Supreme Court Says Patent Holders Can't Shake Down Entire Supply Chain

from the big-win dept

The Supreme Court continues to bring a bit of common sense back to the patent system. While most of the tech world was sitting around paying attention to whatever Steve Jobs has to say this morning, the really big news in the tech industry may be the Supreme Court's decision that patent holders can't shake down the entire supply chain, by forcing each level of the supply chain to also license the patent (even if they bought a product from someone who had licensed the patent).

This the LG v. Quanta case that the Supreme Court agreed to hear last fall. Basically, LG had some patents that it licensed to Intel. Intel then sold products based on those patents, which its customers used to build other products. LG demanded license fees from those customers as well, even though they bought fully licensed products from Intel. LG insisted that since its contract with Intel said that the license didn't cover any additional products, then the patents had to be relicensed by each player down the supply chain. To some extent, this question of "patent exhaustion" is similar to questions about first sale doctrine when it comes to copyright, in determining if you have a right to actually resell a product that was legally purchased. And, thankfully, the Supreme Court agrees that patent exhaustion is an important concept.

This is yet another very important limitation on patent holders, preventing them from stifling innovation at every step of the product process, and double-, triple- and quadruple-dipping off a product based on a single use of their patented invention. Hopefully this will lead to the quick dismissal of a bunch of cases that were filed last fall against a ton of companies up and down various supply chains. A lot of patent hoarders, fearing this exact decision, tried to just sue everyone at once, hoping for quick settlements before the Supreme Court stepped in. It's great to see the Supreme Court taking such an active interest in rolling back massive abuses of the patent system. Update: The EFF has a good take on the ruling, noting some of the holes in it, suggesting that it's unfortunate the the Supreme Court wasn't as clear as it could/should have been.
Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: contracts, first sale, patent exhaustion, patents, supply chain, supreme court
Companies: lg, quanta


Reader Comments

Subscribe: RSS

View by: Time | Thread


  1. identicon
    NotPerryMason, 9 Jun 2008 @ 6:33pm

    MLS, I need your legal expertise!

    I just spray painted my LG phone. Will they sue me? Will Title 35 apply?

Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Follow Techdirt
Insider Shop - Show Your Support!

Essential Reading
Techdirt Insider Chat
Recent Stories

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it
Close

Email This

This feature is only available to registered users. Register or sign in to use it.