Federal Circuit: Ok To Copy K-Cups
In a decision issued on October 17, 2013, the U.S. Court of Appeals for the Federal Circuit affirmed the U.S. District Court for the District of Delaware’s summary judgment that Sturm Foods’ unlicensed cartridges fitting Keurig coffee brewers do not infringe on Keurig’s ‘488 and ‘938 method patents. Keurig, Inc. v. Sturm Foods, Inc., No. 2013-1072, 2013 WL 5645192 (Fed. Cir. Oct. 18, 2013). The ruling thwarts Keurig’s efforts in the courts to block its competitors from taking advantage of the recent expiry of Keurig’s ‘765 and ‘189 K-cup patents.
The ‘765 and the ‘189 patents were two important patents protecting the K-cup. Soon after they expired on September 16, 2012, companies such as Kroger, Safeway, and Whole Foods announced plans to sell their own K-cups that could be used in Keurig brewing machines. In addition, two companies, Sturm Foods and JBR, Inc., had already started making cartridges that did not technically infringe on the ‘765 and ‘189 patents. Sturm’s cartridges did not have a filter and used instant coffee (spawning at least two suits against Sturm for false advertising) and JBR’s cartridge did not have the “double-chamber” design claimed in Keirig’s patents.
In the face of this mounting competition, Keurig took the legal offensive. It sued Sturm in the U.S. District Court for the District of Delaware claiming that Sturm had infringed on patents ‘488 and ‘938 which protected the method (but not the apparatus) of brewing coffee through the use of disposable cartridges that are pierced by the brewing apparatus. By producing knock-off cartridges, Keurig argued, Sturm was impermissibly enabling consumers to use Keurig’s patent-protected method without a license. In essence, Keurig was saying, “We can’t stop you from making the cartridges, but we can stop people from using them.” A win against Sturm would send a strong signal to Keurig’s other competitors to back off.
Unfortunately for Keurig, their argument was fatally flawed. Since Keurig is the only company that manufactures a brewing machine that accepts cartridges (Keurig’s patents on its brewing platform don’t expire until well past 2020), any knock-off cartridge on the market has to be used in a machine manufactured by Keurig. However, when you buy a Keurig brewing machine, you presumably acquire a license to use Keurig’s patented methods to make coffee embodied in the machine, including the method of piercing a disposable cartridge. The idea is that Keurig implicitly says to its customers, “Just buy our brewing machine, and we’ll be happy to license to you all the methods that go with it.” So, Keurig can’t stop anyone from using a knock-off cartridge by enforcing its method patent because anyone using a knock-off already owns a license to the method by owning a machine.
Responding to this problem, Keurig argued that the sale of its brewer did not inherently carry with it a license to all methods. Since the machine can be used with non-disposable, pre-pierced cartridges, the only license necessarily given with the purchase of the brewer was for that limited method. Keurig took the position that the license for the more valuable method employing disposable cartridges should understandably be reserved for those who purchase those cartridges from Keurig. In other words, Keurig is saying, “You can only use our disposable cartridge method if you buy our machine and our cartridges.”
The Delaware court didn’t buy it. Neither did the Federal Circuit. In his decision, Judge Lourie wrote, “Keurig sold its patented brewers without conditions and its purchasers therefore obtained the unfettered right to use them in any way they chose…. 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.”
But don’t feel too badly for Keurig. Though some market share will likely be lost to the buzzards circling around its dead patents, the marketing and manufacturing edge that Keurig developed while those patents were alive will probably ensure Keurig’s success for the foreseeable future. When you think about it, that’s exactly what the patent system is supposed to do.