High Court Rules Against Patent Holder Seeking Downstream Royalties
The U.S. Supreme Court has ruled that a patent holder cannot seek royalties from multiple companies involved in the computer manufacturing process.
The court ruled in a unanimous opinion (PDF posted by SCOTUSblog) by Justice Clarence Thomas that patents held by LG Electronics were extinguished after the first sale of rights to Intel Corp. LG had contended that computer makers that bought Intel products were infringing the patents.
Thomas said the doctrine of patent exhaustion still applies to components in a patented system that must be combined with other components.
Thomas said LG granted a license to Intel to sell products using its patented components. “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,” he wrote.
“This case illustrates the danger of allowing such an end run around exhaustion,” Thomas said. “On LGE’s theory, although Intel is authorized to sell a completed computer system that practices the LGE Patents, any downstream purchasers of the system could nonetheless be liable for patent infringement.”
The case is Quanta Computer Inc. v. LG Electronics Inc.
Stories on the decision are available from Reuters and the Associated Press.
Updated at 11:30 a.m. to provide links to coverage in Reuters and AP.
