Tuesday, May 30, 2017

Impression Products, Inc. v. Lexmark Int'l, Inc., Docket 15-1189

Patent exhaustion doctrine: International exhaustion (patent): First sale doctrine: License: Common law: Fee simple:

When a patentee sells one of its products, however, the patentee can no longer control that item through the patent laws—its patent rights are said to “exhaust.” 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.

Two questions about the scope of the patent exhaustion doctrine: First, whether a patentee that sells an item under an express restriction on the purchas­er’s right to reuse or resell the product may enforce that restriction through an infringement lawsuit. And second, whether a patentee exhausts its patent rights by selling its product outside the United States, where American patent laws do not apply. Answer:  a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.

First up are the Return Program cartridges that Lexmark sold in the United States. We conclude that Lexmark exhausted its patent rights in these cartridges the moment it sold them. The single-use/no-resale re­strictions in Lexmark’s contracts with customers may have been clear and enforceable under contract law, but they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.

For over 160 years, the doctrine of patent exhaustion has imposed a limit on that right to exclude. See Bloomer v. McQuewan, 14 How. 539 (1853). The limit functions automatically: When a patentee chooses to sell an item, that product “is no longer within the limits of the monopoly” and instead becomes the “private, individual property” of the purchaser, with the rights and benefits that come along with owner­ship. Id., at 549–550. A patentee is free to set the price and negotiate contracts with purchasers, but may not, “by virtue of his patent, control the use or disposition” of the product after ownership passes to the purchaser. United States v. Univis Lens Co., 316 U. S. 241, 250 (1942). The sale “terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 625 (2008).

This well-established exhaustion rule marks the point where patent rights yield to the common law principle against restraints on alienation. The Patent Act “pro­motes the progress of science and the useful arts by granting to inventors a limited monopoly” that allows them to “secure the financial rewards” for their inventions. Univis, 316 U. S., at 250. But once a patentee sells an item, it has “enjoyed all the rights secured” by that limited monopoly. Keeler v. Standard Folding Bed Co., 157 U. S. 659, 661 (1895). Because “the purpose of the patent law is fulfilled . . . when the patentee has received his reward for the use of his invention,” that law furnishes “no basis for restraining the use and enjoyment of the thing sold.” Univis, 316 U. S., at 251.

We have explained in the context of copyright law that exhaustion has “an impeccable historic pedigree,” tracing its lineage back to the “common law’s refusal to permit restraints on the alienation of chattels.” Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. 519, 538 (2013). As Lord Coke put it in the 17th century, if an owner restricts the resale or use of an item after selling it, that restriction “is voide, because . . . it is against Trade and Traffique, and bargaining and contracting betweene man and man.” E. Coke, Institutes of the Laws of England §360, p. 223 (1628); see J. Gray, Restraints on the Alienation of Prop­erty §27, p. 18 (2d ed. 1895) (“A condition or conditional limitation on alienation attached to a transfer of the entire interest in personalty is as void as if attached to a fee simple in land”).

Lexmark cannot bring a patent infringement suit against Impression Products to enforce the single-use/no-resale provision accompanying its Return Program cartridges. Once sold, the Return Program cartridges passed outside of the patent monopoly, and whatever rights Lexmark retained are a matter of the contracts with its purchasers, not the patent law.

In sum, patent exhaustion is uniform and automatic. Once a patentee decides to sell—whether on its own or through a licensee—that sale exhausts its patent rights, regardless of any post-sale restrictions the patentee pur­ports to impose, either directly or through a license.

(…) What helped tip the scales for global exhaustion was the fact that the first sale doctrine originated in “the common law’s refusal to permit restraints on the aliena­tion of chattels.” Id., at 538. That “common-law doctrine makes no geographical distinctions.” Id., at 539. The lack of any textual basis for distinguishing between domestic and international sales meant that “a straightforward application” of the first sale doctrine required the conclu­sion that it applies overseas. Id., at 540.

Applying patent exhaustion to foreign sales is just as straightforward. Patent exhaustion, too, has its roots in the antipathy toward restraints on alienation, and nothing in the text or history of the Patent Act shows that Congress intended to confine that borderless common law principle to domestic sales. In fact, Congress has not altered patent exhaustion at all; it remains an unwritten limit on the scope of the patentee’s monopoly. See Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U. S. 104, 108 (1991) (“Where a common-law principle is well established, . . . courts may take it as given that Congress has legislated with an expectation that the principle will apply except when a statutory purpose to the contrary is evident”).

(…) Allowing patent rights to stick remora-like to that item as it flows through the market would violate the principle against restraints on aliena­tion. Exhaustion does not depend on whether the patentee receives a premium for selling in the United States, or the type of rights that buyers expect to receive. As a result, restrictions and location are irrelevant; what mat­ters is the patentee’s decision to make a sale.

Secondary sources: E. Coke, Institutes of the Laws of England §360, p. 223 (1628); J. Gray, Restraints on the Alienation of Prop­erty §27, p. 18 (2d ed. 1895); M. Nimmer & D. Nimmer, Copyright §17.02, p. 17–26 (2017).

(U.S.S.C., May 30, 2017, Impression Products, Inc. v. Lexmark Int'l, Inc., Docket 15-1189, C.J. Roberts).

La protection conférée par le brevet cesse dès que la chose est vendue à un tiers, soit dès le transfert de propriété. Que la vente soit interne ou internationale ne change rien. Un contrat de licence n'est pas l'équivalent d'une vente. Mais le titulaire peut vendre par lui-même ou par l'intermédiaire d'un contrat de licence avec le même effet : ces types de vente mettent également fin à la protection.

Si le titulaire du brevet vend la chose en restreignant contractuellement le droit de l'acheteur de la revendre, ce titulaire peut-il requérir le respect de cette restriction par une action en violation du brevet ? La réponse est négative, seule la voie contractuelle est à disposition à cet égard.

C'est qu'en effet, le droit des brevets confère un monopole limité pour permettre au titulaire de bénéficier de la récompense financière qu'il mérite, promouvant ainsi l'innovation. Mais dès que le titulaire vend le produit de son invention, il est réputé avoir bénéficié des droits découlant du monopole limité. De la sorte, le but du droit des brevets est atteint quand le titulaire a reçu sa rémunération pour l'usage de la chose. Ainsi, la loi sur les brevets ne saurait servir à restreindre l'usage et la jouissance de la chose vendue.

La cessation de la protection conférée par le brevet en cas de transfert de propriété de la chose trouve sa source dans la Common law, qui ne permet pas de restreindre les droits de l'acquéreur. La Common law ne distingue pas suivant que la vente soit interne ou internationale. Ni l'interprétation littérale ni l'interprétation historique de la loi fédérale sur les brevets ne démontre d'intention du Congrès d'altérer le contenu de ces principes de Common law. La cessation de la protection telle que décrite demeure une limite non écrite au monopole découlant du brevet. Quand un principe de la Common law est bien établi, les Tribunaux peuvent tenir pour acquis que le Congrès a légiféré avec pour but l'application du principe, sauf indication légale contraire évidente.

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