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<i>Quanta Computer, Inc., et al. v. LG Electronics, Inc.</i>

BY Matthew W. Siegal
July 30, 2008
On June 9, 2008, the United States Supreme Court issued its long-awaited decision in Quanta Computer, Inc. v. LG Elecs., Inc., 128 S.Ct. 2109 (2008). (' Quanta'). Many observers believed that the Court would address whether, and to what extent, a party can contractually restrict application of the patent exhaustion doctrine, under which patent rights covering a product are extinguished when the product is sold without restriction. Instead, the Court's decision in Quanta appears to be relatively narrow, confirming that the sale of unpatented components can exhaust a system patent that is substantially, but not completely, embodied by those components, but leaving open the broader question of whether parties can contractually limit application of the patent exhaustion doctrine to the detriment of downstream good faith purchasers.

This article provides background and context as to how the Quanta case arose, examines the district court and Federal Circuit decisions in that case, and discusses the Supreme Court's analysis and holding, including the apparently limited scope of the Quanta decision.

Background: The Patents at Issue

Respondent LG Electronics Inc. ('LG') is the owner of the three patents at issue: U.S. Patent Nos. 4,939,641 (the ”641 patent'); 5,379,379 (the ”379 patent'); and 5,077,733 (the ”733 patent') (collectively, the 'LG Patents'). The '641 and '379 patents relate to systems whereby a microprocessor writes or reads data to or from memory. See LG Elecs., Inc. v. Bizcom Elecs., Inc., 453 F.3d 1364, 1377-78 (Fed. Cir. 2006). The '733 patent addresses a problem of resource allocation and provides a rotating priority system under which each device ' such as a
keyboard, monitor, mouse, hard drive and memory ' has priority access for a preset period of time to the data bus connecting the microprocessor seated in the chipset. Intel sold Quanta chips and microprocessors (the 'Intel Chips'), but not the standard hardware (e.g., buses and memory units) used to connect the Intel Chips in a working computer. None of the Intel Chips infringed the LG Patents until assembled with that hardware into a computer.

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