How Quanta will change licensing
01 July 2008
The Supreme Court's decision in Quanta v LG could make it harder for licensors to collect downstream royalties. Eileen McDermott explores the implications
When the Supreme Court found in favour of Quanta in the closely watched patent exhaustion case, Quanta Computer v LG Electronics, last month, it left open some questions that could result in turmoil for licensors. For instance, the Court ruled that the doctrine of patent exhaustion can be applied to method claims, which directly contradicts Federal Circuit case law on the subject. The Court also said that, although the licence in question was clearly conditional and placed restrictions on downstream use of the microprocessors and chipsets, because the products "substantially embodied" the patents at issue, their sale triggered exhaustion. Both of these concepts have the potential to make life considerably more difficult for patentees/licensors, particularly in markets with large numbers of downstream purchasers, and could also result in greater expense for first licensees, since sellers will want to ensure that they get all of their royalties up front. Furthermore,...
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