On October 2, 2015 the full Federal Circuit heard oral arguments regarding whether overseas sale of a product exhausts the patent owner’s right to assert its U.S. patent rights with respect to that product when resold in the United States. A decision will likely arrive in January or early February, 2016. For some, it might be a Happy New Year, and for others, not so much. The case is Lexmark International v. Impression Products.
In 2001 the Federal Circuit held that United States patents are not exhausted by products sold outside of the United States. Subsequent Federal Circuit cases have affirmed or confirmed this holding, including cases in 2005 and 2012. The U.S. Supreme Court has declined to take up the issue as recently as 2 years ago. So, the law seemed to be pretty settled on this point.
However, in 2013, the United States Supreme Court held that the foreign sale of a work of authorship exhausted the copyright owners’ rights under copyright law. Many commentators believe that this decision “opened the door” for the Federal Circuit to revisit its decision with respect to international patent exhaustion. And, the Federal Circuit has clearly opened and walked through that door.
Obviously, if the Federal Circuit affirms its prior decisions, then patent owners will presumably continue to conduct their business as they have in the past. However, if the Federal Circuit has a change in heart and overturns its prior decisions, then patent owners will be looking for ways to overcome any adverse consequences of international patent exhaustion.
Of course, it is very likely that regardless of how the Federal Circuit rules – affirming its precedent that there is no international exhaustion of patents or overturning existing law and holding that there is international exhaustion of patents — the issue will likely end up with the U.S. Supreme Court in the not too distant future. Therefore, patent owners are not likely to have any degree of certainty for some period of time.