July 14, 2017
On May 30, 2017, the Supreme Court decided 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 were two questions 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.
By a vote of 7-1, the Supreme Court reversed the judgment of the Federal Circuit and remanded the case. In an opinion by Chief Justice Roberts, the Court held that (1) Lexmark exhausted its patent rights in toner cartridges sold in the United States through its "Return Program"; and (2) Lexmark cannot sue Impression Products for patent infringement with respect to cartridges Lexmark sold abroad, which Impression Products acquired from purchasers and imported into the United States, because an authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act. The Chief Justice’s majority opinion was joined by Justices Kennedy, Thomas, Breyer, Alito, Sotomayor, and Kagan. Justice Ginsburg filed an opinion concurring in part and dissenting in part. Justice Gorsuch took no part in the consideration or decision of the case.
And now, to discuss the case, we have Adam Mossoff, who is Professor of Law and Co-Director of Academic Programs and Senior Scholar of CPIP, Antonin Scalia Law School, George Mason University.