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The Impact of the Patent Exhaustion and Implied License Doctrines on License Negotiations

By Christopher D. Joslyn

Nothing should be left to chance when drafting patent licenses. Indeed, the parties on both sides of the transaction have a keen interest in eliminating ambiguities. This is particularly true with respect to the scope of the license grant. The licensor must be reasonably assured that it has not inadvertently given away more than what was bargained for. On the other side, the licensee must be reasonably assured that it may use the patent as it intended without being sued for infringement.

Beyond the language of the grant, a key consideration for both parties is the impact of the patent exhaustion and implied license doctrines. Both doctrines operate similarly. In essence, they limit the licensor's right to claim infringement against downstream users of its patent or sellers of devices that embody the patent. Although these doctrines are often applied with indistinguishable results, the requirements for each are different. Moreover, these doctrines also differ in scope.

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