Patent exhaustion doctrine and personal property rights and Basel

"Quanta, Wistron."

The Jeopardy question:   Which companies makes most Laptops,  Notebooks, and Tablets?

These Taiwanese companies make stuff as contract manufacturers, which Americans recognize by other brand names.  For Quanta (biggest competitor to Foxconn), the devices they manufacture include:

Acer, Alienware, Apple Inc., Cisco, Compaq, Dell, Fujitsu, Gateway, Gericom, Casper, Hewlett-Packard, Lenovo, LG, Maxdata, MPC, Sharp Corporation, Siemens AG, Sony, Sun Microsystems, and Toshiba.

Also noteable for Quanta is the company's role as the "one laptop per child" manufacturer.  These are examples of the companies described in the Harvard Business Review article, "The Battle for China's Good Enough Market."   When a company excels at making a  product which is good enough for a person of modest means (3B3K), they become good at "scale", which will eventually lead to, well, Japan or South Korean economies.  What Honda, Toyota and Datsun did with autos which were "good enough" in the 1970s is happening today with electronics manufacturing.

But perhaps the most important contribution by the Taiwanese company is neither affordable manufacturing, sustainable takeback, nor even one-laptop per child.  In 2008, lawyers for Quanta stood up to massive opposition by monied interests and won a unanimous decision by the USA Supreme Court protecting property owners from "patent" rights, which some people want to extend to working and repairable product... a move I call "obsolescence in hindsight".  The court stood firm on the USA's definition of patent exhaustion doctrine, resisting efforts to extend patents to control personal property in other nations.

The wikipedia article about the 2008 lawsuit basically describes LG accusing Quanta of some kind of unintended use of patented computer chips technology, licensed by LG to Intel.  Intel resold the chips in circuit boards made for Quanta, and Quanta used them to make something LG had not intended (one definition of "the gray market").  The USA Supreme Court unanimously ruled that a patent does not extend past the sale of the product, as they did Fuji vs Jazz Camera case and the Lexmark ink cartridge case.  Americans don't have to ask patent holders permission to use and reuse parts ("cores"). 

 "The Supreme Court of the United States ruled that LG, who had a patent sharing deal with Intel did not have the right to sue, because Quanta, being a consumer, did not need to abide by patent agreements with Intel and LG.^[3]"

^{The best description of Patent Exhaustion Doctrine, and the USA Supreme Court's UNANIMOUS 2008 ruling supporting Right to Remanufacture and Right to Reuse, is probably in Sheppard Mullin's Intellectual Property Law Blog.}

"Whether or not a patent owner is entitled to claim a royalty from the end product assembler, having already licensed the component manufacturer, is a multi-billion dollar question."

<sup>He notes, as I have, that other countries are not nearly as unanimous in curtailing the rights of original manufacturers who have billions to spend.  If you look at how and where patent laws have been applied to restrict reuse - surprise, surprise - the products "protected" are made in the nation "protecting" them. 


I'd put it another way:</sup>  

"Hardware is not software".  There is no EULA. If you sell a hammer to me, I own it. 

In the USA, if an OEM has a legitimate concern about their product's reuse, that is what leases and buy-backs are for.  I love having had the option to sell my used Honda Odyssey back to the Honda dealer... but there should be no law or taxpayer subsidy to leverage that decision.  I should not forfeit a deposit if I make a 3rd party sale.  My Honda was eligible as a "clunker" last summer, but it is not, and the person who bought it from me is grateful.

If used goods are being mislabeled as "clunkers" or "waste" before their useful value is exhausted, even in order to regulate suspected "toxics along for the ride", then Stewardship advocates have a responsibility to beef up on the exhaustion doctrine laws which could sacrifice consumers personal property rights.  All the economic studies of the "cash for clunkers" law show that it was a clumsy government effort, and students of "ewaste" policy could probably apply much of the same analysis to California SB20 and other "cancellation" subsidies.

^{All I can hope for is that the agents of change who rely on Stewardship as a policy or solution will become conversant in topics like patent exhaustion doctrine and contract manufacturing.  The environment is too important to surround yourself with people who agree with you, or to build certifications upon dogmatic failures to recognize Techs of Color.}