Quanta Computer, Inc. v. LG Electronics, Inc.

128 S. Ct. 2109, 170 L. Ed. 2d 996, 21 Fla. L. Weekly Fed. S 308, 553 U.S. 617, 2008 U.S. LEXIS 4702, 76 U.S.L.W. 4375, 86 U.S.P.Q. 2d (BNA) 1673
CourtSupreme Court of the United States
DecidedJune 9, 2008
Docket06-937
StatusPublished
Cited by110 cases

This text of 128 S. Ct. 2109 (Quanta Computer, Inc. v. LG Electronics, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of the United States primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109, 170 L. Ed. 2d 996, 21 Fla. L. Weekly Fed. S 308, 553 U.S. 617, 2008 U.S. LEXIS 4702, 76 U.S.L.W. 4375, 86 U.S.P.Q. 2d (BNA) 1673 (U.S. 2008).

Opinion

*621 Justice Thomas

delivered the opinion of the Court.

For over 150 years this Court has applied the doctrine of patent exhaustion to limit the patent rights that survive the initial authorized sale of a patented item. In this case, we decide whether patent exhaustion applies to the sale of components of a patented system that must be combined with additional components in order to practice the patented methods. The Court of Appeals for the Federal Circuit held that the doctrine does not apply to method patents at all and, in the alternative, that it does not apply here because the sales were not authorized by the license agreement. We disagree on both scores. Because the exhaustion doctrine applies to method patents, and because the license authorizes the sale of components that substantially embody the patents in suit, the sale exhausted the patents.

I

Respondent LG Electronics, Inc. (LGE), purchased a portfolio of computer technology patents in 1999, including the three patents at issue here: U. S. Patent Nos. 4,939,641 (’641); 5,379,379 (’379); and 5,077,733 (’733) (collectively LGE Patents). The main functions of a computer system are carried out on a microprocessor, or central processing unit, which interprets program instructions, processes data, and controls other devices in the system. A set of wires, or bus, connects the microprocessor to a chipset, which transfers data between the microprocessor and other devices, including the keyboard, mouse, monitor, hard drive, memory, and disk drives.

The data processed by the computer are stored principally in random access memory, also called main memory. Webster’s New World Dictionary of Computer Terms 334, 451 *622 (8th ed. 2000). Frequently accessed data are generally stored in cache memory, which permits faster access than main memory and is often located on the microprocessor itself. Id., at 84. When copies of data are stored in both the cache and main memory, problems may arise when one copy is changed but the other still contains the original “stale” version of the data. J. Handy, Cache Memory Book 124 (2d ed. 1993). The ’641 patent addresses this problem. It discloses a system for ensuring that the most current data are retrieved from main memory by monitoring data requests and updating main memory from the cache when stale data are requested. LG Electronics, Inc. v. Bizcom Electronics, Inc., 453 F. 3d 1364, 1377 (CA Fed. 2006).

The ’379 patent relates to the coordination of requests to read from, and write to, main memory. Id., at 1378. Processing these requests in chronological order can slow down a system because read requests are faster to execute than write requests. Processing all read requests first ensures speedy access, but may result in the retrieval of outdated data if a read request for a certain piece of data is processed before an outstanding write request for the same data. The ’379 patent discloses an efficient method of organizing read and write requests while maintaining accuracy by allowing the computer to execute only read requests until it needs data for which there is an outstanding write request. LG Electronics, Inc. v. Asustek Computer, Inc., No. C 01-02187 CW etc., Order Construing Disputed Terms and Phrases, p. 42 (ND Cal., Aug. 20, 2002). Upon receiving such a read request, the computer executes pending write requests first and only then returns to the read requests so that the most up-to-date data are retrieved. Ibid.

The ’733 patent addresses the problem of managing the data traffic on a bus connecting two computer components, so that no one device monopolizes the bus. It allows multiple devices to share the bus, giving heavy users greater access. This patent describes methods that establish a rotating pri *623 ority system under which each device alternately has priority access to the bus for a preset number of cycles and heavier users can maintain priority for more cycles without “hogging” the device indefinitely. Id., at 37-38.

LGE licensed a patent portfolio, including the LGE Patents, to Intel Corporation (Intel). The cross-licensing agreement (License Agreement) permits Intel to manufacture and sell microprocessors and chipsets that use the LGE Patents (Intel Products). The License Agreement authorizes Intel to “‘make, use, sell (directly or indirectly), offer to sell, import or otherwise dispose of’” its own products practicing the LGE Patents. Brief for Petitioners 8 (quoting App. 154). 1 Notwithstanding this broad language, the License Agreement contains some limitations. Relevant here, it stipulates that no license

“ ‘is granted by either party hereto ... to any third party for the combination by a third party of Licensed Products of either party with items, components, or the like acquired . . . from sources other than a party hereto, or for the use, import, offer for sale or sale of such combination.’ ” Brief for Petitioners 8 (quoting App. 164).

The License Agreement purports not to alter the usual rules of patent exhaustion, however, providing that, “‘Notwithstanding anything to the contrary contained in this Agreement, the parties agree that nothing herein shall in any way limit or alter the effect of patent exhaustion that would otherwise apply when a party hereto sells any of its Licensed Products.’” Brief for Petitioners 8 (quoting App. 164).

In a separate agreement (Master Agreement), Intel agreed to give written notice to its own customers informing them that, while it had obtained a broad license “ ‘ensuring] that any Intel product that you purchase is licensed by LGE and thus does not infringe any patent held by LGE,’ ” the license *624 “ ‘does not extend, expressly or by implication, to any product that you make by combining an Intel product with any non-Intel product.’” Brief for Respondent 9 (quoting App. 198; emphasis deleted). The Master Agreement also provides that “ ‘a breach of this Agreement shall have no effect on and shall not be grounds for termination of the Patent License.’” Brief for Petitioners 9 (quoting App. 176).

Petitioners, including Quanta Computer (collectively Quanta), are a group of computer manufacturers. Quanta purchased microprocessors and chipsets from Intel and received the notice required by the Master Agreement. Nonetheless, Quanta manufactured computers using Intel parts in combination with non-Intel memory and buses in ways that practice the LGE Patents. Quanta does not modify the Intel components and follows Intel’s specifications to incorporate the parts into its own systems.

LGE filed a complaint against Quanta, asserting that the combination of the Intel Products with non-Intel memory and buses infringed the LGE Patents. The District Court granted summary judgment to Quanta, holding that, for purposes of the patent exhaustion doctrine, the license LGE granted to Intel resulted in forfeiture of any potential infringement actions against legitimate purchasers of the Intel Products. LG Electronics, Inc. v. Asustek Computer Inc., 65 USPQ 2d 1589, 1593, 1600 (ND Cal. 2002).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
128 S. Ct. 2109, 170 L. Ed. 2d 996, 21 Fla. L. Weekly Fed. S 308, 553 U.S. 617, 2008 U.S. LEXIS 4702, 76 U.S.L.W. 4375, 86 U.S.P.Q. 2d (BNA) 1673, Counsel Stack Legal Research, https://law.counselstack.com/opinion/quanta-computer-inc-v-lg-electronics-inc-scotus-2008.