[Ip-health] Fred Lohmann on Quanta v LG

[James Love]

---------- Forwarded message ----------
From: Fred von Lohmann EFF <fred@eff.org>
Date: Mon, Jun 9, 2008 at 10:10 PM
Subject: deeplink post re Quanta v LG

[]

<http://www.eff.org/deeplinks/2008/06/supreme-court-victory-patent-first-sale-doctrine>

Supreme Court Victory for Patent First Sale Doctrine
Posted by Fred von Lohmann
The Supreme Court today issued a unanimous opinion in Quanta v. LG
Electronics, its first ruling in 66 years addressing the patent
exhaustion doctrine. Patent exhaustion is the patent law equivalent to
copyright law's first sale doctrine -- once you buy a product, you own
it and the patent owner generally can't interfere with your subsequent
use. EFF filed an amicus brief on behalf of itself, Consumers Union, and
Public Knowledge in the case.

Today's ruling was relatively narrow in scope, but what news there is,
is good. The case involved an effort by the patent owner, LG
Electronics, to sue Quanta for patent infringement. Quanta, for its
part, had purchased patented chipsets from Intel, which was authorized
by LG to manufacture and sell the chipsets. Huh, you may ask -- how can
Quanta be a patent infringer when it purchased perfectly legit chipsets
from a perfectly legit, licensed manufacturer? LG argued that its
license only reached Intel, not its customers. Moreover, LG required
Intel to give customers a "notice" that explicitly said as much. This is
exactly the kind of downstream "double-dipping" that the patent
exhaustion doctrine was meant to prevent (for more on this, read the
EFF-CU-PKamicus brief).

The Supreme Court today ruled against LG Electronics. So the upshot is a
victory for the principle of "you bought it, you own it:" a mere
unilateral notice to customers is not enough to prevent a patent from
being exhausted upon first authorized sale. This should help consumers
who purchase patented (and copyrighted) products festooned with "single
use only" and "not for resale" notices rest a bit easier. Today's ruling
suggests that those kinds of notices, too, would have no force under
patent law.

Unfortunately, the Court did not take the opportunity to issue a broad
ruling on whether othersorts of labels, or licenses, or contracts might
be enough to defeat the patent exhaustion doctrine. So the Court's
ruling leaves the door open for patent owners to experiment with these
tactics, all in a continuing effort to transform purchases into
"conditional sales" and stick consumers with restrictions on post-sale
activities, such as resale (as we've seen in cases likeUMG v. Augusto
and Vernor v. AutoDesk in the copyright context), reuse (as we've seen
in the case involving Lexmark's "not for refill" printer cartridges),
repair, and modification, among other things.

Forecast: more litigation and, someday, another trip to the Supreme
Court to face the issue squarely.