20 March 2017
Washington DC
Reporter: Barney Dixon

SCOTUS to decide patent exhaustion question


The US Supreme Court will hear oral arguments tomorrow (21 March) in the much-anticipated Impression Products v Lexmark International litigation, as justices grapple with one of the more uncertain areas of US patent law.

Lexmark accused Impression of patent infringement at the US District Court for the Southern District of Ohio last year, after Impression sold Lexmark products, which were modified abroad, in the US.

But Impression filed a motion to dismiss, arguing that Lexmark had “exhausted its US patent rights” by its initial sales of them.

The district court granted Impression’s motion involving products Lexmark had first sold in the US, but also held that the exhaustion doctrine did not apply to the products Lexmark had sold abroad.

Both parties appealed to the US Court of Appeals for the Federal Circuit, which issued a 10-2 en banc decision, siding with Lexmark in that the sale of a patented product abroad does not exhaust a party’s rights.

Impression took the case to the Supreme Court, asking whether a “conditional sale” that transfers title to the patented item, while specifying post-sale restrictions on the article’s use or resale, avoids application of the patent exhaustion doctrine and therefore permits the enforcement of restrictions through the infringement remedy.

Christopher Loh, partner at Fitzpatrick, Cella, Harper & Scinto, argued that Impression’s position “appears to ignore a long line of precedent upholding the rights of patentees to sue downstream purchasers for unauthorised uses”.

“I think the court’s questions to Impression’s counsel will focus on that precedent.”

Loh also identified the Supreme Court’s continued interest in questions over what types of extraterritorial activity might affect US patent rights, as seen in its Life Tech v Promega ruling.

“Several amici have voiced a common concern that, if foreign sales are held to trigger exhaustion, such sales might reduce incentives to innovate and encourage the formation of grey markets for low-quality or potentially unsafe goods,” he said.

Robert Gerstein, patent litigation partner at Marshall Gerstein, added that a reversal by the Supreme Court on either side would “upset the business models of many companies”.

“Businesses like Lexmark that sell products at a lower price believing they will not be reused might raise prices or lease products instead of selling them. Depending on how the court rules, some businesses might use licences or other structures to enhance their ability to impose post-sale restrictions.”

He added: “Finally, those businesses that charge more in the US for patented items than they do for foreign sales, will likely see more of their products purchased overseas and brought back to the US.”

More news
The latest news from IPPro Patents
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
ITC investigates Caterpillar
22 August 2017 | Washington DC | Reporter: Barney Dixon
The US International Trade Commission will investigate machinery company Caterpillar following a complaint from the Wirtgen Group
Nvidia loses subject matter challenge
22 August 2017 | Delaware | Reporter: Barney Dixon
Visual Memory’s patent for computer memory technology, asserted in its case against Nvidia, does cover eligible subject matter, according to a reversal from the US Court of Appeals for the Federal Circuit
BakerHostetler hires partner trio
22 August 2017 | Chicago | Reporter: Barney Dixon
BakerHostetler has has hired three patent partners to bolster its Chicago office
US formally institutes China IP investigation
21 August 2017 | Washington DC | Reporter: Barney Dixon
A Section 301 investigation into intellectual property malpractice in China championed by US President Donald Trump has formally launched
CIPU enters education partnership
21 August 2017 | New York | Reporter: Barney Dixon
The Center for Intellectual Property Understanding and the Michelson 20MM Foundation are partnering to improve awareness of intellectual property rights
Universities should be more flexible
18 August 2017 | London | Reporter: Barney Dixon
Perceived barriers could potentially be torn down by the Aarhus University’s proposed ‘patent free’ research zone, but academia should not be wedded to a single solution, according to Sean Jauss, partner at Mewburn Ellis
Ericsson sues Wiko over standard-essential patents
17 August 2017 | Stockholm | Reporter: Barney Dixon
Ericsson has sued smartphone maker Wiko for infringement of standard-essential patents for 2G, 3G and 4G technology