WASHINGTON (CN) – LG Electronics lost its ability to assert patent rights over technology that had been licensed to Intel Corp. and sold to Quanta Computer. The U.S. Supreme Court ruled for Quanta, limiting the ability of companies to keep collecting royalties on their patents after the sale.
The high court unanimously held that the doctrine of patent exhaustion, which limits the patent rights after the sale of a patented item, applies to LG Electronics’ patents and prevents the South Korean company from asserting patent rights over the technology licensed to Intel and bought by Intel customers.
Intel manufactured microprocessors and chipsets using LG Electronics’ technology and sold them to Quanta, which used them to make computers. Quanta’s computers contained a combination of Intel and non-Intel parts, prompting LG Electronics to sue for patent infringement, claiming Quanta owed it royalties. LG Electronics argued that the doctrine of patent exhaustion does not apply to method patents, or patents that describe a process for making a product.
The Federal Circuit agreed, but Justice Clarence Thomas overturned its decision.
“Nothing in this Court’s approach to patent exhaustion supports LGE’s argument that method patents cannot be exhausted.”
The ruling is a victory for the Taiwan-based Quanta and other system manufacturers that sell to computer giants such as Dell, Hewlett-Packard and IBM.