Jun. 17, 2008
First, starting with its decision
Mallinckrodt, 976 F.2d 700, the Federal Circuit has allowed patentees to enter into agreements which authorized licensees to use their invention, but not have the patent exhaustion doctrine apply.
See also, e.g., LG Electronics, Inc. v. Bizcom Electronics Inc., 453 F.3d 1364 (Fed. Cir. 2006). Until
Quanta, there was significant debate whether this law was counter to prior Supreme Court precedent.
See, e.g., Univis, 316 U.S. 241 (finding that once an authorized first sale occurs, exhaustion applies in spite of any attempt to contract around it). This departure has allowed some patent owners to set up licensing schemes that allows them to collect royalties from multiple parties for the same authorized product for the same patent claim.
Second, starting with one of the earliest Federal Circuit decisions on the doctrine of patent exhaustion, Bandag Inc. v. Al Bolser's Tire Stores Inc., 750 F.2d 903 (Fed. Cir. 1984), the Federal Circuit has held that method claims are not subject to patent exhaustion. See also, e.g., LG Electronics, 453 F.3d 1364. Prior to Quanta, there was also significant debate as to whether this law was also counter to prior Supreme Court precedent. See, e.g., Univis, 316 U.S. 241 (applying exhaustion doctrine to method claims). This limitation has allowed patentees to draft claims to cover necessary uses of new products in the form of "method" claims, and thus collect from more than one party for use and disposition of the same authorized product under the same patent claim.
Finally, more recently, in a series of cases involving refurbishing of products sold overseas in the first instance (i.e., disposable cameras), the Federal Circuit has made broad statements that sales outside the United States could not "exhaust" a U.S. Patent. See Fuji Photo Film Co., Ltd. v. Jazz Photo Corp., 394 F.3d 1368 (Fed. Cir. 2005); Jazz Photo Corp. v. U.S. ITC, 264 F.3d 1094 (Fed. Cir. 2001). The implications of the broad statements made in those cases can have a significant impact on international commerce today, where components are manufactured and distributed abroad for products that are ultimately distributed in the United States. Patentees have used these broad pronouncements to argue they should be able to collect a royalty under the same patent for the same product from both the component supplier and the end-product manufacturer.
For a more detailed explanation on how the Federal Circuit's precedent on exhaustion has deviated from prior Supreme Court precedent, see Michael J. Kasdan, Quanta Computer v. LG Electronics: Will The Supreme Court Revive The Exhaustion Doctrine?, Amster, Rothstein & Ebenstein, LLP, January, 2008 Available at: www.arelaw.com/articles/index.html.
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