If a patent holder is allowed to control what happens to their patented products after the first sale, where would it end? Would they be able to take a cut from thrift shops? Garage sales?
Lexmark International, a technology company that makes printers and ink cartridges for those printers, has been selling its ink cartridges on the condition that they could not be refilled and resold after the initial sale. Despite that contingency, Impression Products, a small company based in West Virginia, was buying Lexmark’s ink cartridges (in the U.S. as well as abroad), refilling and refurbishing them, and reselling them at a reduced price.
Lexmark responded by suing Impression Products, claiming the company’s refusal to abide by the limitations Lexmark provided constituted trademark infringement. The case went before the U.S. Court of Appeals for the Federal Circuit, which is located in Washington. That court supported both of Lexmark’s claims concerning the resale of patented items that were initially purchased both in America, as well as those bought in other countries.
The appeals court agreed that, in most cases, anyone who bought a patented product was free to use it however they saw fit once they had paid for it, but that the conditions Lexmark had placed upon the sale of its ink cartridges was valid.
Impression Products appealed that decision and the case went before the U.S. Supreme Court, which reversed both of the appellate court’s rulings.
In a unanimous decision, the Supreme Court held that, under current patent law, a patent holder does not maintain any control over their patented items once those items have been sold. Chief Justice Roberts, who wrote the Court’s opinion, used the example of an auto shop that repairs and sells used cars. If vehicle manufacturers were to retain their patents on their vehicles and parts indefinitely, it would wipe out an entire industry that is no doubt beneficial to our economy.
The example Chief Justice Roberts supplied is just one of several ways their decision in this case could have consequences reaching far beyond printer ink. Smartphones and name-brand drugs are among the top products with a heavy import and resale market, without which many consumers would not have any access to such products.
In addition to their patent claim on the products they sold in the U.S., Lexmark had also made a separate claim on the products they sold overseas (sometimes for a lower price than in the U.S.) that Impression Products had allegedly bought, refilled and refurbished, and resold in the U.S. at a lower price.
Other technology companies, such as Intel, wrote a brief in support of Impression Products concerning the issue of patent laws overseas. Intel and its fellow supporters noted that a Supreme Court ruling against Impression Products on that issue could disrupt a global economy in which a product could be designed in one country, assembled in a second country made with parts manufactured in a third country, and then shipped back to the country where it was designed to be sold. Companies in all sorts of industries rely on this kind of global supply chain, especially technology companies that design and sell smartphones and tablets.
In the end, the Supreme Court did side with Impression Products on the overseas, as well as the domestic purchases. In its opinion, the court stated that any purchase exhausts the patent on that product, regardless of where the purchase took place.
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