Helferich Patent Licensing v. New York Times et al.: Federal Circuit Reverses District Court Summary Judgment Ruling Regarding Patent Exhaustion

February.18.2015

​In Helferich Patent Licensing LLC v. New York Times Co., 2015 U.S. App. LEXIS 2047 (Fed. Cir. Feb. 10, 2015), the Court of Appeals for the Federal Circuit ("CAFC") concluded that the judicially-created doctrine of patent exhaustion should not be expanded such that authorized sales to persons practicing a first set of patent claims exhaust the patentee's rights to enforce other patent claims against different parties, reversing a district court decision that had granted summary judgment of non-infringement in favor of the accused infringers under the doctrine.  Helferich Patent Licensing, LLC v. New York Times Co., 965 F. Supp. 2d 971 (N.D. Ill. 2013).

Helferich Patent Licensing, LLC ("HPL") holds rights to a large portfolio of patents and enforces those patents with licensing or through litigation.  The Helferich patents-at-issue relate to methods and systems that send and receive hyperlinks to an electronic device, such as a cellular phone.  Using Short Message Service ("SMS") or Multimedia Messaging Service ("MMS") protocols, a cell phone can receive a link to a website from a content provider.  A user can then click on the link to retrieve content via a website.  The CAFC referred to the Helferich patent claims directed toward this process as "content claims."

A related set of claims in some of the asserted Helferich patents consists of product and method claims directed generally to mobile wireless communication devices on handsets such as mobile phones and receiving and/or requesting content on such handsets (collectively referred to by the CAFC as the "handset claims").  Helferich has licensed virtually all mobile handset manufacturers under the handset claims, while expressly stating in most of those licenses that no license was being granted to content providers as to the content claims by virtue of the license.

Between 2010 and 2012, Helferich filed complaints against several content providers including the New York Times, J.C. Penney Corp, G4 Media LLC, the Bon-Ton Stores, and CBS in the United States District Court for the Northern District of Illinois.  In these complaints, Helferich asserted that the defendant content providers infringed the content claims in six patents.  Two of the six asserted patents also contained handset claims, which, as previously noted, had already been licensed to virtually every handset manufacturer.

The district court, in August 2014, granted defendants' request for summary judgment of non-infringement, holding that, by granting handset manufactures broad authority to sell handsets under the handset claims, Helferich had exhausted its ability to enforce the content claims not only against acquirers of the handsets, but also against the defendant content providers who presumptively infringed the content claims of these patents by managing and delivering content to handset users.  Helferich appealed the district court's summary judgment ruling to the CAFC, arguing that patent exhaustion should not apply to content claims as to parties not licensed under the handset claims.

The CAFC, on February 10, 2015, reversed.  The three judge panel unanimously held that the judicially created doctrine of patent exhaustion should not be expanded to bar infringement claims against content providers based on the content claims.  The CAFC faulted the district court for not focusing on the particulars of the handset claims and the content claims.  The CAFC further pointed out that the district court failed to show that two key elements of patent exhaustion were present.  The first such required element is that those who possessed licensed handsets by definition used the content claims.  The second element necessitates that, to the extent the asserted content claims contemplate someone else's use of a handset, they specify that the handset have inventive features claimed in particular handset claims.

The CAFC noted that patent exhaustion is a judicially fashioned doctrine not codified in the patent statute, and it would be improper to apply the doctrine, as defendants proposed, merely based on the enhanced practical utility to a handset owner of being able to use the inventions of the content claims.  The CAFC concluded that the defendants' broad proposed approach "would extend exhaustion far beyond the doctrine's traditional scope, and it does not lie within a sensible range of judicial elaboration pursuant to implied congressional authority."  "We cannot say that inventions of the asserted content claims have no reasonable use other than one involving someone's practicing of the handset claims, because we cannot say that the asserted content claims call on use of the inventive features of the handset claims: at most an ordinary handset is required."

Conclusion

The CAFC confirms that the patent exhaustion defense is a narrow one.  The decision and reasoning in Helferich make clear that assertion of a patent exhaustion defense requires a detailed analysis of the asserted patent claims and individual analyses for each claimed invention.  In some situations, the patent exhaustion analysis may need to be performed separately for different claims within a single patent.  In addition, licensees of a patent portfolio with related claims should make every effort to ensure that the grant language in the license agreement is sufficient to cover the intended uses by the licensee and its customers of the licensed products and methods.