On 30 May 2017, the United States Supreme Court again overturned Federal Circuit precedent, this time in a case addressing the doctrine of patent exhaustion. In Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189, slip op. (U.S. May 30, 2017), the Supreme Court held 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.” Id. at 2.
MSI's Utah law firm member Michael Best & Friedrich LLP provides an update on the recent ruling.
The case involved patented toner cartridges for laser printers that, when depleted, can be refilled and used again. The patentee structured its sales to encourage purchasers to return spent cartridges instead of selling them to “remanufacturers,” who then refill the cartridges and resell them at a price lower than the new ones the patentee puts on the shelves. More specifically, the patentee provided customers with two options—they could buy a patented toner cartridge at full price, with no strings attached, or they could buy a patented cartridge at roughly 20% off by signing a contract agreeing to use the cartridge only once and to refrain from transferring the cartridge to anyone but the patentee. Notwithstanding the limitations on reuse and resale of the reduced-price cartridges, remanufacturers were still finding customers willing to sell them.
In 2010, the patentee sued these remanufacturers, including the defendant, for patent infringement with respect to two groups of cartridges—the reduced-price cartridges that the patentee sold in the United States, and all cartridges the patentee sold abroad and that the remanufacturers imported into the United States. The defendant, however, maintained that the patentee’s sales, both in the United States and abroad, exhausted its patent rights in the cartridges. The Federal Circuit disagreed, ruling 