In Lexmark Int’l, Inc. v. Impression Products, Inc., Appeal Nos. 2014-1617, -1619, the Federal Circuit held that (1) a patent holder may expressly restrict buyers from reselling and reusing a patented product so long as the restrictions do not violate some other area of law; and (2) foreign sales do not exhaust the patentee’s U.S. patent rights in the patent, even when no reservation of rights accompanies the sale.
Lexmark sells toner cartridges in two ways. Under the first way, the buyer pays full price and there are no terms restricting the resale or reuse. Under the second way, the buyer receives a discount and the cartridge is subject to single-use and no-resale restrictions. Impression is a cartridge remanufacturer that refills used Lexmark cartridges and sells them in the U.S., including cartridges that were originally sold with restrictions on reuse, and other cartridges that were originally sold outside the U.S.
Lexmark sued Impression for patent infringement, alleging that Impression sold and imported into the U.S. the patented cartridges. Impression argued that Lexmark’s initial sales exhausted its patent rights. The district court held (1) Lexmark’s patent rights were exhausted by its domestic sales because the Supreme Court’s holding in Quanta overruled Mallinckrodt’s “single-use” restriction exception to patent exhaustion; and (2) Lexmark’s patent rights were not exhausted by its foreign sales because the Supreme Court’s holding inKirtsaeng did not overrule Jazz Photo regarding exhaustion of patent rights by a first sale abroad, due to the differences between copyright exhaustion and patent exhaustion.
The Federal Circuit held that Mallinckrodt remains good law, and that unless a sale restriction is improper under some other body of law, a patentee’s own sale of its patented article under a clearly communicated restriction does not exhaust the patentee’s reserved patent rights. The Court reasoned that Quanta did not involve a patentee’s sales and there were no restrictions on the sales made by the licensee in Quanta.
The Federal Circuit affirmed the district court’s decision that the sale of a U.S.-patented article abroad does not exhaust the patentee’s U.S. patent rights in the article. The Court refused to apply the doctrine of copyright exhaustion by a foreign sale in Kirtsaeng to patent law, reasoning that the holding in Kirtsaeng is copyright specific, especially in light of the “right of sale” guarantee under the copyright statute, 17 U.S.C. § 109(a).
The dissent concluded that Mallinckrodt’s “single-use” restriction exception is inconsistent with Quanta and that Jazz Photo’s patent exhaustion protection should only extend to cases where the patent holder has notified the buyer of its retention of U.S. patent rights.