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Supreme Court examines LG over 'duplicative' licensing claims

Patent liability in the product chain

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The US Supreme Court has agreed to hear a controversial case in which LG Electronics is accused of trying to "shake down the entire computer industry for several billion dollars in duplicative licensing fees".

Taiwanese contract computer manufacturer Quanta and other computer builders in Taiwan are suing LG Electronics over its assertion of patent rights. They hope to overturn an appeals court decision that they say could open up manufacturers to new suits.

They claim that LG is asserting its patent rights against every company in a manufacturing chain to produce a computer.

The companies make computers under contract to major US computing brands such as Hewlett-Packard, Dell, and Gateway. Those companies have filed supporting documents to the court backing Quanta.

LG sued Quanta and others in 2000 alleging that they infringed computer chip patents held by it.

The technology was part of a licensing deal with Intel which allowed that company to use LG technology on its chips. When Intel sold those chips to Quanta LG said that its licence agreement did not extend to the computer manufacturers.

A California District Court backed the Taiwanese companies, but a federal appeals court overturned that decision, finding in favour of LG. The Supreme Court has now agreed to look into the case.

The Supreme Court has shown close interest in patent matters in recent months, ruling recently on "obviousness" in patent applications in a case between KSR and Teleflex over a car accelerator pedal.

The court also recently ruled that Microsoft cannot be punished in the US for patent infringement that takes place on foreign soil. The Supreme Court's recent rulings have been seen as generally reining in the scope of patents.

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OUT-LAW.COM is part of international law firm Pinsent Masons.

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