UPDATE 1-Supreme Court says it will hear LG patent case

Tue Sep 25, 2007 10:29am EDT

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WASHINGTON, Sept 25 (Reuters) - The U.S. Supreme Court said on Tuesday that it would review a patent fight in which LG Electronics (066570.KS) accused Quanta Computer Inc (2382.TW) of Taiwan and others of infringing patents on microprocessor chips in its personal computers.

The case has widespread implications because it raises questions about how tough patent holders can be in restricting licenses.

LG Electronics filed the suit against Quanta, Quanta Computer USA Inc, Bizcom Electronics Inc, Compal Electronics Inc, Sceptre Technologies Inc, Everex Systems Inc, First International Computer Inc, First International Computer of America Inc and Q-Lity Computer Inc.

The U.S. District Court for Northern California decided that Quanta, a Taiwanese company, and the other companies did not infringe on LG's patents. That decision was overturned in July 2006 by a federal appeals court.

The case hinges on whether patent holders can demand royalties from multiple companies during the manufacturing process.

Quanta argued that LG Electronics had licensed its technology to Intel (INTC.O), which in turn made microprocesser chips that it sold to Quanta. Quanta used the chips to make computers under contract for Dell, Inc DELL.O, Hewlett-Packard Co. (HPQ.N), and Gateway, Inc GTW.N.

LG Electronics argued that it structured the license so that it did not extend to any of Intel's customers.

A few weeks ago, LG Electronics filed a separate patent-infringement suit against Quanta Computer, this time for infringing on four patents used to make DVDs. That lawsuit accused Quanta of using LG Electronics' intellectual property in notebooks supplied to Apple (AAPL.O), Dell, Hewlett-Packard, IBM (IBM.N), Sony Corp (6758.T), and Toshiba (6502.T).

Quanta also makes the wildly popular Apple iPhone.

U.S. Solicitor General Paul Clement recommended that the Supreme Court take up the case.

The Supreme Court is expected to hear arguments in the case early next year, with a decision likely by the end of June. (Reporting by Diane Bartz, editing by Gerald E. McCormick/Dave Zimmerman)

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