Attorney Thomas Joseph on the Quanta patent decision by the US Supreme Court

Posted By Cliff Tuttle | August 14, 2008

Posted by Cliff Tuttle

The most significant decision of the United States Supreme Court in the term ending this June may have been Quanta Computer, Inc. v. LG Electronics, Inc., cited below in the guest blog article by patent attorney Thomas Joseph. If you’ve been meaning to find out about this important case, here it is in a nutshell. Tom is an attorney with the Pittsburgh area law firm of Price & Adams, which concentrates its practice on intellectual property law. Tom can be reached at 412-882-7170.

CLT
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The US Supreme Court recently addressed the 150 year old exhaustion doctrine by holding that the doctrine applies to products that embody method claims. See Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109, 170 L. Ed. 2d 996 (June 9, 2008).

The two most common formats for patent claims are method claims and apparatus claims. Apparatus claims include a series of interconnected mechanical, chemical, or electrical elements. Method claims include a series of steps for performing a process. Many patents include both apparatus and method claims.

The exhaustion doctrine provides that the initial authorized sale of a patented item terminates all patent rights in that item. In other words, a person who purchases a patented product without restrictions generally has the right to use that product without restriction by the patentee. The exhaustion doctrine does not apply: (1) when the sale is not authorized; (2) when the sale is conditioned upon a lawful restriction; or (3) when the “sale” is actually a license with restrictions.

Prior to the Quanta decision, it was settled law that the exhaustion doctrine applied to apparatus claims. The gravamen of the dispute in Quanta centered around whether the exhaustion doctrine applied to method claims in principle. Once the Court determined that the exhaustion doctrine applied to method claims, the Court had to decide whether the exhaustion doctrine applied to the specific technology at issue.

Ultimately, the Court decided that the computer technology at issue embodied method claims. Accordingly, the Court held that the patentee was barred from asserting its patent rights against the ultimate purchaser by the exhaustion doctrine.

The decision is significant for two reasons. First, method claims are very common in patents that cover computer, software and Internet-related technology due to the fact that the steps within the claims can include broad, functional language that is particularly suitable for that technology. In fact, the Quanta patentee asserted three patents relating to computer technology. Second, the decision follows a recent trend in which the Court has limited the rights of patent holders. See KSR2 International Co. v. Teleflex, Inc., 127 S. Ct. 1727, 167 L.Ed. 2d 705 (2007) (The Court applied a more flexible and expansive test for obviousness in assessing the validity of patents); Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746, 167 L.Ed. 2d 737 (2007) (The Court limited the scope of extraterritorial enforcement of patents under 35 U.S.C. §271(f)); MedImmune, Inc. v. Genetech, Inc., 549 U.S. 118, 127 S.Ct. 764, 166 L. Ed. 2d 604 (2007) (The Court held that a licensee was not required to break or terminate its license agreement before filing a declaratory judgment action for patent invalidity); eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S. Ct. 1837, 164 L. Ed. 2d 641 (2006) (The Court held that patentees who obtained a judgment of infringement against an accused infringer were no longer entitled to an automatic permanent injunction).

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CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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