On May 30, 2017, the U.S. Supreme Court decided Impression Products, Inc. v. Lexmark International, Inc. (Slip Op. 15-1189) which hold that when a patentee sells one of its products, however, the patentee can no longer control that item through the patent laws—its patent rights are said to “exhaust,” reversing a decision of the U.S. Court of Appeals for the Federal Circuit (CAFC).

Summary of the Facts:

The Respondent, Lexmark, owns a number of patents that cover components of toner cartridges and the manner in which they are used. When Lexmark sells toner cartridges, it gives consumers two options: One option is to buy a toner cartridge at full price, with no restrictions. The other option is to buy a cartridge at a discount through Lexmark’s “Return Program.” In exchange for the lower price, customers who buy through the 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 Lexmark toner cartridges—including Return Program cartridges—from purchasers in the United States, refill them with toner, and then resell them. They do the same with Lexmark cartridges that they acquire from purchasers overseas and import into the United States. Lexmark sued a number of these remanufacturers, including petitioner Impression Products, Inc., for patent infringement with respect to both groups of cartridges.

The Supreme Court held that Lexmark exhausted its patent rights in the Return Program cartridges that it sold in the United States. 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. As a result, even if the restrictions in Lexmark’s contracts with its customers were clear and enforceable under contract law, they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.

It also held that Lexmark cannot sue Impression Products for infringement with respect to the cartridges sold abroad. An authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act, just as it does in copyright law.

Chief Justice Roberts delivered the opinion of the Court, in which Associate justices Kennedy, Thomas, Breyer, Alito, Sotomayor, and Kagan joined. Justice Ginsburg filed an opinion concurring in that part of the holding regarding domestic sales and dissenting in that part of the holding regarding foreign exhaustion.