Impression Products, Inc. v. Lexmark Int'l, Inc.
2017 U.S. LEXIS 3397, 198 L. Ed. 2d 1, 137 S. Ct. 1523 (2017)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The authorized first sale of a patented item by a patentee exhausts all of the patentee's rights in that item under the Patent Act. This exhaustion applies regardless of any post-sale restrictions the patentee purports to impose and regardless of whether the sale takes place in the United States or abroad.
Facts:
- Lexmark International, Inc. designs, manufactures, and sells patented toner cartridges for its laser printers both in the United States and internationally.
- Lexmark offered customers a 'Return Program' to purchase cartridges at a discount in exchange for signing a contract agreeing to use the cartridge only once and to return the empty cartridge solely to Lexmark.
- To enforce this agreement, Lexmark installed a microchip on each 'Return Program' cartridge to prevent it from being refilled and reused.
- Impression Products, Inc. is a remanufacturer that acquires empty Lexmark cartridges, including 'Return Program' cartridges sold in the U.S. and other cartridges originally sold by Lexmark abroad.
- Impression Products developed a method to counteract the microchip on the 'Return Program' cartridges.
- Impression Products then refilled the cartridges with toner and resold them in the United States in competition with Lexmark.
- For the cartridges Lexmark sold abroad, Impression Products imported them into the United States before refilling and reselling them.
Procedural Posture:
- Lexmark International, Inc. sued Impression Products, Inc. for patent infringement in the U.S. District Court for the Southern District of Ohio.
- Impression Products moved to dismiss the claims.
- The district court granted the motion to dismiss with respect to cartridges first sold in the U.S. ('Return Program' cartridges) but denied it for cartridges first sold abroad.
- Both parties appealed to the U.S. Court of Appeals for the Federal Circuit.
- The Federal Circuit, sitting en banc, held for Lexmark on both issues, concluding that neither the restricted domestic sales nor the foreign sales exhausted Lexmark's patent rights.
- The U.S. Supreme Court granted Impression Products' petition for a writ of certiorari.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a patentee's sale of a patented item, either domestically with post-sale use restrictions or internationally, exhaust all of the patentee's rights under the Patent Act, thereby preventing the patentee from suing for infringement when the item is resold or imported?
Opinions:
Majority - Chief Justice Roberts
Yes. 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 or the location of the sale. The Court reasoned that the doctrine of patent exhaustion is a fundamental limit on the patentee's right to exclude, rooted in the common law's deep-seated principle against restraints on alienation. Once a patentee sells an item, it has received its reward for the invention, and the item passes outside the patent monopoly, becoming the private property of the purchaser. Any post-sale restrictions, such as the single-use/no-resale condition, are a matter for contract law, not patent infringement law. For international sales, the Court extended the reasoning from copyright law in Kirtsaeng, holding that the common law principle against restraints on alienation is not limited by geography; therefore, an authorized sale abroad exhausts U.S. patent rights just as a domestic sale does.
Concurring in part and dissenting in part - Justice Ginsburg
No, as to the international exhaustion question. Justice Ginsburg concurred with the majority's holding on domestic exhaustion but dissented on international exhaustion. She argued that patent law is strictly territorial, meaning a U.S. patent offers no protection for a sale abroad. Because the U.S. patentee receives no reward under the U.S. patent system for a foreign sale, that sale should not exhaust its U.S. patent rights. She distinguished the Court's copyright precedent, Kirtsaeng, by noting that copyright law is more harmonized internationally through treaties like the Berne Convention, whereas patent laws vary significantly from country to country.
Analysis:
This decision significantly expands the patent exhaustion doctrine and limits the ability of patentees to control the downstream use and sale of their products. It explicitly overturned Federal Circuit precedent that had allowed patentees to enforce post-sale restrictions through infringement suits. By extending exhaustion to international sales, the Court legitimized the 'gray market' for patented goods, allowing third parties to import and sell products originally sold abroad without fear of infringement liability. This holding forces patentees to rely on contract law to enforce use restrictions and may affect their ability to implement international price discrimination strategies.
