QUANTA VS. LGE : a decision concerning licencing

QUANTAVS.LGE:ADECISIONCONCERNINGLICENSING

FRANÇOISPAINCAHUDANDCLAIRECEBRON*
LEGER
ROBICRICHARD,LLP
L
AWYERS,PATENTANDTRADE-MARKAGENTS
Generally,whenapatentownersellsapatentedproducttoafirstbuyer,the
purchaserisfreetouseorsellthatpatentedproductwithouthavingtoworryabout
beingsuedforinfringementbythepatentholder.Thisisreferredtoasthedoctrine
of“patentexhaustion”.
InacaseopposingtheKoreancompany,LGElectronics(“LGE”),andthe
TaiwanesecompanyQuantaComputers(“Quanta”),theSupremeCourtofthe
UnitedStatesrecentlyruledonthesensitivesubjectoftheapplicabilityofthe
doctrineofpatentexhaustiononmethodpatents(QuantaComputer,Inc.v.LG
Electronics,Inc.,no.06-937,2008U.S.LEXIS4702(June9
th,2008)).
TheSupremeCourtunanimouslyoverruledtheFederalCircuit’sdecisionandheld
that(i)thedoctrineofpatentexhaustionappliestomethodpatents,andthat(ii)once
aproductisunconditionallyauthorizedforsale,andthatthisproductcomprisesthe
essentialelementsofapatentedinvention,withnootherintendedusethanto
practicethepatent,thedoctrineofpatentexhaustionappliesandthepatentowner
cannolongerinvokepatentlawinanattempttoreceiveadditionalroyaltiesorlimit
therightsofthelicensee’ssubcontractorsandthelatter’sclients,since,bydoingso,
thepatentownerwouldextendthepatent’sscopeandtherightswhichthepatent
conferswithoutduecause.
Inreachingthisdecision,theSupremeCourtreaffirmeditssupportofadoctrine
which,accordingtoitsadvocates,servestomaintianacompetitivemarket.
However,theCourtdidnotruleuponthecontractualaspectofthedisputebetween
thepartiesasitdidnotdiscussorlimittherightsofthepatentownerstoimpose
restrictions/conditionstothesaleoftheirproductsbywayofalicenseagreement.
Therefore,itfollowsthatwhenpatentlawcannotbeusedtoprohibitorlimittheuse
ofaproduct,contractuallawmaycomeintoplaytoachievetheintendedresult.
Theimpactofthisdecisiongoeswellbeyondtheissueofthescopeofapplicability
ofthedoctrineofpatentexhaustion,sincepatentownerswillhaveeveryinterest,
beforemarketingtheirproduct,toreviewthewordingoftheirlicenseagreements(at

©CIPS,2008.
*WithLEGERROBICRICHARD,LLP.amultidisciplinaryfirmofLawyers,andPatentandTrade-mark
Agents.PublishedintheWinter2008Newsletterofthefirm(Vol.12,No.4).Publication068.101.

2
leastwithrespectto,directlyorindirectly,theterritoryoftheUnitedStates),for
instanceby:
1-draftinglicenseagreementswhichclearlyrestricttherightofthe
licenseetore-sellpatentedarticlesonlytopurchasersauthorizedbythe
licensor,whilepreventinganti-competitivepractices.Assuch,(i)thesale
willbedeemedconditionalandthedoctrineofpatentexhaustionwillnot
apply,(ii)everythirdpartypurchaserwillalsohavetoenterintoalicense
agreementwiththepatentowner,allowingthelattertosuperviseand
restricttheuseofthepatentedarticle,(iii)thepatentownerwillthereby
retainacertaindegreeofcontrolovergainsstemmingfromtheuseofthe
patentbyimposingaroyaltytobepaidbyeverylicensee;or
2-fullynegotiatingtheamountoftheroyaltytoretainthemaximumvalue
ofthepatentedrights,whenthelicenseisgrantedtothefirstbuyer.
AlthoughpatentownersappeartobeabletolimittheimpactoftheSupremeCourt’s
decisionbyusingcontractualclausestotheiradvantage,potentiallicenseesmight
bereluctanttoenterintoalicenseagreementwhichimposessubstantialobligations
uponthem.Itwillbeinterestingtoseehowlicensorsandlicenseeswillstrikea
balancebetweentheirrespectiveinterests.

ROBIC,ungroupedavocatsetdagentsdebrevetsetdemarquesdecommercevouédepuis1892à
laprotectionetàlavalorisationdelapropriétéintellectuelledanstouslesdomaines:brevets,dessins
industrielsetmodèlesutilitaires;marquesdecommerce,marquesdecertificationetappellations
dorigine;droitsdauteur,propriétélittéraireetartistique,droitsvoisinsetdelartisteinterprète;
informatique,logicielsetcircuitsintégrés;biotechnologies,pharmaceutiquesetobtentionsvégétales;
secretsdecommerce,know-howetconcurrence;licences,franchisesettransfertsdetechnologies;
commerceélectronique,distributionetdroitdesaffaires;marquage,publicitéetétiquetage;poursuite,
litigeetarbitrage;vérificationdiligenteetaudit.ROBIC,agroupoflawyersandofpatentand
trademarkagentsdedicatedsince1892totheprotectionandthevalorizationofallfieldsof
intellectualproperty:patents,industrialdesignsandutilitypatents;trademarks,certificationmarks
andindicationsoforigin;copyrightandentertainmentlaw,artistsandperformers,neighbouringrights;
computer,softwareandintegratedcircuits;biotechnologies,pharmaceuticalsandplantbreeders;
tradesecrets,know-how,competitionandanti-trust;licensing,franchisingandtechnologytransfers;
e-commerce,distributionandbusinesslaw;marketing,publicityandlabelling;prosecutionlitigation
andarbitration;duediligence.
COPYRIGHTER
IDEASLIVEHERE
ILATOUTDEMÊMEFALLULINVENTER!

3
LAMAÎTRISEDESINTANGIBLES
LEGERROBICRICHARD
NOSFENÊTRESGRANDESOUVERTESSURLEMONDEDESAFFAIRES
PATENTER
R
ROBIC
ROBIC+DROIT+AFFAIRES+SCIENCES+ARTS
ROBIC++++
ROBIC+LAW+BUSINESS+SCIENCE+ART
THETRADEMARKERGROUP
TRADEMARKER
VOSIDÉESÀLAPORTÉEDUMONDE,DESAFFAIRESÀLAGRANDEURDELAPLANÈTE
YOURBUSINESSISTHEWORLDOFIDEAS;OURBUSINESSBRINGSYOURIDEASTOTHE
WORLD
Trade-marksofLEGERROBICRICHARD,
LLP(“ROBIC”)