Case Name: Quanta Computer, Inc. v. LG Electronics, Inc. (infringement)
Citation: Quanta Computer, Inc. v. LG Electronics, Inc., 128 S.Ct. 2109 (June 9, 2008). 2008 U.S. LEXIS 4702
Facts: LG Electronics (LGE) purchases a portfolio of computer patents in 1999, including the patents at issue (641, 379, and 733). The 641 patent addresses a problem with data copying by ensuring the most current data are retrieved from main memory by monitoring data requests and updating main memory from the cache. The 379 patent relates to the coordination of requests to read from, and write to, main memory. The 733 patent manages the data traffic on a bus connecting two computer components so that no one device monopolizes the bus. LGE licensed the portfolio to Intel to allow Intel to make and sell microprocessors and chipsets using these patents. Intel sent a notice to third parties telling them that the license did not extend to products made by combining an Intel product with a non-Intel product. Quanta, however, manufactured computers using Intel parts in combination with non-Intel memory and buses in ways that practice the LGE patents.
Procedural History: LGE filed a complaint that Quanta had infringed the patents. The District Court granted summary judgment to Quanta, holding that, for purposes of the patent exhaustion doctrine, the license LGE granted to Intel resulted in forfeiture of any infringement actions. The Court of Appeals affirmed in part and reversed in part concluding that the patent exhaustion doctrine did not apply to method claims; however, LGE did not license to Intel to sell the Intel products to Quanta. Certiorari was granted.
Holding: The authorized sale of an article that substantially embodies a patent will exhaust the patent holder’s rights and will prevent the patent holder from invoking patent law to control the post-sale of the article. Intel’s microprocessors and chipsets substantially embodied the patent; nothing in the licensing agreement limited Intel’s ability to sell; therefore, the sale to Quanta took the product outside the scope of patent monopoly. Judgment of the Court of Appeals was reversed.
Important Dicta: Patent Exhaustion Doctrine: provides that the initial authorized sale of a patented item terminates all patent rights to that item.
Something substantially embodies a patent when the only step necessary to practice the patent is the application of common processes or the addition of standard parts.
The sale of a device that practices patent A does not, by virtue of practicing patent A, exhaust patent B. But if the device practices patent A while substantially embodying patent B its relationship to patent A does not prevent exhaustion of patent B.
Likely Future Importance: Specifically, this decision clarifies the patent exhaustion doctrine in relation to method patents. The Court stated that eliminating exhaustion for method patents would seriously undermine the exhaustion doctrine. The concern of the Court was that patentees would avoid patent exhaustion by simply drafting claims to describe a method rather than an apparatus; therefore, shielding practically any patented item from exhaustion.
This decision also forces future patentees to thoroughly consider licensing agreements because a substantial embodiment does not prevent exhaustion from occurring. Also, if sale limitations are not included, then third parties are able to work outside of the patent scope and patentees can lose their monopoly.
Critical Analysis: When I shepardized the case, I realized that this decision wasn’t marked as affecting any older decisions. This surprised me because I would have thought that over the many years of patent law there would be a licensing situation with third parties combining parts. Would this type of case fall under contributory infringement instead? I also think that the attorney for LG Electronics was sloppy with the licensing agreement because of the absent sales restrictions to third parties.
Citation: Quanta Computer, Inc. v. LG Electronics, Inc., 128 S.Ct. 2109 (June 9, 2008). 2008 U.S. LEXIS 4702
Facts: LG Electronics (LGE) purchases a portfolio of computer patents in 1999, including the patents at issue (641, 379, and 733). The 641 patent addresses a problem with data copying by ensuring the most current data are retrieved from main memory by monitoring data requests and updating main memory from the cache. The 379 patent relates to the coordination of requests to read from, and write to, main memory. The 733 patent manages the data traffic on a bus connecting two computer components so that no one device monopolizes the bus. LGE licensed the portfolio to Intel to allow Intel to make and sell microprocessors and chipsets using these patents. Intel sent a notice to third parties telling them that the license did not extend to products made by combining an Intel product with a non-Intel product. Quanta, however, manufactured computers using Intel parts in combination with non-Intel memory and buses in ways that practice the LGE patents.
Procedural History: LGE filed a complaint that Quanta had infringed the patents. The District Court granted summary judgment to Quanta, holding that, for purposes of the patent exhaustion doctrine, the license LGE granted to Intel resulted in forfeiture of any infringement actions. The Court of Appeals affirmed in part and reversed in part concluding that the patent exhaustion doctrine did not apply to method claims; however, LGE did not license to Intel to sell the Intel products to Quanta. Certiorari was granted.
Holding: The authorized sale of an article that substantially embodies a patent will exhaust the patent holder’s rights and will prevent the patent holder from invoking patent law to control the post-sale of the article. Intel’s microprocessors and chipsets substantially embodied the patent; nothing in the licensing agreement limited Intel’s ability to sell; therefore, the sale to Quanta took the product outside the scope of patent monopoly. Judgment of the Court of Appeals was reversed.
Important Dicta: Patent Exhaustion Doctrine: provides that the initial authorized sale of a patented item terminates all patent rights to that item.
Something substantially embodies a patent when the only step necessary to practice the patent is the application of common processes or the addition of standard parts.
The sale of a device that practices patent A does not, by virtue of practicing patent A, exhaust patent B. But if the device practices patent A while substantially embodying patent B its relationship to patent A does not prevent exhaustion of patent B.
Likely Future Importance: Specifically, this decision clarifies the patent exhaustion doctrine in relation to method patents. The Court stated that eliminating exhaustion for method patents would seriously undermine the exhaustion doctrine. The concern of the Court was that patentees would avoid patent exhaustion by simply drafting claims to describe a method rather than an apparatus; therefore, shielding practically any patented item from exhaustion.
This decision also forces future patentees to thoroughly consider licensing agreements because a substantial embodiment does not prevent exhaustion from occurring. Also, if sale limitations are not included, then third parties are able to work outside of the patent scope and patentees can lose their monopoly.
Critical Analysis: When I shepardized the case, I realized that this decision wasn’t marked as affecting any older decisions. This surprised me because I would have thought that over the many years of patent law there would be a licensing situation with third parties combining parts. Would this type of case fall under contributory infringement instead? I also think that the attorney for LG Electronics was sloppy with the licensing agreement because of the absent sales restrictions to third parties.