Because only an "authorized" sale triggers the doctrine, it may be difficult or at least controversial to determine whether the exhaustion doctrine applies in a particular case: for example, when the patentee purports to restrict or condition the use or resale of the patented article once purchased and in the hands of an end user (post-sale restrictions); or when the patentee licenses another to manufacture and use or sell the patented product only in a particular field.
[6] Providing these protections, however, comes with social costs (monopoly rents) and limits the public's ability to freely alienate patented goods.
[10] In that case, the patentee Adams assigned to another the right to make, use, and sell patented coffin lids only within a ten-mile radius of Boston.
[11] Thus, there are circumstances where it may be difficult to determine whether the exhaustion doctrine is triggered, in light of restrictions that the patentee has purported to place on the sale or use of the patented invention.
[16] The applicability of exhaustion to the sale of an incomplete article was recognized by the Supreme Court in 1942 in United States v. Univis Lens Co..
In Quanta, the Supreme Court applied the same test to determine whether exhaustion is triggered by the licensing of a portfolio of product and method patents.
[20] Thus, under the Univis test, the Intel products sufficiently embodied the patents, making the exhaustion doctrine applicable.
[22] If the license limitations ("restrictions") are exceeded ("violated"), then exhaustion cannot occur and therefore is not triggered, and the patentee can successfully sue the licensee and any downstream customers for patent infringement.
A licensee who exceeds ("violates") a field-of-use limitation by selling an article outside of the permissible field commits patent infringement.
"[26] Because the contractual documents in the Quanta case were insufficiently explicit, the Court applied the exhaustion doctrine, finding the sale "authorized" and unconditional, even though LGE attempted to impose some restrictions on use of the products.
The most difficult and unsettled area of the law regarding patent exhaustion involves cases in which a patentee purports to impose post-sale restrictions.
"[28] The plaintiff in the case owned a patent on a medical device, which it sold to hospitals with a "single use only" notice label.
As one commentator noted: "The Supreme Court, in Quanta, was widely expected to rule on whether Mallinckrodt was good law.
Because the Supreme Court sidestepped the issue, it remains unclear to what extent a patentee can use a conditional license to impose restrictions on downstream purchasers.
At issue in Static Control was Lexmark's so called "prebate" program, in which customers could buy cartridges that were subject to a single use for a 20 percent discounted price.
In its original order, before Quanta was decided, the court rejected Static Control's argument that Lexmark's patent rights were exhausted as a result of the authorized sale of the cartridges.
Relying heavily on Mallinckrodt, the court found that the sales were valid post-sale restrictions that avoided exhaustion.
Until recently, or at least since the formation of the Federal Circuit in 1982 until recently,[39] most U.S. courts simply assumed that a sale outside the United States, even if made by the U.S. patent owner or its parent, subsidiary, or affiliate, or by the U.S. patent owner's licensee, did not trigger the exhaustion doctrine within the United States.
"[44] This is quite unlike the usual U.S. situation, such as that in the Lexmark and Jazz cases, in which the U.S. patent owner was responsible for the foreign sale, and therefore profited from it.
[46] The point is now pending decision in the Federal Circuit, because that court has ordered en banc rehearing on that issue in the Lexmark case.
[51] A World Intellectual Property Organization (WIPO) report[52] in 2010 provides a listing of various countries' statutory provisions on international exhaustion.
For example, a smartphone, TV set, or set-top box may be economically important to both equipment manufacturers and content providers, as well as the end user public (i.e., consumers).
The invention concerns methods and systems for alerting smartphone users to content that may be of interest to them, for example, breaking news stories.
The way the invention works is along these lines: A content provider such as the New York Times sends a text message to its online subscribers' smartphones.
Diagrammatically, the fact pattern of this type of case is as follows: P → lic (P1) → A, a A → a (P1) → C ← i (P2) ← B On appeal from the district court's summary judgment ruling, the Federal Circuit held that the structure of the patent licensing arrangement avoided the exhaustion doctrine.
The court further explained this, using slightly different terminology: [It is a] core notion that exhaustion lifts legal restrictions on an authorized acquirer.
This principle appears to differ somewhat from U.S. patent law, in which bringing the restriction to the attention of the purchaser is generally immaterial.
[67] In the Fullplastverfahren case, the German Federal Supreme Court stated: The doctrine [of exhaustion] finds its justification in the argument that the holder of the rights who puts into circulation the product produced under the application of the protected procedure has had the opportunity to avail himself of the advantages granted by the patent.
[70] A recent decision of the Düsseldorf District Court,[71] however, perhaps points to greater similarity between German and U.S.; patent law.
For the mere fact that national borders are crossed does not constitute a sound reason why a second opportunity for compensation for the disclosure of the invention should be allowed."