Supreme Court Rules Patent Laws Can’t Be Used to Prevent Reselling

Supreme Court Rules Patent Laws Can’t Be Used to Prevent Reselling
By ADAM LIPTAK and VINDU GOEL
May 30 2017
https://www.nytimes.com/2017/05/30/business/supreme-court-patent-rights-lexmark.html

WASHINGTON — The Supreme Court on Tuesday placed sharp limits on how much control patent holders have over how their products are used after they are sold.

The case concerned Lexmark International, which makes toner cartridges for use in its printers. The court ruled that the company could not use patent law to stop companies from refilling and selling the cartridges.

Mark Lemley, director of the Stanford Program in Law, Science and Technology, said that anyone who refurbished, repaired or resold used products would now be protected from patent infringement claims. The ruling will also prevent manufacturers from forcing consumers to buy supplies only from the original source.

“It’s good for consumers,” Mr. Lemley said. “It’s going to reduce consumer prices.”

Lexmark sold the cartridges on the condition that they not be reused after the ink ran out. Impression Products, a small company in Charleston, W.Va., nonetheless bought Lexmark cartridges in the United States and abroad, refurbished and refilled them, and sold them more cheaply than Lexmark does.

Lexmark sued for patent infringement, and the United States Court of Appeals for the Federal Circuit, a specialized court in Washington, accepted both of its main arguments, concerning domestic and international sales.

The appeals court acknowledged that the general rule was that buyers of patented products could do with them what they wished. But it said the conditions Lexmark placed on the sale of its cartridges could be enforced as a matter of patent law for sales in the United States.

Chief Justice John G. Roberts Jr., writing for a unanimous Supreme Court on this point, disagreed. He said Lexmark could not use the patent laws to enforce the contractual conditions it placed on the sale of its cartridges. Under the doctrine of “patent exhaustion,” he wrote, once a patent holder sells an item, it can no longer control the item through the patent laws.

“The purchaser and all subsequent owners are free to use or resell the product just like any other item of personal property, without fear of an infringement lawsuit,” the chief justice wrote.

He used an illustration to make the point.

“Take a shop that restores and sells used cars,” Chief Justice Roberts wrote. “The business works because the shop can rest assured that, so long as those bringing in the cars own them, the shop is free to repair and resell those vehicles. That smooth flow of commerce would sputter if companies that make the thousands of parts that go into a vehicle could keep their patent rights after the first sale.”

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