Patent Exhaustion

Covenants Not to Sue Trigger Patent Exhaustion

The interaction of the patent exhaustion doctrine and covenants not to sue was highlighted in a recent opinion from the District of Delaware in Purdue v. Collegium. The court denied Collegium’s motion to dismiss, which was premised on Purdue’s covenant not to sue Collegium’s supplier. Purdue sued Collegium for infringing U.S. Patent Nos. 9,861,583; 9,867,784; and 9,872,836 with its pain-relief medication Nucynta. Separately, Purdue settled a patent-infringement suit with Assertio, another pharmaceutical company, which involved granting Assertio a covenant not to sue. The covenant not to sue extended to other entities interacting with Assertio, but Collegium was expressly carved out. The settlement affected this case because Assertio supplied Nucynta to Collegium under a commercialization agreement. That commercialization agreement provided that title to the product shifted from a contract manufacturing organization (CMO) directly to Collegium, never passing to Assertio. But the day after Assertio received the covenant not to sue as part of settling with Purdue, Collegium and Assertio amended the commercialization agreement so that title did transfer from the CMO to Assertio before transferring to Collegium. The court’s reasoning was based on interpreting this commercialization agreement against the background of the patent exhaustion doctrine. Generally, an authorized sale of a… Read More »Covenants Not to Sue Trigger Patent Exhaustion

With License Ambiguous, Patent Exhaustion Heads to Jury

In Audio MPEG, Inc. v. Dell Inc., the Eastern District of Virginia denied summary judgment of patent exhaustion because it was ambiguous whether a license between Audio MPEG and Dell’s supplier Microsoft covered the allegedly infringing software, leaving the issue to the jury. Audio MPEG asserted that Dell’s sales of computers infringed three of its patents on encoding and decoding digital audio signals. Dell sold computers with both Microsoft Windows and third-party audio software preinstalled. The parties primarily disagreed on two factual questions: (1) Did Audio MPEG’s license agreement with Microsoft cover Windows codecs called by the third-party software? (2) Did the preinstalled third-party software only call the codecs or does it contain infringing programming? (According to the expert witness quoted by the court, “A codec is a piece of software that encodes and/or decodes a digital data stream. Codecs typically exist as a part of a shared library, such as a DLL, so they can be utilized by more than one software program.”) In denying summary judgment of patent exhaustion, the court noted the stakes based on the resolution of these two questions: “if the Windows codecs are included under the License Agreement and the third party software calls… Read More »With License Ambiguous, Patent Exhaustion Heads to Jury

Pleading Implied License as an Affirmative Defense to Patent Infringement

An implied license is an affirmative defense to patent infringement. Because the defense is, by definition, highly fact-specific, it is not always clear what allegations are required to adequately plead the implied license defense. However, requirements for pleading the defense, e.g., under an estoppel theory, are not unduly onerous.  The court’s denial of a motion to dismiss the defense in Integrated Global Concepts, Inc. v. J2 Global, Inc., No. C-12-03434-RMW (N.D. Cal. June 28, 2013), is illustrative. A complicated procedural history, including other litigation, underlies this declaratory judgment action. For present purposes, the essentials of the pleadings are that J2 brought counterclaims seeking a declaratory judgment of infringement of four patents in response to IGC’s declaratory judgment action, and IGC in turn responded to J2’s counterclaims with its own counterclaim for a declaratory judgment of implied license, among other things. The facts underlying these pleadings are also a little complicated, but necessary for understanding the basis of the implied license defense raised by IGC. The facts (which you can skim and skip below to the gist of the court’s analysis) as pled by IGC were that: In 1997 and 1998, J2 filed patent applications that subsequently issued as U.S. Patent… Read More »Pleading Implied License as an Affirmative Defense to Patent Infringement

Patent Exhaustion Based on Foreign Sales

Sales outside the United States exhausted a patent owner’s rights in its U.S. patent, according to Multimedia Patent Trust v. Apple, Inc., No. 10-CV-2618-H (KSC), 2012 U.S. Dist. LEXIS 167479 (S.D. Cal. Nov. 9, 2012). Therefore, among rulings on summary judgment motions addressing a myriad of issues, the Court granted summary judgment to Canon on its affirmative defense of patent exhaustion based on Canon’s purchase of accused products from Fujitsu outside the United States. Fujitsu held an unconditional worldwide license to the patent in question, having received this license from AT&T, the patent’s former owner. MPT, the plaintiff, had alleged that Canon and other defendants variously infringed four patents related to video compression technology, including U.S. 5,136,377. Canon was accused of infringing only the ’377 patent, based on encoding and decoding functions of Fujitsu chips in Canon products. Fujitsu had licensed the ’377 patent from AT&T, its prior owner. Licensed patents, of which the ’377 patent was one, included those “issued at any time in any or all countries of the world.” The Fujitsu chips at issue were indisputably covered products under the patent license agreement. Contrary to MPT’s arguments, there were no genuine issues of material fact concerning whether the… Read More »Patent Exhaustion Based on Foreign Sales