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LG Electronics had an agreement with Intel that allowed the processor giant to manufacture chips and chipsets based on its patents. However, this agreement explicitly barred Intel from mixing the components with non-Intel parts.

Quanta bought the components from Intel and used them to make notebook computers. 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.

"If the question is did Intel have the right to sell the system as a system, the answer is yes," argued LG attorney Carter Phillips.

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"But it didn't sell the system as a system. It sold the components."

However, Quanta argues that because LG Electronics collected its royalties from Intel, Quanta owes it no further money. "LGE did get its royalty from Intel, did give it 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," Quanta attorney Maureen Mahoney told the court.

Irritation

During proceedings, justices Stephen Breyer and David Souter both expressed concern that the fact that a computer chip has only one real use, in a computer, meant that it fell into a category of goods whose patents are exhausted. Chief Justice John Roberts seemed to agree.

Roberts also seemed irritated with the parties' failure to create a solid license that would have prevented the court challenges.

"So the parties are unwilling to spell out exactly how this is going to work out in their contract," he said. "There's a lot of uncertainty that could be resolved, rather than take their chances in the Supreme Court."

A Supreme Court ruling is expected by the end of June.