SCOTUS rules on patent exhaustion case

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The U.S. Supreme Court has limited the ability of companies to collect royalties after the first sale of a patented product. The case tackled an issue of patent exhaustion that hasn't been ruled on in 66 years.

In a unanimous opinion this morning in Quanta Computer, et al. v. LG Electronics, No. 06-937, the nation's highest court said that longstanding patent law precedent extends to method patents that are often part of high-technology components and products.

"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," Justice Clarence Thomas wrote in the 22-page opinion. "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 all patents."

Justices reversed a decision by the Federal Circuit Court of Appeals, which came in a case focusing on whether South Korean company LG could sue to force the computer suppliers to pay royalties on components they legally purchased from Intel, even though Intel already paid royalties to LG in a technology licensing agreement.

One of those companies sued was Quanta, which argued that it didn't have to pay royalties to the original patent holder because of the patent exhaustion doctrine that only applied to the first sale.

In its ruling, the court rejected arguments that patents are never exhaustible. It relied on precedent that it described as supplying "solid footing" and focused heavily on the one last tackling this issue, U.S. v. Univis Lens Co., 316 U.S. 241 (1942) that involved patents for finished eyeglass lenses.

Indianapolis attorney Todd Vare with Barnes & Thornburg, who wasn't involved in this case but has watched it closely, urged other intellectual property lawyers to carefully review this opinion, whether they represent patent-holders, licensees or those offering patent indemnification.

"This could dramatically change patent licensing programs," he said, though he noted the ruling wasn't a surprise given the court's history in recent years of scaling back patent rights.

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  1. I think the cops are doing a great job locking up criminals. The Murder rates in the inner cities are skyrocketing and you think that too any people are being incarcerated. Maybe we need to lock up more of them. We have the ACLU, BLM, NAACP, Civil right Division of the DOJ, the innocent Project etc. We have court system with an appeal process that can go on for years, with attorneys supplied by the government. I'm confused as to how that translates into the idea that the defendants are not being represented properly. Maybe the attorneys need to do more Pro-Bono work

  2. We do not have 10% of our population (which would mean about 32 million) incarcerated. It's closer to 2%.

  3. If a class action suit or other manner of retribution is possible, count me in. I have email and voicemail from the man. He colluded with opposing counsel, I am certain. My case was damaged so severely it nearly lost me everything and I am still paying dearly.

  4. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  5. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.