The following is by Christopher R. Pudelski, an associate at Akin Gump who assisted in the preparation of the brief discussed in this post.

On Tuesday, we filed this amicus brief in Quanta Computer, Inc. v. LG Electronics, Inc., No. 06-937, which presents the question whether patent rights are exhausted by a licensee’s authorized sale of a patented product to an authorized purchaser, where that product has no reasonable use other than in practicing the patented invention.

The case arises out of a lawsuit brought by LG Electronics, Inc., et al. (“LG”), against Quanta Computer Inc., et al., for infringement of certain patents in LG’s portfolio. LG and Intel Corporation entered into a licensing agreement that granted Intel authority to sell microprocessors and chipsets embodying essential features of LG’s patents. Intel then sold the licensed products to Quanta and other purchasers, who then incorporated them into computers and file servers for resale. In a separate agreement with Intel, LG required Intel to notify its prospective purchasers (like Quanta) that they did not receive a license from LG to use the products purchased from Intel to combine with non-Intel products. Quanta purchased an ongoing stream of these products from Intel and combined them with non-Intel products for resale. LG sued for infringement.

The district court granted Quanta’s motion for summary judgment on the ground that Intel’s authorized sale of the products exhausted LG’s patent rights. On reconsideration, the district court upheld its finding with regard to LG’s apparatus claims, but held that LG’s method claims were not exhausted. The Federal Circuit reversed. It held that the patent exhaustion doctrine did not apply to conditional sales, and that these sales were conditional given LG and Intel’s purchaser-notification agreement.

Our amicus brief argues in support of neither party on behalf of the Biotechnology Industry Organization, the principal trade association representing the biotechnology industry worldwide. The brief attempts to: (i) educate the Court about one important and complicated context in which patent arguments arise; (ii) highlight the significant legal distinctions between the biotechnology industry and other industries; (iii) limit the Court’s holding to the type of practice before the Court; and (iv) to explain the adverse implications of a broad-sweeping ruling. The brief argues that the patent exhaustion doctrine does not authorize purchasers to “make” self-replicating products – such as transgenic, self-replicating seeds and DNA – which are unique to the biotechnology industry. The brief also argues that the doctrine does not apply to validly restricted sales and purchases that reasonably protect the patentee’s retained rights while permitting reasonable use of a product.

Posted in Quanta v. LG, Uncategorized