For Patent Infringement, Sold Property Is All Yours
When do patent rights end? If you buy a patented invention, is it your property in the same way that you can do with a pair of pants as you please after purchasing it? After the purchase of a pair of pants, the owner can resell, alter, or even burn it as desired. With patents, some companies have used patent infringement litigation and licenses to retain control of their patented products even after ownership of the product has been transferred to the buyer. In Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189, (May 30, 2017) (“Lexmark”), the U.S. Supreme Court put an end to post-sale patent infringement by deciding that a patent holder’s rights are exhausted by the sale transaction.
In Lexmark, the Court considered patented components in toner cartridges for printers. Lexmark sold toner cartridges at two different prices. The lower priced toner cartridge specified on the container that the purchaser agreed that the toner cartridge was single use, while there was no restriction on the use of the higher priced toner cartridge. Customers of Lexmark had turned to third party toner remanufacturers to refill the single use cartridges at a lower price than the cost of a new one, which was impacting Lexmark’s sales. Lexmark proceeded to sue some of the remanufacturers for patent infringement. The Court held that by deciding to sell a patented product, the patent holder “exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.” The Court said its reasoning applied to both domestic and international sales for patented products.
This decision clarifies that a sale of a patented product is the end of the patent holder’s rights to the “sold product.” However, this may not be end of the story. The Court opined that the single use restriction language could still be enforced under contract law. While it may not be economically likely that a patent holder would sue its own customers, there may be other contract-based restrictions introduced by patent holders to supplement the loss of patent infringement as a means of controlling products after sale. Further, absent such restrictions, if the patent holder sells its products in a foreign country at a lower price, the holder cannot prevent the importation of the “sold product” back into the U.S. for sale at a higher price under patent law.