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CAFC Strengthens Patent Rights by Limiting Exhaustion

Posted Sunday, February 14, 2016 by Jim Ruttler

Patents just became more valuable thanks to a recent decision by the Federal Circuit. The majority opinion in Lexmark v. Impression came down on Friday whereby the Court held that a patent owner can limit the use and resale of a patented article. That is, patent owners can prevent customers from using or reselling a product and such limitation is binding not only on the customer but also on downstream purchasers of the product from the customer.

Lexmark sold certain printer cartridges that were covered by a patent and expressly limited the printer cartridges for single use. Impression bought the single use printer cartridges and then adapted them to make the reusable and then sold them at a discount compared to Lexmark's other reusable cartridges. Lexmark sued for infringement and Impression defended on the basis that Lexmark lost patent rights in the sold printer cartridges because they were sold to impression. This is otherwise known as exhaustion. The Federal Circuit said in a very lengthy opinion that patent rights are different from copyrights, which are subject to copyright exhaustion. Used books and CDs and paintings can be resold on the secondary market when the copy is lawfully purchased. Here, the Court said that patents are different. According to the court, the Patent Act expressly allows for the patent owner to prevent others from making, using, and selling the patented invention. There is no statute as with copyright law that limits the patent rights via exhaustion. Thus, the Court held that if a patent owner limits the rights that accompany the sale of a product and there is not implied or express license granted to the purchaser, then the patent owner retains those rights.

For example, if a patent owner sells an article and states the the customer is only to use the article one time and cannot resale the article, then it would be infringement for the customer to resale the article. Moreover, it would be infringement of any purchaser to purchase and use the article from the customer.

It is clear for the time being, unless the Supreme Court or Congress intervenes, that patent owners can place limits on the use and resale of patented products and have those limits be binding on customers and all downstream purchasers. This is great news for innovators as it will allow patent owners to have greater control of patented products and maximize the benefit associated therewith.

CAFC Strengthens Patent Rights by Limiting Exhaustion ›› Ruttler Mills PLLC