`
`LIFESCAN SCOTLAND LTD. V. SHASTA TECHNOLOGIES LLC , 734 F.3D 1361 (FED. CIR.
`2013) (“LIFESCAN DECISION”)
`
`
`
`
`
`Pharmatech Solutions, Inc.: EXHIBIT 1029
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`
`
`
`
`United States Court of Appeals,
`Federal Circuit.
`LIFESCAN SCOTLAND, LTD. and LifeScan, Inc.,
`Plaintiffs–Appellees,
`v.
`SHASTA TECHNOLOGIES, LLC and Conductive
`Technologies, Inc., Defendants–Appellants,
`and
`Instacare Corp. and Pharmatech Solutions, Inc., De-
`fendants–Appellants.
`
`
`
`No. 2013–1271.
`Nov. 4, 2013.
`
`
`Background: Patentees brought action against com-
`
`petitors, alleging infringement of their patents related
`to glucose monitoring systems. Patentees moved for a
`
`preliminary injunction, and competitors moved to
`dismiss. The United States District Court for the
`
`Northern District of California, Edward J. Davila, J.,
`933 F.Supp.2d 1243, granted patentees' motion for
`
`preliminary injunction and denied competitors' mo-
`tion. Competitors appealed.
`
`Holdings: The Court of Appeals, Dyk, Circuit Judge,
`held that:
`(1) distribution of meters exhausted patent rights, and
`(2) as an issue of first impression, absence of consid-
`
`eration for meters was not barrier to application of
`patent exhaustion.
`
`
`Reversed and remanded.
`
`
`
`
`
`
`
` Reyna, Circuit Judge, filed a dissenting opinion.
`
`West Headnotes
`
`
`
`Page 1
`
`776
`
`[1] Federal Courts 170B
`
`170B Federal Courts
` 170BVIII Courts of Appeals
` 170BVIII(K) Scope, Standards, and Extent
` 170BVIII(K)1 In General
` 170Bk776 k. Trial de novo. Most Cited
`Cases
`
`
`To the extent that a district court's decision to
`grant a preliminary injunction hinges on questions of
`law, review is de novo.
`
`
`1075
`
`[2] Injunction 212
`
`212 Injunction
` 212II Preliminary, Temporary, and Interlocutory
`Injunctions in General
` 212II(A) Nature, Form, and Scope of Remedy
` 212k1075 k. Extraordinary or unusual na-
`ture of remedy. Most Cited Cases
`
`
`A preliminary injunction is an extraordinary
`
`remedy that may only be awarded upon a clear
`showing that the plaintiff is entitled to such relief.
`
`
`1092
`
`[3] Injunction 212
`
`212 Injunction
` 212II Preliminary, Temporary, and Interlocutory
`Injunctions in General
` 212II(B) Factors Considered in General
` 212k1092 k. Grounds in general; multiple
`factors. Most Cited Cases
`
`
`A plaintiff seeking a preliminary injunction must
`
`establish that he is likely to succeed on the merits, that
`he is likely to suffer irreparable harm in the absence of
`
`preliminary relief, that the balance of equities tips in
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`Pharmatech Solutions, Inc: 1029-1
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`his favor, and that an injunction is in the public inter-
`est.
`
`
`295
`
`[4] Patents 291
`
`291 Patents
` 291XII Infringement
` 291XII(B) Actions
` 291k293 Preliminary Injunction
` 291k295 k. Establishment of validity of
`patent in general. Most Cited Cases
`
`
`298
`
`Patents 291
`
`291 Patents
` 291XII Infringement
` 291XII(B) Actions
` 291k293 Preliminary Injunction
` 291k298 k. Establishment of infringe-
`ment. Most Cited Cases
`
`
`If the accused infringer raises a substantial ques-
`
`tion concerning either infringement or validity, then
`the patentee has not established that it is likely to
`
`succeed on the merits, and a preliminary injunction is
`not appropriate.
`
`
`191
`
`[5] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`Patentee's meters for glucose monitoring sub-
`
`stantially embodied methods in patent claiming
`method of comparing measurements taken by two
`
`separate working electrodes, such that distribution of
`meters exhausted patentee's patent rights under doc-
`
`Page 2
`
`trine of patent exhaustion; although patentee argued
`that meters were components with reasonable nonin-
`
`fringing use, patentee distributed meters in expecta-
`tion and with intent that customers would use its me-
`
`ters with its test strips, and claimed inventive concept
`of method claims of patent was in meter, rather than
`
`the strips, because meters controlled and carried out
`inventive functions of method claims in comparing
`readings of two working electrodes.
`
`
`191
`
`[6] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`Alternative uses are relevant to the exhaustion
`inquiry only if they are both reasonable and intended
`by the patentee or its authorized licensee.
`
`
`191
`
`[7] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`Absence of consideration for glucose monitoring
`
`meters distributed for free to physicians to give to
`patients was not barrier to application of patent ex-
`
`haustion in patentee's infringement action against
`manufacturer of glucose test strips.
`
`
`191
`
`[8] Patents 291
`
`291 Patents
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`Pharmatech Solutions, Inc: 1029-2
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`A patentee may demand a particular price in ex-
`
`change for an article and the invention which it em-
`bodies; alternately, a patentee may choose to give that
`
`article away for free in the hope of obtaining a future
`benefit.
`
`
`191
`
`[9] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`A patentee cannot evade patent exhaustion prin-
`
`ciples by choosing to give the article away rather than
`charging a particular price for it.
`
`
`191
`
`[10] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`Where a patentee unconditionally parts with
`ownership of an article, it cannot later complain that
`
`the approach that it chose results in an inadequate
`reward and that therefore ordinary principles of patent
`exhaustion should not apply.
`
`
`[11] Patents 291
`
`191
`
`Page 3
`
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`For patent exhaustion purposes, the amount of
`compensation received by the patentee may in some
`
`instances be relevant to the question of whether a
`particular transaction is indeed an unconditional
`
`transfer of ownership as opposed to a conditional sale
`or license.
`
`
`191
`
`[12] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`For patent exhaustion purposes, unless the pur-
`
`chaser of a patented product has made an express
`contractual undertaking, the transfer is an uncondi-
`tional sale, not a conditional sale or license.
`
`
`191
`
`[13] Patents 291
`
`291 Patents
` 291X Title, Conveyances, and Contracts
` 291X(A) Rights of Patentees in General
` 291k191 k. Rights and powers of patentees
`as to making, use, or sale of invention. Most Cited
`Cases
`
`
`Absent a valid contractual restriction, restraints
`
`upon the downstream use or sale of a patented product
`offend against the ordinary and usual freedom of
`
`traffic in chattels, and that is so regardless of the
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`Pharmatech Solutions, Inc: 1029-3
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`amount of consideration demanded by the patentee
`when it originally parted with the product.
`
`
`328(2)
`
`Patents 291
`
`291 Patents
` 291XIII Decisions on the Validity, Construction,
`and Infringement of Particular Patents
` 291k328 Patents Enumerated
` 291k328(2) k. Original utility. Most Cited
`Cases
`
`
`5,120,420, 6,258,229, 7,250,105. Cited.
`
`
`*1363 Gregory L. Diskant, Patterson Belknap Webb
`& Tyler LLP, of New York, NY, argued for plain-
`
`tiffs-appellees. With him on the brief were Eugene M.
`Gelernter and Kathleen M. Crotty. Of counsel on the
`
`brief were Charles Hoffmann and Sean Marshall,
`Hoffmann Marshall Strong LLP, of New York, NY.
`
`John J. Shaeffer, Lathrop & Gage LLP, of Los Ange-
`les, CA, argued for defendants-appellants. With him
`
`on the brief were Robert P. Andris and Lael D. An-
`dara, Roper, Majeski, Kohn & Bentley, of Redwood
`
`City, CA; and William A. Rudy, Lathrop & Gage
`LLP, of Kansas City, MO. Of counsel was Carole E.
`Handler, Lathrop Gage LLP, of Los Angeles, CA.
`
`Before DYK, PROST, and REYNA, Circuit Judges.
`
`DYK, Circuit Judge.
`Defendants Shasta Technologies, LLC; Conduc-
`
`tive Technologies, Inc.; Instacare Corp.; and Phar-
`matech Solutions, Inc. (collectively, “Shasta”) appeal
`
`from a decision of the United States District Court for
`the Northern District of California granting a prelim-
`
`inary injunction in favor of Plaintiffs LifeScan Scot-
`land, Ltd. and LifeScan, Inc. (“LifeScan”). The in-
`
`junction prohibited Shasta from making, using, or
`selling its blood glucose test strips. The district court
`
`Page 4
`
`strips likely indirectly infringes LifeScan's U.S. Patent
`No. 7,250,105 (“the '105 patent”). Because we agree
`
`that Shasta has established that it has a patent ex-
`haustion defense, we reverse.
`
`
`BACKGROUND
`I
`This case concerns blood glucose monitoring
`systems, which are used by individuals with diabetes
`
`to assist them in maintaining healthy blood glucose
`levels. Such systems typically consist of an electro-
`
`chemical meter and disposable test strips. To use the
`system, the user first inserts a test strip into the meter,
`
`then uses a lancet to draw a small drop of blood and
`places the drop on the test strip. The strip contains one
`
`or more electrodes, which may be “working elec-
`trodes” or “reference electrodes,” and which connect
`
`to the meter during operation. Each working electrode
`is coated with an enzyme, such as glucose oxidase,
`
`and a mediator, such as ferricyanide. The enzyme
`reacts with glucose in the blood sample, releasing
`
`electrons. The *1364 mediator then transfers those
`electrons to the working electrode. The working elec-
`
`trode is connected to the meter, which measures the
`resulting electric current. Because this current corre-
`
`lates with the concentration of glucose in the sample,
`the meter is thus able to measure the user's blood
`
`glucose level. The reaction occurring at the working
`electrode does not occur at the reference electrode
`
`because the reference electrode is not coated with
`glucose oxidase. Thus, by comparing the current at the
`
`reference electrode to the current at the working elec-
`trode, the meter can verify that the current produced at
`
`the working electrode is solely due to the reaction of
`the enzyme and mediator with blood glucose in the
`sample.
`
`
`Blood glucose meters and disposable test strips of
`
`this general design first became available in the 1980s.
`The '105 patent claims to improve upon earlier sys-
`
`tems. It claims a method of comparing the measure-
`ments taken by two separate working electrodes. If the
`
`found that the making, using, or selling of Shasta's
`
`readings of the two working electrodes differ signifi-
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`Pharmatech Solutions, Inc: 1029-4
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`cantly, this indicates problems such as inadequate
`sample volume or manufacturing defects, and the
`
`readings are to be discarded. A reference electrode on
`the strip serves as a common reference for both
`working electrodes.
`
`
`LifeScan manufactures such a system, which it
`
`calls the “OneTouch Ultra” blood glucose monitoring
`system. According to LifeScan, its OneTouch Ultra
`
`system uses the technology described in the '105 pa-
`tent. Claim 1, the only independent claim in the '105
`patent, reads:
`
`
`1. A method of measuring the concentration of a
`
`substance in a sample liquid comprising the steps
`of:
`
`
`
`
`
`
`
`
`
`providing a measuring device[,] said device com-
`prising:
`
`a first working sensor part for generating charge
`carriers in proportion to the concentration of said
`substance in the sample liquid;
`
`a second working sensor part downstream from
`
`said first working sensor part also for generating
`charge carriers in proportion to the concentration
`
`of said substance in the sample liquid wherein
`said first and second working sensor parts are
`
`arranged such that, in the absence of an error
`condition, the quantity of said charge carriers
`
`generated by said first working sensor [ ] part [is]
`substantially identical to the quantity of said
`
`charge carriers generated by said second working
`sensor part; and
`
`Page 5
`
`sample liquid is constrained to flow substantially
`unidirectionally across said reference sensor part
`
`and said first and second working sensor parts;
`wherein said first and second working sensor
`
`parts and said reference sensor part are provided
`on a disposable test strip;
`
`applying the sample liquid to said measuring de-
`vice;
`
`measuring an electric current at each working
`sensor part proportional to the concentration of
`said substance in the sample liquid;
`
`comparing the electric current from each of the
`
`working sensor parts to establish a difference
`parameter; and
`
`giving an indication of an error if said difference
`parameter
`is greater
`than a predetermined
`threshold.
`
`
`
`
`
`
`
`
`
`
`
`'105 patent col. 6 l. 52 to col 8 l. 4. In LifeScan's
`
`OneTouch Ultra system, the *1365 “sensor parts”
`refer to the electrodes located on the strips. The
`
`“measuring an electric current ...,” “comparing the
`electric current ...,” and “giving an indication of an
`error ...” steps are performed by the meter.
`
`
`LifeScan sells 40% of its meters at below cost
`
`prices. It distributes the remaining 60% of its
`OneTouch meters through health care providers, who
`
`in turn give the meters to diabetic individuals for free.
`LifeScan distributes its meters in this way “in the
`
`expectation and intent that customers will use its
`OneTouch Ultra meters with [its] OneTouch Ultra test
`
`a reference sensor part upstream from said first
`and second working sensor parts which reference
`
`strips, from which [it] derive[s] a profit.” JA 319.
`Shasta does not sell blood glucose meters, but com-
`
`sensor part is a common reference for both the
`first and second working sensor parts, said ref-
`
`erence sensor part and said first and second
`working sensor parts being arranged such that the
`
`petes with LifeScan in the market for test strips.
`Shasta's “GenStrip” test strips are designed to work
`with LifeScan's meters.
`
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`Pharmatech Solutions, Inc: 1029-5
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`Page 6
`
`II
`On September 9, 2011, LifeScan filed suit against
`
`Shasta. In its amended complaint, it alleged that
`Shasta's manufacture and distribution of GenStrips
`would indirectly infringe the '105 patent.FN1 It alleged
`that the users of Shasta's GenStrips would be direct
`
`LifeScan “receive[s] no remuneration at the moment
`[it] part[s] with [its] patented invention,” LifeScan
`
`could likely show that patent exhaustion is inapplica-
`ble to the meters distributed for free. JA 9. The court
`
`also concluded that patent exhaustion would not apply
`to LifeScan's sale of the remaining meters because
`
`infringers. LifeScan also sought a preliminary injunc-
`tion barring Shasta “from contributing to and inducing
`
`“the '105 patent is a method patent that requires both a
`meter and a test strip for an individual to practice it.”
`
`the infringement of [the '105 patent] by selling or
`offering to sell [its] GenStrip product in the United
`
`JA 10. Although the court acknowledged that, under
`Quanta, a method claim is exhausted by the sale of a
`
`States.” JA 62. Shasta argued that a preliminary in-
`junction should not issue, inter alia, because Shasta
`
`product that “ ‘substantially embodies' ” the invention,
`JA 11 (quoting Quanta, 553 U.S. at 633, 128 S.Ct.
`
`had a substantial defense based on the doctrine of
`patent exhaustion under Quanta Computer, Inc. v. LG
`
`2109), it concluded that LifeScan's meters “likely do
`not embody the inventive feature of the '105 patent.”
`
`Electronics, Inc., 553 U.S. 617, 128 S.Ct. 2109, 170
`L.Ed.2d 996 (2008). The sale and distribution of
`
`JA 14. The district court also rejected Shasta's other
`noninfringement and invalidity arguments. Finally,
`
`LifeScan's meters, according to Shasta, exhausted
`LifeScan's rights under its method patent because the
`meters substantially embody the invention.
`
`
`FN1. LifeScan's complaint also asserted in-
`
`the district court concluded that the remaining pre-
`liminary injunction factors favored LifeScan.
`
`
`*1366 [1] Shasta appeals. We have jurisdiction
`pursuant to 28 U.S.C. § 1292(c)(1). “[T]o the extent
`
`fringement of two other patents. The District
`Court subsequently granted Shasta's motion
`
`that a district court's decision to grant a preliminary
`injunction hinges on questions of law, our review is de
`
`to stay the action as to those other patents
`pending the outcome of ex parte reexamina-
`
`novo.” Nat'l Steel Car, Ltd. v. Can. Pac. Ry., Ltd., 357
`F.3d 1319, 1325 (Fed.Cir.2004) (quotation marks and
`
`tion proceedings at the U.S. Patent and
`Trademark Office. Order Granting in Part
`
`alteration omitted). On April 29, 2013, we granted
`Shasta's motion for stay, staying the injunction
`
`and Den. in Part Defs.' Mot. to Stay,
`LifeScan, No. 11–cv–4494, 2013 WL
`
`1149827, ECF No. 245 (Mar. 19, 2013).
`These other patents are not pertinent to the
`preliminary injunction or this appeal.
`
`
`
`The district court granted LifeScan's motion for a
`
`“pending further order of the court.” LifeScan Scot.,
`Ltd. v. Shasta Techs., LLC, No. 2013–1271 (Fed.Cir.
`Apr. 29, 2013).
`
`
`DISCUSSION
`[2][3][4] A preliminary injunction is “an ex-
`traordinary remedy that may only be awarded upon a
`
`preliminary injunction. With respect to LifeScan's
`likelihood of success on the merits, the court first
`
`clear showing that the plaintiff is entitled to such
`relief.” Winter v. Natural Res. Def. Council, Inc., 555
`
`addressed the issue of patent exhaustion. It began by
`concluding that LifeScan was likely to establish that
`
`U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008)
`(citing Mazurek v. Armstrong, 520 U.S. 968, 972, 117
`
`its patent was not exhausted with respect to the 60% of
`meters that it distributes for free. It reasoned that pa-
`
`S.Ct. 1865, 138 L.Ed.2d 162 (1997) (per curiam)). “A
`plaintiff seeking a preliminary injunction must estab-
`
`tent exhaustion applies only to a “sale” where the
`patentee has received “consideration” in exchange for
`
`lish that he is likely to succeed on the merits, that he is
`likely to suffer irreparable harm in the absence of
`
`the patented product. It concluded that because
`
`preliminary relief, that the balance of equities tips in
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`Pharmatech Solutions, Inc: 1029-6
`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
`
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`his favor, and that an injunction is in the public inter-
`est.” Id. at 20; see also Titan Tire Corp. v. Case New
`
`Holland,
`
`1375–76
`1372,
`F.3d
`566
`Inc.,
`(Fed.Cir.2009). If the accused infringer “raises a sub-
`
`stantial question concerning either infringement or
`validity,” then the patentee has not established that it
`
`is likely to succeed on the merits, and a preliminary
`injunction is not appropriate. See Amazon.com, Inc. v.
`
`Barnesandnoble.com, Inc., 239 F.3d 1343, 1350–51
`(Fed.Cir.2001); Oakley, Inc. v. Sunglass Hut Int'l, 316
`
`F.3d 1331, 1340 (Fed.Cir.2003). Because we conclude
`that Shasta has established a patent exhaustion defense
`
`as a matter of law, we reverse the grant of a prelimi-
`nary injunction without reaching other issues in this
`case.
`
`
`I
`[5] LifeScan's primary argument is that the dis-
`tribution of its meters, whether by sale or gift, does not
`
`Page 7
`
`e.g., Keeler v. Standard Folding Bed Co., 157 U.S.
`659, 15 S.Ct. 738, 39 L.Ed. 848 (1895); Bloomer v.
`Millinger, 68 U.S. (1 Wall.) 340, 17 L.Ed. 581 (1864).
`
`
`The Court applied the exhaustion doctrine to
`
`method as well as product patents in United States v.
`Univis Lens Co., an antitrust case. 316 U.S. 241, 62
`
`S.Ct. 1088, 86 L.Ed. 1408 (1942). The patent-holder
`operated an eyeglass lens business. Id. at 243–45, 62
`
`S.Ct. 1088. The patent-holder's licensee sold “lens
`blanks” to wholesalers and finishing retailers, who
`
`*1367 then ground and polished the lens blanks into
`finished lenses that could be used in eyeglasses. Id. at
`
`244, 62 S.Ct. 1088. The patent-holder owned nu-
`merous patents related to eyeglass lenses. See id. at
`
`246–47, 62 S.Ct. 1088; United States v. Univis Lens
`Co., 41 F.Supp. 258, 262–63 (S.D.N.Y.1941) (listing
`
`and describing many of the patents-in-suit), aff'd in
`part and rev'd in part, 316 U.S. 241, 62 S.Ct. 1088, 86
`
`trigger exhaustion because its meters do not substan-
`tially embody the claims of the '105 patent. Because
`
`L.Ed. 1408 (1942). Of the patents at issue in the case,
`eight were product patents describing the “shape, size,
`
`the ' 105 patent is a method patent, the parties agree
`that this issue is governed by the Supreme Court's
`decision in Quanta.
`
`
`Before Quanta, the Supreme Court had repeat-
`
`edly held, in addressing device patents, that the sale of
`a patented device exhausted the patent-holder's right
`
`to exclude, and that an infringement suit would not lie
`with respect to the subsequent sale or use of the de-
`
`vice. In Adams v. Burke, for example, the accused
`infringer argued that the sale of patented coffin lids
`
`composition and disposition of ... pieces of glass of
`different refractive power in [lens] blanks.” Univis,
`
`316 U.S. at 247, 62 S.Ct. 1088. The other relevant
`patents were method patents. See id. at 246–47, 62
`
`S.Ct. 1088. The Supreme Court “assume[d] ... that sale
`of the [lens] blanks by an unlicensed manufacturer to
`
`an unlicensed finisher” to be ground and polished into
`finished lenses “would constitute contributory in-
`
`fringement by the seller.” Univis, 316 U.S. at 248–49,
`62 S.Ct. 1088.
`
`
`exhausted the patentee's rights in the lids throughout
`the United States even though the assignee from
`
`The Court held that once the lens blanks were sold
`by a licensed manufacturer, the patent-holder's rights
`
`whom the accused infringer purchased the lids was
`only authorized to sell the lids in a limited geograph-
`
`in them were exhausted. Id. at 249–52, 62 S.Ct. 1088.
`The Court reasoned that “[a]n incident to the purchase
`
`ical area. 84 U.S. (17 Wall.) 453, 21 L.Ed. 700 (1873).
`The Court explained that “the sale by a person who
`
`of any article, whether patented or unpatented, is the
`right to use and sell it,” and that “the authorized sale of
`
`has the full right to make, sell, and use such a machine
`carries with it the right to the use of that machine to the
`
`an article which is capable of use only in practicing the
`patent is a relinquishment of the patent monopoly with
`
`full extent to which it can be used.” Id. at 455. The
`Supreme Court applied the patent exhaustion doctrine
`
`respect to the article sold.” Id. at 249, 62 S.Ct. 1088.
`Thus, the Court held that the sale of an article which
`
`in many other cases involving product patents. See,
`
`“embodies essential features” of a patented invention
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
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`INTER PARTES REVIEW -- IPR2013-00247
`OF U.S. PATENT NUMBER 7,250,105
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`Page 8
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`*1368 The Supreme Court held that LGE's suit
`was barred by patent exhaustion. The Court first re-
`
`jected LGE's argument that patent exhaustion did not
`apply to method patents. The Court stated that it had
`
`“repeatedly held that method patents were exhausted
`by the sale of an item that embodied the method,” and
`
`pointed to Univis as an example of such a prior hold-
`ing. Id. at 629, 128 S.Ct. 2109.FN2
`
`
`
`
`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`exhausted the patent-holder's rights in that article. Id.
`at 250–52, 62 S.Ct. 1088. The patent-holder conceded
`
`that “each [lens] blank ... embodies essential features
`of the patented” invention. Id. at 249, 62 S.Ct. 1088.
`
`The Court viewed the method patents as presenting the
`same question as the device patents, holding that the
`
`sale of the blanks exhausted the method patents as
`well. See id. at 246–49, 62 S.Ct. 1088; see also
`
`Quanta, 553 U.S. at 629, 128 S.Ct. 2109 (“ Univis
`held that the sale of optical lens blanks that partially
`
`practiced a patent exhausted the method patents that
`were not completely practiced until the blanks were
`ground into lenses.”).
`
`
` Quanta confirmed that the exhaustion doctrine
`
`applies to method patents and clarified the applicable
`test. 553 U.S. at 628–35, 128 S.Ct. 2109. Quanta
`
`involved several patents containing method claims
`directed to functions performed by computer proces-
`
`sors and chipsets in conjunction with other computer
`components, such as memory and buses. Id. at
`
`621–23, 128 S.Ct. 2109. LGE, the patent-holder, li-
`censed Intel to manufacture and sell processors and
`
`chipsets embodying the patented technology. Id. at
`623, 631, 128 S.Ct. 2109. Intel, in turn, sold its pro-
`
`cessors and chipsets to computer manufacturers such
`as Quanta Computer, who combined the processors
`
`and chipsets with unpatented components to create
`finished computer systems that practiced the method
`
`patents. Id. at 624, 128 S.Ct. 2109. A separate
`agreement between LGE and Intel required Intel to
`
`FN2. The Court in Quanta also cited Ethyl
`Gasoline Corp. v. United States, 309 U.S.
`
`436, 60 S.Ct. 618, 84 L.Ed. 852 (1940) as a
`case where it had applied patent exhaustion
`
`to method patents. Quanta, 553 U.S. at 629,
`629 n. 4, 128 S.Ct. 2109. Ethyl Gasoline was
`
`an antitrust suit by the government against a
`patentee that owned both product and method
`
`patents relating to tetraethyl lead for use in
`motor fuel. Ethyl Gasoline, 309 U.S. at
`
`445–46, 60 S.Ct. 618. The patentee argued
`that its allegedly anticompetitive licensing
`
`agreements were within the scope of its pa-
`tent monopoly. Id. at 456–57, 60 S.Ct. 618.
`
`The Court held that “by the authorized sales
`of the fuel by refiners to jobbers the patent
`
`monopoly over it is exhausted, and after the
`sale neither appellant nor the refiners may
`
`longer rely on the patents to exercise any
`control over the price at which the fuel may
`be resold.” Id. at 457, 60 S.Ct. 618.
`
`The Court next addressed “the extent to which a
`
`product must embody a patent in order to trigger ex-
`haustion.” Id. at 630, 128 S.Ct. 2109. It concluded that
`
`the issue was governed by Univis. Id. at 631, 128 S.Ct.
`2109. As discussed above, the Supreme Court's find-
`
`ing of exhaustion in Univis was based on the patentee's
`concession that its lens blanks “embodie[d] essential
`
`features” of the patented invention. Univis, 316 U.S. at
`250–51, 62 S.Ct. 1088. The Court in Quanta thus held
`
`that the critical issue, whether a method or product
`patent is involved, is whether the product “substan-
`
`instruct purchasers of those processors and chipsets
`that Intel's license to make and sell the processors and
`
`
`
`chipsets “d[id] not extend ... to any product [the pur-
`chasers] ma[d]e by combining an Intel product with
`
`any non-Intel product.” Id. at 623–24, 128 S.Ct. 2109
`(quotation marks omitted). Nevertheless, Quanta
`
`Computer manufactured computers in which Intel
`processors and chipsets were combined with non-Intel
`
`parts. Id. at 624, 128 S.Ct. 2109. LGE contended that
`Quanta's combination of the Intel processors and
`
`chipsets with non-Intel memory and buses infringed
`the method claims of LGE's patents. Id.
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
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`Pharmatech Solutions, Inc: 1029-8
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`
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`
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`734 F.3d 1361, 108 U.S.P.Q.2d 1757
`(Cite as: 734 F.3d 1361)
`
`tially embodies the patent”—i.e., whether the addi-
`tional steps needed to complete the invention from the
`
`product are themselves “inventive” or “noninventive.”
`553 U.S. at 633–34, 128 S.Ct. 2109. Applying that test
`
`to the case before it, the Supreme Court found that the
`authorized sale of Intel's processors and chipsets ex-
`
`hausted LGE's patent rights. Id. at 631–34, 128 S.Ct.
`2109. It explained that the processors and chipsets had
`
`no reasonable noninfringing use because they “cannot
`function until ... connected to buses and memory” and
`
`because “the only apparent object of Intel's sales to
`Quanta was to permit Quanta to incorporate the Intel
`
`[processors and chipsets] into computers that would
`practice the patents.” Id. at 632, 128 S.Ct. 2109. The
`
`Court further held that Intel's products substantially
`embodied the patents because “[e]verything inventive
`
`about each patent [was] embodied in the Intel [pro-
`cessors and chipsets]” and “because the only addi-
`
`tional step necessary to practice the patent[s was] the
`application of common processes or the addition of
`standard parts.” Id. at 633, 128 S.Ct. 2109.
`
`
`A
`The facts relevant to the patent exhaustion issue
`here are undisputed. Shasta argues that under Quanta
`
`and other Supreme Court cases, the transfer of the
`meters to health care providers and users exhausts
`
`LifeScan's patent rights. LifeScan disagrees. It first
`contends that Quanta is inapplicable because its me-
`
`ters have reasonable noninfringing uses. Relying on
`language from Quanta noting that the Intel processors
`
`and chipsets “had no reasonable noninfringing use,”
`553 U.S. at 638, 128 S.Ct. 2109, LifeScan argues that
`
`the sale of a component does not result in exhaustion
`where the component has reasonable noninfringing
`
`uses. LifeScan's theory appears to be that if the meters
`had a reasonable noninfringing use, then the transfer
`
`of the meters would not necessarily imply that the
`recipient was authorized *1369 to practice the claimed
`
`invention as opposed to the noninfringing alternative.
`We have recently rejected the contention that a po-
`
`tential non-infringing use prevents exhaustion where
`the use in question is the very use contemplated by the
`
`Page 9
`
`patented invention itself. Keurig, Inc., v. Sturm Foods,
`Inc., No. 13–1072, 732 F.3d 1370, 1373, 2013 WL
`5645192, *3 (Fed.Cir. Oct. 17, 2013).
`
`
`Even if a showing of reasonable noninfringing
`
`uses of a product could alone be sufficient to avoid
`exhaustion here, we would find no merit in LifeScan's
`
`argument. LifeScan bases this argument on expert
`testimony that Shasta could have designed new strips
`
`that would work with LifeScan's meter in a nonin-
`fringi