Supreme Court Sounds Skeptical About Suing Up And Down The Supply Chain For Patent Infringement

from the fingers-crossed dept

Last fall, we mentioned that the Supreme Court had agreed to hear yet another interesting patent case, looking at whether companies could sue up and down the supply chain for patent infringement. If you're familiar with the concept of the "first sale doctrine" in copyright law, this case looks at whether or not the same concept applies to patents as well. Basically, if Company A legitimately licenses a patent from Company B and then sells a product based on that product to Company C, who turns around and resells it (perhaps as a component of a larger product), can Company B sue Company C for patent infringement? Or, did Company B "exhaust" the right to control Company A's products once it licensed the patent? That's what happened in the case. LG licensed a patent to Intel, who used the patent to make some chips. Intel turned around and sold those chips to computer makers, such as Quanta, who put them in laptops, which they then sold. LG claims that all those laptop makers also need to license the patents, even though they bought the chips from someone who had already licensed them. Basically, it's LG trying to get paid multiple times for the same patent.

On Wednesday, the Supreme Court actually heard the case, and most of the mainstream press coverage suggests that the Justices were extremely skeptical of LG's position, though others note that Supreme Court Justice tea leaves aren't so easy to read. It does sound like the Justices did focus in on the key issues, though, and were concerned about the absurdity of a situation where a company is still controlling the sale of a product after it's been sold. While we wait for a decision, expect to see a few more patent hoarders try to rush through infringement lawsuits where they sue up and down the supply chain. In the meantime, we're still curious to know why Yahoo sided with LG, while most tech firms sided with Quanta on the other side.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Joshua, Jan 17th, 2008 @ 5:55pm

    Microsoft

    Isn't this essentially the same thing Microsoft keeps threatening FOSS people with? If you can't sue the users of a product that is patented then their whole FUD tactic goes to hell (It's the same reason OGG support being missing from so many players is blamed on). I would epect Microsoft to be heavily on LG's side (as well as any other company that likes to use patents as weapons, like IBM for example)

     

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  2.  
    identicon
    Corporate Tool, Jan 17th, 2008 @ 6:20pm

    Chasing Payments

    Why are the stock holders not complaining about misappropriation of funds?

     

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  3.  
    identicon
    Anonymous Coward, Jan 17th, 2008 @ 7:19pm

    Re: Microsoft

    What the hell does this have to do with Microsoft? I don't see any correlation at all.

     

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  4.  
    identicon
    zcat, Jan 17th, 2008 @ 7:53pm

    the MSFT connection...

    It's not an exact comparison but;

    MSFT are threatening to sue end-users of Linux for the '245 patents' that Linux and OSS apparently infringe upon. (Ignoring for a moment that Microsoft won't even tell us which 245 patents are infringed, let alone what part of the Linux codebase is infringing on them)

    It would seem to be more fair if they only get to sue the person or company who actually introduced the patent-infringing code, and end-users who merely use the code don't have to worry about any of this

     

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  5.  
    identicon
    nonuser, Jan 17th, 2008 @ 8:45pm

    Re: the MSFT connection...

    IANAL but the situation seems a bit different. In the other case, LG licensed a patent to Intel, presumably including the right to make and sell products based on that patent. But, LG is now claiming that Intel's customers have to re-license the same patent to use those products. Very dubious.

    In Microsoft's case, let's suppose that they actually do have valid patents that Linux is infringing (which is far from clear, especially since Microsoft refuses to provide a list). Microsoft could claim that the users are using unlicensed software, and ought to have to pay product licensing fees that should have gone to Microsoft. This is somewhat dubious, but maybe less so if Microsoft provides appropriate legal warning to those users. But I doubt that Joe McCarthy-style saber rattling in the press about unspecified patent violations constitutes legal warning.

     

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  6.  
    identicon
    Anonymous Coward, Jan 17th, 2008 @ 9:04pm

    Terms

    Basically, if Company A legitimately licenses a patent from Company B and then sells a product based on that product to Company C, who turns around and resells it (perhaps as a component of a larger product), can Company B sue Company C for patent infringement?

    My take: If company B actually sold the patent to company A, then company A do what ever it wants with it. But, if company B only licensed the patent to company A, then company A can only do what what their license permits. So it all comes down to the terms of the license, in my view. Now, are Intel and LG disagreeing about the terms of the license? I don't see why The Supreme Court would get involved in a contract dispute like that. But, if Intel is claiming a legal right to ignore the terms then that's a whole different question. I don't see how The Supreme Court would uphold that.

     

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  7.  
    identicon
    Anonymous Coward, Jan 17th, 2008 @ 9:12pm

    Re: the MSFT connection...

    MSFT are threatening to sue end-users of Linux for the '245 patents' that Linux and OSS apparently infringe upon. (Ignoring for a moment that Microsoft won't even tell us which 245 patents are infringed, let alone what part of the Linux codebase is infringing on them)

    It seems to me then that M$ might not have a case due to not filing in a timely manner and the doctrine of laches. Google is currently defending itself in a patent case using that defense.

     

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  8.  
    identicon
    zcat, Jan 18th, 2008 @ 1:02am

    Simplest possible example..

    Ignoring the situation with Linux for a moment, here's how I understand the situation with LG/Intel/Quanta, etc..

    I have an mp3 player made by "Actions semiconductor", one of many asian companies thaty make very cheap mp3 players. At some point I presume Actions got the appropriate licenses from Fraunhofer to use the mp3 format.. and in buying the player, I 'sort of' inherit permission to use the mp3 format without having to go back to Fraunhofer for an independent license.

    But if I ended up building an mp3 jukebox around my cheap Actions mp3 player, and sold it, would I still have the same permission? Would this still be true even if I was making many jukeboxes, buying one (licensed) mp3 player per jukebox sold?

    I would hope so.. but you never know for sure.

     

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  9.  
    identicon
    Lion XL, Jan 18th, 2008 @ 7:17am

    practical look

    I see chips as a finished product, and patent license should only be extended to the maker of such finished products. any other way and we would all have to pay for each and every peice of technology we use. Could you imagine if the patent holder for CREATING CHIPS decided to go after every manufacturer that put a chip in a hard drive?

     

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  10.  
    identicon
    Anonymous Coward, Jan 18th, 2008 @ 12:36pm

    Re: practical look

    I see chips as a finished product, and patent license should only be extended to the maker of such finished products.

    That would all depend upon the terms of the license, wouldn't it? Or are you suggesting that license terms shouldn't be legally enforceable?

    any other way and we would all have to pay for each and every peice [sic] of technology we use. Could you imagine if the patent holder for CREATING CHIPS decided to go after every manufacturer that put a chip in a hard drive?

    It is illegal to use patented technology if you don't have the proper license (whether you are a manufacturer or not). In the case of manufactured goods, it is up to the manufacturer to obtain the proper licenses. If they don't, then you can be sued for using patented technology without a license. Simple. Then to recover your damages you can turn around and sue the manufacturer (maybe even the store that sold it to you) for not obtaining the proper licenses. That's the way the legal system works: everybody sues everybody and it all comes out in the wash.

     

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  11.  
    identicon
    Joe, Jan 18th, 2008 @ 4:23pm

    Contract thoughts

    Intel does not have stupid or incompetent lawyers. They would have made sure it was clear to sell the finished chip before the first one was even made. Get off the contract thing and focus on a patent holder trying to double dip.

     

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  12.  
    identicon
    Anonymous Coward, Jan 18th, 2008 @ 6:25pm

    Re: Contract thoughts

    Intel does not have stupid or incompetent lawyers.

    But you think that LG does, huh? Why is that?

     

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  13.  
    identicon
    Walter Dnes, Jan 18th, 2008 @ 10:25pm

    This would make selling most used goods illegal

    Cars have a gazillion parts, many of them patented. Computers have patented parts too. Imagine a situation where you can't sell or trade-in your used car or used computer without paying a bunch of patent-holders. Absolutely insane.

     

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  14.  
    identicon
    Anonymous Coward, Jan 19th, 2008 @ 1:35am

    Re: This would make selling most used goods illega

    No, it would not make it illegal to sell used goods because most goods are properly licensed.

    Imagine a situation where you can't sell or trade-in your used car or used computer without paying a bunch of patent-holders.

    Sell it or trade it? You can't even legally drive or use it if the patents aren't licensed. You're still responsible just as you would be if you bought stolen property. That's the way patent law currently works. If you find yourself in that situation then you should probably sue whoever you got it from.

     

    reply to this | link to this | view in thread ]


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