High court rules against multiple royalties
Lawyer Blogs
The Supreme Court has limited the ability of companies to collect multiple royalties on their patents.
The unanimous decision Monday was helpful to customers of Intel Corp. and is the latest step by the justices to scale back the power of patent-holders.
The case revolves around a long-time Supreme Court doctrine that says the sale of an invention exhausts the patent-holder's right to control how the purchaser uses it.
In 1992, a federal appeals court in Washington, D.C., that hears patent cases from around the country began eroding the doctrine, ruling that patent-holders could attach post-sale conditions to patented products.
Justice Clarence Thomas reined in the appeals court, saying that "for over 150 years the Supreme Court has applied the doctrine of patent exhaustion" and that it applies in this case.
In the case before the Supreme Court, a South Korean company, LG Electronics Inc., licensed some of its patents to Intel Corp.
LG then sued some of Intel's customers for patent infringement, saying they owed royalties to LG because the customers combined Intel's microprocessors and chipsets with non-Intel products.
Patent laws can carry triple-damage awards when a court finds willful infringement.
The Intel customers are computer system manufacturers that include Taiwan-based Quanta Computer Inc. System manufacturers sell to industry brandnames such as Dell Inc., Hewlett-Packard Co., International Business Machines Corp. and Gateway Inc.
The Bush administration supported Intel's customers. It cited inconvenience, annoyance and inefficiency of multiple royalty payments being passed down the chain of distribution with no obvious stopping point.
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