On June 9, the U.S. Supreme Court presented a victory to the aftermarket in the case of Quanta Computer Inc. v. LG Electronics. The decision overturned a previous ruling by the U.S. Court of Appeals for the Federal Circuit, citing the "patent exhaustion" doctrine, which removes the patent holder's ability to exert patent rights over the customers of its licensees.
In light of the ruling, Static Control Components has filed a motion to reconsider the trial judge's ruling on Prebate. In its filing SCC "respectfully requests that the Court reconsider its interlocutory order[R. 10081] and deny Lexmark's Renewed Motion for Judgment as a Matter of Law regarding inducement of infringement."
LG Electronics had licensed some of its patents related to memory management to Intel. However the license did not extend to third party "downstream users" that combined Intel's licensed products with third-party components. Quanta was one of those downstream users. It purchased licensed parts from Intel and used them in conjunction with non-Intel parts. LG sued Quanta and asserted that the combination of the Intel products with non-Intel memory and buses infringed LG's patents. Quanta argued that those patents were exhausted as to the Intel products Quanta was using.
In the ruling, the Supreme Court stated "The authorized sale of an article that substantially embodies a patent exhausts the patent holder's rights and prevents the patent holder from invoking patent law to control post-sale use of the article."
Also in the ruling, Justice Clarence Thomas stated "the primary purpose of our patent laws is not the creation of private fortunes for the owners of patents but is to promote the progress of science and the useful arts."
In the April 2007 ruling in the Static Control v. Lexmarkcase, the Court held that Lexmark could enforce a single-use restriction underpatent law against any downstream entity (e.g., third-party remanufacturers or Static Control) because Lexmark had not exhausted its patent rights by the authorized sale of Prebate-labeled cartridges. Static Control's filing states that Quanta requires this Court to reconsider and reverse its conclusion that Prebate is valid and enforceable under patent law.
