Licensing company “exhausted” patent even though it limited licenses to specific claims

Marc Kaufman of Reed Smith alerts managers of corporate licensing programs to a case that may necessitate a change in licensing strategy. “Licensors should determine if their licensing strategy relies on restricting the license to specific claims of a patent.” If it does, those licenses may be exhausting the patent, preventing subsequent licenses of remaining patent claims for the same product.

Helferich Patent Licensing LLC (HPL) had already sublicensed patents on mobile devices to hundreds of manufacturers, restricting the licenses to specific claims in the patents. Then HPL sued several of the sublicensees for infringement, asserting claims not included in the licenses.

The defendants filed for and won a motion for “Summary Judgment claiming that, under the doctrine of ‘patent exhaustion,’  the licenses to the mobile device manufacturers prevented HPL from collecting royalties based on use [covered by remaining patent claims, or claims not specified in the licenses] of the same mobile devices.”

It is likely HPL will appeal. Nonetheless, prudent license program managers whose organizations are or would be affected by this ruling should immediately begin contingency planning. Valuation analysts with clients offering licenses for separate claims in the same patent for the same devices will want to review those revenue streams.