U.S. Supreme Court to Hear Patent Exhaustion Case.
The U.S. Supreme Court has recently granted certiorari for a patent case, namely Quanta Computer v. LG Electronics (06-937). The question presented by petitioner Quanta is:
Whether the Federal Circuit erred by holding, in conflict with decisions of this Court and other courts of appeals, that respondent’s patent rights were not exhausted by its license agreement with Intel Corporation, and Intel’s subsequent sale of products under the license to petitioners.
The doctrine of patent exhaustion, also known as the first sale doctrine, typically states that an unrestricted sale of a patented item exhausts the patentee’s right to control the purchaser’s use of the item thereafter. The CAFC had found that the license agreement at issue “expressly disclaim[ed] granting a license allowing computer system manufacturers to combine Intel’s licensed parts with other non-Intel components.” Thus, although Intel was free to sell its microprocessors and chipsets, those sales were conditional. Intel’s customers were expressly prohibited from infringing LGE’s combination patents. Accordingly, the CAFC held that LGE’s rights in asserting its system claims were not exhausted, because the exhaustion doctrine does not apply to expressly conditional sales or licenses.
Links related to the Quanta Computer v. LG Electronics case may be found here: the July 2006 Federal Circuit opinion, the Supreme Court docket, Quanta’s petition, LG’s brief in opposition, and Quanta’s reply (petition, brief, and reply via SCOTUS Blog).