1. Your PowerPoint presentation contains substantive information, relevant graphics and images and provides an interesting approach to the assignment; however, please review the activity page instructions wherein it requires you to do the following: research the case and then to bring the outcome up to date with recent findings in the industry at the next managerial meeting. In addition, the instructions require you to respond to six bullet point issues. You did a good job in discussing the elements of a contract, the issue of a well publicized agreement, and the ruling of the Court, but I did not see a response to bullet points Please revise this presentation to include a response to bullet points, Please see additional comments by clicking on the “jd” box in the left hand corner of the slides. Please resubmit this assignment by 8/22.
Let me know if you have any questions.
Jo Davis 8/20/14

2. You be the investigator….
Was there a binding agreement between Quanta and LG?
This presentation will help you be the investigator in the case of Quanta v. LG (2008).
The case of LG v. Quanta (Quanta Computer Inc. v. LG Electronics, 128 S. Ct. 2109, 2008) dealt with a legal doctrine called patent exhaustion. The case is fairly complex. LG Electronics held a patent. Intel wanted to use that patent to manufacture some chips. They applied to LG and got a patent license in due time. Intel manufactured the chips and sold them to the Quanta Company. However....
The contract between LG and Intel said that the patent license granted Intel the right to manufacture the chips. The contract stated the patent license did not extend to use of the chips by any customers who might be downstream.
The net effect was that LG felt they would win if they sued Quanta for infringing their patent. They argued that even though LG gave permission to manufacture the chips, Quanta had impinged on that agreement by using chips in products it sold.
As an investigator for the defense, what questions would you ask in this case? The first question that springs to my mind is What did LG think the chips were going to be used for, if it was not giving Intel the right to use the chips in commerce?
The second question that I would investigate is Wouldn’t it be fraud if LG gave a patent license to Intel but then denied them the right to use the product in sale, if the contract didn’t ban the use?

3. What is a binding contract?
Though the agreement was “well-publicized” is it binding?
Does it make the contract legal?
Is this a valid defense?
Publicity has nothing to do with a contract. If this were the case, I would simply publicize that the instructor found my work to be of “A” quality and was giving me an A. Perhaps the instructor might laugh, and reply “Sure, I’m giving him an ‘A’ all right.” Dozens of Twitters might occur saying the instructor had agreed to give me an A. Someone with a phone might have captured the moment and put it on YouTube. My mother might have seen the story on TMZ, and told all her friends!
Nevertheless, publicity has nothing to do with validity of a contract. If the legal requirements for a contract are not met, the contract will not be binding regardless of how much publicity the alleged contract brings in.
Does the publicity make the contract legal? It doesn’t even ensure the contract is really a contract, as we saw in the example above. There is far more to the definition of a contract than publicity would imply. Thus, we might ask, is this a valid defense? The answer would be no, instead of course if BOTH parties asserted there were a valid contract. However, logically speaking, if both parties asserted there was a valid contract, then the case would not be in court!

4. What is a contract, anyway? Is it:
Length?
Content?
Value?
Period of time?
The name of the companies?
The contents?
The font?
What makes a contract, anyway? Is it the length, the content, or the financial value? Could it be the period of time the contract convers? Do the names of the companies make a difference, or are the contents the only thing that matters? And does it require any particular type of font?
The investigator for Quanta Computer Inc. v. LG Electronics came up with many, many questions. The next few slides will show what the investigation revealed

5. The Contract is a Binding Agreement
A contract establishes what will be done and the rules that will be followed between the parties.
A contract is a promise.
A contract can be verbal or written.
A contract establishes who will do what, how they will do it, and how much they get paid for doing it.
Without contracts, business would be difficult ... Or impossible.
A contract establishes a binding agreement for something that will done and provides the rules through which the action will be accomplished. Contracts, albeit very basic ones, have existed since man has existed. Contracts are part of civil law and they help keep the business world out of chaos. Today, a contract is an agreement that contains a promise to do something, for some type of pay. If contracts, either formal or informal, did not exist, the business world could not exist.
Contracts can be verbal, or they can be written. Even the most basic verbal contract is still a contract. At its most simple, when the neighbor says he will mow your lawn tomorrow for $20, a contract exists.
There is a catch, however. If your neighbor’s 12 year old says he will mow your lawn for $20, it is NOT a contract! Do you know why?
The reason has to do with the elements required for a contract. The elements help to describe what happened with Quanta Computer Inc. v. LG Electronics, as well. Some areas of the country require four elements in a contract, some five. The elements described in the next slides are
present in every contract.

6. There are four to six elements (depending on the perspective)
Agreement (offer and acceptance)
Consideration (some type of pay)
Legal objective of the contract
Parties must be competent
There are four basic elements to a contract. (Some jurisdictions consider the acceptance elements separately, changing the elements to five; other areas add more qualities to raise the elements to six. Here, we consider four as it is typical of most areas.) CITATIONS?????
There must be an offer, and the acceptance of that offer. Some type of consideration (i.e., some type of pay, though it does not have to be cash) must exist. The contract’s objectives must be legal, and the parties who sign the contract must be competent to make that contract (Farnsworth, 2004).
What is an offer? An offer is something that one of the parties offers to have happen in the future. It may be something small (like the mowing of the lawn) or it may be something that is really extensive (perhaps the purchasing of 20 Boeing 747s). In the case under discussion, the offer was by LG to let Intel have a right to manufacture chips. The offer must be accepted. Either the parties have to accept the offer verbally, or in writing. While most types of contract are legal, even if verbal, it would be very foolhardy indeed to agree to pay a billion dollars to buy 20 Boeing 747s with no written agreement.
We can even see this in the example of the yard. Perhaps the neighbor has offered to mow your yard every week, for $20. In the meantime, it rains, and your weeds go crazy. After fighting with the weeds for three hours, getting mosquito bitten and scratched, your neighbor disappears. You track him down when you realize the lawn is not finished. You ask him when he will finish, and he says never, he has changed his mind, the yard is too complex to mow it for $20 a week. You could take this to court, but without a written agreement, the judge is unlikely to enforce our verbal contract.

7. Legal Objective and Competence
It must be legal. It is not legal to contract to do something illegal.
The parties must be legally competent. None of the individuals here would be able to sign a contract. The alcoholic is likely considered incompetent to manage his own affairs. The judge says Brittney Spears cannot manage her own affairs. The girl with the dog is too young to sign a contract. In the eyes of the law, she is an “infant”.
The final two elements of the contract are that the contract must have a legal objective (it must be legal. It is not legal to contract to do something illegal.). Thus, a contract to mow your lawn might be enforced; a contract to murder your wife would not. In fact, using the example of mowing the lawn for $20 a week, if the contract was signed and the parties were competent, your neighbor would probably be stuck mowing your lawn every week for $20.
This brings us to the next point. The parties must be legally competent. Your neighbor could easily argue that he was crazy when he signed the contract to mow that mess of a lawn for $20 a week. Lee (1998) pointed out that most of the time, the question of competency does not come up until after one of the parties (or their guardian) is trying to get out of the contact. In addition, the majority of the people who combat a contract by saying they are incompetent have not been formally found to be incompetent. If the person has already been judged incompetent (but did not tell you), they can disaffirm without further hearing in most locations. Further, that contract is assumed not only to be voidable, but to actually BE void. If, however, the person has not been found incompetent, then the party who alleges incompetence has the burden of proof. In the illustrations on this slide, if the alcoholic has not been found incompetent, it will be more difficult to disavow the contract than if he or she has. Thus, there would be no question that Brittney Spears would NOT have to mow your lawn if she signed the contract; she is legally incompetent (Hershovitz, 2006). The alcoholic, however, will need to go to hearing in order to get out of the contract, and the trial court would endeavor to determine if he understood what he was signing. The little girl is a minor and not emancipated. Thus, she is too young to sign a contract to mow your lawn. Individuals under age 18 are considered infants under the law unless a judge has already ruled otherwise.
So why is it that you see kids all over America mowing lawns for cash? Simple. They are providing a commodity, but they are not asking for a contract. They can provide a service, but not contract to provide a service. Contracts cover future behavior, not an immediate act.

8. How does this apply to Quanta Computer Inc.v.
LG Electronics?
Here is an excerpt from the Wilson and Kelling article:
“We suggest that "untended" behavior also leads to the breakdown of community controls. A stable neighborhood of families who care for their homes, mind each other's children, and confidently frown on unwanted intruders can change, in a few years or even a few months, to an inhospitable and frightening jungle. A piece of property is abandoned, weeds grow up, a window is smashed. Adults stop scolding rowdy children; the children, emboldened, become more rowdy. Families move out, unattached adults move in. Teenagers gather in front of the corner store. The merchant asks them to move; they refuse. Fights occur. Litter accumulates. People start drinking in front of the grocery; in time, an inebriate slumps to the sidewalk and is allowed to sleep it off. Pedestrians are approached by panhandlers.”

9. Patent Exhaustion FIRST
So how does this apply to Quanta Computer v. LG? The concept of patent exhaustion doctrine says that if the company that holds a patent allows the manufacture of one of the parts of the product, covered by one of its patents, it has exhausted its rights to that product. In plain English, Lee (2008) argues that once this happens, the company holding the patent cannot sue the downline customers for infringement. The Supreme Court (Quanta Computer Inc v. LG Electronics (2008) 128 S. Ct. 2109) ruled that this was indeed the case. Thus, even though the LG contract with Intel said something completely different, it can be enforced under the concept of patent exhaustion. In the court case, LG accused Quanta of patent infringement, because to there way of thinking, Quanta had infringed on their product by using their chip. This is why the case was written the way it was, and why the Court interpreted it the way they did. Quanta was not being accused of contract breach, because there was no contract between LG and Quanta. Remembering the four elements of the contract (offer and acceptance, consideration, legal objective, and competence) it is clear no contract existed between Quanta and LG. No one offered any product, no one offered to pay, there was nothing contracted, and there was no reason to worry about competence, because no one did any signing. The Supremes thus saw this as a patent infringement case.

10. Second
Contract
Law
The next discussion is a little more exciting. Had the Supreme Court not ruled this was a patent infringement case, it would have been addressed as a contact case.
It is Lee’s contention that LG tried to use its original contract with Intel to try and force Quanta into an indirect or implicit contract. Based on what we have learned today about contracts, one company cannot force another company (who has no offer or consideration) into a contract. Given that Quanta was buying the chips in product from Intel, LG would have no standing; they are not part of the process and they had already signed a contract with Intel. They could potentially take Intel to court for breach of contract, but Quanta would still be sitting there with the chips, and if LG won, Intel would have to take Quanta to court to get the product back. Ironically, if Intel did not have the right to the chips, then its contract with Quanta would be null and void (remembering that there has to be a legal basis for a contract, and without the rights there would be no basis).
Perhaps the strongest point of this case, and one that the Court emphasized, was that the patent holder would have to rely on state contract mechanism to enforce post sale restrictions in these kinds of cases. If LG had chosen to do this, the courts would have had to have looked at whether or not LG’s contact violated antitrust laws, and whether or not the contract represented unfair control of trade (Hungar, 2009). What LG could not have done was take Quanta to court; again, they would have had to deal with Intel, not Quanta.

11. WHEW.
Luckily, the form of this contract was NOT binding, simply because there was no contract between Quanta and LG. To put this case in a personal perspective, assume that your neighbor contracted to mow your lawn, and was mowing it weekly (under protest). Assume further that you answer the door on a Friday afternoon and you find a processor server at the door. You are being served because your neighbor is mowing your lawn with a lawnmower that has an LG chip in it, and the mower itself is a Troy Bilt. This is roughly what occurred in the Quanta case.
Summarizing, Quanta should never have been involved in this case because there was no agreement between Quanta and LG; there was no offer, no acceptance, and no consideration. Whether or not the signer was of sound mind is irrelevant, because the first two elements of a contract were completely missing. Because there was no contract at all, there was no legal standing. LG would have argued that Quanta had an implied contract (still not acceptable argument, because there was no consideration). Finally, Quanta would have been able to argue that by refusing to let companies that purchase the chip (i.e. Intel) to use the chip in products for sale, LG was conducting an illegal restraint of trade. That would make any contract between Quanta and LG null and void anyway, because it would be preventing Quanta from buying the chip from an authorized seller (Intel). In short, it would still not be a contract!

12. Updates
Static Control Components, Inc. v. Lexmark Int’l, Inc., 615 F. Supp. 2d 575, 585 (E.D. Ky. 2009) ruled that Quanta overruled other less restrictive cases (Mallinckrodt.) However, in general, the Supreme Court seems content to address cases similar to Quanta as patent cases, rather than contract cases.

13. References
Farnsworth, A. (2004) Contracts, fourth edition. New York: Aspen Publishers
Hershovitz, S. (2006). Accountability and Political Authority. Minn. L. Rev, 1003, 1012.
Hungar, T. (2009) Observations regarding the Supreme Court’s decision in Quanta Computer, Inc. v. LG Electronics, Inc. Paper delivered to American Intellectual Property Law Association meeting, October 24, IDEA 49(4)
Lee, R. (1998) Mental illness and the right to contract. Florida Bar Assn Journal LXXII (11) 48; Revised February 12, 2012.
Lee, T. (2008) Quanta case preserved the distinction between patent law and contract law. Freedom to Tinker, September 29, Retrieved from
Quanta Computer Inc v. LG Electronics (2008) 128 S. Ct. 2109
Static Control Components, Inc. v. Lexmark Int’l, Inc., 615 F. Supp. 2d 575, 585 (E.D. Ky. 2009)
Please indent the second and subsequent lines of each citation. Insert the title of a non periodical in italics, enclose the edition number in parenthesis (i.e. (4th ed.)). Insert the name of a journal or periodical in italics.