Los Angeles, CA (June 10, 2008) Paul, Hastings, Janofsky & Walker LLP, a leading international law firm, scored a major victory for Quanta Computer when the U.S. Supreme Court ruled unanimously to re-affirm the doctrine of patent exhaustion. The decision in Quanta Computer v. LG Electronics clarifies that a patentee cannot sell a patented product and still reserve the right to collect additional royalties at several steps along the manufacturing chain, as components are integrated into larger products.
The decision is consistent with the law of exhaustion that had been in place for 150 years, but was in flux given some recent decisions by the Federal Circuit, said Terry Garnett, lead counsel for Quanta and a partner at Paul Hastings. The ruling should bring clarity on the issue, which in turn should make it easier to predict the consequences of licensing arrangements.
LG Electronics had granted a broad patent license to Intel Corporation to sell microprocessors and other computer chips. These chips were sold by Intel to Quanta Computer for use in notebook computers. Although there was no limitation on Intel's right to sell computer chips, LG Electronics sought to place restrictions on Quanta's right to use licensed chips it purchased from Intel unless Quanta paid another royalty.
The Supreme Court held that Intel's authorized sale to Quanta of licensed chips released LG Electronics' patent rights relating to those chips. In addition, the Supreme Court reversed the Federal Circuit's case law that had distinguished between apparatus claims and method claims, holding that the patent exhaustion doctrine applied equally to both.
Paul Hastings represented Quanta Computer in its ongoing patent litigation with LGE from its inception at the district court level all the way through to Federal Circuit on appeal and ultimately to the Supreme Court. Partners Terry Garnett and Vincent Yip from Paul Hastings Los Angeles office are lead counsel for Quanta, and were assisted by partner Maxwell Fox and associate Peter Wied.
Paul, Hastings, Janofsky & Walker LLP, founded in 1951, is a leading international law firm with over 1,200 attorneys in 18 offices. The firm serves a diverse client base including many of the leading global financial institutions and Fortune 500 companies and offers deep capabilities in capital markets, finance and restructuring, intellectual property, international arbitration and dispute resolution, investment management, labor and employment, mergers and acquisitions, private equity, product liability, project finance, real estate, securities litigation and tax advisory services. For additional information, please visit our website at www.paulhastings.com.