Mobile Device Licenses Do Not Exhaust Patent Owner's Right to Sue Content Providers: Federal Circuit | Practical Law

Mobile Device Licenses Do Not Exhaust Patent Owner's Right to Sue Content Providers: Federal Circuit | Practical Law

In Helferich Patent Licensing, LLC v. The New York Times Co., the US Court of Appeals for the Federal Circuit reversed the US District Court for the Northern District of Illinois' grant of summary judgment of non-infringement under the doctrine of patent exhaustion. The Federal Circuit held that the patent owner's licensing of mobile device manufacturers did not exhaust its right to assert separate but related patent claims against mobile device content providers.

Mobile Device Licenses Do Not Exhaust Patent Owner's Right to Sue Content Providers: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 12 Feb 2015 • USA (National/Federal)
In Helferich Patent Licensing, LLC v. The New York Times Co., the US Court of Appeals for the Federal Circuit reversed the US District Court for the Northern District of Illinois' grant of summary judgment of non-infringement under the doctrine of patent exhaustion. The Federal Circuit held that the patent owner's licensing of mobile device manufacturers did not exhaust its right to assert separate but related patent claims against mobile device content providers.
On February 10, 2015, in Helferich Patent Licensing, LLC v. The New York Times Co., the US Court of Appeals for the Federal Circuit reversed the US District Court for the Northern District of Illinois' grant of summary judgment of non-infringement (Nos. 2014-1196, -1197, -1198, -1199, -1200, (Fed. Cir. Feb. 10, 2015)). The Federal Circuit held that the patent owner's licensing of communication technologies to mobile device manufacturers did not exhaust its ability to assert related but distinct patent claims against mobile device content providers.
Helferich Patent Licensing, LLC owns over 30 patents covering wireless communication technologies. Between July 2010 and March 2012, Helferich filed patent infringement complaints against several companies who provide content to mobile devices, including the New York Times Co., G4 Media LLC, CBS Corp., Bravo Media LLC and J.C. Penney Corp., Inc. (Content Providers). Helferich's seven asserted patents derive from a common specification and implicate two types of claims:
  • Handset Claims. Some of the asserted patents include claims covering the transmission and receipt of content by mobile devices. Helferich licensed its Handset Claims portfolio to several mobile device manufacturers and disclaimed any grant of rights to the Content Claims. Helferich also reserved the right in the license agreements to seek damages against mobile device content providers. Helferich did not assert any Handset Claims in the litigation against the Content Providers.
  • Content Claims. All of the asserted claims in the lawsuit against the Content Providers were Content Claims covering systems and methods for storing and updating content (such as news) and sending it to mobile devices. Helferich alleged that the Content Providers infringed the Content Claims by storing content and delivering it to mobile devices through mobile device applications, text-messaging services and third-party networking programs.
In March 2013, the Content Providers moved for summary judgment of non-infringement, arguing that Helferich's licenses to the mobile device manufacturers exhausted its rights to enforce the Content Claims. Helferich cross-moved for summary judgment, arguing that exhaustion was inapplicable as a matter of law. The district court granted the Content Providers' motion and found that Helferich's licenses to mobile device manufacturers exhausted its patents rights against the Content Providers because all of the asserted patents require the use of a mobile device.
Helferich appealed the district court's summary judgment decision. On appeal, the Content Providers argued that the Handset and Content Claims are functionally synonymous and therefore authorized sales of licensed mobile devices exhaust Helferich's right to enforce the Content Claims against them. The Federal Circuit disagreed and found that the Handset and Content Claims are not functionally synonymous, explaining that:
  • The plain language of the Handset and Content Claims shows that they are practiced by different parties.
  • The Content Providers failed to show that any of the Handset and Content Claims overlap and cover the same inventive concept.
  • The USPTO treated the Handset and Content Claims as separate inventions. Specifically, the USPTO:
    • issued all of the relevant claims, including some that were added, amended or confirmed on reexamination;
    • did not require any asserted patent to include a terminal disclaimer in light of an earlier Helferich patent; and
    • identified a number of different inventions in the original application and demanded that they be prosecuted in separate applications, which led to the issuance of multiple related patents.
After finding that the Handset and Content Claims are distinct, the Federal Circuit rejected the Content Providers' exhaustion argument, noting that:
  • The US Supreme Court and Federal Circuit have never applied the exhaustion doctrine unless the patentee alleges infringement by authorized acquirers or users of the licensed product. The court found that the Content Providers were not authorized acquirers because their alleged infringement did not require the use of previously-licensed mobile devices.
  • The Supreme Court's decision and analysis in Morgan Envelope Co. v. Albany Perforated Wrapping Paper Co. indicates that exhaustion should not apply where the alleged infringement involves an invention that is distinct from a related licensed invention, even where the two inventions are designed to be used together (152 U.S. 425, 435 (1894)).
  • A finding in favor of the Content Providers would exceed Congressional approval of the judicially-created exhaustion doctrine and have dramatic economic implications on patent licensing and enforcement.
The Federal Circuit left open the possibility that the Content Providers might establish their exhaustion defense on remand if they prove to the district court that specific Handset and Content Claims cover the same inventive concept and require the use of both inventions to function.