The Sale of a Patented Apparatus Exhausts Patent Rights to Methods Covering the Normal and Intended Use of the Apparatus

Authored by D. Brian Kacedon, John C. Paul, and Kevin D. Rodkey

The exhaustion doctrine in patent law precludes a patent owner from asserting patent rights to control the use of an apparatus after an authorized sale. In Keurig, Inc. v. Sturm Foods, Inc.,¹ the Federal Circuit held that a patent owner's rights to a patented method are exhausted when the patent owner sells an apparatus with a normal and intended use of practicing the method. The Federal Circuit also stated that exhaustion is determined on a patent-by-patent basis, not a claim-by-claim basis. This latter portion of the Keurig decision is significant for patent owners because it could have additional ramifications for those whose patents cover both method and apparatus claims.

Background

Keurig makes single-serving beverage brewers. To make a beverage, a consumer inserts a cartridge into the brewer, the brewer then forcing hot water through the cartridge, dispensing the beverage. Keurig sells both the brewers and the cartridges to consumers. Keurig's brewers embody the apparatus claims of two of its patents. These two patents also include method claims, which are practiced by Keurig's brewers when making beverages. Sturm Foods, Inc., sells cartridges that can be used with Keurig's brewers, but does not make or sell the brewers.

Keurig sued Sturm alleging that consumers' use of Sturm's cartridges in Keurig's brewers directly infringed certain method claims of Keurig's patents. Keurig alleged that Sturm induced and contributed to infringement by selling cartridges for use in Keurig's brewers. Sturm argued that Keurig's patent rights to assert the method claims were exhausted when Keurig sold its brewers to the consumers. The district court agreed with Sturm, holding that Keurig's rights were exhausted and granting Sturm's motion for summary judgment of noninfringement. Keurig appealed.

The Decision

On appeal, Keurig admitted that the sale of the brewers exhausted its rights to assert the apparatus claims of its two patents but argued that it could still assert the method claims against use of the brewers with Strum's cartridges. The Federal Circuit affirmed the district court's ruling that applied exhaustion to all uses of Keurig's brewers.

The court first considered the Supreme Court's Univis and Quanta decisions, which involved the sale of unpatented articles that embodied patented methods. The Federal Circuit distinguished Univis and Quanta because the brewers sold by Keurig were patented articles, rather than nonpatented articles embodying a patented method. The Federal Circuit also noted that Keurig did not assert any of its cartridge-related patents against Sturm, but only the method claims covering the use of Keurig's brewers with Sturm's cartridges. The court applied the principle that Keurig's authorized sale of a patented apparatus grants the purchaser the right to use the apparatus so long as it is capable of use. Thus, when Keurig sold the patented brewers to consumers, the consumers obtained an unrestricted right to use them as they chose, including using cartridges sold by a third party.

The Federal Circuit reasoned that allowing Keurig to assert the method claims against Sturm would amount to an impermissible postsale restriction on consumers' use of the brewers because Keurig could control which cartridges a consumer must purchase and use with the brewers after the initial sale. The Federal Circuit also stated that a consumer's ability to use cartridges that would not infringe the patented methods did not prevent exhaustion of Keurig's two patents, which are directed to the brewers and methods of using the brewers. As a result, Keurig could not preclude an individual who purchased a Keurig brewer from using a non-Keurig cartridge and could not preclude a third party from selling cartridges to use in Keurig's brewers.

The Federal Circuit, rejecting Keurig's argument that exhaustion must be determined on a claim-by-claim basis, observed that the exhaustion jurisprudence discusses exhaustion of patents, not exhaustion of claims, and that when both method and apparatus claims are included in a single patent, all of those claims are judged together for exhaustion purposes. The Federal Circuit reasoned that a claim-by-claim exhaustion analysis would vitiate the exhaustion doctrine and create uncertainty about which rights are exhausted by an authorized sale. Because at least one claim was exhausted by Keurig's sale of brewers, so were all of Keurig's rights in its two patents.

Judge O'Malley concurred in the judgment. She agreed that Keurig's initial authorized sale of the patented brewers exhausted its rights for those brewers, including the claimed methods practiced by brewers' normal and intended use. Judge O'Malley reasoned, however, that determining whether patent rights are exhausted on a patent-by-patent basis or a claim-by-claim basis was not necessary to reaching this result. In Judge O'Malley's view, therefore, this portion of the court's opinion should be considered dictum, and she dissented from the majority to the extent that it held that patents are exhausted on a patent-by-patent basis.

Strategy and Conclusion

The Keurig decision provides another example of patent exhaustion and signals that the Federal Circuit (and therefore district courts too) may apply a broad patent-level analysis. Application of the doctrine may limit a patent owner's ability to assert its patent against third-party consumable manufacturers when the patent covers a method of using the apparatus sold by the patent owner. The court's statements that patents are exhausted on a patent-by-patent basis (rather than a claim-by-claim basis) and that a different analysis may have applied to a patent directed to the cartridges themselves may raise possible implications in patenting and licensing strategies where a single patent includes both method and apparatus claims.

Endnotes
¹ The Keurig opinion can be found at http://www.finnegan.com/files/Publication/64dcd5e1-341f-4b93-b8d7-bc5d1868851d/Presentation/PublicationAttachment/f2e74dc5-7d68-482a-9f65-c258d8cbbb5b/13-1072%2010-17-13.pdf.

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