Quanta Brief Summary 901330223

Brief of Amicus Curiae Intellectual Property Owners Association In Support of the Respondents

Introduction

• Members of the Intellectual Property Owners Association (IPO) are granted about 30% of the patents issued to U.S. nationals by the U.S. Patent and Trademark Office.

• The IPO’s four main arguments focus on the nature of the business community and the negative economic and developmental consequences that would result from the Petitioners’ position.

• The IPO claims that patent holders have the “right to lawfully condition the sale or license of a patented product to limit the scope of the patent rights granted.” They also assert that downstream purchasers—such as Quanta—“should not be able to claim broader rights than those held by the party from whom they purchase.”
  • Valid conditional agreements allow patent holders to distribute their property logically and with proper economic gain.
  • In this case, the petitioners’ purchase and use of the licensed Intel products should not give them permission to practice all of LGE's patents.

Four Main Arguments

1. The patentee’s ability to grant limited licenses is a right inherent in the patent grant

• The patent holder may choose to license with or without restriction.
• The Court has enforced conditional license agreements.
  • For example, in General Talking Pictures Corp. v. W. Elec. Rubber Co., the Court upheld a limited license for home use that excluded commercial use.
  • The Court also upheld agreements where products were sold as “single use only.”

2. Conditional licensing is common practice in many industries

• Court precedent exists.
• Owners of intellectual property rely on the “ability to condition sales of patented goods […] Conditional licenses and sales of intellectual property ensure that the price for the right to use the protected intellectual property is commensurate with its economic value.”
  • For example, commercial uses are more valuable than individual uses, so the economic compensation for commercial use is higher.
• In the case of conditional sales, the copyright interest is analogous to the patent interest. Granting different conditional licenses (at different rates) to different users allows patent holders “to make their property available for many different applications on a sensible economic basis.”
  • The same product might have a different economic value depending on its use.
  • Different embodiments of a patent may have different applications and different values.
  • One claim may cover a single component while another might describe that component within a system.

Examples

• Genetically modified crop seeds
  • If the seller sold both the seeds and the right to sell future generations of seeds, it would be forced to recoup all of its investment in one growing season. This would discourage expensive and risky investment; this is the opposite of the patent system’s goal of promoting the sciences and useful arts.
• Electronics industry
  • A microprocessor might be most valuable in high-end research computers but have some lower value in home PCs. It is optimal to charge a lower price to home users on the condition that they do not resell them for use in the high-value computers. If patent holders could not license usage in this way, they would increase the cost of all systems by charging the higher values or market the product as a commodity, lose the high-value compensation, and discourage product development.

3. Public policy favors enforcing conditional sales or licenses

• A “patent owner should be able to fashion a license that grants less than the full patent right” just as the owner of any other kind of property can generally limit how that property is used.

• Otherwise, patentees will shift the burden for protecting their inventions from license agreements to the patenting process.
  • They would be forced into the impossible task of predicting all the possible uses and marketing strategies for their property.
  • The extra applications would overburden the patent system

4. Conditional licenses are subject to patent exhaustion when paired with an abuse of patent rights

• Patent exhaustion provides a limit when a monopoly extends too far, such as when it violates antitrust laws or tries to dictate where a property can be used geographically.

Bottom Line

The nature of the market and patent rights requires “flexible licensing arrangements.” The Court has long supported valid conditional licenses that allow for an “appropriate exchange of economic value.”