US Supreme Court hears LG-Quanta patent case

By Diane Bartz

WASHINGTON, Jan 16 (Reuters) - The U.S. Supreme Court heard arguments in a dispute between LG Electronics Inc (066570.KS: Quote, Profile, Research, Stock Buzz) and Quanta on Wednesday that will either expand or contract the rights of a patent holder.

LG Electronics, which holds patents on microprocessor chips and chip sets, had an agreement with Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) that allowed Intel to make the chips and chip sets but explicitly barred it from mixing the components with non-Intel parts.

Quanta Computer Inc (2382.TW: Quote, Profile, Research, Stock Buzz), among others, bought the components from Intel and used them to make notebook computers. South Korea's LG Electronics sued, accusing Quanta of infringing the patents not of the components themselves but "systems and methods" of using them to make a functioning computer.

LG Electronics' attorney Carter Phillips told the high court that LG had allowed Intel to make the chips, but had placed restrictions on the companies that bought them to prevent them from infringing LG separate patents on how they were to be used.

"If the question is did Intel have the right to sell the system as a system, the answer is yes," Phillips said. "But it didn't sell the system as a system. It sold the components."

Quanta's attorney Maureen Mahoney argued that because LG Electronics collected its royalties from Intel, that Quanta owed it no further money.

"LGE did get its royalty from Intel, did give them authority to sell products which would otherwise contributorily infringe and now what it's seeking to do is to say ... we want to collect another royalty from the buyer of the product," she said.