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The Hyperion Catalysis International, Inc. and Showa Denko K.K. Agreements: Considerations for Purchasers of Licensed Products
Volume 6, Issue 2

Robert H. Fischer, Fitzpatrick, Cella, Harper & Scinto
Victoria Silcott Molenda, Fitzpatrick, Cella, Harper & Scinto

It has recently been reported that two commercial producers of carbon nanotubes, Hyperion Catalysis International, Inc. (“Hyperion”) and Showa Denko K.K. (“SDK”), entered into license and supply agreements earlier this year. The Hyperion-SDK license arrangement involves three tiers of commerce: 1) Hyperion, the patent owner and licensor; 2) SDK, the nanotube manufacturer and licensee; and 3) SDK’s customers, who purchase the nanotubes from SDK for incorporation into products. Apparently in reference to this transaction, one source quoted SDK as saying that the licensing arrangement “allows customers who are concerned about Hyperion’s patent rights to free ly use our products."

The multi-tiered relationship just described can have interesting legal ramifications under the doctrine of “patent exhaustion.” In the 2008 case of Quanta Computer, Inc. v. LG Electronics Inc., the U.S. Supreme Court reaffirmed this doctrine, and at the same time, extended its application to method claims. The Court, however, simultaneously indicated that the consequences of the doctrine could be reduced by appropriately structuring the license. In particular, the scope of the license agreement may exclude the purchaser’s particular use of the product, thereby subjecting the purchaser to liability for patent infringement. Therefore, purchasers of products made under a license should carefully review the terms of the licensing agreement to determine whether their use of the licensed products would infringe on the licensor’s patent(s).

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