01 December 2009

How to sell and license post-Quanta

John Rondini and David Syrowik examine how patent owners are adapting their business practices a year on from Quanta

One-minute read

In Quanta Computer Inc v LG Electronics Inc, the Supreme Court addressed the patent exhaustion doctrine after a 66-year hiatus. The decision will most certainly affect the viability of certain patent and perhaps other intellectual property licensing strategies such as copyright licensing strategies. Because of the importance of intellectual property licensing to the domestic and foreign economy, it is important for IP owners not only to fully understand the patent exhaustion doctrine as clarified byQuanta but also to consider relatively recent sales and licensing strategies. In particular, so-called field of use and single use licensing has been used in the printer cartridge business model as a way to avoid the patent exhaustion doctrine. This article concludes with some practical pointers when using standard form contracts to market products which “substantially embody” a patent as set out in Quanta.

The patent exhaustion doctrine operates to exhaust a patentee's rights following the first authorised sale of a patented item. Once a patented article is unconditionally sold by the patent owner or its licensee without restriction, that article passes beyond the exclusive rights of the patent. In this way, the first authorised sale of a patented article exhausts the patent to the extent that an unconditional sale frees the purchaser from patent liability to use and resale the article.

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How to sell and license post-Quanta

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