U.S. patent ruling aids Intel clients

The Supreme Court has limited the ability of companies to collect multiple royalties on their patents.

The unanimous decision Monday was helpful to customers of Intel Corp. and is the latest step by the justices to scale back the power of patent holders.

The case revolves around a longtime Supreme Court doctrine that says the sale of an invention exhausts the patent holder’s right to control how the purchaser uses it.

In 1992, a federal appeals court in Washington, D.C., that hears patent cases from around the country began eroding the doctrine, ruling that patent holders could attach post-sale conditions to patented products.

Justice Clarence Thomas reined in the appeals court, saying that “for over 150 years the Supreme Court has applied the doctrine of patent exhaustion” and that it applies in this case.

In the case before the Supreme Court, South Korea-based LG Electronics Inc. licensed some of its patents to Intel Corp.

LG then sued some of Intel’s customers, alleging patent infringement, saying they owed royalties to LG because the customers combined Intel’s microprocessors and chip sets with non-Intel products.

The Intel customers are computer system manufacturers that include Taiwan-based Quanta Computer Inc. System manufacturers sell to companies such as Dell Inc., IBM Corp. and Gateway Inc.

The Bush administration supported Intel’s customers, citing the inconvenience and inefficiency of multiple royalty payments being passed down the chain of distribution with no obvious stopping point.