Let's Build a Responsible Cyber Society




"Once Sold, it remains Sold".. the emerging doctrine in IPR issues

Close on the heels of the interesting judgement in the Autodesk-Vernor case discussed below, another Court decision in US has tried to limit the operation of Patent rights to prevent multiple royalties being charged.

The case revolves around a long-time Supreme Court doctrine that says the sale of an invention exhausts the patent-holder's right to control how the purchaser uses it.

In 1992, a federal appeals court in Washington, D.C., that hears patent cases from around the country began eroding the doctrine, ruling that patent-holders could attach post-sale conditions to patented products. This decision has been set right now in the case of Quanta v. LG Electronics, 06-937.

In the case before the Supreme Court, a South Korean company, LG Electronics, licensed some of its patents to Intel. LG then sued some of Intel's customers for patent infringement, saying they owed royalties to LG because the customers combined Intel's microprocessors and chipsets with non-Intel products.

The decision now reaffirms the patent exhaustion doctrine, which entitles consumers to use, repair, or resell patented products that they have purchased.

The issue is of increasing importance to consumers, who often face "single use only" and "not for resale" labels on patented products, interfering with legitimate activities and secondary markets. Lexmark, for example, has used "single use only" labels to limit the market for refilled toner cartridges. Similarly, "not for resale" labels could interfere with second-hand and refurbished product sales on eBay and Craigslist.

The case of Autodesk Vs Vernor also upheld a similar principle where "Sale" of a "Software" was held to consist of the "Right to Re-sell".

This principle should now start reflecting on all IPR issues as the principle "Once Sold, It is Sold". Limited or Restricted sale concepts in IPR contracts will now be difficult to be protected.

This should also apply to neighboring rights such as broadcast rights, rights on sale of event specific content such as TV rights of Cricket matches etc.

The principle upheld in the above two decisions therefore represents a turning point in the history of IPR.


June 10, 2008