JOLT Digest

Supreme Court Reinvigorates Patent Exhaustion
By Andrew Ungberg — Edited by Joshua Gruenspecht

Quanta Computers, Inc. v. LG Electronics, Inc.
Supreme Court of the United States, June 9, 2008, No. 2006-937
Slip Opinion

The Supreme Court reversed the Federal Circuit, which had held that patent holders could seek infringement damages from subsequent purchasers further “downstream” provided that the initial transfer had imposed some type of restriction on the initial purchaser. The Federal Circuit’s ruling, had it been upheld, would have effectively extinguished the doctrine of patent exhaustion and allowed patent holders the ability to control the use of their patents far beyond traditional limits.

Justice Thomas delivered the unanimous decision, holding that the 155-year-old doctrine of patent exhaustion limits the patentee’s power to dictate the terms of use through the first level of sales only. In an opinion steeped in tradition, the Court held that the reasoning of United States v. Univis Lens Co. 316 U.S. 241 (1942) controlled the case. The Univis Court held that a patentee’s rights were extinguished because the finished product (cut eyeglass lenses) embodied essential features of the patented product (unfinished eyeglass lens blanks). While this has long been the standard for process patents, the Court for the first time here extended that same logic to method patents. The Court also stated that a use “substantially embodying” the patent, rather than fully practicing it, was sufficient to exhaust the patent-holder’s rights.

Overviews of the case are available at Patently-O, the SCOTUS Blog and Law.com.

The full transcript of the oral argument is available here.

Professor Mark R. Patterson of Fordham University authored an article last November advocating a broad overruling of the Federal Circuit decision on Patently-O, which outlined the negative implications of allowing the lower court’s decision to stand.

(more…)

Supreme Court Leaves in Place Eighth Circuit Test Favoring First Amendment Protection for Fantasy Sports
By Dmitriy Tishyevich — Edited by Evie Breithaupt

Major League Baseball Advanced Media v. C.B.C. Distribution and Marketing
8th Circuit, Oct 16, 2007, cert. denied June 2, 2008
Eighth Circuit Opinion, Supreme Court Order

On June 2, the Supreme Court denied petition for a writ of certiorari from Major League Baseball Advanced Media (“MLB”). MLB had sought to appeal the Eighth Circuit’s decision, which held that the First Amendment interests in public information about baseball and baseball players outweighed the players’ state law right of publicity.

The Eighth Circuit affirmed the district court, which had granted summary judgment to CBC, a producer of fantasy major league baseball games. CBC sought a declaratory judgment that it may use, without license, the names of and information about major league baseball players in connection with its for-profit fantasy baseball products.

The Eighth Circuit found that MLB had provided sufficient evidence to establish a cause of action for violation of players’ rights of publicity under Missouri law. It held, however, that under Supreme Court precedent, a state law right of publicity must be balanced against First Amendment considerations. The court found that the CBC’s First Amendment rights superseded the players’ rights of publicity. The majority noted that information meant only to provide entertainment still enjoys First Amendment protection, and it reasoned that the significant public value of information about “the national pastime” entitles it to substantial protection. It noted also that as the information used by CBC was already available in the public domain, it would be “strange law” if CBC did not have a First Amendment right to use information available to everyone else. The court was not persuaded that CBC had violated the economic interests of the players which the right of publicity seeks to protect, noting that the players were already adequately compensated for their participation in games. It also rejected the argument that the non-economic interests protected by the right of publicity, such as rewarding celebrity labors and avoiding emotional harm, were violated, finding that none of these interests were implicated in the context of fantasy baseball.

Judge Colloton dissented. He agreed with the majority’s analysis of the right to publicity and the application of the First Amendment to fantasy baseball, but disagreed as to its resolution of the contractual dispute between the parties.

(more…)