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Sale of Battery-Pack Part Exhausts Patent Rights

May 21, 2003

Decision icon Decision

Last Month at the Federal Circuit - June/July 2003

Judges: Schall (author), Mayer, and Dyk

In Anton/Bauer, Inc. v. PAG, Ltd., No. 02-1487 (Fed. Cir. May 21, 2003), the Federal Circuit reversed a grant of a preliminary injunction to Anton/Bauer, Inc. (“Anton/Bauer”), finding that the district court had erred when it held that Anton/Bauer had not granted purchasers of certain accused parts an implied license to practice the claimed invention.

Anton/Bauer owns U.S. Patent No. 4,810,204 (“the ‘204 patent”), which is directed to a battery-pack connection that allows a battery pack to be quickly and efficiently replaced on discharge of the batteries. The claims of the ‘204 patent each recite a combination of a female plate and a male plate, where the female plate contains a plurality of keyholes or slots and the male plate contains a plurality of projections that correspond to the female keyholes or slots. Each claim further requires a “releasable locking means.” Anton/Bauer manufactures and sells the female plates directly to members of the portable-television video-camera industry, who attach them to commercial video cameras and sell them directly to end users as an after-market product. Anton/Bauer also manufactures and sells battery packs. Defendant, PAG, Ltd. (“PAG”), sells the accused battery packs that can be used in combination with Anton/Bauer’s female plates.

After filing suit, Anton/Bauer moved for a preliminary injunction, which the district court granted.

On appeal, the issue concerning the likelihood of success on the merits turned on the Federal Circuit’s interpretation of the exhaustion doctrine as it applied to Anton/Bauer’s accusations of indirect infringement.

The Federal Circuit stated that sale of an unpatented article exhausts the seller’s right to control the further sale or use of that article, but only certain circumstances exhaust the seller’s patent right and result in an implied license. The Court further confirmed that a patentee grants an implied license to a purchaser when (1) the patentee sells an article that has no noninfringing uses, and (2) the circumstances of the sale plainly indicate that the grant of a patent should be inferred.

The Federal Circuit observed that the district court had based its decision on a finding that the accused battery pack was not a replacement for any component of the mechanical and electrical combination claimed in the ‘204 patent and that the circumstances did not indicate that an implied license had been granted to Anton/Bauer’s customers to practice the patented combination with a male plate from a company other than Anton/Bauer.

The Federal Circuit concluded that sales by Anton/Bauer of the unpatented female plate extinguish Anton/Bauer’s right to control the future use of that plate because the plate can only be used in the patented combination and the combination must be completed by the purchaser. The parties agreed that there are no noninfringing uses of the female plate sold by Anton/Bauer. Moreover, Anton/Bauer places no express restrictions on the use of the female plates it sells. Nor does it require that manufacturers to whom it sells female plates expressly restrict the grant of a license upon sale of the finished camera product that incorporates the plate. This unrestricted sale of the female plate, the Federal Circuit ruled, grants an implied license to Anton/Bauer’s customers to use the claimed combination.

Accordingly, the Court found no direct infringement to support a claim of either inducement of infringement or contributory infringement. The Court ruled that Anton/Bauer’s customers have an implied license to practice the patented combination during the life of the female plate purchased from Anton/Bauer, regardless of the order that the customer purchased the accused battery pack and the female plate. As such, the Court concluded that Anton/Bauer will not likely succeed on the merits of its claim of inducement or contributory infringement.