patent exhaustion doctrine

Bowman v. Monsanto Company

Monsanto Company, a producer of herbicide resistant soybean seeds and technology, sued Vernon Hugh Bowman, a soybean farmer, for patent infringement.  Bowman replanted second-generation seeds, which were the product of seeds purchased from a licensed Monsanto technology distributor.  Monsanto argued that by planting the product of Monsanto’s herbicide resistant seeds instead of purchasing new ones, Bowman was in violation of the Technology Agreement for the seeds.  The Federal Circuit upheld a district court decision awarding Monsanto damages for violation of their patented technology, reasoning that Monsanto's herbicide resistant technology was covered by patent regardless of whether it was the original seed or a product of the original seeds. Bowman contends that Monsanto’s patent rights were exhausted once he bought the seeds and that use of progeny seeds is an expected use of the product.  Monsanto responds that in the case of self-replicating technologies the patent extends to the technology, here, the trait of herbicide resistance, rather than the seed itself. 

Questions as Framed for the Court by the Parties

Patent exhaustion delimits rights of patent holders by eliminating the right
 to control or prohibit use of the invention after an authorized sale. In this case, the Federal Circuit refused to find exhaustion where a farmer used seeds purchased in an authorized sale for their natural and foreseeable purpose--namely, for planting.                                      

The question presented is: Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?

Issue

May patent holders enforce their rights on the products of self-replicating technologies, such as replicating seeds, after an authorized sale or does the patent only apply to the original article?

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Impression Products v. Lexmark International

Issues

Does a “conditional sale” transferring title with post-sale restrictions on the use or resale of the item avoid the patent exhaustion doctrine, thus permitting a suit for infringement as a means of enforcing the post-sale restriction; and, does a foreign sale of a patented article exhaust the U.S. patent rights in that article?

The Supreme Court must decide whether Lexmark International, Inc., a company that manufactures toner cartridges for use in its printers, can use post-sale restrictions to prevent remanufacturers such as Impression Products, Inc., the defendant in this case, from refurbishing and reselling the cartridges. Petitioner Impression Products argues that under the patent exhaustion doctrine, all of a patent holder’s rights to a patented item are exhausted by the initial authorized sale of the item. Accordingly, Impression Products argues that the patent holder cannot place restrictions on how the patented article is used after its sale. Respondent Lexmark International, however, contends that Section 154(a) gives a patent holder authority to impose restrictions on the post-sale use of a patented item and allows a patent holder to transfer less than the complete patent rights to the buyer. Thus, a patent holder need not completely exhaust the patent after the sale. The ultimate decision by the Supreme Court may have an impact on the judicial doctrine of patent exhaustion and may potentially hinder the market for remanufactured patented goods. 

Questions as Framed for the Court by the Parties

The “patent exhaustion doctrine”—also known as the “first sale doctrine”—holds that “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617, 625 (2008).

The questions presented are:

  1. Whether a sale that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy.
  2. Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), that the common law doctrine barring restraints on alienation that is the basis of exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article—authorized by the U.S. patentee—that takes place outside of the United States exhausts the U.S. patent rights in that article.

Lexmark International, Inc. is a company that makes and sells toner cartridges compatible with its printers. Lexmark International, Inc., v. Impression Products, Inc., No. 14-1617 (Fed. Circuit Feb. 12, 2016) at 9. Lexmark owns several patents on the cartridges it produces.

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patent

A patent grants its holder the exclusive right to exclude others from making, using, importing, or selling the patented invention for a limited time. Authority for the U.S. patent system derives from Article I, Section 8, Clause 8 of the Constitution, which empowers Congress to secure for limited times to inventors the exclusive right to their discoveries. The Patent Act, 35 U.S.C.

Quanta Computer, Inc. v. LG Electronics, Inc.

 

In the latest Supreme Court case on patent law, LG Electronics, Inc. (LGE) sued Quanta Computers, Inc. (Quanta) for patent infringement. A patent license agreement between LGE and Intel allowed Intel to use LGE's patents but required Intel to notify its customers, including Quanta, that its license did not extend to third-party purchasers' combinations of Intel and non-Intel components. LGE alleges that Quanta infringed LGE's patents by combining Intel and non-Intel components. LGE argued that Intel's sale to Quanta did not exhaust LGE's rights as a patent holder, allowing LGE to sue Quanta. Quanta, however, argued that Intel's authorized sale to Quanta exhausted LGE's patent rights. The Federal Circuit agreed with LGE, holding that the exhaustion doctrine did not apply because the notice provided by Intel to Quanta created a conditional sale, and that sales of patented devices do not exhaust a patent holder's methods claims. In deciding this case, the Supreme Court will determine whether a patent holder can sue customers who use patented components purchased from licensees. The outcome of this case will clarify the exhaustion doctrine generally and will help define the scope of patent holders' rights, including their ability to collect royalties from and sue downstream users of their patents.

Questions as Framed for the Court by the Parties

Whether the Federal Circuit erred by holding, in conflict with decisions of this Court and other courts of appeals, that respondent's patent rights were not exhausted by its license agreement with Intel Corporation, and Intel's subsequent sale of product under the license to petitioners.

LG Electronics, Inc. (LGE), a Korean company, owns patents that relate to personal computers. See LG Electronics, Inc. v. Bizcom Electronics, Inc., 453 F.3d 1364, 1368 (Fed. Cir.

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