Impression Products v. Lexmark
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| Impression Products, Inc. v. Lexmark International, Inc. | |
| Reference: 15-1189 | |
| Issue: Patent law | |
| Term: 2016 | |
| Important Dates | |
| Argued: March 21, 2017 Decided: May 30, 2017 | |
| Outcome | |
| United States Court of Appeals for the Federal Circuit reversed and remanded | |
| Vote | |
| 8-0 to reverse and remand on domestic exhaustion 7-1 to reverse and remand on international exhaustion | |
| Majority | |
| For domestic exhaustion: Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan For international exhaustion: Roberts • Kennedy • Thomas • Breyer • Alito • Sotomayor • Kagan | |
| Concurring | |
| Ginsburg (as to domestic exhaustion) | |
| Dissenting | |
| Ginsburg (as to international exhaustion) | |
Impression Products, Inc. v. Lexmark International, Inc. is a case argued during the October 2016 term of the U.S. Supreme Court. Argument in the case was held on March 21, 2017. The case came on a writ of certiorari to the United States Court of Appeals for the Federal Circuit. On May 30, 2017, in an opinion by Chief Justice John G. Roberts, the court reversed and remanded the judgment of the Federal Circuit. Justice Ruth Bader Ginsburg wrote an opinion concurring in part and dissenting in part.
In this case, the court held that a patentee's decision to sell a product exhausts all of the patentee's rights to that item, regardless of any provisions or stipulations the patentee may impose on the buyer. This holding applies to items sold both domestically and internationally.
In brief: In an en banc ruling by the full United States Court of Appeals for the Federal Circuit, the court upheld the validity of two of its own precedents as binding in the law of patent exhaustion, that is, when a patent holder no longer has exclusive rights over the use of a patented item once that item has been sold. Impression Products argued that two recent U.S. Supreme Court opinions overruled the Federal Circuit's opinions in this area of law. Argument in the case was held on March 21, 2017.
You can review the Federal Circuit's opinion here.[1]
Click on the tabs below to learn more about this Supreme Court case.
Case
Background
As part of its business practices, Lexmark offered customers the option to purchase a regular toner cartridge at full price or a return program cartridge at a 20% discount from the full price. Customers who purchased the regular cartridges were not subject to any restrictions regarding reuse or resale of the cartridges. Customers who purchased the return program cartridge were subject to a single-use/no resale restriction. That restriction indicated that the buyer may not reuse the cartridge once the toner ran out and that the cartridge could not be transferred, once used, to any entity other than Lexmark. A microchip placed in return program cartridges prevented use of a refilled cartridge. Third parties, however, created unauthorized replacement microchips which, when installed in a return program catridge, permitted a reuse of that cartridge. Impression Products, Inc., (Impression) is one of several entities that resells these program cartridges for use with Lexmark printers. In addition to direct sales to customers, Lexmark sold return program catridges to resellers like Impression and the single-use/no resale restriction applied equally to resale by resellers like Impression. When companies, including Impression, were discovered to have resold return program cartridges, Lexmark sued for patent infringement.[1]
Lexmark's infringement lawsuit against Impression was limited to two specific groups of cartridges. The first group of cartridges were those return program cartridges that Lexmark itself sold in the United States with the clear restriction denying any entity authority to resell or to reuse the cartridges. The second group of cartridges included any cartridges, regular or return program, that Lexmark sold internationally, but which were imported into the United States for resale. During the course and scope of litigation in federal court, only one defendant, Impression, remained, and only one count of infringement remained. Impression countered that Lexmark's patent rights exhausted after the initial sale and presented arguments challenging two different precedents of the United States Court of Appeals for the Federal Circuit: Mallinckrodt, Inc. v. Medipart, Inc. (Mallinckrodt) for the first group of cartridges and Jazz Photo Corp. v. International Trade Commission (Jazz Photo) for the second group of cartridges.
Return program cartridges sold domestically
In regards to the first group of cartridges, the district court agreed with Impression that Lexmark had exhausted their patent rights. In Mallinckrodt, the Federal Circuit upheld the use of clearly communicated restrictions on patented articles as a means of preserving a patent holder's rights against conduct involving patented items, unless those restrictions were in violation of some other law. The district court, however, concluded that a 2008 U.S. Supreme Court opinion, Quanta Computer, Inc. v. LG Electronics, Inc. overruled Mallinckrodt. In Quanta, the Supreme Court held that a patent holder's rights over an item were exhausted after the initial, authorized sale of the item. Applying Quanta's rationale, the district court held that the post-sale restrictions on return program cartridges imposed by Lexmark were invalid given that the initial sales were authorized and unrestricted.
Cartridges imported into the United States for resale
The district court, however, held that Lexmark had not exhausted its patent rights over cartridges sold overseas and later imported into the United States for resale. The district court relied on the Federal Circuit's decision in Jazz Photo to support the decision that exhaustion did not apply. In Jazz Photo, the Federal Circuit held that Jazz Photo infringed on patents held by Fuji Photo when Jazz Photo imported refurbished disposable cameras originally sold by Fuji or with Fuji's permission. The Federal Circuit held that there was no rule under which U.S. patent rights, actual or presumed, were waived by virtue of an international sale made or authorized by a U.S. patentee; in other words, buying a patented item overseas did not, by itself, strip a patentee of its U.S.-based patent rights. The district court held that the same logic applied here. Impression argued a 2013 decision of the U.S. Supreme Court, Kirtsaeng v. John Wiley & Sons, Inc. governed. In Kirtsaeng,, the court held that exhaustion applied to copies of copyrighted works made lawfully abroad, however the district court noted that exhaustion in copyright law was not parallel to exhaustion in patent law.
Appeal to the Federal Circuit
On appeal to the Federal Circuit, the court sua sponte (on its own authority) heard the case en banc. In it's ruling, the Federal Circuit:
- affirmed that the district court was correct in finding Lexmark retained patent rights over imported cartridges under the circuit's precedent in Jazz Photo,
- reversed the district court's judgment that Lexmark no longer had patent rights over the group of cartridges initially sold by Lexmark domestically and later resold. The circuit held that Mallinckrodt was not overridden by the Supreme Court's ruling in Quanta, that Mallinckrodt was still the governing precedent in the case, and that Lexmark's patent rights over the return program cartridges sold domestically had not exhausted, and,
- the circuit court remanded the case back to the district court to correct the district court's ruling on the domestically sold cartridges.
Impression appealed to the U.S. Supreme Court.
Petitioner's challenge
Impression Products, Inc., the petitioner, challenged the holding of the United States Court of Appeals for the Federal Circuit that Mallinckrodt and Jazz Photo governed these disputes in light of the U.S. Supreme Court's rulings in Quanta and Kirtsaeng.
Certiorari granted
On March 21, 2016, Impression Products, Inc., the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the Federal Circuit. The U.S. Supreme Court granted Impression Product's certiorari request on December 2, 2016. Argument in the case was held on March 21, 2017.
Arguments
Questions presented
| Questions presented: "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: |
Audio
- Audio of oral argument:[3]
Transcript
- Transcript of oral argument:[4]
Outcome
Decision
Chief Justice John G. Roberts delivered the opinion for the court. In this case, the court held that a patentee's decision to sell a product exhausts all of the patentee's rights to that item, regardless of any provisions or stipulations the patentee may impose on the buyer. This holding applies to items sold both domestically and internationally. Justice Ruth Bader Ginsburg wrote an opinion concurring in part and dissenting in part. [5]
Opinion
Chief Justice Roberts' opinion commanded a unanimous court as applied to patent rights over items sold domestically. Justice Ruth Bader Ginsburg dissented from the court's opinion as applied to patent rights over items sold internationally.
In his opinion, Chief Justice Roberts concluded, in a domestic sphere, that "patent exhaustion is uniform and automatic. Once a patentee decides to sell—whether on its own or through a licensee—that sale exhausts its patent rights, regardless of any post-sale restrictions the patentee purports to impose, either directly or through a license.[5]
Chief Justice Roberts next addressed the rights of a patentee's patent rights over an item sold internationally, concluding "an authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act."[5]
The chief justice summarized the court's views on patent exhaustion thusly, "...exhaustion occurs because, in a sale, the patentee elects to give up title to an item in exchange for payment. Allowing patent rights to stick remora-like to that item as it flows through the market would violate the principle against restraints on alienation. Exhaustion does not depend on whether the patentee receives a premium for selling in the United States, or the type of rights that buyers expect to receive. As a result, restrictions and location are irrelevant; what matters is the patentee’s decision to make a sale."[5]
As a result of the court's opinion, the judgment of the Federal Circuit was reversed and remanded.
Concurring opinions
Justice Ruth Bader Ginsburg filed an opinion concurring in part and dissenting in part. Justice Ginsburg announced that she concurred with the court's opinion as it related to the court's judgment on domestic sales. She wrote, "I concur in the Court’s holding regarding domestic exhaustion—a patentee who sells a product with an express restriction on reuse or resale may not enforce that restriction through an infringement lawsuit, because the U.S. sale exhausts the U.S. patent rights in the product sold."[5]
Dissenting opinions
Justice Ruth Bader Ginsburg filed an opinion concurring in part and dissenting in part. Justice Ginsburg announced that she dissented from the court's opinion as it related to the court's judgment on international sales. She wrote, "Patent law is territorial. When an inventor receives a U.S. patent, that patent provides no protection abroad. ... Because a sale abroad operates independently of the U.S. patent system, it makes little sense to say that such a sale exhausts an inventor’s U.S. patent rights. U.S. patent protection accompanies none of a U.S. patentee’s sales abroad—a competitor could sell the same patented product abroad with no U.S.-patent-law consequence. Accordingly, the foreign sale should not diminish the protections of U.S. law in the United States."[5]
The opinion
Filings
The U.S. Supreme Court granted Impression Product's certiorari request on December 2, 2016.
Merits filings
Parties' briefs
- Impression Products, Inc., the petitioner, filed a merits brief on January 17, 2017.
- Lexmark International, Inc., the respondent, filed a merits brief on February 16, 2017.
Amicus curiae filings
The following groups filed amicus curiae briefs in support of the petitioner, Impression Products, Inc.:
- Brief of the Association of Medical Device Reprocessors
- Brief of the Association of Service and Computer Dealers International et al.
- Brief of the Auto Care Association et al.
- Brief of Costco Wholesale Corporation et al.
- Brief of HTC Corporation and HTC America, Inc.
- Brief of Huawei Technologies
- Brief of Intel Corporation, Dell Inc., and Vizio Inc.
- Brief of the Mitchell Hamline School of Law Intellectual Property Institute
- Brief of Professor Frederick M. Abbott
- Brief of Professor Robin Feldman et al.
- Brief of Public Knowledge et al.
- Brief of Quanta Computer Inc.
- Brief of various intellectual property professors et al.
The following groups filed amicus curiae briefs supporting the petitioner in part or in support of neither party:
- Brief of the American Intellectual Property Law Association
- Brief of the Austin Intellectual Property Law Association
- Brief of Licensing Executives Society Inc.
- Brief of Professors John Duffy and Richard Hynes
- Brief of the United States of America supporting reversal in part and vacatur in part
The following groups filed amicus curiae briefs in support of the respondent, Lexmark International, Inc.:
- Brief of Biotechnology Innovation Organization et al.
- Brief of the Boston Patent Law Association
- Brief of Dolby Laboratories Inc.
- Brief of the Imaging Supplies Coalition
- Brief of the Intellectual Property Owners Association
- Brief of Interdigital, Inc.
- Brief of International Business Machines (IBM) Corporation
- Brief of the Medical Device Manufacturers Association
- Brief of Medtronic PLC and Zimmer Biomet Holdings, Inc.
- Brief of the New York Intellectual Property Law Association
- Brief of Nokia Technologies Oy and Nokia USA Inc.
- Brief of Plantronics
- Brief of Pharmaceutical Research and Manufacturers of America
- Brief of Professors Adam Mossoff and Gregory Dolin
- Brief of Qualcomm Incorporated
- Brief of various law, economics, and business professors
Certiorari filings
Parties' filings
- Impression Products, Inc., the petitioner, filed a petition for certiorari on March 21, 2016.
- Lexmark International, Inc., the respondent, filed a brief in opposition to certiorari on May 23, 2016.
- Impression filed a reply to the brief in opposition on June 2, 2016.
- Lexmark filed a supplemental brief on November 1, 2016.
- Impression filed a supplemental brief on November 3, 2016.
Amicus curiae filings
The following groups filed amicus curiae briefs in support of granting certiorari:
- Brief of the Association of Service and Computer Dealers International et al.
- Brief of the Auto Care Association et al.
- Brief of Costco Wholesale Corporation et al.
- Brief of Intel Corporation et al.
- Brief of Public Knowledge et al.
- Brief of the Sandisk Corporation
- Brief of the United States of America
- Brief of various intellectual property professors
See also
Footnotes
- ↑ 1.0 1.1 U.S. Court of Appeals for the Federal Circuit, Lexmark International, Inc. v. Impression Products, Inc., filed February 12, 2016
- ↑ Supreme Court of the United States, Impression Products, Inc. v. Lexmark International, Inc., December 2, 2016
- ↑ Supreme Court of the United States, Impression Products, Inc. v. Lexmark Int'l, Inc., argued March 21, 2017
- ↑ Supreme Court of the United States, Impression Products, Inc. v. Lexmark Int'l, Inc., argued March 21, 2017
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 Supreme Court of the United States, Impression Products v. Lexmark, decided May 30, 2017
