Agoracom

The concluding paragraph of the SC ruling has this -

"Nothing in the License Agreement limited Intel's ability to sell its products practicing the LGE Patents. Intel's authorized sale to Quanta thus took its products outside the scope of the patent monopoly, and as a result, LGE can no longer assert its patent rights against Quanta. "

What does this sentence mean? SC was reminding that LGE made a big mistake in not including the restrictive language in their contract with Intel. This mistake cause two bad consequences to LGE –

1. “Intel's authorized sale to Quanta thus took its products outside the scope of the patent monopoly”

2. “LGE can no longer assert its patent rights against Quanta. "

The first part was telling LGE and Corps alike to use 

restrictive contract to get around the patent exhaustion, 

so patent owners can get loyalties from down stream users. 

If LGE had restrictive language in the contract with Intel 

(like AMD/PTSC contract - "LICENSEE may sublicense 

the rights set forth herein only to third parties (e.g., 

foundry, distributor, design consultants, benchmark 

agencies, etc.) that assist LICENSEE in exercising 

any of it's licensed rights set forth herein. "), then the 

issue would still be within “scope of the patent monopoly”  and 

LGE could still pursue Quanta using monopoly power of 

their patent. Essentially, the restrictive language in the 

patent licensing agreement is the one stone that can shoot 

down two birds – keeping the dispute within the patent law 

arena, and secure the right to pursue down stream users 

(third party companies) of the patented technology.

Is LGE dead in the woods? Maybe not. 

“At the end of its opinion, the Supreme Court practically begs LGE is to sue Intel for breach of contract. And they should! If the understanding between LGE and Intel was that Intel's customers were going to pay part of the royalties due LGE, and those customers didn't come through, then Intel absolutely should be required to make good for the shortfall.”

http://brokensymmetry.typepad.com/br...

Let’s try a different version apply to our case – “If the understanding between PTSC/TPL and Intel was that Intel's customers were going to pay part of the royalties due PTSC/TPL, and those customers didn't come through, then Intel absolutely should be required to make good for the shortfall” and we can “sue Intel for breach of contract”. Is this sound too good to be true? If Intel/Sony and others paid too little, too early, they may not be out of the hook yet, there is a second round battle to be waged by mainly using the contract law instead of mainly using the patent law, as suggested by this SC ruling just before the concluding paragraph quoted above -

⁷We note that the authorized nature of the sale to Quanta does not necessarily limit LGE’s other contract rights. LGE’s complaint does not include a breach-of-contract claim, and we express no opinion on whether contract damages might be available even though exhaustion operates to eliminate patent damages. See Keeler v. Standard Folding Bed Co., 157 U. S. 659, 666 (1895) (“Whether a patentee may protect himself and his assignees by special contracts brought home to the purchasers is not a question before us, and upon which we express no opinion. It is, however, obvious that such a question would arise as a question of contract, and not as one under the inherent meaning and effect of the patent laws”).

Here, SC pointed out two mistake make by LGE –

1. “No conditions limited Intel’s authority to sell products substantially embodying the patents.”

2. “LGE’s complaint does not include a breach-of-contract claim”

And SC leaves it open for LGE to pursue “contract damages” “even though exhaustion operates to eliminate patent damages.”

All indications so far imply that TPL/PTSC did not make the same mistake as LGE did for mistake #1. For #2, if we do go to the second round with Intel/Fujitsu/Sony, etc., just include a breach-of-contract claim in the lawsuit to avoid having the same fate as LGE. Supreme Court had just taught all patent holders how to write patent license agreement to pursue downstream patent users, and how to take the patent licensees to the court for breach-of-contract . For those who celebrate as victors based on yesterday’s ruling, they may have to go back to read it a few times more to get the true meaning of ruling.