Legally Speaking: Quantafying the Value of Patent Exhaustion Rules

Intellectual Property and Patents

Article Snapshot


Pamela Samuelson


Communications of the ACM, Vol. 51, November 2008


This article looks at how much control patent owners have over how consumers use a product.

Policy Relevance

Supreme Court cases hold that the rights of a patent owner should not extend to control the way that the customers of a patent licensee use the product.

Main Points

  • In 2008, the U.S. Supreme Court decided an important case called Quanta Computer, Inc. v. LG Electronics, Inc., involving the idea of “patent exhaustion.”

  • Usually, when we buy a book or a machine, we can use it as we choose, even when its owner holds a copyright or a patent on the creation.

  • In the Quanta case, a technology firm called LGE licensed its patent to Intel, under a license that allowed Intel to resell products using LGE’s technology to customers like Quanta.
    • LGE’s patent license tried to restrict Intel’s customers from mixing Intel and non-Intel components.
    • LGE sued Quanta for patent infringement when Quanta mixed components.

  • The Supreme Court ruled that, as in earlier cases, a patent license could not restrict what customers who bought the product from the licensee did with the product, whether the product was an apparatus or a method. The patent owner’s rights were “exhausted” upon the sale of the product.

  • Some Federal Circuit Court of Appeals cases allow the patent owner to extend his rights if the licensee’s customer agrees in a license or contract, rather than buying the product in an outright sale. These cases are probably wrongly decided. 

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