Razor Slashed Prices: The Applicability of Patent Exhaustion to Sales for Below Cost

Authors

Daniel Huttle

Document Type

Note

Abstract

(Excerpt)

This Note addresses whether this expansion of patent exhaustion is necessary or justified. Part I provides a background on the relevant doctrines and concepts implicated by the LifeScan decision. This Part begins with a discussion on the history and development of the patent exhaustion doctrine under the common law. This Part also introduces the antitrust concept of tying and how it relates to patent misuse. Part II considers whether patent exhaustion should be applied to both goods distributed for no cost and goods sold below the cost to produce. Part III analyzes the anticompetitive potential of refusing to extend patent exhaustion in both of these situations, and discusses the application of the doctrine of patent misuse in such circumstances. Finally, Part IV analyzes a hypothetical situation where the concerns created by the expansion of patent exhaustion are put into sharper focus.

The Note concludes that the Federal Circuit’s extension of patent exhaustion is not consistent with United States Supreme Court jurisprudence on the matter. Further, this refocus on transfers of title instead of sales for fair value causes problems to the metered pricing model, which may lead to unintended harms to both consumers and manufacturers of patented goods. Finally, this Note argues that any anticompetitive results that might arise from a failure to expand patent exhaustion in such a way are mitigated by the existing doctrine of patent misuse. To begin, the evolution of both patent exhaustion and patent misuse must be discussed.