The dispute was between two manufacturers of computer components, LG Electronics and Quanta Computer, but the decision could be used for licensing agreements across all industries including pharma and biotech. LG Electronics holds three US patents, and licences the technology from these patents to Intel, who makes microprocessor chips that are sold to Quanta. Quanta then use these components, together with non-Intel parts, in the manufacture of computers. LG sued Quanta, even though they were downstream of the licensee Intel, asserting that Quanta's combination of Intel and non-Intel components infringed the LG patents. A district court had sided with Quanta, but this had been overturned by the Court of Appeals, largely on the grounds that exhaustion does not apply to patents that describe methods, such as the LG ones.
In the Supreme Court, LG argued that the exhaustion doctrine was not applicable because method claims are not linked to a tangible article, but to a process that can never be exhausted through a sale. They asserted that practising the patent, which occurs each time an article embodying the method patent is used, should only be allowed when the patent rights are transferred in a contract. In response, Quanta said that method claims could not be excluded from exhaustion, as any other rule would allow patent holders to avoid exhaustion entirely by claiming a method rather than an apparatus in their patent. The Court felt that Quanta had “the better of this argument”, and rejected LG's assertions.
This is a preview of subscription content, access via your institution