Guide of Patent Protection

Born as the son of slaves, buried next to Booker T Washington, hundreds of inventions in between - that summarizes the life of George Washington Carver.

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Rockville, Maryland-based Hillcrest Laboratories has filed a patent infringement suit against Nintendo and its Wiimote controller.

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Today, we are living in the age of information technology & spreading our wings to every aspect of the society. We exchange our information (ideas, techniques, process, and product) to a target group but we never come to know this thing that someone is also targeting our information. So we are much prone to unintentionally leakage of our precious ideas as our information passes through different portals.

It is the human tendency to share their innovative thoughts with their near & dear ones but that proves fatal, in most of the cases, in respect of the that original creation or your property i.e. intellectual property (IP).Most of the people acts indiscreetly & ignorantly which results in jeopardizing the chance of saving their intellectual property i.e. novelty of ideas as they comes under public domain & lose their chance to be protected by the INELLECTUAL PROPERTY RIGHTS.

Intellectual property literally means some academic or scholar work. Intellectual property (IP) pertains to any scholar or any original creation of the human intellect; that work can be artistic, literary, technical or scientific creation.

Intellectual property rights mean those rights which are given by the State to the inventor or creator to protect one’s invention or creation for a certain period of time.

Need for intellectual property rights:-

For individual: - IP helps to protect investment of time, money, effort & such other resources of the inventor or creator.

For public:-IP provides a pool of information to the general public since all forms of IP are published in journals & magazines except in case of trade secrets.

For country:-IP provides a mechanism of handling infringement, piracy and unauthorized use & it encourages industrial development & technological advancement which leads to overall economic development of the country.

Bundle of rights:-

IPR are bundle of rights i.e. it includes the various independent rights. Following are the various independent rights for which IPR collectively provides protection:

1. Patent Right(Patent Act,1971 & Patent Rules,2000)

2. Industrial Design(Design Act,)

3. Trademarks (Trademarks Act)

4. Copyright(Copyrights Act)

5. Geographical Indication(Geographical Indication Of Goods Act)

6. Trade secrets(Common Law)

7. Circuit Layout Design(Semiconductor Layout Design Act)

India at International level:-

• The fact that India is a member state of World Intellectual Property Organization (WIPO), an international organization, responsible for the promotion of the protection of intellectual property throughout the world proves that India has proved its potential & has been acknowledged at international level.

We are here concerned with Patent Law; A patent is an exclusive right granted to inventor or creator of a useful or improved article or a new process of making an article for a specified period of time. After the expiry of the duration the invention becomes part of public domain i.e. everyone can use it. So Patent means monopoly rights of inventor in respect of an invention.

Geographical limits of the patent:-

Patent is granted for a specific invention in a particular country in which an application is made for the same cause. There is no international patent as such though it has acquired an international character. For e.g. a patent granted in India is valid only for India and not in the USA. However, a patent granted in the EPO is valid in all the contracting states recognized by European Patent Organization. The protection so granted in a country / region not only identifies the rights of the creator/ inventor or his assignees, but also enables the right holder to enforce his rights against infringers.

Moreover, several international agreements, treaties & conventions exist to monitor that the inventor/creator are not denied of his/her rights like European Economic Community Treaty(EEC),Patent co-operation Treaty(PCT),European Patent Conventions and Protocols(EPC),Community Patent Convention and Protocols(CPC) resulting in a common patent office for granting common patents applicable to the member countries.

What can be patented?

Only inventions can be patented.Sec.2 (1) (j) defines invention as an invention means a new product or a new process involving an inventive step & capable of industrial application. Invention includes within its scope any new & useful improvements of any manner of manufacture, article or substance whether patented or not but such improvement must qualify independently to satisfy the pre-requisites of the patent i.e. novelty, inventive step & capable of industrial application.

Who may apply for patent?

An application for a patent may be made by inventor, either alone or jointly with another, or his/their assignee, legal representative of deceased inventor or assignee are entitled to apply. For e.g. If a person invents a new product or process & unfortunately soon after that he dies then his legal heirs can or any person authorized by him before his death can apply for patent.

Term & date of patent:-

Term of every patent will be from 20 years from the date of filling of patent application & date of patent is the date on which the application for patent is filed, irrespective of the fact whether it is filed with provisional or complete application. To keep the patent in force renewal fee is to be paid every year. The first renewal fee is payable for the third year of the patent’s life & must be paid before the patent’s second anniversary. Term of patent can’t be extended beyond the specified term of patent.

Where a patent application should be filed?

The Indian Patent Office has its head office at Kolkata, which has three branch offices located at Mumbai, Chennai and Delhi. The Controller General heads the Patent Office and each branch has a Controller as its head. In case of an Indian applicant, the patent application must be filed at the patent office under whose jurisdiction the applicant’s has his place of work, or place of residence or place where he conduct business from.

For e.g. if an applicant provides a Chandigarh based address, the application must be filed at the Delhi Patent Office. In case of foreign applicant/s, the jurisdiction in which the patent application is filed would be based on the address for services of the applicant’s agent. For e.g. if the address for services for foreign applicant is based at Bangalore, the patent application must be filed at the Chennai Patent Office.

What are the rights given to the patentee?

The patentee (i.e. an applicant who has been granted a patent) has the exclusive right to prevent unauthorized third parties from making, using, offering for sale, selling or importing the patented product or process in India.

Patent information centre:-

Patent Information Centre (PIC) has been set up in 20 states & is further expanding in other states. Patent information centre provides information regarding the techniqulities & procedure laid down by the government to get a patent. One can get all the information regarding the filing of the patent application & further procedure up till the patent is not granted. The centre provides general precaution for the applicant before & after applying for a patent. The most common mistake which an applicant often does is to publish their invention in newspaper or scientific & technical journals, before applying for patents. Publication of an invention, even by the inventor himself, would (except under certain rare circumstances) constitute a bar for the subsequent patenting of it. Similarly, the use of the invention in public, or the commercial use of the invention in public or even in secrecy, prior to the date of the patent would be a fatal objection to the grant of the patent. However the secret working of the invention by way of reasonable trial or experiment, or the disclosure of the invention to other confidentially may not result into loss of novelty.

Another mistake, which is frequently made by the inventors, is to wait until their inventions are fully developed for commercial working, before applying for the patents. Delay in making application for a patent involves certain risks. so it is advisable to apply for the patent as soon as one’s invention get a physical appearance with 3-D drawings sheets depicting the whole model.

Incentives for obtaining patents:-

An innovative industry can gain competitive advantage in the market if it develops the necessary expertise and skills in developing and manufacturing new products, which are patented. For example, the advantage of a three year excise duty exemption or exemption from Drugs Price Control Order may translate into reserves / income which may offset the cost towards R&D. In order to promote R&D and innovation in Indian industries, Government of India provides a number of fiscal incentives and support measures to industries. Some of them are following:-

• Excise duty waiver on the patented article for a period of 3 years from the date of commencement of commercial production provided that such products be designed &developed by wholly owned Indian companies.

• Exemption from drug price control for a period of 5 years from the date of commencement of commercial production provided that they are produced from the basic stage by a process of manufacture developed by the unit through its own R&D efforts.

• Weighted tax deduction @ 150% on R&D expenditure is available to companies engaged in the business of biotechnology, or the business of manufacture or production of drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals and manufacture of aircraft and helicopters. The expenditure on scientific research in relation to drugs and pharmaceuticals shall include expenditure incurred on clinical trials of drugs, obtaining approval from the regulatory authority under any Central, State or provincial Act and the filing of a patent application in India.

• Depreciation allowance at a higher rate is available in respect of plant and machinery installed for manufacturing goods based on indigenous technology developed in recognized in-house R&D units, Government R&D institutions, national laboratories and Scientific and Industrial Organizations (SIRO). The present rate of depreciation for plant and machinery is 40% as against 25% for other plants and machinery.

• Income tax exemption:-Under Section 35(1)(i) of the Income Tax Act 1961, the revenue expenditure on scientific research, by recognized R&D units, on activities related to the business of the company is allowed full deduction. Under Section 35(1)(iv) expenses of capital nature could be deducted totally from the income of the year in which the expenses have been incurred. Section 35(2AA) of the IT Act 1961 provides for a weighted tax deduction of 125% for expenses on sponsoring research programmes at National laboratories functioning under ICAR, CSIR, ICMR, DRDO, Department of Biotechnology, Department of Atomic Energy, Department of Electronics; IIT and universities.

For more information locate at:-http:/Ipindia.nic.in. Or e-mail at: pisnag@nag.mah.nic.in/pisnagpur@satyam.net.in

For further inquiries e-mail writer at: - kamal_417@yahoo.com, kamdahiya@gmail.com

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New innovation through research is becoming more and more expensive, mostly in case of pharmaceutical industries. If after investing lots on money and efforts, one cannot commercialize their invention due to unforeseen problems with third party patents, then it is a high loss. Thus to ease the commercialization of new research innovations, most innovative and research-driven companies have started outsourcing patent landscaping studies for their future research plans.

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There’s also a long-standing war between printer makers and third-party cartridge companies that sell cheap knockoff ink packs.

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Today, we are living in the age of information technology & spreading our wings to every aspect of the society. We exchange our information (ideas, techniques, process, and product) to a target group but we never come to know this thing that someone is also targeting our information. So we are much prone to unintentionally leakage of our precious ideas as our information passes through different portals.

It is the human tendency to share their innovative thoughts with their near & dear ones but that proves fatal, in most of the cases, in respect of the that original creation or your property i.e. intellectual property (IP).Most of the people acts indiscreetly & ignorantly which results in jeopardizing the chance of saving their intellectual property i.e. novelty of ideas as they comes under public domain & lose their chance to be protected by the INELLECTUAL PROPERTY RIGHTS.

Intellectual property literally means some academic or scholar work. Intellectual property (IP) pertains to any scholar or any original creation of the human intellect; that work can be artistic, literary, technical or scientific creation.

Intellectual property rights mean those rights which are given by the State to the inventor or creator to protect one’s invention or creation for a certain period of time.

Need for intellectual property rights:-

For individual: - IP helps to protect investment of time, money, effort & such other resources of the inventor or creator.

For public:-IP provides a pool of information to the general public since all forms of IP are published in journals & magazines except in case of trade secrets.

For country:-IP provides a mechanism of handling infringement, piracy and unauthorized use & it encourages industrial development & technological advancement which leads to overall economic development of the country.

Bundle of rights:-

IPR are bundle of rights i.e. it includes the various independent rights. Following are the various independent rights for which IPR collectively provides protection:

1. Patent Right(Patent Act,1971 & Patent Rules,2000)

2. Industrial Design(Design Act,)

3. Trademarks (Trademarks Act)

4. Copyright(Copyrights Act)

5. Geographical Indication(Geographical Indication Of Goods Act)

6. Trade secrets(Common Law)

7. Circuit Layout Design(Semiconductor Layout Design Act)

India at International level:-

• The fact that India is a member state of World Intellectual Property Organization (WIPO), an international organization, responsible for the promotion of the protection of intellectual property throughout the world proves that India has proved its potential & has been acknowledged at international level.

We are here concerned with Patent Law; A patent is an exclusive right granted to inventor or creator of a useful or improved article or a new process of making an article for a specified period of time. After the expiry of the duration the invention becomes part of public domain i.e. everyone can use it. So Patent means monopoly rights of inventor in respect of an invention.

Geographical limits of the patent:-

Patent is granted for a specific invention in a particular country in which an application is made for the same cause. There is no international patent as such though it has acquired an international character. For e.g. a patent granted in India is valid only for India and not in the USA. However, a patent granted in the EPO is valid in all the contracting states recognized by European Patent Organization. The protection so granted in a country / region not only identifies the rights of the creator/ inventor or his assignees, but also enables the right holder to enforce his rights against infringers.

Moreover, several international agreements, treaties & conventions exist to monitor that the inventor/creator are not denied of his/her rights like European Economic Community Treaty(EEC),Patent co-operation Treaty(PCT),European Patent Conventions and Protocols(EPC),Community Patent Convention and Protocols(CPC) resulting in a common patent office for granting common patents applicable to the member countries.

What can be patented?

Only inventions can be patented.Sec.2 (1) (j) defines invention as an invention means a new product or a new process involving an inventive step & capable of industrial application. Invention includes within its scope any new & useful improvements of any manner of manufacture, article or substance whether patented or not but such improvement must qualify independently to satisfy the pre-requisites of the patent i.e. novelty, inventive step & capable of industrial application.

Who may apply for patent?

An application for a patent may be made by inventor, either alone or jointly with another, or his/their assignee, legal representative of deceased inventor or assignee are entitled to apply. For e.g. If a person invents a new product or process & unfortunately soon after that he dies then his legal heirs can or any person authorized by him before his death can apply for patent.

Term & date of patent:-

Term of every patent will be from 20 years from the date of filling of patent application & date of patent is the date on which the application for patent is filed, irrespective of the fact whether it is filed with provisional or complete application. To keep the patent in force renewal fee is to be paid every year. The first renewal fee is payable for the third year of the patent’s life & must be paid before the patent’s second anniversary. Term of patent can’t be extended beyond the specified term of patent.

Where a patent application should be filed?

The Indian Patent Office has its head office at Kolkata, which has three branch offices located at Mumbai, Chennai and Delhi. The Controller General heads the Patent Office and each branch has a Controller as its head. In case of an Indian applicant, the patent application must be filed at the patent office under whose jurisdiction the applicant’s has his place of work, or place of residence or place where he conduct business from.

For e.g. if an applicant provides a Chandigarh based address, the application must be filed at the Delhi Patent Office. In case of foreign applicant/s, the jurisdiction in which the patent application is filed would be based on the address for services of the applicant’s agent. For e.g. if the address for services for foreign applicant is based at Bangalore, the patent application must be filed at the Chennai Patent Office.

What are the rights given to the patentee?

The patentee (i.e. an applicant who has been granted a patent) has the exclusive right to prevent unauthorized third parties from making, using, offering for sale, selling or importing the patented product or process in India.

Patent information centre:-

Patent Information Centre (PIC) has been set up in 20 states & is further expanding in other states. Patent information centre provides information regarding the techniqulities & procedure laid down by the government to get a patent. One can get all the information regarding the filing of the patent application & further procedure up till the patent is not granted. The centre provides general precaution for the applicant before & after applying for a patent. The most common mistake which an applicant often does is to publish their invention in newspaper or scientific & technical journals, before applying for patents. Publication of an invention, even by the inventor himself, would (except under certain rare circumstances) constitute a bar for the subsequent patenting of it. Similarly, the use of the invention in public, or the commercial use of the invention in public or even in secrecy, prior to the date of the patent would be a fatal objection to the grant of the patent. However the secret working of the invention by way of reasonable trial or experiment, or the disclosure of the invention to other confidentially may not result into loss of novelty.

Another mistake, which is frequently made by the inventors, is to wait until their inventions are fully developed for commercial working, before applying for the patents. Delay in making application for a patent involves certain risks. so it is advisable to apply for the patent as soon as one’s invention get a physical appearance with 3-D drawings sheets depicting the whole model.

Incentives for obtaining patents:-

An innovative industry can gain competitive advantage in the market if it develops the necessary expertise and skills in developing and manufacturing new products, which are patented. For example, the advantage of a three year excise duty exemption or exemption from Drugs Price Control Order may translate into reserves / income which may offset the cost towards R&D. In order to promote R&D and innovation in Indian industries, Government of India provides a number of fiscal incentives and support measures to industries. Some of them are following:-

• Excise duty waiver on the patented article for a period of 3 years from the date of commencement of commercial production provided that such products be designed &developed by wholly owned Indian companies.

• Exemption from drug price control for a period of 5 years from the date of commencement of commercial production provided that they are produced from the basic stage by a process of manufacture developed by the unit through its own R&D efforts.

• Weighted tax deduction @ 150% on R&D expenditure is available to companies engaged in the business of biotechnology, or the business of manufacture or production of drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals and manufacture of aircraft and helicopters. The expenditure on scientific research in relation to drugs and pharmaceuticals shall include expenditure incurred on clinical trials of drugs, obtaining approval from the regulatory authority under any Central, State or provincial Act and the filing of a patent application in India.

• Depreciation allowance at a higher rate is available in respect of plant and machinery installed for manufacturing goods based on indigenous technology developed in recognized in-house R&D units, Government R&D institutions, national laboratories and Scientific and Industrial Organizations (SIRO). The present rate of depreciation for plant and machinery is 40% as against 25% for other plants and machinery.

• Income tax exemption:-Under Section 35(1)(i) of the Income Tax Act 1961, the revenue expenditure on scientific research, by recognized R&D units, on activities related to the business of the company is allowed full deduction. Under Section 35(1)(iv) expenses of capital nature could be deducted totally from the income of the year in which the expenses have been incurred. Section 35(2AA) of the IT Act 1961 provides for a weighted tax deduction of 125% for expenses on sponsoring research programmes at National laboratories functioning under ICAR, CSIR, ICMR, DRDO, Department of Biotechnology, Department of Atomic Energy, Department of Electronics; IIT and universities.

For more information locate at:-http:/Ipindia.nic.in. Or e-mail at: pisnag@nag.mah.nic.in/pisnagpur@satyam.net.in

For further inquiries e-mail writer at: - kamal_417@yahoo.com, kamdahiya@gmail.com

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BOSTON & PISCATAWAY, N.J. — – Invention Machine, a leading provider of innovation software, and IEEE, the world’s largest technical professional society, today announced a strategic collaboration that will …

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Background

LG Electronics (”LGE”) owns the rights to several computer technology patents, all of which describe a computer operation or method, not actual products. LGE licensed these patents to Intel Corporation in a License Agreement that authorizes Intel to manufacture and sell microprocessors and chipsets that use and incorporate the LGE patents. LGE and Intel had a separate agreement (”Master Agreement”) that required Intel to give its customers written notice that the license does not extend to a product made by combining an Intel Product with a non-Intel product. The Master Agreement states that breach of it does not affect the integrity and terms of the License Agreement.

Quanta purchased microprocessors and chipsets from Intel, and then manufactured computers using the Intel parts in combination with non-Intel parts, but without modifying the Intel parts. LGE sued Quanta, claiming this combination infringed the LGE patents. Quanta claimed that LGE’s patents were exhausted when Intel sold Quanta the parts that embodied LGE’s patent and therefore LGE has no further rights.

The District Court initially granted summary judgment in favor of Quanta, but upon reconsideration, denied the summary judgment on the grounds that the exhaustion doctrine does not apply to method patents. The Federal Circuit agreed that the patent exhaustion does not apply to method patents, and alternatively found that LGE did not license Intel to sell the Intel products to Quanta to combine with non-Intel products.

The United States Supreme Court heard the case on January 16, 2008 and issued its opinion, reversing the Federal Circuit and finding in favor of Quanta, on June 9, 2008.

The doctrine of patent exhaustion and its history pre-Quanta

The basic concept of patent exhaustion means that the first authorized sale of a patented item terminates all patent rights to that item. Quanta, 128 S.Ct. at 2115. The doctrine is premised on the notion that a patentee is entitled to a single royalty - in authorizing that first sale, the patentee presumably has bargained for and received the value of the patent right. The Supreme Court has explained that the touchstone of the patent exhaustion doctrine is “whether or not there has been such a disposition of the article that it may fairly be said that the patentee has received his reward for the use of the article.” United States v. Masonite Corp., 316 U.S. 265, 278 (1942).

In the early 1900’s, some courts allowed patentees to place post-sale restrictions on their patents that enabled them to exercise control (and receive additional royalties) in the downstream chain, long after the initial authorized sale. Quanta, 128 S.Ct. at 2115-2116.  But by 1917, the Supreme Court made it clear that such post-sale restrictions would not be tolerated. In Motion Picture Patents Co. v. Universal Film Mfg Co., 243 U.S. 502, 516 (1917), the court held that “the right to vend is exhausted by a single, unconditional sale, the article sold being thereby carried outside the monopoly of the patent law and rendered free of every restriction which the vendor may attempt to put upon it.”

Prior to Quanta, the Supreme Court’s most recent and important precedent on the exhaustion doctrine, including its application to components and method patents, was United States v. Univis Lens Co., 316 U.S. 241 (1942). In Univis, the patentee (Univis Corp.) held a patent with claims directed to an eyeglass lens and the method for making lenses by producing, grinding and polishing lens blanks. Univis Corp. licensed its related company, Univis Lens, to manufacture lens blanks.

Univis Lens sold the licensed blanks to wholesalers and retailers who would finish the grinding and polishing of the blanks through practice of Univis’ patented method. The licenses to the wholesalers and retailers contained strict post-sale limitations as to whom the lens blanks could be sold and at what price.

The court held that upon Univis’ licensed sale of the lens blanks, which had no realistic use except to practice the Univis patent, the patent rights regarding the lens blanks and finished lenses were exhausted. “[T]he authorized sale of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to the article sold.” Univis, 316 U.S. at 249.

The Court stated:

“The first vending of any article manufactured under a patent puts the article beyond the reach of the monopoly which that patent confers. Whether the licensee sells the patented article in its complete form or sells it before completion for the purpose of enabling the buyer to finish and sell it, he has equally parted with the article, and made it the vehicle for transferring to the buyer ownership of the invention with respect to that article. To that extent he has parted with his patent monopoly in either case, and has received in the purchase price every benefit of that monopoly which the patent law secures to him. If he were permitted to control the price at which it could be sold by others he would extend his monopoly quite as much in the one case as in the other, and he would extend it beyond the fair meaning of the patent statutes and the construction which has hitherto been given to them.” 316 U.S. at 252.

Despite the Univis holding, however, the Federal Circuit again allowed erosion of the exhaustion doctrine by allowing patentees to place post-sale restrictions and limitations on their patents. The seminal (and often criticized) ruling in Mallinckrodt, Inc.  v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992), enabled patentees to limit their customers to a significant extent in repairing, refurbishing, recycling and modifying equipment post-sale - a violation of the restriction constituted patent infringement unless the restriction violated another law such as antitrust law. The rationale for the holding: a patent owner bargains for and receives royalties based upon an anticipated and intended use; if the buyer makes other and additional uses out of the patent, the patent owner ought to be able to claim additional royalties for that non-bargained-for use.

The Mallinckrodt decision and its progeny have limited the law of patent exhaustion in various ways - a controversial result. Patent owners have relied upon these cases by drafting license agreements that the Federal Circuit has interpreted as preserving their rights to pursue infringement claims against downstream users who purchase and use the licensed product. Indeed, the Federal Circuit applied this same line of thinking when it affirmed the District Court’s ruling against Quanta.(1)

Moreover, since Mallinckrodt, also in seeming contradiction to the Univis holding, the Federal Circuit has held that method claims are not subject to patent exhaustion.(2) The Federal Circuit has severely weakened the exhaustion doctrine by limiting it only to apparatus claims.

Quanta reaffirms Univis and revives the exhaustion doctrine

In its decision in Quanta, the Supreme Court relied heavily upon the precedent of Univis and conclusively held that the exhaustion doctrine does apply to method claims as well as apparatus claims.

The Court stated: “It is true that a patented method may not be sold in the same way as an article or device, but methods nonetheless may be ‘embodied’ in a product, the sale of which exhausts patent rights.” 128 S.Ct. at 2117.

The Court warned that any other result “would seriously undermine the exhaustion doctrine. Patentees seeking to avoid patent exhaustion could simply draft their patent claims to describe a method rather than an apparatus.” 128 S.Ct at 2117. This exhaustion-avoidance technique, if it were effective, would wreak havoc on downstream purchasers who could find themselves suddenly liable for patent infringement, unaware that a method encompassed in the product they purchased enjoys an inexhaustible patent.

After confirming that exhaustion applies to method claims, the court explained “the extent to which a product must embody a patent in order to trigger exhaustion.” Id. at 2118. Again, the court looked to Univis for guidance, finding that when the licensed product that contains the patented method is really only capable of use when it practices the patented method, exhaustion applies:

“Like the Univis lens blanks, the Intel Products constitute a material part of the patented invention and all but completely practice the [LGE] patent. Here, as in Univis, the incomplete article substantially embodies the patent because the only step necessary to practice the patent is the application of common processes or the addition of standard parts. Everything inventive about each patent is embodied in the Intel Products.” 128 S.Ct. at 2120.

LGE argued that exhaustion did not apply because Intel’s sale to Quanta was not an “authorized” first sale. LGE asserted that the contractual post-sale restriction it imposed on its patents - namely, that LGE did not license Intel to sell the Intel Products to Quanta to combine with non-Intel products - prevented application of the doctrine. 128 S.Ct. at 2121. The Federal Circuit had agreed with this argument, following the precedent it had created for itself (that parties can contract around exhaustion) over the last 15 years.

But the Supreme Court disagreed. LGE had two separate agreements with Intel: a License Agreement that granted Intel the right to manufacture and sell LGE’s patents, and a separate Master Agreement that contained the post-sale restriction. But the Master Agreement specifically stated that its breach did not affect the validity of the License Agreement. As a result, the License Agreement gave Intel the authority to sell its products containing the LGE patent, and that first authorized sale exhausts LGE’s patents, regardless of the other agreement. Id. at 2121-2122.

Quanta leaves one imperfectly-answered question

There may be a lingering question about exhaustion when the component that embodies the patent has other non-infringing uses. For example, if the Intel products had thousands of non-infringing uses outside of the patented LGE process, but someone used the Intel product to practice the LGE patent, an argument could be made that exhaustion should not apply and LGE should have the right to pursue and infringement action against that user.

This certainly was not the case in Quanta, as the Intel chips have really no utility, even while embodying the LGE patent, until they are put into a computer and put to use practicing the patent. But what if the chips had numerous other uses, only one of which was to practice the LGE patent? Could exhaustion still apply? The overwhelming precedent indicates that exhaustion would not apply in such circumstances.

But the Quanta opinion includes this curious comment:

“While each Intel microprocessor and chipset practices thousands of individual patents, including some LGE patents not at issue in this case, the exhaustion analysis is not altered by the fact that more than one patent is practiced by the same product. The relevant consideration is whether the Intel Products that partially practice a patent - by, for example, embodying its essential features - exhaust that patent.” 128 S.Ct. at 2121.

To the extent that this excerpt might suggest that a patented process can be exhausted even if it is contained in a product with numerous non-infringing uses, we think that is merely erroneous wording by the court. Future cases may clarify the issue more specifically, but the precedent should solidly prevent application of exhaustion in this circumstance.

(1) LG Electronics, Inc. v. Bizcom Electronics Inc., 453 F.3d 1364, 1369-1370 (Fed. Cir. 2006).
(2) See, e.g., Glass Equipment Devel. Inc. v. Besten Inc., 174 F.3d 1337, 1341, n.1 (Fed. Cir. 1999).

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