[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

A NEW BEGINNING
Brief for Petitioners 2, 8-9. Now, respondent
seeks to enforce its patent
rights against the petitioners based on
their alleged violation of “conditions”
placed on the original agreement with
Intel. The first sale doctrine was designed
to prohibit precisely this type of
reach-through by the patent owner to
enforce its patent rights. Under this
Court’s precedents, once the petitioners
purchased products embodying essential
features of the patented invention
in an authorized sale, respondent’s
patent rights were exhausted. If the
conditions placed in the license with
Intel are consistent with contract law,
antitrust law, and the patent misuse
doctrine, then any violations can be enforced
against Intel as contract claims
(or possibly against the petitioners as
third party contract claims), rather than
patent infringement claims with the attendant
remedies of injunctive relief,
treble damages, and attorneys’ fees.
Such a result is consistent with the need
for certainty and competitiveness of not
only this market transaction, but also
the wide ranges of market transactions
that rest on intellectual property. In
eBay Inc. v. Mercexchange, L.L.C., 126
S.Ct. 1837 (2006), a plurality of the
Court was concerned about the development
of an industry “in which firms
use patents not as a basis for producing
and selling goods but, instead, primarily
for obtaining licensing fees”, and the
potentially harmful effects of injunctive
relief “[w]hen the patented invention is
but a small component of the product
the companies seek to produce….” Id.
at 1842 (Kennedy, J., concurring). The
In future cases, Indian High Courts could look to procompetition
decisions in the United States, such as eBay
and perhaps Quanta, to recognize that the need for competition
balances the need for intellectual property rights
first sale doctrine plays a role in preventing
similar market disruption, as
here, when a non-manufacturing patentee
seeks to control the manufacture of
end products in which the patented item
is but a small component.
The United States Supreme Court’s
resolution of the Quanta case has implications
globally. By abrogating the
conditional sale doctrine, the Court will
be affirming the bedrock principle of
the first sale doctrine. More importantly,
it will be recognizing competitive
values in intellectual property law.
Such a result is imperative for countries
like India that are reforming intellectual
property law and institutions. As
the recent dispute brought by Novartis
over the patentability of Gleevak shows,
intellectual property norms are still being
debated locally. The Quanta case
shows that these norms are global. If
the first sale doctrine is affirmed, then
competition becomes an important normative
goal for the design of intellectual
property systems. India will have
a strong position in asserting the values
of competition as a limit on patent and
other intellectual property rights.
More subtly, if the Supreme Court
strikes down the conditional sale doctrine,
the Court will be placing some
limits on the power of the Federal Circuit,
the specialized patent appellate
court in the United States. The Court
will be implicitly saying that despite its
expertise in patent law, the Federal Circuit
cannot alter through the creation
of new rules, like the conditional sale
doctrine, that counter established principles
of competition law and policy,
like the first sale doctrine. In the Novartis
dispute, the High Court of Chennai
deferred to the Indian patent office
and left open the standard for innovation
in the pharmaceutical industry. In
future cases, Indian High Courts could
look to pro-competition decisions in the
United States, such as eBay and perhaps
Quanta, to recognize that the need for
competition balances the need for intellectual
property rights. As discussion
in this essay suggests, intellectual property
rights and competition together are
both important for innovation.
In conclusion, a business dispute over
a patent license is the basis for the dispute
in Quanta. But at stake is a bedrock
principle of law, the first sale doctrine,
and the relationship between
competition norms and intellectual
property law. The Supreme Court’s
decision in the case should be closely
watched for what it implies for international
intellectual property law.
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