Anticipate This!™ | Patent and Trademark Law Blog

Quanta v. LG Electronics.

Posted in Opinion Commentary by Jake Ward on June 23, 2008

The authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control postsale use of the article.

(553 U. S. ____ (2008))

Per JUSTICE THOMAS, who delivered the opinion of the Supreme Court:

For over 150 years this Court has applied the doctrine of patent exhaustion to limit the patent rights that survive the initial authorized sale of a patented item. In this case, we decide whether patent exhaustion applies to the sale of components of a patented system that must be combinedwith additional components in order to practice the patented methods. The Court of Appeals for the Federal Circuit held that the doctrine does not apply to method patents at all and, in the alternative, that it does not apply here because the sales were not authorized by thelicense agreement.  We disagree on both scores. Because the exhaustion doctrine applies to method patents, and because the license authorizes the sale of components that substantially embody the patents in suit, the sale exhausted the patents.  (Emphasis ours)

The facts of the case were nicely boiled down to the following paragraph.

Here, LGE licensed Intel to practice any of its patents and to sell products practicing those patents. Intel’s microprocessors and chipsets substantially embodied the LGE Patents because they had no reasonable noninfringing use and included all the inventive aspects of the patented methods. Nothing in the License Agreement limited Intel’s ability to sell itsproducts practicing the LGE Patents. Intel’s authorized sale to Quanta thus took its products outside the scope of the patent monopoly, and as a result, LGE can no longer assert its patent rights against Quanta.  Accordingly, the judgment of the Court of Appeals is REVERSED.  (Emphasis ours).

See background posts from AT! here, here, and here.

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