License of Specific Patent Claims to Handset Manufacturers Exhausts All Claims as to Downstream Use of the Handsets

The court granted defendants' motion for summary judgment on their patent exhaustion defense because plaintiff’s license to cellular handset manufacturers, which were limited to specific patent claims and specific fields of use, exhausted the entire licensed patents as to downstream consumers and third party users of the handsets. "[Plaintiff] contends it ‘carefully licensed the materially different content and handset claims to the respective infringers in the respective fields.’ It is apparent that [plaintiff] sought to carefully construct some of its Licensing Agreements in such a way that it could recover multiple royalties on the same patents from a single sale or use. . . . [Plaintiff] argues that the handset manufacturer companies which obtained licenses from [plaintiff] received licenses to practice only the handset claims. Defendants’ activities . . . purportedly infringe [plaintiff's] content claims, which were not licensed to the handset manufacturer companies. . . . However, [plaintiff] cannot avoid patent exhaustion by attempting to shield some of the claims within the patents-in-suit from being covered by Licensing Agreements. . . . Once [plaintiff] licensed its patent portfolio to, for example, Motorola, downstream consumers and third-party users of Motorola devices employing [plaintiff’s] patents cannot be found to be infringing. . . . All of the patents-at-issue require the use of a handset device. . . . If these claims are separate and distinct within a single patent that a patentee seeks royalties on licenses for each individual claim, the patentee must file separate patents and then issue a license on each distinct patent. . . . To permit [plaintiff] to recover multiple times on the same patent by selling licenses to the patents piece by piece (or claim by claim) is contradictory to these policies supporting the doctrine of patent exhaustion.”

Helferich Patent Licensing, LLC. v. New York Times Co., 1-10-cv-04387 (ILND August 14, 2013, Order) (Darrah, J.).