ANNOUNCEMENT 30 May 2017
By limiting the enforcement rights of patent holders, this decision may facilitate the importation of goods for which manufacturers prefer a closed market.
NUMBER OF INTERVENTIONS
On May 30, 2017, the U.S. Supreme Court issued a decision that may facilitate trade in “gray market” goods (i.e., legal, non-counterfeit goods sold outside normal distribution channels by sellers that may have no relationship with the producer of the goods). In Impression Products, Inc. v. Lexmark International, Inc. (Slip Op. 15-1189) the court reversed a decision of the U.S. Court of Appeals for the Federal Circuit to hold that when a patentee sells one of its products, the patentee has exhausted its rights and can no longer control that item through the patent laws.
In this case, Lexmark – which owns patents that cover components of toner cartridges and the manner in which they are used – requires that customers who buy through the company’s return program must sign a contract agreeing to use the cartridge only once and to refrain from transferring the cartridge to anyone but Lexmark. Remanufacturers acquire empty toner cartridges, refill them, and resell them. Lexmark sued remanufacturers for patent infringement. The Supreme Court held that Lexmark exhausted its patent rights, and 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. It also held that Lexmark cannot sue remanufacturers for infringement with respect to the cartridges sold abroad.