High Court Appears Willing to Limit Licensing Fees for Patent Owners - WSJ.com - Sent Using Google Toolbar

High Court Appears Willing to Limit Licensing Fees for Patent Owners - WSJ.com

High Court Appears Willing to Limit
Licensing Fees for Patent Owners

January 17, 2008; Page B4

WASHINGTON -- The Supreme Court yesterday seemed ready to roll back a patent holder's power to control the use of its invention after it has been sold to somebody else.

Separately, the justices upheld New York state's system of selecting judicial nominees through political conventions, despite claims that the practice locks out independent challengers to party machines.

In the patent case, LG Electronics Inc. of South Korea licensed Intel Corp. to make computer chips but demanded a second royalty from companies that bought the Intel chips and used them to assemble computers.

One of those companies, Quanta Computer Inc. of Taiwan, argued that LG was demanding more than patent law allowed. The license to Intel exhausted the patent claims, the company contended. Since the chips have no use other than as a computer component, it would make no sense to license their sale but forbid installing them in computers, it said.

Several justices seemed to agree. "What you are trying to do is expand what you get," Chief Justice John Roberts told LG's attorney, Carter Phillips. "And the reason that troubles me is because if you had imposed a condition on the sale, Intel wouldn't have paid you as much."

The U.S. Court of Appeals for the Federal Circuit, a specialized tribunal that hears patent appeals, had agreed with LG. But in recent years the Supreme Court has overruled a raft of Federal Circuit decisions that gave patentees broad power to control their inventions and made it difficult for competitors to challenge the validity of patents.

A decision is expected by July.

(Quanta Computer Inc. v. LG Electronics)

Separately, the court unanimously rejected claims that New York's method of selecting judicial nominees violates the First Amendment.

A former Brooklyn judge had sued, claiming that party bosses shut her out of the Democratic nomination after she refused demands to make patronage hires. Under the system, voters elect delegates to a partisan judicial nominating convention, which selects candidates for the general election. With most districts under effective one-party control, nomination was tantamount to election, critics argued.

Writing for the court, Justice Antonin Scalia said that the system provided adequate alternatives for challengers to get their names on the ballot at the general election. Several justices noted that the court wasn't endorsing New York's Byzantine system.

(New York State Board of Elections v. Lopez Torres)

Write to Jess Bravin at jess.bravin@wsj.com