Quanta Computer, Inc. v. LG Electronics, Inc.
| Quanta Computer, Inc. v. LG Electronics, Inc. | |
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| Argued January 16, 2008 Decided June 9, 2008 |
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| Full case name | Quanta Computer, Inc., et al., Petitioners, v. LG Electronics, Inc. |
| Docket nos. | 06-937 |
| Citations | 553 U.S. 617 (more)
128 S.Ct. 2109, 170 L.Ed.2d 996, 76 USLW 4375, 86 U.S.P.Q.2d 1673
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| Prior history | Denied summary judgment, finding of non-infringement, 248 F.Supp.2d 912 (N.D. Cal. 2003). Reversed in part and remanded, Fed. Cir. finding that license language sufficient to create limited license and exhaustion doctrine does not apply to method claims, 453 F.3d 1364 (Fed. Cir. 2006). Cert. granted, 128 S.Ct. 28 (2007). |
| Holding | |
| Patent license language insufficient to create limited license and avoid effect of exhaustion doctrine; exhaustion doctrine applies to method claims and to authorized sale of article that substantially embodies claimed invention. | |
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| Case opinions | |
| Majority | Thomas, joined by unanimous |
Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), is a decision of the United States Supreme Court in which the Court reaffirmed the validity of the patent exhaustion doctrine, and in doing so made uncertain the continuing precedential value of a line of decisions in the Federal Circuit that had sought to limit Supreme Court exhaustion doctrine decisions to their facts and to require a so-called “rule of reason” analysis of all post-sale restrictions other than tie-ins and price fixes. In the course of restating the patent exhaustion doctrine, the Court held that the exhaustion doctrine is triggered by, among other things, an authorized sale of a component when the only reasonable and intended use of the component is to practice the patent and the component substantially embodies the patented invention by embodying its essential features. The Court also overturned, in passing, the part of decision below that held that the exhaustion doctrine was limited to product claims and did not apply to method claims.
LG Electronics (LGE) owned several patents on methods and systems for processing information. It entered into two contracts with Intel. In the License Agreement, LGE authorized Intel to make and sell microprocessor products using the patented inventions. Moreover, the License Agreement expressly stated that no license was granted to any third party for combining licensed products with other products (for example, for combining Intel microprocessor products with other parts of a computer). The License Agreement also provided, however, “Notwithstanding anything to the contrary contained in this Agreement, the parties agree that nothing herein shall in any way limit or alter the effect of patent exhaustion that would otherwise apply when a party hereto sells any of its Licensed Products.”
In the Master Agreement, LGE required Intel to give its customers notice that the patent license does not extend to any product made by combining a licensed Intel microprocessor product with any other product (for example, a computer containing the Intel microprocessor products). The Master Agreement also provided that its breach would have no effect on the License Agreement and would not be grounds for its termination. Apparently, LGE was willing to allow Intel’s customers to combine the microprocessor products with products not licensed by LGE, but only upon payment of a further royalty to LGE for the right to do so. This point is not discussed in the Court’s opinion, which recites the facts only in very limited terms because the record was under seal to protect trade secrets.
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