Mike do you have the language of the MMP license contract? It is not cut and dry on down stream targets. Here is some language worth reading.

Can contract trump the exhaustion doctrine?

The Court, in a footnote quoted above (the Court's note 7), expressly refrained from stating any of the following: whether contractual language could overcome, or prevent triggering, the exhaustion doctrine; if so, what language would be effective to do so; and whether the surrounding circumstances would be relevant.

To the extent that the exhaustion doctrine is grounded in considerations of public policy, and to the extent that the interests of the public and third parties (such as Quanta in the Quanta case) are to be considered as well as those of the contracting parties, the courts may be more likely to place limits on whether the parties can by contract make the doctrine inapplicable to the goods that are the subject of their contract. On the other hand, if the policy of the exhaustion doctrine is seen merely as a rule to make sure that downstream purchasers get fair notice that their use of goods whose purchase they are considering will be restricted, courts may be more likely to uphold such restrictions unless they collide with other policies, such as those of competition or antitrust law.

The Court explicitly refused to consider this issue in Quanta.[33] The Quanta court did make clear, however, that it recognized the fundamental difference in law between a sale of patented goods by a patentee and a patentee’s license of another to manufacture the patented goods, which the Supreme Court had explained in United States v. General Electric Co.[34] At the same time, the Court made it clear that LGE had failed to license Intel (the seller to Quanta) in language that invoked the General Talking Pictures doctrine, which could have changed the outcome, as discussed above in the section of this article captioned “Licensing a limited field.”

The House of Lords considered whether contract could trump the similar doctrine against derogation from title in British Leyland Motor Corp. v. Armstrong Patents Co.. This is the doctrine that a seller may not successfully take actions, such as enforcing an intellectual property right, that decrease the value of what the seller has sold to a purchaser. The House of Lords ruled that contract could not be used to lessen the rights of end user purchasers, at least purchasers of consumer products such as motor cars.

Just before closing, the Court added a final note pointing out that the case did not raise, and the Court did not rule on, whether LGE could have enforced a contractual restriction. In footnote 7, the Court commented:

We note that the authorized nature of the sale to Quanta does not necessarily limit LGE’s other contract rights. LGE’s complaint does not include a breach-of-contract claim, and we express no opinion on whether contract damages might be available even though exhaustion operates to eliminate patent damages.

By the same token, the Court said nothing as to specific performance or whether contract rights, if any, could be enforced against Quanta

GL TW