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Wednesday, September 17, 2008

Patent Exhaustion a Defense, Not a Cause of Action

Patent Prospector has a good summary of the recent ExcelStor v. Papst decision by the CAFC. Excelstor licensed technology from Papst and alleged that Papst failed to notify it of a concurrent license of the technology with another licensee. Rather than file a complaint against Papst for fraud or contract breach, Excelstor alleged as a cause of action patent exhaustion. The argument was that Papst had already fully exhausted its rights in the patented technology by previously licensing it, so the CAFC had jurisdiction of the appeal. The CAFC affirmed the District Court's decision that the federal courts lacked subject matter jurisdiction, holding:

ExcelStor's claims fail to meet either prong of the Christianson test. First, patent law does not create the cause of action in this case. In arguing that it does, ExcelStor's appeal fundamentally misunderstands the nature of the patent exhaustion doctrine. As the district court held, patent exhaustion is a defense to patent infringement, not a cause of action.

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