LG Electronics, Inc. v. Bizcom Electronics, Inc.
Decided July 7, 2006
Judge Mayer with Judges Michel and Newman

Sales of components recited in combination patent claims do not exhaust patent rights if a license disclaims use of the components and customers are notified before sale.

LG licensed 5 patents that cover computer chip interactions to Intel, on condition that Intel’s buyers are notified that they can only practice the system claims with Intel chips.  LG then sued buyers, who violated the prohibition, at the U.S. District Court for the Northern District of California.  Judge Claudia Wilken construed the claims, granted summary judgment of non-infringement, and declared that LG’s rights in any system claims were exhausted, for 4 of 5 patents in the suit.  All parties appealed various issues.

The Federal Circuit reversed the judgment of patent exhaustion for system claims because “[t]he exhaustion doctrine…does not apply to an expressly conditional sale or license.”  An interesting claim construction issue was whether “an industry standard, which was incorporated into the specification by reference” can be used for construing the system claims.  LG’s patent specifications incorporated by reference an IEEE committee document that included an industry standard for computer bus operation, which supported LG’s claim construction.  The Federal Circuit relied on the incorporated reference and reversed the district court because “prior art cited in a patent or cited in the prosecution history…. constitutes intrinsic evidence.”

The Federal Circuit often cites the Phillips case and defers to the specification when construing claims.  Juicy claim construction evidence from documents that are incorporated by reference is fair game for litigators and represents a large untapped reservoir of intrinsic evidence.

Albert Hazelquist v. Guchi Moochie Tackle Company, Inc. and Ken Yamaguchi

Decided February 9,  2006

Judge Clevenger with Judges Lourie and Bryson

“[E]ach act of patent infringement gives rise to a separate cause of action.”

Albert sued Guchi and his fishing tackle company at the U.S. District Court for the Western District of Washington for allegedly infringing a fishing lure design patent.  Guchi stayed the litigation by declaring bankruptcy and Albert attempted to block dismissal of his litigation after Guchi admitted continued infringement following the bankruptcy.  Judge Ricardo Martinez dismissed anyway, and Albert appealed to the Federal Circuit.

The Federal Circuit reversed the dismissal because “a discharge in bankruptcy operates as an injunction…..only…to causes of action that arose or could have been commenced prior to filing for bankruptcy…”

This case is a reminder that each infringing act is a separate independent ground for infringement litigation.