Quanta Brief - Craig Krzyskowski
Brief WL 4340885 (U.S.) in support of LG Electronics
- When a patentee makes an unconditional sale of a patented invention, the law presumes that the patentee has bargained for and received the full value of the patented invention, which exhausts the patentee’s rights under patent law
- Nothing in the patent laws requires a patentee to make an unconditional sale that enables it to recoup the value of its patent rights in a single transaction.
- Intel did not bargain for or receive an unconditional right to use the patented systems and methods; nor did it pay respondent for such an unconditional right.
- The doctrine of patent exhaustion rests on the rule that a patentee is “entitled to but one royalty for a patented machine, and consequently when a patentee has himself constructed the machine and sold it… and the consideration has been paid to him for the right, he has then to that extent parted with his monopoly, and ceased to have any interest whatever in the machine - nothing in the patent laws repeals freedom of contract - “any conditions which are not in their very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee for the right to manufacture or use or sell the [patented] article, will be upheld by the courts
- upon the sale of a patented item, the compensation that the patentee had received represented the full value of its patent monopoly, and the resale price agreements were an improper effort to inhibit competition in the wholesale and retail markets
- Basic principles of property law make plain that a purchaser who has obtained only a limited right to practice a patented invention free from infringement claims cannot convey to its purchasers any greater right, whether or not title has passed to the purchaser
- licensing rather than the unconditional sale of intellectual property frequently has procompetitive effects: field-of-use, territorial, and other limitations on intellectual property licenses may serve procompetitive ends by allowing the licensor to exploit its property as efficiently and effectively as possible. These various forms of exclusivity can be used to give a licensee an incentive to invest in the commercialization and distribution of products embodying the licensed intellectual property
- for someone unable to pay for full patent rights, the most efficient result for licensing can be achieved if the parties are able to negotiate a limited license that permits the licensee to practice the patent in the fashion that is of the greatest value to it
- Intel did not negotiate an appropriate license with respondent; instead the petitioners enjoyed an unearned windfall by buying an unlimited right and treating it as an unlimited right