Impression Products, Inc. v. Lexmark Int'l, Inc.

2017-05-30

Headline: Ruling finds that selling a patented product — whether with a contractual limit or sold abroad — exhausts U.S. patent rights, preventing manufacturers from suing over reuse, resale, or importation.

Holding: The Court held that a patentee's sale of a product, whether in the United States or abroad, exhausts its U.S. patent rights and bars infringement suits to enforce post-sale restrictions or to block imports.

Real World Impact:

Bars patent lawsuits to enforce post-sale reuse or resale limits.
Allows refurbishers to resell domestically sold cartridges without patent suits.
Treats authorized foreign sales as exhausting U.S. patent rights.

Topics: patent rights after sale, resale and refurbishment, imports and foreign sales, printer cartridges

Summary

Background

Lexmark, a printer maker, sold toner cartridges in two ways: at full price with no limits, and at a discount through a Return Program where buyers agreed to use a cartridge once and return empties. Lexmark put microchips on Return Program cartridges to block reuse. Remanufacturers, including Impression Products, acquired emptied cartridges sold both in the United States and abroad, refilled them, and resold them. Lexmark sued for patent infringement, arguing its contracts and the location of sales meant its patent rights were not exhausted. A district court dismissed the domestic claim but not the foreign one; the Federal Circuit ruled for Lexmark on both issues and the Supreme Court took the case.

Reasoning

The Court addressed whether a sale subject to an express restriction can be enforced through patent law and whether foreign sales exhaust U.S. patent rights. The Court held that patent exhaustion is a limit on the patentee’s right to exclude: once a patentee sells an item, its patent rights in that item are exhausted. Contractual restrictions can be enforced by contract law but cannot be enforced through patent infringement suits. The Court also held that authorized sales abroad exhaust U.S. patent rights in the same way as domestic sales.

Real world impact

The decision prevents manufacturers from using patent lawsuits to control how buyers, resellers, or refurbishers reuse, resell, or import products after an authorized sale. Sellers may still pursue contract remedies against direct customers who agreed to limits, but cannot rely on patent law to police downstream uses. The Court reversed the Federal Circuit and sent the case back for further proceedings consistent with this opinion.

Dissents or concurrances

Justice Ginsburg agreed on domestic exhaustion but disagreed about foreign sales; she would hold that foreign sales do not exhaust U.S. patent rights because patent law is territorial and U.S. patents give no protection abroad.