Quanta v. LG Electronics: Frustrating patent deals by taking contracting options off the table

FS Kieff - Cato Sup. Ct. Rev, 2007 - HeinOnline
Cato Sup. Ct. Rev, 2007HeinOnline
The Supreme Court's unanimous decision in Quanta v. LG Electronics' may make it
significantly more difficult to structure transactions involving patents. While this decision
does make a group of players into winners in the immediate term for existing patent deals
(this group includes any customer who, like Quanta, buys patented parts without buying a
patent license), almost everyone is likely to come out a loser going forward. The Court in
Quanta decided that a patent license that LG Electronics sold only to Intel-and explicitly …
The Supreme Court's unanimous decision in Quanta v. LG Electronics' may make it significantly more difficult to structure transactions involving patents. While this decision does make a group of players into winners in the immediate term for existing patent deals (this group includes any customer who, like Quanta, buys patented parts without buying a patent license), almost everyone is likely to come out a loser going forward.
The Court in Quanta decided that a patent license that LG Electronics sold only to Intel-and explicitly limited to exclude Intel's customers, like Quanta, and priced to reflect these modest ambitionswould be treated by the Court as extending permission under the patent to those Intel customers. The legal" hook" on which the Court hung its decision is the patent law doctrine called" first sale" or" exhaustion." 2
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