The Federal Circuit Limits The Use Of The Patent Exhaustion Defense To 'Authorized Acquirers'

On February 10, 2015, the Court of Appeals for Federal Circuit in Helferich Patent Licensing v. NY Times and JCPenney reversed a district court decision holding that the doctrine of patent exhaustion barred a patentee's claim of patent infringement. The Federal Circuit's decision narrowly construes the doctrine of patent exhaustion, holding that patent exhaustion is a defense held only by "authorized acquirers" of patented technology and does not protect infringing actions by other parties. Thus, this limitation on the exhaustion defense may have wide reaching effects on third party providers of products or services for use with licensed technology that has entered the stream of commerce.

The patent statute gives a patentee the right to exclude others from making or using or selling a patented invention and imposes legal restrictions on acts that violate the exclusivity right by defining, in closely related terms, what it means for a person to "infringe" the right. The "first sale" or "patent exhaustion" doctrine removes those legal restrictions when a patent holder authorizes another party to sell a patented article as that sale "confers on the purchaser, or any subsequent owner, 'the right to use [or] sell' the thing as he sees fit." Bowman v. Monsanto Co., 133 S. Ct. 1761, 1766 (2013) (quoting United States v. Univis Lens Co., 316 U.S. 241, 249-50 (1942)). In other words, patent exhaustion limits the legal restrictions on what purchasers "can do with an article embodying or containing an invention" where the initial sale (or comparable transfer) was authorized by the patentee. Id. at 1766 & n.2.

The patentee, Helferich, in the recent case owns more than thirty U.S. patents that cover a range of wireless-communication technologies, all of which share a common specification. One subset of the patentee's claims cover apparatus and method claims directed to mobile wireless-communication devices and receiving and/or requesting certain wireless content. Another subset of patent claims cover systems and methods for storing and updating information of various types (content) and sending it to handsets. The patentee licensed its patents to most, if not all, wireless handset manufacturers selling products in the U.S. These licenses generally distinguish the conduct of handset makers and their purchasers from the conduct of others, such as content providers, and the licenses generally disclaim any grant of rights to content providers.

Helferich...