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US Supreme Court Rules Against Multiple Royalties Claims in Patent Disputes
Patent rights holders are limited in their abilities to collect multiple royalties following a recent U.S. Supreme Court decision. The Supreme Court held that LG Electronics, Inc. (LGE) cannot seek patent royalties from customers of its customer, Intel Corp. LGE licensed some of its patents to Intel to make chipsets and attempted to reserve rights to further combinations and use of those chipsets by Intel’s customers. The Supreme Court refused LGE’s attempt at post-sale restrictions and applied the doctrine of first-sale exhaustion: the sale of an invention exhausts the patent-holder’s rights to control how purchasers use the invention. Exhaustion applies to “method-type” patents as well as to the sale of products that do not fully practice the invention if the products embody the essence thereof and their reasonable and intended use is to practice the invention.
Did the Supreme Court leave the door open to a patent holder imposing contractual restrictions on use by the customer’s customer? LGE licensed the patents in a license agreement that did not purport to alter patent exhaustion rules. Thus, the first sale by Intel was an authorized sale that triggered the exhaustion.
For additional information, visit:
http://www.patentlyo.com/patent/2008/06/supreme-court-d.html
For a copy of the decision visit: