April 06, 2017
On March 21, 2017, the Supreme Court heard oral argument in Impression Products, Inc. v. Lexmark International, Inc. Lexmark International, Inc. (Lexmark), which owns many patents for its printer toner cartridges, allows customers to buy its cartridges through a “Return Program,” which is administered under a combination single-use patent and contract license. Customers purchasing cartridges through the Return Program are given a discount in exchange for agreeing to use each cartridge once before returning it to Lexmark. All of the domestically-sold cartridges at issue here and some of those sold abroad were subject to the Return Program. Impression Products, Inc. (Impression) acquired some Lexmark cartridges abroad--after a third party physically changed the cartridges to enable their re-use--in order to resell them in the United States. Lexmark then sued, alleging that Impression had infringed on Lexmark’s patents because Impression acted without authorization from Lexmark to resell and reuse the cartridges. Impression contended that its resale of the cartridges was not an infringement because Lexmark, in transferring the title by selling the cartridges initially, granted the requisite authority. The district court granted Impression’s motion to dismiss as it related to the domestically sold cartridges but denied it as to the foreign-sold cartridges. The U.S. Court of Appeals for the Federal Circuit reversed the district court’s judgment as to the domestically sold cartridges but affirmed dismissal regarding the cartridges sold abroad.
There are two questions now before the Supreme Court: (1) whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article's use or resale avoids application of the patent-exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy; and (2) whether, in light of this court’s holding in Kirtsaeng v. John Wiley & Sons, Inc. that the common-law doctrine barring restraints on alienation that is the basis of exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article – authorized by the U.S. patentee – that takes place outside the United States exhausts the U.S. patent rights in that article.
To discuss the case, we have David S. Olson, who is Associate Professor of Law at Boston College Law School.