Covenant Not to Sue Manufacturer Exhausts Patent as to Downstream Customers

The court granted in part a customer defendant's motion for summary judgment of patent exhaustion following plaintiff's offer of a covenant not to sue to defendant's manufacturer. "[Plaintiff's] offer of a covenant not to sue [the manufacturer] is an 'authorized sale' within the meaning of the patent exhaustion doctrine, as to the [patent-in-suit]. It is undisputed that [plaintiff] offered [the manufacturer] a covenant not to sue during the proceedings on [the manufacturer's] declaratory judgment action. [Plaintiff] cannot retract its admission in this case. The offer of a proposed covenant not to sue shows [plaintiff's] intent to allow [the manufacturer] to use and employ the patented practice while promising not to sue for infringement. [Plaintiff's] stated intent to prevent any rights under the covenant to extend to [the manufacturer's] customers is not a relevant consideration under a patent exhaustion analysis. Consequently, [the manufacturer's] downstream customers, like [defendant], have the right to practice the patent through the doctrine of patent exhaustion."

Alberta Telecommunications Research Centre v. AT&T Corporation, 3-09-cv-03883 (NJD July 14, 2014, Order) (Sheridan, J.)