When Is a Patent Exhausted? Licensing Patents on a Claim-By-Claim Basis

The patent exhaustion doctrine is meant to protect legitimate purchasers of patented items from post-sale restrictions imposed by patent owners. The courts, however, have recently expanded the doctrine of patent exhaustion by holding that the sale of a device which “partially” practices a patent exhausts that patent in its entirety. This holding essentially precludes patent owners from licensing their patents on a claim-by-claim basis. As inventions become more complex and require more parties working in concert to bring an idea to market, the inability to license patents on a claim-by-claim basis will lead to inventors being unable to fully monetize their inventions, licensees over-paying for licenses, and market hold-ups where ideas languish in conception. Further, the expansion of the patent exhaustion defense affords legitimate purchasers no additional protections, conflicting with the original purpose behind the doctrine. As a matter of policy, courts must allow patent owners to license their patents on a claim-by-claim basis by replacing the current test to determine whether a patent has been exhausted. This Note makes two main arguments. First, the patent exhaustion defense should only be available to legitimate purchasers of patented products—those who have directly or indirectly contributed economically to the patent owner. Second, patents should only be exhausted in cases where normal or expected use of the product by the authorized purchaser would result in infringement, not simply when the product “partially” practices a patent. This proposal would solve the problems created by the recent rulings while also aligning with prior case law and the historical reasoning behind the patent exhaustion doctrine