A Federal Judge in Illinois recently ruled (PDF) that the infringement claims asserted by Helferich Patent Licensing, LLC—the notorious troll who owns patents on sending links to cell phones—did not hold up, all thanks to a doctrine known as "patent exhaustion."
This is important for two reasons: One, the case is a big victory for end users—customers who buy products or utilize services—who increasingly find themselves targeted by patent trolls; two, patent exhaustion is an important legal doctrine that can and should be used more to protect those facing troll threats. In fact, Apple is currently arguing that exhaustion bars the infamous troll Lodsys' claims against iOS app developers because Apple already has a license to Lodsys' patents.
Helferich's patents cover the delivery of content (alerts with a hyperlink) to a cell phone. The patents included some claims directed to the device (i.e. the cell phone) and some directed to the delivery of the alerts (i.e. the content). Asserting that its license to mobile phone manufacturers only covers the cell phone claims in the patent and not the content claims, the troll proceeded to demand payment from hundreds of companies who utilized the everyday practice of sending text messages containing hyperlinks.
After sending a litany of demand letters resulting in over a hundred companies taking out a dubious content license, Helferich has finally been stopped in its tracks. The defendants in this latest case—The New York Times, G4 Media, CBS, Bravo Media, and J.C. Penney—refused to comply and fought back hard in court, winning summary judgment.
How'd they win? Because of "patent exhaustion."
Helferich licensed their patents to every mobile phone manufacturer, who, in turn, sell their devices to customers. The doctrine of patent exhaustion states that the sale of a product that practices a patent (even one that partially practices a patent) exhausts that patent in its entirety. In other words, the patentee doesn’t get two bites of the apple; it can't sue a product's downstream user if that user acquired it legally from a supplier that already licensed the patent.
In this case, Helferich argued that it had separately licensed its patents' cell phone claims and content claims. The Court found that Helferich's attempts to separately license its patents' various claims and then sue downstream content providers effectively and impermissibly turned one patent into multiple. Not only did Helferich receive licensing fees from cell phone manufacturers, but it was attempting to double dip by demanding an additional license from content providers like the New York Times and J.C. Penney.
Luckily, the court rightly found this to be totally bogus:
The doctrine of patent exhaustion is designed to avoid double recovery by a patentee, promote the orderly administration of patent rights, provide an efficient method for determining the termination of the patent monopoly, and promote fair competition. To permit HPL to recover multiple times on the same patent by selling licenses to the patents piece by piece (or claim by claim) is contradictory to these policies supporting the doctrine of patent exhaustion. Therefore, HPL's patents are exhausted.
The Big Idea: Protect End Users
Patent trolls are everybody's problem now.
They're no longer simply going after high tech companies. Increasingly, they are targeting end users for patent infringement.
Scan documents in your office? This troll wants you to pay up. Offer Wi-Fi at your café? This other troll might come knockin'. Send text messages with hyperlinks? Well, with this recent decision, there's now a glimmer of hope.
Patent exhaustion won't apply to all cases—only circumstances with prior licenses or sales. But end users must be protected from bad actors in the patent space. We've said it; the White House has called for empowering end users; Congress has proposed bills to fix it. Entities like Helferich make it clear just how necessary reform is—this time, patent exhaustion saved the day, but that won't always be the case.