WASHINGTON (AP) - The Supreme Court has limited the ability of companies to
collect multiple royalties on their patents.
The unanimous decision Monday was helpful to customers of Intel Corp. and is
the latest step by the justices to scale back the power of patent-holders.
The case revolves around a long-time Supreme Court doctrine that says the
sale of an invention exhausts the patent-holder's right to control how the
purchaser uses it.
In 1992, a federal appeals court in Washington, D.C., that hears patent
cases from around the country began eroding the doctrine, ruling that
patent-holders could attach post-sale conditions to patented products.
Justice Clarence Thomas reined in the appeals court, saying that "for over
150 years the Supreme Court has applied the doctrine of patent exhaustion" and
that it applies in this case.
In the case before the Supreme Court, a South Korean company, LG Electronics
Inc., licensed some of its patents to Intel Corp.
LG then sued some of Intel's customers for patent infringement, saying they
owed royalties to LG because the customers combined Intel's microprocessors and
chipsets with non-Intel products.
Patent laws can carry triple-damage awards when a court finds willful
infringement.
The Intel customers are computer system manufacturers that include
Taiwan-based Quanta Computer Inc. System manufacturers sell to industry
brandnames such as Dell Inc., Hewlett-Packard Co., International Business
Machines Corp. and Gateway Inc.
The Bush administration supported Intel's customers. It cited inconvenience,
annoyance and inefficiency of multiple royalty payments being passed down the
chain of distribution with no obvious stopping point.
The case is Quanta v. LG Electronics, 06-937.
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