IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

HELFERICH PATENT LICENSING, LLC, )

an Illinois Limited Liability Company, )

) No: 1:11-cv-9143

Plaintiff, )

) Judge John W. Darrah

v. )

) Magistrate Judge Jeffrey T. Gilbert

J.C. PENNEY CORPORATION, INC., )

a Delaware Corporation, )

)

Defendant. )

DEFENDANT J.C. PENNEY CORPORATION, INC.'S

MOTION FOR EXPEDITED EXHAUSTION BRIEFING

In order to streamline and expedite these proceedings, defendant J.C. Penney 

Corporation, Inc. ("J.C. Penney") seeks a modified scheduling order limiting discovery to 

matters related to J.C. Penney's case-dispositive patent exhaustion defense and setting a briefing 

schedule for J.C. Penney's motion for summary judgment of patent exhaustion. J.C. Penney's 

proposal will allow the Court to consider a potentially case-dispositive legal issue after limited 

fact discovery easing the burden on both parties as well as the Court.

BACKGROUND

Plaintiff Helferich Patent Licensing, LLC ("Helferich") initiated this case on December 

23, 2011. (Dkt. No. 1). A scheduling order was entered by Judge Pallmeyer on March 23, 2012, 

(Dkt. No. 32), but that order was vacated by this Court in April upon reassignment. (Dkt. No. 

37). On June 28, 2012, this Court entered an Amended Scheduling Order governing discovery in 

this case. (Dkt. No. 50). On July 20, 2012, Helferich filed a motion seeking to modify the

Amended Scheduling Order to allow for expedited claims construction. (Dkt. No. 52). That 

motion is currently noticed for hearing on August 22, 2012.

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Prior to filing its motion for expedited claims construction, Helferich and J.C. Penney 

met and conferred regarding discovery and case scheduling. During that meeting, J.C. Penney 

proposed an expedited schedule for discovery and briefing related to its case-dispositive 

exhaustion defense. Helferich refused J.C. Penney's proposal, instead seeking the nondispositive approach of expedited claims construction briefing. Unlike Helferich's proposal, 

which would be costly, time consuming, and would most likely have to be repeated, J.C. Penney

offers a case-dispositive proposal regarding a question of law, with the need for only limited 

discovery. 

PATENT EXHAUSTION STANDARD

The longstanding doctrine of patent exhaustion provides that the initial authorized sale of 

a patented item terminates all patent rights to that item. Quanta Computer, Inc. v. LG Elec., Inc., 

553 U.S. 617, 625 (2008); 35 U.S.C. § 273(d). For nearly 100 years, the Supreme Court has 

rejected attempts by patentees to use post-sale restrictions to limit the use of their products in 

order to secure market control of related, unpatented items. See, e.g., Motion Picture Patents Co. 

v. Universal Film Mfg. Co., 243 U.S. 502, 518 (1917). In 2008, the Supreme Court clarified that 

“the traditional bar on patent restrictions following the sale of an item applies when the item 

sufficiently embodies the patent—even if it does not completely practice the patent—such that 

its only and intended use is to be finished under the terms of the patent.” Quanta, 553 U.S. at 

628. The facts of Quanta, as well as the cases relied upon by the Supreme Court in its opinion, 

demonstrate why an early decision on J.C. Penney's patent exhaustion defense will likely

conserve substantial resources of both the parties and this Court. 

For example, as the Federal Circuit recently summarized: 

In Quanta, patent holder LG licensed a portfolio of patents to Intel. Under the 

License Agreement, Intel could sell its own products practicing the LG patents. 

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The License Agreement did not, however, grant Intel the right to practice the 

patents in conjunction with non-Intel products. Quanta purchased, from Intel, 

products substantially embodying the LG patents and combined them with nonIntel products to practice the licensed patents. 

The Supreme Court held that LG's patent rights were exhausted upon Intel's 

authorized sale to Quanta. ... Indeed, the [patent license] agreement “authorized 

Intel to sell products that practiced the [asserted patents]. No conditions limited 

Intel's authority to sell products substantially embodying the patents. Because 

Intel was authorized to sell its products to Quanta, the doctrine of patent 

exhaustion prevented LG from further asserting its patent rights against those 

products purchased from Intel. 

Tessera, Inc. v. International Trade Com'n, 646 F.3d 1357, 1369 (Fed. Cir. 2011) (internal 

citations omitted). 

The Supreme Court’s decision in Quanta relied on U.S. v. Univis Lens Co., 316 U.S. 241, 

244 (1942), in which a patentee’s attempts to parse out the performance of patented methods –

which constituted various steps in the manufacture of patented lenses – was held invalid and 

unenforceable under the doctrine of exhaustion. In short, Univis attempted first to license its bifocal and tri-focal lens patents to a manufacturer that Univis authorized only to fuse together 

different lens segments to create Univis lens blanks, and then to sell those lens blanks only to 

Univis licensed wholesalers or retailers. See, e.g., Quanta, 553 U.S. at 627 (citing Univis Lens 

Co., 316 U.S. at 244). Univis wholesalers were licensed to grind the blanks into lenses that fell 

within the scope of Univis’ patents. Univis retailers were similarly licensed to grind the lenses to 

match a consumer’s prescription, which also resulted in the creation of a patented lens. Id. 

The Supreme Court “assumed that the Univis patents containing claims for finished 

lenses were practiced in part by the wholesalers and finishing retailers who ground the blanks 

into lenses, [but] held that the sale of the lens blanks [by the manufacturer] exhausted the patents 

on the finished lenses.” Quanta, 553 U.S. at 627 (citing Univis Lens Co., 316 U.S. at 248-49). 

Because the lens blanks created by the manufacturer “embodi[ed] [the] essential features of the 

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patented device and [were] without utility until ... ground and polished as the finished lens of the 

patent,” the patents were exhausted upon a sale by the manufacturer. Id. at 627-28 (citing Univis 

Lens Co., 316 U.S. at 249) (holding also that “where one has sold an uncompleted article which, 

because it embodies essential features of his patented invention, is within the protection of his 

patent, and has destined the article to be finished by the purchaser in conformity to the patent, he 

has sold his invention so far as it is or may be embodied in that particular article”). 

The Quanta decision is also consistent with Ethyl Gasoline Corp. v. U.S., 309 U.S. 436, 

446, 457-59 (1940), in which “the [Supreme] Court held that the sale of a motor fuel produced 

under one patent also exhausted the patent for a method of using the fuel in combustion motors.” 

Quanta, 553 U.S. at 629. In Ethyl Gasoline Corp.: 

The patentee held patents for (1) a fluid additive increasing gasoline efficiency, 

(2) motor fuel produced by mixing gasoline with the patented fluid, and (3) a 

method of using fuel containing the patented fluid in combustion motors. The 

patentee sold only the fluid, but attempted to control sales of the treated fuel. The 

Court held that the sale of the fluid to refiners relinquished the patentee's 

exclusive rights to sell the treated fuel.

Id. at 629, n. 4 (internal citations omitted) (citing Ethyl Gasoline Corp., 309 U.S. at 446, 

457-59). 

ARGUMENT

Helferich's case is a classic example of patent exhaustion. Helferich alleges that its 

patents cover methods "to create, store, and cause delivery of electronic messages and related 

content to mobile phones." See, e.g., Helferich's Sec. Amend. Compl., Dkt. No. 28, ¶ 11. 

Helferich also touts the fact that it has licensed its patents to every major cellular phone 

manufacturer in the world, including, for example, Apple, Motorola Mobility, Research In 

Motion, and others. See, e.g., Dkt. No. 28, ¶ 16. In other words, Helferich has licensed its 

patents to cellular phone makers, allowing them to manufacture and sell devices which are 

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capable of requesting, sending, and receiving content to and from content providers (e.g., 

retailers like J.C. Penney), which send or have others send messages to cellular phones. Once a 

cellular phone manufacturer sells one of its mobile devices to a consumer, the doctrine of patent 

exhaustion is triggered and the consumer's use of the device to request or retrieve content on the 

phone is a non-infringing or exhausted downstream use. 

Despite the Supreme Court's guidance to the contrary, Helferich is attempting to acquire 

licenses from entities at multiple tiers of the supply chain. Just as LGE attempted to stop a 

purchaser of a licensed Intel product from combining it with non-licensed material, Helferich is 

attempting to enforce its patents against the use by a purchaser of a licensed cell phone to receive 

"non-licensed" content. See, e.g., Quanta, 553 U.S. at 628. J.C. Penney will argue, for example, 

that Helferich's claims of infringement resulting from a consumer's use of a cellular phone to 

retrieve a message posted by J.C. Penney to the internet website twitter.com is essentially no 

different than the attempts by Ethyl Gasoline Corp. to enforce its method patents for using its 

fuel additive in an internal combustion engine after first licensing its patents to refiners to make 

and sell the fuel additive. See, e.g., Ethyl Gasoline Corp., 309 U.S. at 446, 457-59. 

While Helferich has indicated that it will oppose J.C. Penney's exhaustion motion, 

arguing that a patentee may license only certain claims of a patent, not the patent itself, to avoid 

the application of the doctrine of patent exhaustion, any decision on this and other similar 

arguments will be a question of law that can be made using minimal facts identified through 

limited discovery, and without the need to do extensive and complex technical briefing related to 

claims construction or patent validity. 

Accordingly, J.C. Penney asks that this Court limit all discovery to issues related to 

patent exhaustion and hold all other deadlines in abeyance, until the Court decides the patent 

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exhaustion defense. Helferich would still provide its LPR 2.2 initial infringement contentions on 

September 7, 2012 as currently scheduled in order to understand the scope of Helferich's claims 

and ensure that J.C. Penney's summary judgment motion fully address the exhaustion issues.1 

The parties, however, could forego their respective LPR 2.3 & 2.4 obligations to provide and 

respond to initial invalidity and unenforceability contentions. And discovery would otherwise 

proceed on an expedited basis only as to exhaustion issues, followed by summary judgment 

briefing on the issue of patent exhaustion, as set forth below: 

Event Deadline

Helferich to serve LPR 2.2 Initial Infringement 

Contentions 

September 7, 2012

J.C. Penney to serve LPR 2.3 Initial Non-Infringement 

Contentions, but not Invalidity or Unenforceability 

Contentions

September 28, 2012

Deadline for Helferich to Serve All Licenses Agreements 

Covering/Relating to the Patents-In-Suit

October 1, 2012

Limited Discovery Related to Patent Exhaustion Closes January 15, 2013

J.C. Penney's Motion for Summary Judgment of 

Exhaustion is Due

February 12, 2013

Helferich's Response in Opposition to Summary Judgment 

of Exhaustion is Due

March 12, 2013

J.C. Penney's Reply in Support of Summary Judgment of 

Exhaustion Due

April 2, 2013

Proposed Status Hearing April 9, 2013 at 9:30 AM

 1 While J.C. Penney's LPR 2.3 initial non-infringement contentions are not strictly relevant to the exhaustion 

defense, J.C. Penney proposes providing them to maintain balance and fairness in the discovery process.

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This schedule is not simply a speeding up of a single portion of the case, after which the 

parties will necessarily be required to conduct additional discovery, file summary judgment 

motions and hold a trial on a variety of liability and damages issues. J.C. Penney offers both 

parties and the Court the opportunity to resolve a single, case-dispositive legal issue at the outset 

of the case. To the extent that J.C. Penney's analysis of the patent exhaustion issue is correct, the 

issue would be case dispositive. And deciding the issue at the outset would avoid significant and 

unnecessary fact and expert discovery, as well as complex claims construction proceedings, all 

of which would later be rendered moot when the Court considered J.C. Penney's patent 

exhaustion motion late in the case.

CONCLUSION

For the foregoing reasons, J.C. Penney respectfully requests that this Court enter a 

modified scheduling order as outlined above, limiting discovery to matters related to J.C. 

Penney's case-dispositive patent exhaustion defense and setting a briefing schedule for J.C. 

Penney's motion for summary judgment of patent exhaustion. 

Dated: August 9, 2012 Respectfully submitted,

J.C. PENNEY CORPORATION, INC. 

/s/ Daniel L. Farris

R. David Donoghue 

Daniel L. Farris 

HOLLAND & KNIGHT LLP

131 South Dearborn Street, 30th floor

Chicago, IL 60603

Tel: (312) 263-3600 

Fax: (312)578-6666

david.donoghue@hklaw.com

daniel.farris@hklaw.com

Attorneys for Defendant J.C. Penney Corporation, Inc.

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