WASHINGTON (AP) -- The Supreme Court on Wednesday appeared ready to make it harder for patent owners to demand licensing fees from companies throughout the manufacturing supply chain.

The case before the court, which began when a South Korean consumer electronics maker sought to enforce three patents against a Taiwanese maker of laptop computers, has implications for many industries.

LG Electronics Inc. entered into a broad patent licensing agreement in 2000 with Intel Corp., which then sold chips with LG's technology to Quanta Computer Inc. and other computer manufacturers. LG's lawyer, Carter Phillips, argued that Intel's license didn't extend to the computer makers and that once Quanta installed the chips into computers, it infringed LG's patents.

Phillips said that LG required Intel to send notices to the computer makers notifying them that Intel's license did not allow them to combine the chips with non-Intel products.

But Maureen Mahoney, Quanta's lawyer, countered that under the legal doctine of "patent exhaustion," once Intel made a sale of the chips to Quanta, LG could no longer rely on such notices to seek royalties from companies downstream.

Several justices, including Stephen Breyer, seemed to agree. Breyer told Phillips: "All that we would do by finding in your favor is destroy the exhaustion doctrine."

The case has attracted a significant amount of attention from the high tech, automotive and biotechnology sectors, with over 25 parties filing friend of the court briefs in the case.

IBM Corp., biotech firm Gen-Probe Inc. and groups representing the auto parts industry filed briefs in support of Quanta, while Yahoo Inc. and Qualcomm Inc. submitted papers in support of LG.

Quanta is the world's largest contract manufacturer of laptop computers. Many U.S. computer makers, such as Hewlett-Packard Co. and Dell Inc., outsource the assembly of their computers to Quanta and other Taiwanese firms.

The two U.S. companies, along with Cisco Systems Inc. and eBay Inc., also filed court papers in support of Quanta. They argued that a federal appeals court decision in 2006, which sided with LG, would allow the South Korean company to eventually seek additional royalties from them.

It isn't clear, however, how far the court will go in limiting patent owners.

Wireless technology developer Qualcomm, for example, said in court papers that it restricts the chip companies that license its technology by only allowing them to sell chips to mobile phone companies that have separate agreements with Qualcomm.

This allows the company to provide different rights to separate companies under its patent portfolio and seek royalties throughout the manufacturing process, Qualcomm said. The company cautioned the court against expanding the exhaustion doctrine to the point that patent owners could only collect royalties once, at the beginning of the supply chain.

Some of the justices drew distinctions between such upfront conditions and the notification requirement that LG sought to impose on Intel's sales to Quanta.

Justice Ruth Bader Ginsburg asked Mahoney if LG could have limited Intel to only selling chips to companies that had separate agreements with LG.

Mahoney said yes, because that would have also made Intel liable for "contributory" patent infringement if Quanta didn't adhere to those terms. But Mahoney argued that LG's requirement that Intel give notice to Quanta wasn't sufficient for LG to prevent exhaustion of its patent rights.

A ruling in the case is expected by July. The case is Quanta Computer Inc. v. LG Electronics Inc., 06-937.