Patent Exhaustion Ironically Dooms Keurig's Coffee Pod Claims - Federal Circuit
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Patent Exhaustion Ironically Dooms Keurig's Coffee Pod Claims

We've all seen those Keurig coffee makers. Insert a "pod" or "K-cup" into the machine. It shoots hot water through the cup. One serving of coffee is produced. It's basically a super-fast single-serving coffee maker, except those pods cost way more than traditional drip makers. Seeking to cash in on the single-serve market, other companies, including Sturm (under the name "Grove Square"), have introduced their own pods.

The stakes, for Keurig, are high. Motley Fool notes that prior to their 2011 patent expiration, they held 100 percent of market. Green Mountain Coffee (the parent company of Keurig) brings in $2.4 billion in single-serve revenue, or 73 percent of the company's total revenue. Since 2011, competitors have chipped out 8 percent of the market share in recent years.

This decision won't help.

Method Claims Exhausted

Two prior cases, one involving the sale of eyeglass lens blanks, and another involving microchips, set the state of the law in "method claims" exhaustion. Both the lenses and the chips were useless, post-sale, without the use of the patented methods. The Supreme Court, in those cases, set forth the exhaustion doctrine for these types of situations, where "an authorized sale of an item ...substantially embodies the method."

In these cases, the method patent is exhausted if the item (1) has no reasonable noninfringing use and (2) includes all inventive aspects of the claimed method.

There is a slight, though non-dispositive difference here though: whereas the microchips and the lens blanks weren't patented, the Keurig coffee makers are patented.

Keurig is arguing that end-users are infringing upon its brewer patents by practicing the embodied coffee brewing methods, and that Sturm is inducing infringement by selling its own competing pods.

The Federal Circuit wasn't convinced by this attempt to "end-run around exhaustion."

"We conclude, therefore, that Keurig's rights to assert infringement of the method claims of the '488 and '938 patents were exhausted by its initial authorized sale of Keurig's patented brewers."

"[A]s the Supreme Court long ago held, '[W]here a person ha[s] purchased a patented machine of the patentee or his assignee, this purchase carrie[s] with it the right to the use of the machine so long as it [is] capable of use.'"

"Keurig sold its patented brewers without conditions and its purchasers therefore obtained the unfettered right to use them in any way they chose, at least as against a challenge from Keurig."

In short: Keurig's patents were exhausted when it made condition-free sales of its brewers. Keurig can't restrict purchasers of its brewers from using third-party pods by claiming infringement of method patents after such a condition-free sale.

Real World Effect?

This decision is another arrow in the quiver of third-party pod manufacturers. As Motley Fool noted, Keurig is slowly losing a portion of its market share to third-party competitors. Had the decision gone the other way, induced infringement could have stemmed the slow bleeding.

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