Impression Products, Inc. v. Lexmark International, Inc.

Lexmark holds patents on the components of toner cartridges that it manufactures and sells. Lexmark allows consumers to buy a cartridge at full price, with no restrictions, or to buy a cartridge at a discount through Lexmark’s “Return Program,” by signing a contract agreeing to use the cartridge only once and to refrain from transferring the cartridge to anyone but Lexmark. Remanufacturers acquire empty Lexmark cartridges—including Return Program cartridges—from purchasers in the U.S. and overseas, refill them, and resell them in the U.S. Lexmark sued remanufacturers with respect to Return Program cartridges that Lexmark had sold within the U.S. and cartridges that Lexmark had sold abroad and that remanufacturers imported into the country. The Federal Circuit ruled for Lexmark with respect to both. The Supreme Court reversed. Lexmark exhausted its patent rights (35 U.S.C. 271(a)) in all of the cartridges. A patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose. If a patentee negotiates a contract restricting the purchaser’s right to use or resell an item, it may be able to enforce that restriction as a matter of contract law, but may not do so through a patent infringement lawsuit. The exhaustion doctrine is not a presumption about the authority that comes along with a sale; it is a limit on the scope of the patentee’s rights. The Patent Act just ensures that the patentee receives one reward—of whatever it considers satisfactory compensation—for every item that passes outside the scope of its patent monopoly. (READ MORE: https://supreme.justia.com/cases/federal/us/581/15-1189/#tab-opinion-3739529.)A patentee’s decision to sell an item exhausts all of its patent rights in that item, even if the e patentee purports to impose post-sale restrictions, and regardless of whether the sale occurs domestically or internationally. Chief Justice John G. Roberts, Jr. delivered the opinion for the 7-1 majority. The Court held that the Patent Act had long recognized the common law doctrine of patent exhaustion as a way to limit patentees’ power to exclude others from using their patented products. Under the doctrine, once a patentee sold an item, that item was the property of the buyer, and the buyer could act according to the rights and benefits that come with ownership. Therefore, even when a patentee sold an item with an express restriction on its later use, that restriction could not be enforced under patent law, though it might be enforceable under contract law. Such patent exhaustion was uniform and automatic, regardless of how the patentee attempted to create and enforce an express restriction. The Court also held that an authorized sale outside of the United States triggered the doctrine of exhaustion just as a sale within the United States did because the common law doctrine does not have a territorial limit. (READ MORE: https://www.oyez.org/cases/2016/15-1189.)

Justice Ruth Bader Ginsburg wrote an opinion concurring in part and dissenting in part in which she argued that a foreign sale should not exhaust a U.S. inventor’s patent rights because patent law is territorial. When a patentee had a U.S. patent that it wanted to exercise abroad, the patentee had to apply to each individual country in which it wanted to have an exclusive right to sell the product. Because U.S. patent law protection did not accompany a U.S. patentee’s sales abroad, U.S. patent law consequences should also not follow such foreign sales. (READ MORE: https://www.oyez.org/cases/2016/15-1189.)

Justice Neil Gorsuch did not participate in the discussion or decision of this case.

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