Mallinckrodt, Inc. v. Medipart, Inc., and Jerry A. Alexander
976 F.2d 700, 93 Daily Journal DAR 1465, 24 U.S.P.Q. 2d (BNA) 1173 (1992)
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Rule of Law:
A patentee does not exhaust its patent rights through an initial sale of a patented item if the sale is expressly made subject to a valid, conditional license. A violation of such a post-sale restriction, like a 'single use only' notice, can be remedied by a suit for patent infringement, provided the restriction is reasonably within the patent grant and does not violate antitrust law or constitute patent misuse.
Facts:
- Mallinckrodt, Inc. manufactures and sells a patented medical device for delivering aerosol mist to patients' lungs, which is sold as a unitary kit.
- The device and its package insert are marked with patent numbers and bear the inscriptions 'Single Use Only' and 'For Single Patient Use Only'.
- Mallinckrodt sells these devices directly to hospitals.
- After using the devices once, hospitals ship the used assemblies to Medipart, Inc. instead of disposing of them as instructed.
- Medipart has the devices sterilized by a third party, Radiation Sterilizers Inc.
- Medipart personnel then check the assemblies, add new minor components like filters and tubing, and package them as 'reconditioned' units.
- Medipart ships these reconditioned units back to the same hospitals for reuse.
Procedural Posture:
- Mallinckrodt, Inc. sued Medipart, Inc. in the U.S. District Court for the Northern District of Illinois, alleging patent infringement and inducement to infringe.
- Both parties filed motions for summary judgment.
- The district court granted summary judgment in favor of Medipart on the patent infringement counts, holding that the 'Single Use Only' restriction was unenforceable under patent law.
- The district court also granted a preliminary injunction, preventing Mallinckrodt from distributing a new notice to customers that warned of patent infringement for reusing the device.
- Mallinckrodt, Inc. (appellant) appealed the grant of summary judgment and the injunction to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Does a patentee's 'single use only' restriction on the sale of a patented medical device, which is violated when a third party reconditions the device for reuse, give rise to a claim for patent infringement against that third party?
Opinions:
Majority - Pauline Newman
Yes, violation of a valid 'single use only' restriction can give rise to a claim for patent infringement. The district court erred in holding that no restriction could be imposed on a patented good after its first sale. The doctrine of patent exhaustion does not apply to a conditional sale, and historical precedent distinguishes enforceable use restrictions from per se illegal practices like price-fixing or tying arrangements. A restriction is enforceable under patent law if it is reasonably within the patent grant and does not otherwise violate the law, such as antitrust statutes. The court rejected the distinction between a sale from a patentee-manufacturer and a sale from a manufacturing licensee as 'formalistic line drawing.' Therefore, if the 'single use only' restriction is found to be a valid condition of sale, any reuse is unlicensed, and even 'repair' of the device for such reuse would constitute patent infringement.
Analysis:
This decision significantly challenged the broad interpretation of the patent exhaustion doctrine, which holds that a patentee's rights are exhausted after the first authorized sale. By distinguishing between unconditional sales and valid conditional sales, the court affirmed that patentees can control the post-sale use of their inventions through restrictive 'label licenses.' This ruling empowered patent holders to enforce single-use restrictions and other conditions, provided they are not anticompetitive or otherwise illegal. The case established that such restrictions should be evaluated under a rule of reason, rather than being deemed per se unenforceable, impacting business models in industries like medical devices, software, and agriculture where post-sale control is desired.
