Chicago IP Attorney & Lawyer : R. David Donoghue : Chicago IP Litigation Blog

The Winter 2008 edition of the John Marshall Review of Intellectual Property Law has been published and is available online by clicking here.  It includes several interesting articles, including:

• An argument for making stage directions copyrightable, Jennifer J. Maxwell, Making a Federal Case for Copyrighting Stage Directions: Einhorn v. Mergatroyd Productions, 7 J. Marshall Rev. Intell. Prop. L. 393 (2008); and
  
• John W. Osborne, Justice Breyer's Bicycle and the Ignored Elephant of Patent Exhaustion: An Avoidable Collision in Quanta v. LGE, 7 J. Marshall Rev. Intell. Prop. L. 245 (2008), arguing that the Supreme Court should chart its own course regarding patent exhaustion, instead of adopting the parties' positions in Quanta v. LG (click here for more on the case in the Blog's archives):

The Federal Circuit held in LGE v. Bizcom that patent exhaustion could be disclaimed by contract.

The confusion regarding patent exhaustion evident in the Federal Circuit’s LGE v. Bizcom decision can be entirely eliminated by strict adherence to the Supreme Court’s Univis Lens decision. Univis Lens makes clear that the sale of an article embodying the essential features of a patent claim results in the exhaustion of that claim.

But patent exhaustion is reflective of the scope of patent rights granted by statute. A statutory grant of rights should not be expandable by private contract. The Supreme Court should thus reverse in Quanta v. LGE. 261 This conclusion applies equally to any type of patent claim, i.e., component, apparatus, composition, system, combination, method, or process claims. Identifying the essential features of a patent claim, i.e., the patentably distinct features, clarifies the exhaustion analysis, results in predictability, and eliminates the confusion between the doctrines of exhaustion and implied license.

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A couple of unrelated IP stories from Chicago, where most have been focused on snow & the primaries this week:

• The Chicago Tribune reported -- click here for the story -- that a yearly $5,000 scholarship has been established in the name of Allen J. Hoover, a patent attorney at the law firm of Wood Phillips, who was killed in Wood Phillips's offices in December 2006.  The scholarship will be given to a third-year DePaul University law student focusing on intellectual property law.  Hoover was a DePaul alum.  At least some good can come from such senseless violence.
  
• The University of Chicago Faculty Blog discussed patent exhaustion and the recent LG v. Quanta Supreme Court oral argument in this post, as part of an ongoing discussion about "New Servitudes" -- licenses that attempt to control a purchaser's rights in software, digital music, etc. (click here to read Professor Van Houweling's initial post and click here to get the current version of her New Servitudes article at SSRN).  Van Houweling's analysis of the oral argument may not be as deep (note sarcasm) as my analysis of Justice Breyer's cycling analogy, but it is quite interesting and she edges closer than most to predicting an outcome:

Justice Breyer suggested that the “doctrine that you cannot impose equitable servitudes upon chattel” might help to decide the case.  And he returned several times to a hypothetical in which a patent holder tries to enforce restrictions on a consumer’s use of patented bicycle pedals: 

“Imagine that I want to buy some bicycle pedals, so I go to the bicycle shop….The inventor has licensed somebody to make them, and he sold them to the shop.  I go and buy the pedals.  I put it in my bicycle.  I start pedaling down the road.  Now, we don’t want 19 patent inspectors chasing me….” 

Breyer apparently finds this a troubling scenario even if the pedals come with some sort express notice of the use restrictions.  He asked whether

“if … I go in the bicycle shop and I buy the pedals and then they give me … one of these pieces of paper that has all of the 42,000 words on it and there are in these 42,000 words it says, and now you are put on notice that once you put it in your bicycle and you pedal away, they’re going to get you and you’re going to be hauled into Patent Court, then--then that’s ok?”

I don’t want to read too much into the tea leaves of this oral argument transcript.  But Breyer seems to be suggesting (in part relying on the traditional rule against chattel servitudes) that consumers would be justifiably surprised to find themselves “hauled into Patent Court” for merely using things they had lawfully acquired, even where the restriction was imposed by a patent holder by means of a written notice attached to the good.  As Henry's post suggests, the problem here is not exactly lack of notice--the information is available in the “42,000 words” in Breyer’s hypothetical.  But it may not be reasonable or even desirable to expect people (at least not retail pedal purchasers) to absorb that information.  The Court expressed this same anxiety back in Straus v. Victor Talking Machine Co., in which it refused to enforce a restriction printed on plates attached to record players after noting that “not one purchaser in many would read such a notice, and that not one in a much greater number, if he did read it, could understand its involved and intricate phraseology.” 

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The blogs are full of commentary about yesterday's Supreme Court patent exhaustion argument.  But no one is declaring a winner.  Instead, like my earlier post, people are focusing on trends in the Justices questions.  Here are some of the best commentaries:

• Amster, Rothstein & Ebenstein has a guest post all over the blogs -- read it at Patently-O, 271 Patent Blog, and Philip Brooks' Patent Infringement Updates.
  
• Anticipate This!
  
• I/P Updates -- quoting Chief Judge Roberts:  "We've had experience with the Patent Office where it tends to grant patents a lot more liberally than we would enforce under the patent law."  Ouch.
• ScotusWiki -- This is a companion to the well-known SCOTUSblog (which does not have any commentary about the argument posted yet).  ScotusWiki does not provide any commentary, but it is a great resource for information about this case, and any other Supreme Court case.
  
• Troll Tracker -- predicting a 5-4 or 6-3 reversal of the Federal Circuit (although only "leaning" that way and only predicting a "slight" reversal) and, similar to my post, picking up on Justice Breyer's cycling theme, but without professing a love for the sport.

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Quanta Computer, Inc. v. LG Elecs., Inc., No. 06-937 (Jan. 16, 2008).

The Supreme Court heard argument yesterday regarding the bounds of patent exhaustion, as explained in my previous posts on the case -- click here to read them.  The transcript was posted late yesterday and is an interesting read, although not one of the Supreme Court’s most entertaining arguments.  I was thrilled to see Justice Breyer use a cycling hypothetical (regular readers will remember that I am a huge fan of cycling). Justice Breyer, apparently not 100% at ease with chipsets, used the hypothetical of selling patented bicycle pedals either as part of a bicycle or to be used with a bicycle. Here are Justice Breyer’s hypos and a few of the responses from G. Carter Phillips, arguing on behalf of LG:

JUSTICE BREYER: But you couldn't put in --you are authorized to sell the bicycle pedals that I have patented only if you impose a restriction that will tell the bicycle user that he must send me a check for $15 in addition to whatever he pays you. That sounds unlawful under contract law.

* * *

JUSTICE BREYER: Well, there's a reason, I guess, that would be so. Imagine that I want to buy some bicycle pedals, so I go to the bicycle shop. These are fabulous pedals. The inventor has licensed somebody to make them, and he sold them to the shop, make and sell them. He sold them to the shop. I go buy the pedals. I put it in my bicycle. I start pedaling down the road.

Now, we don't want 19 patent inspectors chasing me or all of the other companies and there are many doctrines in the law designed to stop that. One is the equitable servitudes on chattel. Another is the exhaustion of a patent. And now you talk about implied license.

I would say, why does it make that much difference? What we're talking about here is whether after those pedals are sold to me under an agreement that the patent -- you know, you have a right to sell them to me -- why can't I look at this as saying that patent is exhausted, the patent on the pedals and the patent for those bicycles insofar as that patent for the bicycles says I have a patent on inserting the pedal into a bicycle.

Call it exhaustion, call it implied license. Who cares?

MR. PHILLIPS: I don't have any problem with your hypothetical because it's not this case. Your hypothetical deals with the situation of what would have happened if you had bought the chip. Would we be in a position to say, even though you bought the chip, we nevertheless want to retain some right to come out -- to come after you claiming we still have a patent in that chip? And the answer is no. We exhausted -- that was exhausted by the sale of the chip.

The question is if you buy a pedal, can you then take that pedal that was designed for a bicycle, put it into a Stair Master --

* * *

JUSTICE BREYER: All right, now if it should be protected -- and here I'm not sure I'm understanding it, so correct me. Let's suppose we have this contract. So everything is identical except we've got my bicycle example in here because I'm more comfortable with that. I know how to ride a bicycle and I don't know how to work the chips. So what I do --

MR. PHILLIPS: Me too.

JUSTICE BREYER: But you see the analogy I'm making.

MR. PHILLIPS: Right.

JUSTICE BREYER: So what I do I go to the shop and I buy this, this mechanism with the pedals on it, and then I insert it in my bicycle. Now, actually I need help in doing that, but I do it. Okay. Now I start pedaling off, and now what is it for all these things here that would stop that original inventor from catching me and hauling me into court, and say, what you've done, Breyer, is you've put my -- my mechanism here in this bicycle and I happen to have a patent on the system. And now you start talking to me about, well, the patent was exhausted on the bicycle --

MR. PHILLIPS: Pedal.

JUSTICE BREYER: -- pedals, but not on the system.

MR. PHILLIPS: Right.

JUSTICE BREYER: And you agree that shouldn't happen.

MR. PHILLIPS: Right.

JUSTICE BREYER: But if I follow you and I write an opinion just for you, what stops it from happening?

MR. PHILLIPS: Well, in that -- in that particular context, in the absence of relatively clear notice, I think it would be quite reasonable to potentially find that there was an implied license to use it under those circumstances.

* * *

JUSTICE BREYER: Then explain -- now this you might know because it's just following up on what Justice Souter said better than I did. I think from these briefs I've gotten the impression that at least some people think that where you invent a component, say, like the bicycle pedals, and it really has only one use, which is to go into a bicycle, it's the easiest thing in the world to get a patent not just on that component but to also get a patent on the system, which is called handlebars, body, and pedals.

And since that's just a drafting question, all that we would do by finding in your favor is to destroy the exhaustion doctrine, because all that would happen, if it hasn't happened already, is these brilliant patent lawyers, and they don't even -- they can be great patent lawyers, not just fine lawyers, and just draft it the way I said and that's the end of the exhaustion doctrine. And that's why it is preferable to say it is exhausted. What is exhausted? One, the patent on this component and, two, the patent on any system involving this component where that system is the only reasonable use of the component, rather than using the terminology "implied license."

Now, I think that's an argument that's being made in some of these briefs, and if so I'd like to you reply.

MR. PHILLIPS: Well, I think that clearly understates the role of the PTO in granting a separate patent. I mean, this is not -- these are not things you pick up at the corner drugstore. You have to justify them. And if you look at Section 282, "a patent shall be presumed valid," each claim shall be presumed valid independently of the validity of other claims. And there's an independence that's embedded in this entire scheme. If it's true that the PTO has in fact granted patent rights on something that's fundamentally not different from the other -- from some other patent, the solution to that is a validity challenge. And candidly, I think that's exactly what all of those arguments are

CHIEF JUSTICE ROBERTS: Well, then --

MR. PHILLIPS: -- is patent validity challenges.

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