Technology: Cutting edge changes in the ‘patent exhaustion’ doctrine

Two recent court decisions have given the 'disposable component' business strategy a cut and shave

A well-known business strategy is to sell (or give away) a reusable device, then profit from repeat sales of a proprietary disposable component. Think razors and blades (or today, blade servers and software). A complementary legal strategy has been to patent the disposable component, keeping competitors’ compatible components off the market. But two recent decisions have given this strategy a cut and shave.

Since the 1800s, a patentee’s sale of his patented device has “exhausted” his right to recover for infringement by the buyer or any downstream user. In 2008, the Supreme Court in Quanta Computer, Inc. v. LG Elecs., Inc. extended this rule to method patents, holding that the sale of an article that substantially embodies a method patent prevents the patentee from using such a patent to control post-sale use of the article. In Quanta, LG patented a method for using the computer parts it sold but did not patent the parts themselves. Still, because the parts “had no reasonable noninfringing use and included all the inventive aspects of the patented methods,” their sale was held to exhaust LG’s rights in its method patents, preventing LG from suing buyers for their infringing uses.

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James Batchelder

James Batchelder is managing partner of Ropes & Gray’s Silicon Valley office, a co-chair of Ropes & Gray’s technology, media & telecommunications group,...

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Contributing Author

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Matthew Moffa

Matthew Moffa is an IP litigation associate based in Ropes & Gray’s New York office. He advises and protects clients in IP-related matters in...

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