Helferich Patent Licensing, LLC v. The New York Times Co.

Addressing the scope of the judicially created doctrine of patent exhaustion, the U.S. Court of Appeals for the Federal Circuit reversed a lower court’s summary judgment of non-infringement, finding that patent exhaustion only protects “authorized acquirers” of technology. Helferich Patent Licensing, LLC v. The New York Times Co., Case Nos. 14-1196; -1197; -1198; -1199 and -1200 (Fed. Cir., Feb. 10, 2015) (Taranto, J.)

Helferich has over 30 patents relating to wireless communication technology. The patents contain two separate inventions; one directed to wireless handsets and the other directed to related communication methods.  According to Helferich, each invention tends to make the other more useful then when the inventions are separately practiced. Helferich has licensed its patent portfolio to most of the wireless handset manufacturers selling in the United States.  Each license expressly excluded any right for “content providers” to practice the related communication methods.

Helferich sued various “content providers,” which included the New York Times, CBS and Bravo Media, for infringing their related communications methods by storing and delivering content to their customers via mobile-device applications. The content provides argue their infringement of the patents is barred by the doctrine of patent exhaustion, as Helferich has authorized wireless handset manufactures to produce the phones, which are necessary to infringe the patents.  The lower court entered summary judgment of non-infringement, finding that, by granting the handset manufacturers patent licenses conferring broad authority to sell the handsets, Helferich had exhausted its ability to enforce the patents against not only the acquirers of the handsets but also against the defendant content providers.  Helferich appealed.

The Federal Circuit found that patent exhaustion did not bar Helferich’s claims. The Federal Circuit rejected defendants’ argument that the patentee’s licensing of a first invention to a first group terminates the patentee’s right against a second group for practicing a complementary second invention.  The Court also rejected defendants’ argument that preventing “double recoveries” should be an independent test for determining if patent exhaustion applies.

The Federal Circuit found that exhaustion only applies when “the patentee’s assertion of infringement was, or depended on, an assertion that an authorized acquirer was using the same invention by infringing the asserted claims.” Thus, the doctrine is only available to parties who are authorized acquirers.

Here, the claims against the content providers involved distinct, though related, validly patented inventions from those that were license. But, the content providers were not “authorized acquirers” of the patented devices, as they only stored and delivered content to their customers via mobile-device applications. Accordingly, defendants could not rely on patent exhaustion to escape liability, even though the cellphones necessary to infringe the patents were already licensed.