US Supreme Court Holds That Sale of Patented Product Anywhere in the World “Exhausts” US Patent

The World in U.S. Courts: Summer 2017 - Intellectual Property – Patent | May.30.2017

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Impression Products, Inc. v. Lexmark International, Inc., Supreme Court of the United States, May 30, 2017

Plaintiff Lexmark designs, manufactures, and sells patented toner cartridges for use in laser printers. In an effort to discourage third parties from refilling and reselling used cartridges, Lexmark installed a microchip disabling the cartridges after one use, and offered customers a discount in exchange for returning used cartridges to the company. Defendant Impression Products developed a means to counteract the microchip’s intended effect, and continued selling refilled used cartridges. Lexmark sued Impression Products for patent infringement, with respect to cartridges that Lexmark had first sold both in the US and elsewhere.

The US Supreme Court concluded that all such sales by Lexmark “exhausted” Lexmark’s US patent protection. To the extent Lexmark customers in the US resold their used cartridges to Impression Products in violation of the terms of their agreement with Lexmark, the Court stated that Lexmark would retain potential contractual claims but not ones for patent infringement. The Court found the same result to attach even where the original sale had been made outside the US, as to which Lexmark arguably was not being compensated for its US patent rights.

Notably, the Court also concluded that, where a third party anywhere in the world had licensed the US patent, the licensee’s subsequent sale was tantamount to a sale by the patentholder for purposes of implicating the exhaustion doctrine, at least where that sale was consistent with the license terms. By contrast, a licensee’s sale outside the scope of its license would not trigger the doctrine and the patentholder would retain its right to enforce its patent.

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