RESPONDENT: Lexmark International, Inc.
LOCATION: Lexmark International Corporate Headquarters
DOCKET NO.: 15-1189
LOWER COURT: United States Court of Appeals for the Federal Circuit
CITATION: US ()
GRANTED: Dec 02, 2016
Facts of the case
Lexmark International, Inc. (Lexmark) owns many patents for its printer toner cartridges. The customers who buy Lexmark’s cartridges may choose a cartridge subject to a “Return Program,” which is a combination single-use patent and contract license, and those who purchase the Return Program are given a discount on the cartridge in exchange for agreeing to use the cartridge once and then return the empty cartridge to Lexmark. Otherwise, customers may choose a cartridge free of restrictions on its use. Some of Lexmark’s cartridges sold abroad and all of the domestically-sold cartridges at issue were subject to both a discount and the Return Program. Impression Products, Inc. (Impression) acquired the cartridges at issue after a third party physically changed the cartridges to enable re-use in violation of the single-use Return Program. Then, Impression Products acquired the cartridges abroad and resold them in the United States.
Lexmark sued Impression and alleged that Impression infringed on Lexmark’s patents because Impression Products acted without authorization from Lexmark to resell and reuse the cartridges. Impression argued that, under the doctrine of exhaustion, Impression’s resale of the cartridges is non-infringing because Lexmark, in transferring the title by selling the cartridges initially, granted the requisite authority. The district court granted Impression’s motion to dismiss as it related to the domestically sold cartridges and held that the patent-holder’s rights were exhausted when the initial sale was authorized and unrestricted. The motion was denied as it related to the foreign-sold cartridges, however. The U.S. Court of Appeals for the Federal Circuit affirmed in part and reversed in part by holding that Lexmark’s sale did not “confer authority” to Impression to resell without infringing on the patent. The appellate court also held that Lexmark’s foreign sales did not confer authority to import, sell, or use the cartridges, and it did not waive Lexmark’s rights to its patent.
- Does a “conditional sale” that transfers title with post-sale restrictions on the use or resale of the item avoids the patent exhaustion doctrine and therefore permit the enforcement of the post-sale restrictions by suing for infringement?
- In light of Kirtsaeng v. John Wiley & Sons, Inc., which held that copyrighted work lawfully made abroad is subject to the same post-sale restrictions as work made domestically, does the sale of a patented article abroad exhaust the U.S. patent rights in that article?