Patent Law vs Property Law in Impression Prods. v. Lexmark Int’l.

by Dennis Crouch

I finally predicted something! The Supreme Court has now granted writ of certiorari in the pending patent exhaustion case of Impression Products, Inc. v. Lexmark International, Inc., SCT Docket No. 15-1189.  The two questions presented involve domestic and international exhaustion respectively.

The “patent exhaustion doctrine”—also known as the “first sale doctrine”—holds that “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008). This case presents two questions of great practical significance regarding the scope of this doctrine on which the en banc Federal Circuit divided below:

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.

2. Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), 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 of the United States exhausts the U.S. patent rights in that article.

Lexmark offered its rewriting of the questions as follows:

Section 271(a) of the Patent Act provides that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” 35 U.S.C. § 271(a) (emphasis added). The petition asks this Court to review two questions related to this provision:

1. This Court and the court of appeals have held that the sale of a patented article does not automatically confer unlimited “authority” for others to make, sell, or use that article where the patent rights actually conveyed are more limited in scope. E.g., Gen. Talking Pictures Corp. v. W. Elec. Co., 304 U.S. 175 (1938); Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992). Did the court of appeals correctly reaffirm its precedent in holding that Lexmark’s sale of a patented toner cartridge, subject to a lawful and express limitation, did not automatically convey unlimited authority that had been clearly denied?

2. This Court and the court of appeals also have held, in light of Congress’s decision to geographically limit the scope of patent rights and infringement liability to the United States, that a lawful sale abroad does not automatically confer unlimited “authority” to sell or import a patented article in the United States. E.g., Boesch v. Graff, 133 U.S. 697 (1890); Jazz Photo Corp. v. ITC, 264 F.3d 1094 (Fed. Cir. 2001). Did the court of appeals correctly reaffirm its precedent in holding that Lexmark’s sale of a patented toner cartridge in a foreign country, pursuant to the laws of that country, did not automatically convey “authority” to sell and import that product in the United States?