IP Newsletter


U.S. Supreme Court Extends the Exhaustion Doctrine to Method Patents

By: Jason T. Somma


The “exhaustion doctrine” states that once a patented device or apparatus is sold, the U.S. patent holder has obtained the economic. value associated with that patent, and may not further extract a royalty from subsequent users. As to the state of the exhaustion doctrine with respect to method claims, the U, S. Supreme Court has recently confirmed the state of this doctrine of patent exhaustion regarding method claims in the case ofd Electronics U. Quanta Computer, Inc..


LG Electronics (“LG”) acquired several technology method patents relating to processing and managing data. In an effort to exploit these method patents, LG licensed Intel Corporation to “make, use and sell” microprocessors and ellipses, hut the license barred Intel from combining these microprocessors and chipsets with non-Intel parts. The license required Intel to inform any purchasers of their chipsets and microprocessors covered by the license that if they wished to place them into a computer, a separate license must be obtained from LG. While many computer manufacturers negotiated licenses from LG, Quanta Computer, Inc. (“Quanta”) refused. Consequently, LG sued Quanta for patent infringement of the aforementioned method patents.


The trial court found in favor of Quanta, but the U.S. Court of Appeals for the Federal Circuit (C.A.F.C.) reversed in favor of LG. In ruling for LG, the C.A.F.C. found that there was no unconditional sale of the device, and thus ruled that the sale of the patented device did not exhaust a patentee’s rights in its method claims. —click here to read more