Quanta Brief Summary 901422128

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Brief of Dell, Inc, Hewlett-Packard, Co., and Gateway, Inc. as Amici Curiae in Support of Petitioners

  • All of these companies manufacture computers with Intel microprocessor chips and memory components made by other companies
  • LGE, although already having received a royalty from Intel, seeks to extract another royalty payment from Quanta because of the required notice sent by Intel to customers
  • Regimen created by the Federal Circuit would allow patent owners to work through the manufacturing chain
    • Extract separate royalties at each stage for the same invention
  • Purposes of the doctrine of patent exhaustion
    • Patentee receives fair compensation
    • Provides simplicity in the patent system
    • Guarantees peace for owners of patented articles
    • Federal Circuit has eliminated these and in doing so created a regime that is contrary to the purpose of the patent system
  • The USSC in Univis Lens rejected the idea of patentees collecting multiple royalties at different stages of the manufacturing process
    • Federal Circuit misinterpreted Univis Lens
  • Purpose of the patent system is fulfilled when the patentee is compensated for the sale of the invention
    • No basis for restraining use once the invention is sold
  • Federal Circuit has turned the doctrine into an optional limitation that is avoided by altering the terms of sale
  • FC confused two lines of decisions
    1. ”Limitations on a license to ‘’’manufacture’’’ a patented device”
    2. ”Limitations on the ‘’’downstream use’’’ of a patented device”
  • Univis Lens determined that conditions on post-sale uses violated anti-trust laws because they are not enforceable under the patent laws
  • The doctrine is a limitation of the rights granted to patent owners
    • Doesn’t matter about the intent of the patent owner’s sale
  • By obtaining a royalty from Quanta, it would be as if LGE had received no prior royalties from Intel
    • Could also then extract royalties from the purchasers of Quanta’s computers
  • The notion underlying the Federal Circuit’s doctrine of intent based patent exhaustion is false
    • Instead allows a clever patent owner to extract multiple royalties every time the invention changes hands
      • This does not serve the purpose of the patent system (promotion of science and the useful arts”
  • The traditional doctrine requires a patent owner to extract his entire reasonable royalty at one point
  • The FC’s rule could spread and have disastrous effects for any component of a computer (and other technologies)
  • Conclusion: the petition for writ of certiorari should be granted