May a patent owner use contracts to prohibit any resale or reuse of its patented products beyond the initial purchaser? OnTuesday, March 21, 2017, the Supreme Court will hear oral argument in Impression Products v. Lexmark International, which raises this important question.
Lexmark makes patented toner cartridges and sells them with a contract restriction that the cartridges not be resold or refilled. Impression Products buys used Lexmark toner cartridges, refills, and resells them. Lexmark argues that because the license accompanying the original sale of the cartridges prohibits transferring the cartridges, any reuse and refilling of the cartridges is an unauthorized use and thus a patent infringement. If Lexmark’s argument wins, then manufacturers of patented goods will be able to restrict downstream uses of their goods by use of licenses, and no privity of contract will be required to hold third parties liable. On the other hand, defendant Impression Products argues that the “patent exhaustion” doctrine should operate here to restrict Lexmark from asserting any patent rights after a first, authorized sale. Also at issue is whether first sales in foreign countries instead of the U.S. should affect the outcome.
The case will have significant effects on the ability of patent owners to control the downstream uses of their patented products, and may affect the ability of patent owners to prevent the importation of “grey market” goods that have been lawfully sold in other countries, similarly to the Supreme Court’s holding in the 2013 copyright case of Kirtsaeng v. John Wiley & Sons, Inc.
Professor David Olson of Boston College Law School offered impressions and predictions after the Court heard oral argument.
- Prof. David S. Olson, Associate Professor, Boston College Law School