both industries at once, in a single license. This could lead to single license. This at once, in a industries of both the entirety a similarcompanies option across cost-sharing that use either “system-A claims” or “system-B claims.” However, companies would have incentives to simply wait out the process and newly created companies would be free since there would onlyto enter the market be exhausted patents; thus, a be created, as is explainedmarket hold-up will below. and any li- potential patent holder the effects, on both negative economic worst of all is the effect on society,censees. However, above- as the a cause market could mentioned scenario that would keep inven- hold-up market.tions off the 36219-ckt_90-2 Sheet No. 216 Side B 03/25/2015 13:32:44 B 03/25/2015 216 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 217 Side A 03/25/2015 13:32:44 EST FOR EST FOR T ESTITUTION R It is not the same, same, the not is It 120 OCTRINE TO AIR D F 777 777 XHAUSTION , that simply required that the product that the required , that simply E ONTRIBUTION AND PATENT LICENSING ATENT C Helferich ) 3/5/2015) 12:45 PM ruling created a number of problems in the pa- of problems ruling created a number P ELETE D OT N O Helferich CONOMIC (D E , 553 U.S. at 635–38). DOCX . EDEFINING THE Quanta , asking whether the normal or expected use of the product by or the the normal , asking whether AHLIN NDIRECT I III. R 13P-D Overall, implementing the expanded patent exhaustion doctrine to doctrine patent exhaustion the expanded implementing Overall, The first part of the proposed test would be governed under the simple be governed The first part of the proposed test would Although the would be considered under Under this proposal, patent exhaustion a 121 Quanta authorized purchaser would result in infringement. however, as the test used in “partially”thanpractice the patent rather “substantially” practice the pa- tent. 120. Inc. v. LG Elecs., Quanta Computer, (2008). 617, 623–24 Inc., 553 U.S. 121. 2013) (quoting Patent Helferich Licensing, L.L.C. v. N.Y. Co.,Times 965 F. Supp. 2d 971, 979 (N.D. Ill. 2015] 2015] his intellectual monetize cannot holder, who patent well as the as invention, property. patent will exhausting the without licensing of claims individual prohibit cause a number it First, with the historicalwould conflict of problems. create would Second, it exhaustion doctrine. behind the patent reasoning would create a market uncertainty inefficiencies. Third, it and economic creating and inventors from disincentivize that would hold-up scenario it industries. Finally, multiple that border in fields patenting inventions existing licensing from companies would disincentivize relevant claims conception. in languish would such a patent and inventions from rule that patent exhaustion does not apply to non-purchasing third parties. rule that patent exhaustion does not apply non-purchasing to tent exhaustion doctrine, there are no doubt many possible solutions. The possible solutions. The no doubt many are there tent exhaustion doctrine, solution below, however, is simple and would not likely require any legis- lation be passed. It would enable some patents to be licensed on a claim- basis as long as: one an- in question are distinct from by-claim the claims another. would not necessarily one claim implicate other and practicing two-part test. The first part of the test would ask whether there is any eco- to a licensing agreement or chain that can link an accused infringer nomic accused chain the linking is an economic authorized sale. Only if there available. of patent exhaustion be patent should the defense infringer to the on to will move court the connection, then If there is a sufficient economic whether the licensed product sufficiently the second inquiry and determine claims in the non-licensed such a embodies way that those claims are ex- hausted. This second part of the test is essentiallythe same as the test used in 36219-ckt_90-2 Sheet No. 217 Side A 03/25/2015 13:32:44 A 03/25/2015 217 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 217 Side B 03/25/2015 13:32:44 125 Helfer- should should , where the would still would still 126 Quanta simplyTo exempt Thus it could be said 122 124 New York Times [Vol 90:2 90:2 [Vol Thus, the 127 ) 3/5/2015) 12:45 PM , the accused infringers, who took unfinished unfinished , the accused infringers, who took CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D OT N Univis O (D ever directly Helferichor indirectly uti- for compensated DOCX . , 553 U.S. at 623–24. , 553 U.S. at 623–24. Helferich Patent Licensing, L.L.C. v. N.Y. Times (N.D. Co., 965 F. Supp. 2d 971, 980–81 AHLIN Quanta Id. See id. See the patent exhaustion doctrine would still apply. Quanta, by paying Quanta, bypaying still apply. the patent exhaustion doctrine would 13P-D In fact, the only case that would come out differentlywould be In fact, the only case that would come As noted above, the historical purpose of patent exhaustion doctrine doctrine the historical purpose of patent exhaustion As noted above, Under this proposal, the first relevant inquiry for a court would be a court would be for inquiry first relevant the Under this proposal, Similarly, in 123 , where there is no chain of commerce argument to be made that the argument, where there is no chain of commerce to be made was to protect end-users from post-sale was to protect end-users restrictions on products that had from a license. with authority under been manufactured Ill. 2013). have no more of a defense under the patent exhaustion doctrine than anoth- doctrine than exhaustion of a defense under the patent have no more phones without claims in its device who utilized the er phone manufacturer first licensing them. be protected by theydoctrine because the patent exhaustion can be eco- of connected to the patent holder through the lenses’ chain nomically commerce. ich New York Times lizing its patented content inventions. 122. 123. 456 (1873). 453, 84 U.S. v. Burke, Adams 778 778 patent with the problems the above-mentioned of most would solve This in that is appealing doctrine as it currentlyexhaustion stands. This solution doc- exhaustion patent require any the change in not it would substantive such a readingtrine. In fact, would better exhaustion doctrine of the patent the law reasoning of with the historical comport as recentwell as prece- dent. 124. 124. 125. 126. 127. United States v. Univis Lens Co., 316 U.S. 241, 247 (1942). accused infringer had purchased LGE-licensed computer In- accused infringer had purchased LGE-licensed chips from tel, this defense from non-purchasing parties, i.e., manufacturers who cannot be parties, i.e., manufacturers who cannot non-purchasing this defense from of commerce, would licensed product through a chain connected to the pro- exhaustion doctrine while of the patent function fulfill the historical the progress of themoting realize the inventors to sciences by permitting patents. value of their full economic either directly contributed, infringer ever economically whether the accused or indirectly, like in a case to the patent holder. Thus, that some of Quanta’s money ended up in the pocket of the patent owner. that some of Quanta’sof the patent moneyin the pocket ended up Intel for its computer Intel for its chips, indirectlyLGE, the patent own- computer contributed to er, because Intel had negotiated a license with LGE. lenses and ground and polished them into finished products, them lenses and ground and polished 36219-ckt_90-2 Sheet No. 217 Side B 03/25/2015 13:32:44 B 03/25/2015 217 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 218 Side A 03/25/2015 13:32:44 - CONOMIC E EST TEP TEP T -S argued that a “licensee It is worth noting that WO LAIM 128 T -C 779 779 THE - Helferich ruling. Helferich MBODYING ESPONSES TO THE ESPONSES TO THE /E PATENT LICENSING R The court in ) 3/5/2015) 12:45 PM 129 ELETE D OT N O (D However, this uncertainty cannot be a major problem; the major problem; the be a cannot However, this uncertainty ONTRIBUTION C 130 RITICISMS AND DOCX . at 980. at 980. AHLIN IV. C Id. Id. Id. 13P-D If a third party is unsure as to whether a claim or patent has been ex- or patent a claim If a third party is unsure as to whether Part two of the test ensures that a licensee onlythe test gets what it paid for, Part two of First, there is a concern that allowing licenses on a claim-by-claim ba- Manypossible criticisms to the of the proposed two-part test can be unless it cannot utilize what it paid for without infringing on other claims. on without infringing what it paid for unless it cannot utilize This ensures that companies can license only those claims they while need, fair compensationpatent holder to receive allowing the by licensing all of individually, to relevant companies.his claims, current rule is no clearer. Further, any licensee would know what claims it during licensing discussions has licensed have time and would presumably to clarify rights. A patent holder and licensee can directly its determine confusion. should be little what rights the licensee has; thus, there two-step test of the relevant facts in light analyze simply the hausted, it can sale authorized andproduct through an detailed above. If it purchased the only the product according to its normal intends to use and intended use, by patent exhaus- of there would be no doubt that it is protected the defense would be uncertain as to what parts of a patent it has use rights and what is patent it has what parts of a as to uncertain would be not licensed.” 129. 129. 128. 128. 2015] 2015] of a licensed purchase was an authorized on to court will move product, the a defendant meet Should there of the first test, that the requirements product essentially the licensed whether embod- of the test: part the second ensures that the the test of This part claims. non-licensed ies the litigated to the correct was related inquiry the first found in contribution economic claims. hypothetical, could A to our Going back that Company this ensures claims” not license “system-A that, the patent owner and then argue from andbecause there the patent holder, that between them is an economic link A. claims”“system-B to Company have been exhausted with respect 130. 130. many of the potential problems of allowingmany claim-by-claim of the potential problems licensing are minor when compared to the problems caused by the expansion of the pa- tent exhaustion doctrine. sis will confuse licensees. found in the conclusion of the of conclusion found in the 36219-ckt_90-2 Sheet No. 218 Side A 03/25/2015 13:32:44 A 03/25/2015 218 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 218 Side B 03/25/2015 13:32:44 Helferich 131 This criticism lacks lacks This criticism 132 [Vol 90:2 90:2 [Vol However, in the economic However, in the economic 135 note 13. note 13. supra , ) 3/5/2015) 12:45 PM CHICAGO-KENT LAW REVIEW CHICAGO-KENT LAW ELETE D OT N Therefore, it seems as if the court’s fear—that hundreds fear—that Therefore, it seems as if the court’s O (D 134 , 965 F. Supp. 2d at 980. 965 F. 2d at 980. , Supp. 965 F. 2d at 980. , Supp. DOCX . Further, regardless of whether a licensor were to separately li- of whether a licensor were to separately Further, regardless AHLIN Conversely, that a system toallows patents be licensed on a 133 Helferich Helferich See HPL to Appeal Exhaustion Order 136 13P-D Claims already define the boundaries of patent rights; it only makes it only of patent rights; boundaries alreadyClaims define the Simply put, there may be problems with the proposed two-step test, put, there Simply with the proposed be problems may Finally, there is a concern following the two-step test, detailed that Another criticism is if that criticism Another “were able a patent holder to carve out in- cense 100 claims or simply or cense 100 claims an as license patent of 100 claims entire a complete they package, receive the same compensation would as the licen- rights in both scenarios. for the same see would be negotiating exclusive with its own sense that each claim, should be rights to exclude, able to be licensed separately other claims. The Supreme Court has from that “it is long recognized sometimes said that each of claim a patent is a separate patent.” analysis provided in this article, it was discussed how patent owners will be analysisthis article, it was provided in either under-compensated as a result of the or over-compensated ruling. merit as well. Patent owners alreadymerit as well. separate rights owners Patent to exclude based have the claims upon each of These rightswithin their granted patents. already on a claim-by- of whether patents can be licensed exist, and regardless is basis, claim in- a single claim owners can litigate whenever patent fringed. claim-by-claim basis, so long as the claims are distinct, will lead to the are distinct, will lead to the basis, so long as the claims claim-by-claim patent owner being justly compensated for his patent, where each licensor value. full licensing a fraction of the patent’s is paying only such as some uncertainty. However, the current ruling creates far greater 133. 373 (1996). 370, 517 U.S. Inc., Instruments, v. Westview Markman 134. 135. 251 (1892). 248, 144 U.S. Mfg., Jeffery & Gormully v. Pope Mfg. 136. 131. non-obvious is an invention whether determining with simple, which is relatively holder, er and patent whether there is in determining chain between a purchas- the difficulty an economic Compare in light of hundreds of pieces of . 132. 780 780 current than the difficult it ismore no is not simple, the test Although tion. quite a bit simplertest and is than manytests in patent law. of patents will be created out of a single patent—has long alreadyof patents will be created out of been to the patent exhaustion doctrine, it willtrue. And regardless of any change be true. continue to beingabove, will lead to patent owners compensated twice for the same invention, resulting in a double recovery. dividual claims from a single patent, it could potentially claim a multitude a multitude claim could potentially a single from claims it dividual patent, thereby,of separately and one invention in effect, rights licensable from out of a single of patents create hundreds patent.” 36219-ckt_90-2 Sheet No. 218 Side B 03/25/2015 13:32:44 B 03/25/2015 218 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 219 Side A 03/25/2015 13:32:44 137 Helfer- Helferich 781 781 ONCLUSION C ruling without adding much complexity to complexity much without adding ruling PATENT LICENSING ) 3/5/2015) 12:45 PM ELETE , then it creates than it solves. problems more D Helferich OT N O (D Helferich DOCX . AHLIN 13P-D This solution will solve the economic hurdles and market hold-up po- hurdles and market This solution will solve the economic The simple solution is to add a first inquiry to the patent exhaustion the add a first inquiryto solution is to The simple The patent exhaustion doctrine has been recognized for over 150 years years 150 recognized for over has been exhaustion doctrine The patent appeal or on a similar case, could simply enumerate appeal or on a similar need for an the test. Rather than just asking whether the product in question substantially the product just asking whether test. Rather than practices the claims, courtsrelevant litigated look to see wheth- should first indirectly, contribut- economically or ever, directly er the accused infringer chain of commerce. owner through the ed to the patent tential created by the histori- since the inquiry. Further, to the attuned this interpretation is more cal purposes and use of the patent wouldexhaustion doctrine, legislation on ruling Circuit, upon The Federal passed. to be need not likely ich’s and the asserting pa- accused infringer the connection between economic A few simple doctrine to apply. tent owner for the patent exhaustion sen- caused by problems the the tences in an appellate opinion can fix ruling. 137. 456 (1873). 453, 84 U.S. v. Burke, Adams However, if the doctrine is allowed to be permanently expanded to include to expanded is allowed to be permanently However, if the doctrine andnon-purchasing parties exclude the possibility to of claim-by-claim licenses, as in 2015] 2015] uncertainty,greater even including inefficiencies, economic and problems, hold-up. possibly a market and is an importantproducts. Histor- for the purchasers of licensed defense ically, post-sale on licensed restrictions purchasing parties from it protected overcompensated. that patent owners were not products and ensured 36219-ckt_90-2 Sheet No. 219 Side A 03/25/2015 13:32:44 A 03/25/2015 219 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 219 Side B 03/25/2015 13:32:44 36219-ckt_90-2 Sheet No. 219 Side B 03/25/2015 13:32:44 B 03/25/2015 219 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 220 Side A 03/25/2015 13:32:44 36219-ckt_90-2 Sheet No. 220 Side A 03/25/2015 13:32:44 A 03/25/2015 220 Side Sheet No. 36219-ckt_90-2 36219-ckt_90-2 Sheet No. 220 Side B 03/25/2015 13:32:44 36219-ckt_90-2 Sheet No. 220 Side B 03/25/2015 13:32:44 B 03/25/2015 220 Side Sheet No. 36219-ckt_90-2