Supreme Court asks administration to review patent infringement case involving royalty fees

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WASHINGTON -- The Supreme Court Monday asked the Bush administration to weigh in on a patent case that could impact any company with global supply chains.

The Court has not yet decided whether to take the case, but instead asked the U.S. Solicitor General -- the government's lawyer -- to offer its opinion on whether the court should wade into the dispute.

At issue is whether a patent holder can seek royalties from multiple companies as a patented product works its way through the manufacturing process.

The case stems from a patent infringement lawsuit filed by Seoul, South Korea-based, LG Electronics Inc. against a group of Taiwan-based computer manufacturers.

The Taiwanese companies -- Quanta Computer Inc., Spectre Technologies Inc. and several others -- installed chips bought from Intel Corp. into computers that they made, under contract, for U.S. companies such as Dell Inc., Hewlett-Packard Co. and Gateway Inc.

The Taiwanese companies had obtained the patented technology when they bought microprocessor chips from Intel.

The Taiwanese firms argued in court filings that after LG had licensed patents to Intel, patent infringement couldn't be claimed if Intel customers were using the product as originally intended.

LG Electronics, however, responded that it had licensed its patents to Intel in 2000 on the condition that the chips not be combined with non-Intel components in a way that infringed the patents, according to LG's court filings.

Intel had notified the Taiwanese companies of this restriction, LG said, but the companies allegedly violated that condition when they installed the chips into computers they made.

The Court of Appeals for the Federal Circuit ruled in LG's favor in July 2006.

Dell, Hewlett-Packard and Gateway filed a friend-of-the-court brief in support of the Taiwanese firms, arguing that the Federal Circuit's decision essentially allows LG to collect royalties twice on the same patent.

The Solicitor General's response to the Supreme Court likely would include expert legal opinions from U.S. Patent and Trade Office lawyers. If the court decided to consider the case, oral arguments would be scheduled in the next term, which begins in October.

The case is Quanta Computer Inc. v. LG Electronics Inc., 06-937.



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