In its October 17, 2013 opinion in Keurig, Inc. v. Sturm Foods, Inc., the US Court of Appeals for the Federal Circuit affirmed the US District Court for the District of Delaware's grant of summary judgment of noninfringement in favor of Sturm because Keurig, the patentee, exhausted its rights to assert infringement of method claims by its initial authorized sale of its patented brewers used to carry out the method. Significantly, the court rejected Keurig’s argument that the district court erred by declining to apply the Supreme Court's “substantial embodiment” test, and declined to determine exhaustion on a claim-by-claim basis.

Keurig’s US Patent Nos. 7,165,488 (‘488 patent) and 6,606,938 (‘938 patent) concern brewers and methods of using them to make beverages. The asserted claims of the ‘488 and ‘938 patents were directed to methods of brewing a beverage by, among other steps, piercing a disposable cartridge to extract the beverage. Sturm manufactures and sells cartridges for use in Keurig’s brewers. Keurig alleged that purchasers of Keurig’s brewers infringe its brewer patents by using Sturm cartridges, and that Sturm is therefore liable for inducing infringement. Notably, Keurig did not allege infringement of apparatus claims of the ‘488 or ‘938 patents covering the brewers.

The district court held that Keurig triggered the exhaustion of its asserted method claims by its authorized sale of its brewers because they are used to practice every step of the asserted method claims. Accordingly, the court granted partial summary judgment of non-infringement in Sturm’s favor.

On appeal, Keurig argued that the district court erred by declining to apply the Supreme Court's “substantial embodiment” test set out in Quanta Computer, Inc. v. LG Electronics, Inc.. Under this test, authorized sale of an item that substantially embodies a claimed method exhausts the method claim if the item both:

Keurig argued that its method claims were not exhausted under the substantial embodiment test because its brewers are capable of many non-infringing uses. For example, they can be used with pre-pierced cartridges where the user does not carry out the piercing step of the claimed method.

The Federal Circuit rejected Keurig’s arguments. As an initial matter, the Federal Circuit noted that Keurig did not dispute that the sale of its brewers exhausted its rights to assert its apparatus claims. The court reasoned that to allow Keurig to continue to assert method claims when its apparatus claims were exhausted, and when Keurig has already recovered money for the sale of the claimed brewers, would vitiate the patent exhaustion doctrine.

Finally, the Federal Circuit rejected Keurig’s argument that patent exhaustion should be determined on a claim-by-claim basis. The court found that considering apparatus and method claims separately to determine patent exhaustion would frustrate the doctrine's purpose and lead to inefficiency in determining when the patent rights end.

Judge O’Malley concurred in the judgment but disagreed with the majority’s conclusion that exhaustion should not be determined on a claim-by-claim basis. She noted that each patent claim is a separate invention and that almost every other patent analysis is carried out on a claim-by-claim basis. Therefore, a claim-by-claim analysis of patent exhaustion may be appropriate in some cases.