The part of US patent law that allows an owner of a computer or
camera to sell it after use is called patent exhaustion. It
restricts the right of a patent holder to stop the sale of goods
containing their patented inventions so that it only applies to the
first sale of goods to consumers.
The case in question is between Quanta Computer and LG
Electronics and concerns the use of labels on products stipulating
that the product is 'not for resale' or 'single use only'.
Digital rights group the Electronic Frontier Foundation (EFF)
and consumer advocacy body Consumers Union have filed a brief to
the Supreme Court supporting the restriction on patent law that the
patent exhaustion principle creates.
"In the words of this court, 'in the essential nature of things,
when the patentee, or the person having his rights, sells a machine
or instrument whose sole value is in its use, he receives the
consideration for its use and he parts with the right to restrict
that use'," said the document filed to the Supreme Court.
"Consequently, according to a century old line of supreme court
and lower court precedents, when a consumer purchases a patented
product, that consumer owns it outright, and the patent owner may
not thereafter invoke patent law to restrict its post-sale use,
repair, or resale," it said.
The EFF said that a ruling in the early 1990s from a federal
circuit court in a case involving a healthcare company Mallinckrodt
called the patent exhaustion principle an 'implied licence', which
opened the door to a greatly increased number of stickers on
products which attempted to restrict consumers' use of products
they had bought.
It said that the existence of vibrant markets for second hand
goods such as Ebay or Craigslist meant that such attempts to hamper
second hand sales affected consumers greatly.
"By empowering patent owners to conjure what amount to
servitudes that run with patented goods, the federal circuit has
impermissibly and unwisely expanded patent scope by judicial fiat,"
said the document.
The case centres on wholesale computer maker Quanta's use of
Intel chips that in turn used LG Electronics' technology. LG had
licensed the technology to Intel, which sold chips to Quanta, which
built PCs for Dell, Hewlett-Packard and others.
LG then sued Quanta for patent infringement for its use of LG
technology in the machines. "LG's effort here is just one example
of the mischief that unleashed by Mallinckrodt ushering in an era
of chattel servitudes backed by patent law," said the EFF
submission.
"The patent exhaustion doctrine allows consumers to trust that
the ordinary use, repair, and resale of the tangible goods they
purchase will not give rise to an infringement suit at the hands of
the patentee who sold it to them," it said.
The brief submitted to the court said that undermining patent
exhaustion tipped the balance of power away from consumers. "By
disregarding more than a century of patent exhaustion precedent and
legislative acquiescence, the federal circuit has worked an
unsupportable judicial expansion of the scope of the patent
monopoly. With this expansion of patent scope will come a net
wealth transfer from consumers to patent owners," it said.
