Quanta V. LG Electronics Patent Infringement
Facts of the case
LG Electronics (LGE) owned numerous patents on personal computers. Some of the patents covered components like chipsets and microprocessors while others covered methods and systems used to combine these components with other kinds of devices to produce operating computing systems.
LGE entered into contract with Intel in which the license agreement gave authorization to Intel to sell and make microprocessor products by using LGE’s patented inventions. The agreement expressly indicted that third parties did not have the license to combine the licensed products with non-Intel products.
Quanta, a Taiwanese company which incorporates Intel products into its products was given notice by Intel about the license exclusion of Intel and Non-Intel product combinations but it went ahead to combine the products overlooking the agreement made between LG Electronics and Intel. Because of this, LGE filed a patent infringement suit against Quanta.
It asserted that Quanta had violated the 3 patents that contain the method and combination claims which was infringed by the Quanta built products and not those components by Intel only.
The case was heard in the district court which granted Quanta’s summary judgment motion on patent exhaustion grounds. The court stated that microprocessors sale exhausted the patents made by LGE. Through use of Univis interpretation, the court held that “the patent exhaustion doctrine applied to the sale of unpatented items that have no other function but as components in a finished, patented device”.
The court was also in agreement with LG Electronics that the doctrine of patent exhaustion demands unconditional sale and that LGE had the right to impose conditions regarding the sale of the company’s patented products or its essential components of patented products. While these were safe harbors, they did not protect LGE.
The court stated that while LGE had the right to impose conditions on sale of essential patented products, it did not do so. It also stated that the notice sent by Intel to Quanta was not sufficient enough to transform unconditional sale of microprocessor or chipsets into conditional one. Consequently, the court held that patent method claim was not sully exhausted by the sales made by Intel.
The Federal Circuit also affirmed the ruling made by the district court by holding that the technique used for claims was not exhausted. The Federal Circuit also stated that unconditional sale is a requirement for patent exhaustion and it is not applicable to conditional license or sale. Quanta held that the rights of LGE were exhausted but this would only mean that the rights of patent holders would be limited.
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