Jack and the Licensed Beanstalk: In Search of a Licensing Test for Patented Articles Transferred with Contractual Restrictions

Apr 10, 2020

Elliot J. Horlick

A United States patent owner’s right to exclude others from using, offering for sale, selling, and importing a patented article is subject to the doctrine of patent exhaustion. When ownership of a patented article is transferred by sale, patent exhaustion allows the purchaser of the article to use, sell, offer for sale, and import the article without the patent owner’s permission. Patent exhaustion only applies in the event that a patented article has been sold; the doctrine is not triggered when a patent owner merely licenses rights under its patent.

If a patent owner licenses rights under its patent and does not transfer a patented article incident to that license, a sale has not occurred, and patent exhaustion is unambiguously inapplicable. However, this article will argue that current United States patent law presents no tenable distinction between the sale of a patented article with contractual restrictions and the transfer of a patented article incident to a license of patent rights. While some have proposed employing tests used to distinguish between licenses and sales of copyrighted works, this article will illustrate why such copyright tests would prove unworkable under patent law.