Replacement cartridge makers win IP battles on two continents

Investors and valuators alike put a high value on continuity revenues: insurance, subscriptions, even razor blades. Keurig, Inc. went to court to protect its recurring revenues from single-serve coffee cartridges from being eaten into by rival cartridge maker JBR, claiming infringement of one design and two utility patents.

The design patent claim was lost because the judge could easily differentiate between the two cartridge designs. A claim that JBR indirectly infringed because its customers were using JBR cartridges was dismissed because of the first sale doctrine: the patent holder cannot control how a device buyer uses the device. The sale of the product (or licensing of the product) exhausted the patent. JBR revailed on all three claims.

At the same time this was happening to Keurig, a similar ruling went against Nestle in Europe. Key point for valuators: the “first sale” doctrine will limit the patent holders’ enforcement opportunities against manufacturers that make replacement cartridges that work in original, patented machines.