- If you or your clients sell a product whose value relies heavily on being patented—such as medicine or complex technology like smartphones—then now is a good time to review your sale agreements to ensure maximum protection against the threat of the resale of your product.
- once a patent owner sells its product, the patent rights to control the sale of that particular product are exhausted and the patent owner can no longer use patent rights to control the distribution of that product.
Impression Products, Inc. v. Lexmark International, Inc. dealt with the resale of Lexmark’s patented ink cartridges. Lexmark tried to control the resale market by selling its ink cartridges subject to the restriction that the buyer could not resell the cartridges to anyone but Lexmark. Nonetheless, buyers would sell the ink cartridges to resellers, who would refill them and then resell them at a fraction of the original price. Lexmark realized that they could not possibly sue all their individual customers and instead sued the resellers for selling Lexmark’s patented invention.
Lexmark’s argument relied on two decades of Federal Circuit precedent. The Federal Circuit consistently held that the sale of a patented invention did not exhaust a patent owner’s rights in that invention, leaving the patent owner free to enforce its patent rights further down the stream of commerce. See, e.g., Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992). However, on Tuesday, the Supreme Court rejected this precedent, holding “that a patentee’s decision to sell a product exhausts all of its patent rights in the item, regardless of any restrictions that the patentee purports to impose or the location of the sale.”
As a result, if a buyer, who buys a product subject to a use restriction, resells that patented product, then the patent owner’s only course of action is a potential breach of contract claim against the original buyer—not a patent infringement suit against the reseller.