 Howdy, everyone. I'm gonna start with the obligatory disclaimers. I'm a lawyer. I'm not your lawyer And this is going to be mostly focused on US law in fact entirely focused on US law, and I'm not commenting about anything else So with all that out of the way, I Want to talk about patent exhaustion now a lot of times when people are talking about the interaction of patents and free software they really look at Licensing they say does this particular license have Have a patent grant or is there an implied patent license associated with open source? this has been the subject of almost all of the discussion and Surprisingly exhaustion while it has occasionally been mentioned isn't really the focus of any of any analysis I was going I was going through and helping collect all of the primary materials and I realized that the Supreme Court of the United States has recently had a number of very important decisions regarding Recording patent exhaustion and I decided to look at these and see in what way did they Interact with free software and I was surprised I've been doing this for a very long time and I was surprised and so I bet you will be too now one thing Occasionally people who are motivated to say so we'll say something like I'll I'll get to that in a second So one What people will say people will say that that Patent exhaustion doesn't really exist This is a quote from an article that was put that was published a little earlier late last year I Bolded the quote permitting one software to be distributed under an OSS license that conveys no patent rights Involves neither the selling of a product nor the licensing of patent does not implicate patent exhaustion with all due respect This is a pile of crap I'm going to go through and I'm going to hit you with lots and lots of case law in each case In each case I'm going to I'm going to be quoting the quotes that you will see are all from the appropriate cases But now I'm going to say for those who for those who are not intimately familiar with patent law What's the difference between a patent license and patent exhaustion? And we're going to get into this because there's some there's some distinctions that are going to become important a little later But you can think of a patent in patent law a patent Says that there are rights that people have to make something to use something to sell something to import whatever the a patent says a The patent holder is the only person who is allowed to do take those certain actions Those are the reserved rights under patent law It is a transfer when you give someone a license You are giving them permission or at least partial permission to take one of those actions and you're promising you won't sue them because of it Now the difference is patent exhaustion happens as soon as you take advantage of one of those One of those reserved rights under patent law as soon as you sell something as soon as you Pass it on as soon as you make a product as soon as you put something into the stream of commerce There's a doctrine that says you're only allowed to profit once from your Patent and so when you've put it into the stream of commerce your patent is quote-unquote exhausted and you can't sue Anybody who's downstream of the authorized licensed licensed creator or seller or distributor for patents for example Many of you have phones or computers or whatever Can you imagine if you bought those and then? Let's say that people came to you and said hey You know what you also need to license my patents or else. I'm going to sue you and you would say well That's bollocks and you would be right because They you have as soon as you paid them Or even as soon as someone was paid upstream of you they received their reward And they're not allowed to try and sue every every single person all the way down the line to the end user They can only take out that they can only extract a payment once in the entire chain of commerce Clear as mud probably not But I want to I Want to talk about this the thing is that? Patent exhaustion is not a license a license is a transfer of rights It is actually relatively narrow. It is based upon the reserved rights under under patent law Exhaustion takes place any place that you put something and in an authorized way into the stream of commerce so if you learn one thing today the most important thing is a Lot patent exhaustion is not patent licensing. They're completely different and in some ways patent exhaustion is much bigger so What are we going to be talking about? We're going to be talking about some particular cases Particular cases. These are the cases that I'm going to have quotes from I will summarize just briefly what each one of these was about Quanta computer versus LG electronics there was There was somebody who was licensed to create to to create software or to put together I Think was LG had licensed licensed Intel you can use our patents, but you can't use them with any non-intel chips Quanta went ahead and and built a computer with Intel and non-intel chips. They got sued The the Supreme Court said, you know what? Even though you told you told them this is you only gave them this license for Intel versus non-intel chips You know what patent exhaustion you can't you can't try and you already licensed Intel They but quanta got it from Intel. You can only apply it once exhaustion Impression products versus Lexmark. This was one that just came down recently This was an interesting one first of all it took place took place overseas at least in part So it was about the territoriality of patent law the second one is you know that Lexmark They sell those computers those printers and they really really want you to buy their expensive ink And so they had this idea that we're going to sell you a one-time only ink ink cartridge that If you don't return it to us you're you don't return it to us. You're committing patent infringement And so some people bought it and refilled it and sold it and they got sued Supreme Court said nope patent exhaustion Life scan Scotland This is an interesting one has nothing to do with technology or well Someone to do with technology, but it was about like blood draws and things like that What's interesting about this one is they were arguing about the meaning of sale This is this has been talked about in terms of the sale of a patented product in this one They were giving things away Court said nope doesn't matter how you can put it in his room of commerce exhaustion Cascades computer innovation. This was the only one that's actually directly related to free software Cascades had licensed Google For a certain you for certain uses of their patents in the Dalvik virtual machine Cascades then went and sued some people who took the Android open-source project and built their operating systems systems with it Court said nope exhaustion and finally Intel Intel This was about the ability to have made and there is a trick on this one that I'll leave till later So I'm going to hit you with a bunch of principles Number one. What's the most important thing to learn? Exhaustion is not licensing This is what I was talking about in terms of Everybody has these inherent rights to inherent rights to Do these things we have the right to give make you sell those are natural rights in our system The only reason that those are restricted is all is because we have this artificial limitation based upon the patent but This in this case this any time you take one of those actions and put it in the stream of commerce it is You have exhausted your rights it is a limitation on the The on the scope of the patent grant it is completely gone as it says there's no more exclusionary right to Right left to enforce What's the next principle? well Why is patent exhaustion not licensing and This is I think a very key element when you're thinking about free software Licenses are about rights Exhaustion is about goods Now you may think hey free software. I'm getting a license. I'm getting rights But when you are given those rights in Association with the source code you're with a good because those rights are attached to a good That's why exhaustion starts to apply so again licenses are rights Exhaustion has to do with goods Now I'm going to take for a moment The perspective of some some very large patent holders and they say they don't like this and they're going to say Well, what are some things we could do to get around this because you know, that's what lawyers are paid for Let's get around this. This is inconvenient So what if we said I Am not going to I am going to say you're not allowed to do to to To to give it to somebody else without telling them that You're infringing on my rights Well, the Supreme Court said no, it doesn't matter It doesn't matter even if you tell them Hey, I've got patents on this and you are exact and I'm still going to come after you as Long as you have made a sale You've exhausted the patent rights It and they said well What if I particularly like I gave them notice I said you really really you can't do this Well, um wait, no, no, sorry wrong one Okay What if they said well, this is a good my patent is on a method for those who don't know their patents to different types of things Methods systems, you know compositions and matter. What if they said my thing is a method even though I gave you a good The method is really when your end user runs the software that my patent is in force No That again, that doesn't work Supreme Court said if your son the thing that you're doing encompasses and performs the method It's all the basic. It's all basically the same thing and when you're thinking in the context of free software The only time patents are really going to apply is when the patent the software does the patented thing or else Why are we talking about it at all? Well, what if we said something like I am going to write my patent claims So that you need to put it on a computer and I'm only giving you the source code Ha ha I didn't give you all the stuff. You can't do the method. You don't have the system. I sell my patent rights Supreme Court says This is the notice one Sorry, I don't have my thing. So I don't remember exactly which order I'm gonna go ahead Okay, well, we'll do it in the order that I that I put it This is this is the one where in the Intel agreement Intel had to pass forward this this notice that said we still have patent rights. The Supreme Court said Nope, you're still exhausted This is This the court made a particularly strong point opinion about this There have been people who have tried to do this in the context of FOSS in particular There was a Xerox Park license, which they took the BSD license and they said This is the copyright element of this license By the way, there's no patent license granted associated with this those who wish to grant a patent grant List your name at the bottom. You can find this you can find this out there Do you know what even if you explicitly say I am not giving you a patent grant But you still put something in the stream of commerce. Well Hey, it's still exhausted Now this gets to this life scan Life scan Scotland case. What if they said It's free software and you can see from the quote that I put up earlier earlier. They said What you think that this would apply to free software. I mean there's no sale going on here well in life scan Scotland The court was particularly unimpressed by this argument. He said you can give something away and that's exhaust in that exhaust your patent What you're basically doing is saying even though we've talked in general about sale What we're really talking about is entering the stream of commerce. That means you put it into someone's hands in an authorized fashion At that point it's exhausted and what's more if you don't you have the right to choose What sort of reward you get for giving it to somebody and if the reward you want is $0 you can't come back and say we didn't charge enough and so we want to be able to enforce our we want to sue you for more money and In fact, if you think about Jacobson v. Katzer The court there said there is an economic benefit associated with getting your name out and having people use your code and So you are people the courts have recognized an economic benefit That's the quid pro quo that people receive for them receiving your code You've been paid if you choose to release something under open-source software. You can't say it's not a sale It's so no exhaustion This is the this is the one where This is the Cascades case where it applied to to Google and the Android open-source project now it wasn't that It wasn't that Google in particular was selling these things. They were simply they made something free software and Other people were taking it and building on it and doing the things that they would with free software They tried to say say well this was they had a little piece in their license agreement. This is Google you can only use this for Google products and Cascades tried to argue Look, this is a Samsung product. This is an LG LG product. These are other people's products It's outside the scope of the license court said no Remember as soon as you put something in the stream of commerce, it's exhausted. It's gone So it doesn't matter that Android and the Android open-source project. It came from an authorized producer therefore The fact that they chose not to charge money for it. Well, it doesn't matter. They got it from an authorized person They can do what they want The patent is exhausted This is the one that I was getting to about this idea of what if I didn't include All the if I said you need a computer or you need this to do this in the context of a computer system Or a network or something like that Well, the court has come up against people trying to make that argument before and again, they were Unimpressed because they said really You're selling these chips this was in the context of these computer chips that were meant to be combined with other chips they said the only use for these chips is to Connect them together and put them in a computer so you can't say well that last Non-inventive little piece of putting it in a computer is really what is Is is keeping this patent from being exhausted? They not said no as long as the thing that you are putting out there Substantially embodies these patent claims. It is exhausted even if the contemplated even if the contemplated effort requires you to To put it in a system or put it on a computer or do any of those other things This was interesting as they said Well, what if there's some other way in which you could use this and the court said That's a good point. If you have something that is truly dual use Then It is possible that it can be put out there without exhausting the patent, but in this case The thing that you were giving was had no real other use and again If you think about in the context of free software if you've got some sort of piece of it that where they say This embodies these claims well then It's not them about the use of those the software as the whole it is those specific lines that they're saying this does our thing and If these lines don't really have any particular other reason other than to embody this algorithm Well, then that is That is exhausting What if they said oh Geez, I'm running out of arguments here. What if we I don't know What if we told them they had to disable it court said no oops Sorry, I got very excited about this The court said no you can't disable it because disabled code has no use Therefore you can't say that you've sold them something useful Except that it only it only is uninfringed not infringing if you disable all the pieces that have use that that give it that that use So This is really starting to look pretty pretty All-encompassing Now here is the kicker. This is the one where I said there's a twist This was an interesting case in which in which Hewlett-Packard was given a license to To make to they were given a license to be a foundry for some certain chips That you know, they were they were able to manufacture at them and sell them to other people Another company another company that did not have a license to the IP So Intel gave them HP this license some other company You will us I Said hey, we've designed this chip that does the same thing as Intel's chip. Can you manufacture it for us? HP was like sure they took the design they manufactured sold it back and They gave it to him the the court HP Intel students said ULSI is not an authorized person to have designed this thing. They could not be They are not a patent licensee Exhaustion doesn't apply to them because we have never ever in our life talked with ULSI The court said it doesn't matter because it passed through the hands of a company That was authorized under Patent license now when you think about this What does this mean oh by the way, what if we did it outside the country and still exhausted so What if we the court also said There is there's this idea of you only can allow it under contract Which means that in theory you could have a contract that would have some some result of people People did certain things but in the context of a free software free software license you've given them the contract It's a free software license and it says you can do anything that you want so I I've only got about five minutes left, but I want to talk about a scenario Imagine that we had I'm this isn't true This is all made up, but I'm going to use some real names just so that you can so it's a little more concrete Imagine that Qualcomm Qualcomm made a chip that happened to read that happened to embody a patent that was owned by AT&T Now it wasn't the AT&T in Qualcomm had a deal. It was just they Happened to have invented or used you know the same thing that happens all the time Somebody decides well that somebody realizes that this chip is embedded in all these phones And so they happen to go to an AT&T store and they don't want the phones for You know to to join in in to go with AT&T service They want to crack them open and take these chips the Qualcomm chips so they crack them open they open it up and they go to a Festival they come to Fosn they set up an alternative thing and it turns out that they can make a business out of Creating a competitor to AT&T Because they they took these chips AT&T finds their patent ensues who wins well First and says your patents are exhausted AT&T says look We didn't You know we didn't like license you said I bought it at an AT&T store. Oh Qualcomm didn't have a license doesn't matter. I got it from you Turns out the analysis is no different if it is a piece of software that passes through someone's hands now Let me give one big caveat to all this Courts are can are frequently going to try and avoid surprising outcomes and like I said This is where it got surprising to me So it could be that a court says I'm going to pair this back and I'm not really Even though I see your point. I'm not going to allow this But we have in the in the free software community this idea of having mirrors and distributions and these days we've got distributed Distributed source control where everyone is throwing around copies of the source code willy-nilly Turns out that for example if someone Has mirrored a copy of a Linux distribution with its thousands and thousands of patents By this analysis They pat it passed through their hands and they became an authorized distributor of it under all of their patents Makes it so that someone like Microsoft who just bought github yes Yes, turns out that if we go out and we find patent code Distributions that have passed through Samsung's hands and Intel's hands and AT&T's hands and everybody's even incidentally We had we can do an end-way merge on all of these Because it's all the same codes. We're just like figuratively emerging all these patent rights and Creating sort of a public fact That all this code is exhausted with regard to everybody with whose Who with regard to everybody whom it has passed through So Exhaustion as you described it and that was my understanding is is based on goods as in the physical objects Is there authority for this proposition that exhaustion can apply due to to software electronic distribution Software is a good and if you want for example one of the one of the cases was about Android Exhaustion in and and it wasn't included in a phone or in some kind of little object It was specifically the Dalvik virtual machine Right, and it was just downloaded. It wasn't it wasn't that is correct. It bodied in a physical thing. That's correct That was cascades computer innovation versus Samsung. I think in the back Sorry, I'm still a bit confused about the concept of exhaustion. So does it mean that? if you have a patent and You license it to me. Does that mean I have the right to? use your code and Let me distribute it with a copy left license Depends on It means that if I have a patent and I license it to you Then you can distribute it to your neighbor and I can't sue your neighbor I Can't sue you because I've given you a license and I can't sue your neighbor because the patent is exhausted This is applied to design patents in the US I've not done the analysis with regard to design. There's a person way in the back who's had his hand up for a little while I saw your question. Philip. We'll get back to you So there's one case you didn't address here that I think you need to if you're gonna do this analysis Which is the Bowman Monsanto self replicating seed cases. Yep I think that's very relevant to the problem of once the article has been distributed and exhausted. There's a subsequent replication I agree So I that that one causes problems with chains of distribution. I think at least as far as people are So that is a great point and here's why I think it's inapposite The reason why is because that was in particular about a self replicating item But in this case, you have to look at the context of what exact that that could create a problem in other contexts but particularly in the free software context This the software has been passed on with an explicit right to make and To distribute and to pass and to pass on the rights for others to make and distribute It is a license target means that the first part it means that the party who receives it under the open source license The scope of their license included the right to make The Monsanto said we may have given you a license to use but we didn't give you a license to make therefore the self Replication you can't do in this case to add Yeah, okay one last question So hypothetical egg hypothetical example say I have a patent for a video codec so and Someone in my company redistributes Some piece of software with ffmpeg Which happens to have an implementation of this codec and just makes the code available like that that would exhaust my patent 21 Which has received ffmpeg? If if someone who is an authorized licensee of ffmpeg Passes it on with rights for other people to under the If an authorized licensee of the patent passes it on with the rights that are accompanied with every open source Right license. I would say that yes that gets exhausted Okay, so for example by the way for h2.65 and ABC if you can find a copy of ffmpeg under DPL from Samsung They're cocked they're members of two of the patent pools Okay I was just going to say find somebody who is a member of mpgla that happens to redistribute Linux or something Fantastic. Thank you