Patent Exhaustion and Implied Licenses: Important Recent Developments in the Wake of Quanta v. LG Electronics


A little more than a year ago, the U.S. Supreme Court, in Quanta Computer, Inc. v. LG Electronics, Inc.,[1] clarified important questions regarding the application of the patent exhaustion doctrine to system and method patents. In Quanta, the Court also rejected the notion that patent exhaustion can be avoided by mere restrictive notices to downstream customers where the sale was otherwise authorized by the patent owner.[2] However, other much debated issues surrounding the law of patent exhaustion were not expressly addressed by the Court, most notably:

*whether a “covenant not to sue,” as opposed to a license, amounts to an authorization to sell for purposes of patent exhaustion;

*whether the “conditional sale” doctrine established by the Federal Circuit in its highly controversial Mallinckrodt decision[3] is still viable; and

*the questions raised by the Federal Circuit?s Jazz Photo decisions[4] regarding the application of the patent exhaustion doctrine to sales occurring outside the U.S.

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