Summary
The Supreme Court held that patent exhaustion applies to method claims when patented methods are embodied in an item sold by the patent holder or an authorized licensee. The Court concluded that Intel’s microprocessors and chipsets substantially embodied LG Electronics’ patents and that Intel’s authorized sales exhausted LG’s patent rights in those products, despite their combination with non-Intel components. The decision reversed the Federal Circuit’s judgment.
Topics
Practice areas
Questions Presented
- Whether patent exhaustion applies to patent claims directed to methods or processes.
- Whether the sale of components that substantially embody patented inventions, but require combination with standard additional components to practice the patents, exhausts the patent holder's rights.
- Whether Intel's sales to Quanta were authorized for purposes of patent exhaustion despite contractual provisions concerning combinations with non-Intel components.
Holdings
- Patent exhaustion applies to method claims when a patented method is embodied in a product whose authorized sale exhausts the patent rights.
- The Intel microprocessors and chipsets substantially embodied the LG patents because they had no reasonable and intended use other than incorporation into computer systems practicing the patents and contained all of the inventions' inventive aspects.
- Intel's sales to Quanta were authorized and therefore exhausted LG's patent rights in the products substantially embodying the patents.
- Patent exhaustion prevented LG from asserting its patent rights against Quanta for the patents substantially embodied by the Intel products.
Key quotations
“where one has sold an uncompleted article which, because it embodies essential features of his patented invention, is within the protection of his patent, and has destined the article to be finished by the purchaser in conformity to the patent, he has sold his invention so far as it is or may be embodied in that particular article.” (128 S. Ct. 2117)
“By characterizing their claims as method instead of apparatus claims, or including a method claim for the machine's patented method of performing its task, a patent drafter could shield practically any patented item from exhaustion.” (128 S. Ct. 2118)
“The authorized sale of an article that substantially embodies a patent exhausts the patent holder's rights and prevents the patent holder from invoking patent law to control postsale use of the article.” (128 S. Ct. 2122)
Factual background
LG Electronics licensed Intel to manufacture and sell microprocessors and chipsets practicing LG's patents. Quanta purchased those products from Intel and incorporated them, following Intel's specifications, into computers using non-Intel memory and buses. LG sued Quanta for patent infringement, while Quanta argued that Intel's authorized sales exhausted LG's patent rights because the Intel products substantially embodied the patented inventions and had no reasonable noninfringing use.
Procedural history
LG Electronics sued Quanta, alleging that Quanta's combination of Intel microprocessors and chipsets with non-Intel memory and buses infringed LG's patents. The District Court granted summary judgment to Quanta on exhaustion grounds, later limiting that ruling by holding that exhaustion did not apply to method claims. The Federal Circuit agreed that method claims were not subject to exhaustion and alternatively held that the Intel sales were unauthorized for use with non-Intel products. The Supreme Court granted certiorari and reversed.