Search Team

Search by Last Name
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z

Newsletters

Fish Federal Circuit Summary Service: Issue #320

June 9, 2008

Newsletters

Fish Federal Circuit Summary Service: Issue #320

June 9, 2008

Back to News Listing

Exhaustion Applied To Sold Items With “No Reasonable Noninfringing Use [that] Included All the Inventive Aspects” of the Patent Device or Method
Quanta Computer, Inc. v. LG Electronics, Inc. Quanta Computer, Inc. v. LG Electronics, Inc.
Click here to download the case
Date: June 9, 2008
Trial judge: J. Thomas
Summary: Supreme Court reverses Fed Cir decision that found no exhaustion for method claims, and no exhaustion where patentee LG had licensed Intel to sell chips, but forced Intel to tell its customers that they were receiving no license to make patented computer systems using those chips.
Method Claim Exhaustion: After reviewing its 150 years of exhaustion case law, the Court first determined that methods can be exhausted: “It is true that a patented method may not be sold in the same way as an article or device, but methods nonetheless may be ’embodied’ in a product, the sale of which exhausts patent rights… Eliminating exhaustion for method patents would seriously undermine the exhaustion doctrine [because patentees could just draft method claims to avoid the doctrine].”
Exhaustion of the Patented Thing, or More?: Exhaustion is not limited only to situations in which the patented product itself is sold. Rather, just as the unfinished lens blanks in Univis Lens created an exhaustion for patents on finished lenses, the authorized sale by Intel of chips that had no real use other than in infringing computer systems created exhaustion of patents on the systems, and the chips embodied “essential features” of the inventions. Interestingly, the Court distinguished situations in which the inventive aspects are held within the item sold (with which the Court tagged LG) from situations in which the invention was the combination of all the claim elements (such as in Aro).
Exhaustion Via “Authorized Sale”?: The Court held that the LG-Intel-Quanta situation exhausted LG’s patent rights. Specifically, the Court reasoned that Intel’s actions were unfettered by the LG-Intel agreement, so its sale of chips were “authorized sales” even though the chips were (presumably) burdened by a restriction. In other words, the focus for whether a sale is “authorized” is on the seller, and not on the thing that was sold. A quote: “But the question whether third parties received implied licenses is irrelevant because Quanta asserts its right to practice the patents based not on implied license but on exhaustion. And exhaustion turns only on Intel’s own license to sell products practicing the LGE Patents.” The Court expressly noted that it was not opining on whether LG could recover contract damages (note 7).

Note: Footnote 6 dismisses LG’s assertion that the chips had noninfringing uses, either by being sold overseas or by having the relevant features disabled: “But Univis teaches that the question is whether the product is ‘capable of use only in practicing the patent,’ not whether those uses are infringing. Whether outside the country or functioning as replacement parts, the Intel Products would still be practicing the patent, even if not infringing it. And since the features partially practicing the patent are what must have an alternative use, suggesting that they be disabled is no solution. The disabled features would have no real use.” (emphasis in opinion).

KEY WORDS: EXHAUSTION

Stay current with Fish Sign up for our Newsletter