JOHN W. SCHLICHER

PATENTS, PATENT LITIGATION, PATENT DISPUTE RESOLUTION AND

SETTLEMENT, LICENSING, ANTITRUST, LAW AND ECONOMICS

 

 

John W. Schlicher, “The New Patent Exhaustion Doctrine of Quanta v. LG - What It Means for Patent Owners, Licensees and Product Customers,” 90 Journal of the Patent and Trademark Office Society 758 (2008)

Table of Contents (partial)

 

I. Introduction

II.   Summary

A.         The Actual Decision in Quanta

B.        The Language of the Quanta Decision

C.        What Was This Case About and Should the Law Have Defeated the Purpose of the Intel – LG Agreement

 

III.  The Economic Policy of the License, Implied License and Exhaustion Defenses

A.       Patent Rights and Personal Property Rights Are Different and May Be Sold Separately

B.        Three Ways a Patent Owner May Authorize Use of the Patent Rights

C.        The Policy of Licensing Law – Improve the Profitability of Inventing and the Efficiency of Use of Patented Inventions

D.       A Sensible Policy for the Implied License and Exhaustion Doctrines – Improve the Profits from Inventing by Reducing the Cost of Licensing

E.        The Proper Results of this Policy

1.        Where a Patent Owner Grants a Purchaser an Express License, the Implied License and Exhaustion Doctrines Should Not Operate

2.        Where a Patent Owner Grants a Purchaser an Express License, Conditions, Restrictions or Limitations that Prevent Activities the Patent Does Not Give the Patent Owner the Right to Control and Harm Competition in a Market Should Be Unenforceable

3.        When a Patent Owner Grants a Manufacturer an Express License to Sell, the Patent Owner May Limit a Licensee’s Right to Sell and Unauthorized Sales Are Infringement

4.        The Form in Which a Patent Owner Grants an Express License

F.        The Effects of Quanta on the Policy of Exhaustion and Implied License

G.        The Standard Explanations of the Policy of the Exhaustion Doctrine

1.        The Forgotten Influence of the Patent Act of 1836

2.        Exhaustion Is the Essential Nature of Things

3.        A Patent Owner that Sold a Patented Product and Was Paid Has No Interest in a Buyer’s Use or Resale

4.        A Patent Owner Should Not Be Permitted to Capture the Value of an Invention Twice, Once by Selling a Patented Product and Again by an Infringement Action against its Customer

H.       Why These Explanations of the Policy of Exhaustion Are Wrong

 

IV.  The Quanta Decision

A.       The Facts

B.        The District Court’s Decisions

C.        The Court of Appeals’ Decision

D.       The Supreme Court’s View of the Patents and the Lower Court Decisions

E.        The Supreme Court’s View of the Law

1.        The Controlling Decisions on Exhaustion

2.        The Controlling Decisions on Enforceability of Post-Sale Restrictions

3.        Exhaustion, Not Implied License, Governs Sale of Some Unpatented Products

4.        Exhaustion, Not Implied License, Governs Sale of Products Useful in Patented Methods

5.        Unpatented Products that Embody Essential Features of a Patented Invention Trigger Exhaustion

F.        Intel’s Sales Were Authorized by the License and Exhaustion Necessarily Follows

G.        The Conclusion

H. What Was Quanta About and Should the Law Have Defeated the Purpose of the Intel – LG Agreement

 

A. V.   The Court’s Strange Discussion of the Law

B. A.   Exhaustion

C. B.   Exhaustion Applies to Sales of Unpatented Products

D. C.   The Court’s View of the Policy of Exhaustion

E. D.   Post-Sale Restrictions Are Invalid; Why Did the Court Discuss Post-Sale Restrictions?

F. E.   A Patent Owner May Sell with Conditions and Have Contract Claims for Breach

G. Exhaustion Applies Only to Authorized Sales by a License

 

VI.      Conclusion