Photo Corners headlinesarchivemikepasini.com
A S C R A P B O O K O F S O L U T I O N S F O R T H E P H O T O G R A P H E R
Enhancing the enjoyment of taking pictures with news that matters, features that entertain and images that delight. Published frequently.
Supreme Court Rules Against Lexmark On Refilled Cartridges
30 May 2017
In a landmark ruling on patent exhaustion, the Supreme Court today held 8-0 that Lexmark's patent rights in toner cartridges sold through its Return program were exhausted by the sale and by a 7-1 count ruled Lexmark also cannot sue Impression Products for patent infringement of products purchased overseas for resale in the U.S.
According to Chief Justice Roberts who wrote the opinion, "We conclude that 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."
EXHAUSTION
The court cited the mandatory doctrine of exhaustion as the principle behind its ruling:
When a patentee chooses to sell an item, that product is no longer within the limits of the monopoly and instead becomes the private, individual property of the purchaser, with the rights and benefits that come along with ownership. A patentee is free to set the price and negotiate contracts with purchasers, but may not, by virtue of his patent, control the use or disposition of the product after ownership passes to the purchaser. The sale terminates all patent rights to that item.
Roberts gave the example of an auto repair shop:
The business works because the shop can rest assured that, so long as those bringing in the cars own them, the shop is free to repair and resell those vehicles. That smooth flow of commerce would sputter if companies that make the thousands of parts that go into a vehicle could keep their patent rights after the first sale. Those companies might, for instance, restrict resale rights and sue the shop owner for patent infringement. And even if they refrained from imposing such restrictions, the very threat of patent liability would force the shop to invest in efforts to protect itself from hidden lawsuits.
He continued:
A purchaser buys an item, not patent rights. And exhaustion is triggered by the patentee's decision to give that item up and receive whatever fee it decides is appropriate for the article and the invention which it embodies.... [T]he right to exclude just ensures that the patentee receives one reward -- of whatever amount the patentee deems to be satisfactory compensation -- for every item that passes outside the scope of the patent monopoly.
BREACH OF CONTRACT
In a related issue, the court said Lexmark also 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. The court argued that sale too exhausts all rights under the Patent Act. Justice Ruth Ginsburg dissented, disagreeing that U.S. law could necessarily hold when it comes to foreign sales.
While ruling that Lexmark could not use patent laws to stop Impression Products from refilling toner cartridges, the court suggested it could sue its customers for breach of contract.
But not many would buy a cartridge they couldn't resell or refill if there were a resellable/refillable alternative.
In addition, the court said the doctrine of exhaustion could also be read to protect individuals selling spent "single use" cartridges.
Roberts wrote:
A patentee can impose restrictions on licensees because a license does not implicate the same concerns about restraints on alienation as a sale. Patent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace. But a license is not about passing title to a product, it is about changing the contours of the patentee's monopoly: The patentee agrees not to exclude a licensee from making or selling the patented invention, expanding the club of authorized producers and sellers.
For more information see the text of the court's decision.