We live in the digital age where technology makes our lives easier each day. Advance medical equipments are created to help doctors treat patients, kitchen tools are innovated to make it easier for home makers, and cars are made smarter to make driving easier for humans.

Automotive electronics paved the way for helpful features like anti-lock braking systems (ABS) and automatic weather adjustments which makes driving safer and more comfortable.

Car manufacturers spend about two thousand dollars in automotive electronics for every car that comes out of the assembly line. These automotive electronics transform the car into a vehicle with better performing engine, more adaptive entertainment systems, and safety features that are far more superior than its predecessors.

Automotive Electronics of the Modern Car

All modern cars today have extensive amount of electronics, some required for good engine performance, reduce the emissions, and others gadgets. What is your thoughts especially with mechanics who understand the mechanical aspect of the vehicle but not quite sure of the electrical/electronics.

Background

LG Electronics (”LGE”) owns the rights to several computer technology patents, all of which describe a computer operation or method, not actual products. LGE licensed these patents to Intel Corporation in a License Agreement that authorizes Intel to manufacture and sell microprocessors and chipsets that use and incorporate the LGE patents. LGE and Intel had a separate agreement (”Master Agreement”) that required Intel to give its customers written notice that the license does not extend to a product made by combining an Intel Product with a non-Intel product. The Master Agreement states that breach of it does not affect the integrity and terms of the License Agreement.

Quanta purchased microprocessors and chipsets from Intel, and then manufactured computers using the Intel parts in combination with non-Intel parts, but without modifying the Intel parts. LGE sued Quanta, claiming this combination infringed the LGE patents. Quanta claimed that LGE’s patents were exhausted when Intel sold Quanta the parts that embodied LGE’s patent and therefore LGE has no further rights.

The District Court initially granted summary judgment in favor of Quanta, but upon reconsideration, denied the summary judgment on the grounds that the exhaustion doctrine does not apply to method patents. The Federal Circuit agreed that the patent exhaustion does not apply to method patents, and alternatively found that LGE did not license Intel to sell the Intel products to Quanta to combine with non-Intel products.

The United States Supreme Court heard the case on January 16, 2008 and issued its opinion, reversing the Federal Circuit and finding in favor of Quanta, on June 9, 2008.

The doctrine of patent exhaustion and its history pre-Quanta

The basic concept of patent exhaustion means that the first authorized sale of a patented item terminates all patent rights to that item. Quanta, 128 S.Ct. at 2115. The doctrine is premised on the notion that a patentee is entitled to a single royalty – in authorizing that first sale, the patentee presumably has bargained for and received the value of the patent right. The Supreme Court has explained that the touchstone of the patent exhaustion doctrine is “whether or not there has been such a disposition of the article that it may fairly be said that the patentee has received his reward for the use of the article.” United States v. Masonite Corp., 316 U.S. 265, 278 (1942).

In the early 1900’s, some courts allowed patentees to place post-sale restrictions on their patents that enabled them to exercise control (and receive additional royalties) in the downstream chain, long after the initial authorized sale. Quanta, 128 S.Ct. at 2115-2116.