Tech Case May Shape Rule On Patent 'Exhaustion'
By Andrew Noyes

The Supreme Court will usher in 2008 with a high-profile technology case involving a major patent dispute between a group of Taiwanese computer manufacturers and their South Korean competitor. Oral argument is scheduled for Jan. 16.

The plaintiffs, led by Quanta Computer, want the court to upend a 2006 ruling by the Federal Circuit Court of Appeals that they claim would let patent holders -- like rival LG Electronics -- inappropriately seek royalties from multiple companies.

Consumers Union, the Electronic Frontier Foundation and Public Knowledge recently filed a brief arguing that the court incorrectly interpreted a principle that says patent owners "exhaust" their rights after a product is sold and cannot continue imposing post-sale conditions or filing infringement suits.

The watchdog groups, and numerous other Quanta supporters, claim that letting patent owners impose such use restrictions could harm consumers. They say contract law is the proper tool for protecting a patentee's legitimate interest in restricting post-sale uses.

The brief, authored by EFF staffers Fred von Lohmann and Jason Schultz and outside counsel Marc Bernstein, argues that failing to rule in Quanta's favor could lead to "increased information costs when trying to ascertain restrictions on patented goods."

Cisco Systems, Dell, Hewlett-Packard and the online auction site eBay filed their own brief that elaborates on perceived problems with the current regime. The American Antitrust Institute and Computer and Communications Industry Association also weighed in, urging the justices to overturn the appeals court.