Supreme Court to Hear Patent Exhaustion Case

On January 16, 2008, the Supreme Court is set to hear arguments in the Quanta v. LG Electronics case. The case involves the patent exhaustion doctrine, which states that a patent holder may not restrict the manner in which a purchaser of the patented product uses it after the sale.

LG had licensed several patents to Intel and required the company to notify its customers not to combine Intel technology with non-Intel components. While Intel complied, several of Intel's customers—Quanta being one of them—did not, prompting LG to initiate an infringement suit. While the District Court ruled that LG's patents were exhausted, the Court of Appeals for the Federal Circuit reversed, stating that there was no exhaustion due to the notification that LG required Intel to send to its customers.

 Twenty-seven amicus briefs have been filed since the Supreme Court decided to hear the case. Companies that generate a large percentage of their revenue from patent licensing argue that a licensor should be able to collect royalties from different levels of the production chain, while supporters of Quanta argue that the first purchaser of a patented technology should be able to pay a full royalty to the patent holder.