U.S. Court of Appeals for the Ninth Circuit, Bluetooth SIG Inc. v. FCA US LLC, Docket No. 21-35561

Trademark

 

First Sale Doctrine

 

 

The first sale doctrine applies when a trademarked product has been incorporated in a new product

 

Certification Marks

 

 

 

Appeal from the United States District Court for the Western District of Washington

 

Interlocutory Appeal

 

Per Curiam Opinion

 

 

 

This interlocutory appeal concerns the scope of the first sale doctrine in trademark law. Defendant-appellant FCA US LLC invoked the first sale doctrine as a defense to trademark claims asserted against it by plaintiff-appellee Bluetooth SIG Inc.  (“the SIG”). After granting summary judgment for the SIG on the first sale issue, the district court certified the following question to us:  does the first sale doctrine apply “when a trademarked product has been incorporated in a new product?”  We answer “yes,” and we accordingly vacate the district court’s summary judgment and remand for further proceedings.

 

 

The SIG is a nonprofit that administers standards for short-range wireless technology. The SIG owns the word mark, “Bluetooth,” the design mark, and the composite.

 

 

To use any of these marks, a product manufacturer must join the SIG, execute a licensing agreement, submit declarations of compliance, and pay fees. Manufacturers of technological components are subject to     testing requirements, but end product manufacturers may not need further testing if they incorporate a previously qualified product. FCA makes cars under the brands Fiat, Chrysler, Dodge, Jeep, and Ram.

 

 

FCA vehicles contain Bluetooth-equipped head units. Those head units are manufactured by third-party suppliers and have been qualified by the SIG, but FCA has not taken the further steps required by the SIG to qualify the Bluetooth capabilities of its cars. FCA uses the SIG’s marks on its head units and in product publications. The SIG brought trademark claims against FCA, and FCA asserted numerous defenses, including under the first sale doctrine. Ruling on cross-motions for summary judgment, the district court found triable issues on whether (1) the Bluetooth word mark is generic, (2) there was a likelihood of confusion under the nominative fair use doctrine, (3) the SIG had abandoned its marks in the automotive industry through naked licensing, and (4) laches applied.

 

 

1 The word and composite are certification marks, which are “owned by one person and used by others in connection with their goods and services to certify quality, regional or other origin.”  McCarthy on Trademarks and Unfair Competition § 19:91 (5th ed. 2022).

 

 

After vacating a trial date set in September 2020 due to the COVID-19 pandemic, the district court certified for interlocutory appeal whether the first sale doctrine applies “when a trademarked product has been incorporated into a new product.” A motions panel of this court granted FCA’s petition for interlocutory appeal. The district court then stayed proceedings pending resolution of this appeal. We have jurisdiction under 28 U.S.C. § 1292(b).

 

 

Under the first sale doctrine, “with certain well-defined exceptions, the right of a producer to control the distribution of its trademarked product does not extend beyond the first sale of the product.” Sebastian Int’l, Inc.  v. Longs Drug Stores Corp., 53 F.3d 1073, 1074 (9th Cir. 1995) (per curiam). “Trademark rights are ‘exhausted’ as to a given item upon the first authorized sale of that item.” McCarthy on Trademarks and Unfair Competition § 25:41. The district court’s narrow view of the first sale doctrine was based on our statement in Sebastian that “it is the essence of the ‘first sale’ doctrine that a purchaser who does no more than stock, display, and resell a producer’s product under the producer’s trademark violates no right conferred upon the producer by the Lanham Act.” 53 F.3d at 1076.

 

 

Sebastian never purported to articulate the outer bounds of the first sale doctrine. It simply captured that the unauthorized resale of genuine goods presents an easy case for protecting a downstream seller. See id. (explaining that “when a purchaser resells a trademarked article under the producer’s trademark, and nothing more, there is no actionable misrepresentation under the statute.”).

 

 

Binding precedent extends the first sale doctrine beyond what Sebastian described as the doctrine’s “essence.” The first sale doctrine in trademark law derives from Prestonettes, Inc. v. Coty, 264 U.S. 359 (1924). See Au-Tomotive Gold Inc. v. Volkswagen of Am., Inc., 603 F.3d 1133, 1136 (9th Cir. 2010). Prestonettes itself applied the first sale doctrine to conduct exceeding the resale of genuine goods. In Prestonettes, the defendant was a cosmetics manufacturer that purchased genuine powder manufactured by the plaintiff, and then “subjected it to pressure, added a binder to give it coherence and sold the compact in a metal case.” 264 U.S. at 366. The Supreme Court held that trademark law did not prohibit the defendant from using the plaintiff’s mark “collaterally, not to indicate the goods, but to say that the trade-marked product is a constituent in the article now offered as new and changed.”  Id. at 369. So long as the public was “adequately informed” who modified the powder, the Court reasoned, the public was “likely to find it out” if the defendant’s process degraded the quality of the plaintiff’s powder. Id. Following Prestonettes, we applied the first sale doctrine to a retailer’s repackaging of a manufacturer’s trademarked goods. In Enesco Corp. v. Price/Costco Inc., we held that the first sale doctrine protected a retailer that resold porcelain dolls in allegedly inadequate packaging to the extent the repackaging was disclosed. 146 F.3d 1083, 1086–87 (9th Cir. 1998). We explained that “if the public were adequately informed that Price/Costco repackaged the figurines and the figurines were subsequently chipped, the public would not likely be confused as to the cause of the chipping.” Id. at 1087 (citing Prestonettes, 264 U.S. at 369).

 

 

Under Prestonettes and Enesco, the first sale doctrine applies when a mark is used to refer to a component incorporated into a new end product.

 

 

Both Prestonettes and Enesco focused on a seller’s disclosure of how a trademarked product was incorporated and explained that the first sale doctrine places limits on a seller’s liability to the extent that adequate disclosures are made. See Prestonettes, 264 U.S. at 368 (explaining that a trademark “does not confer a right to prohibit the use of the word or words” and cannot be used “to prevent its being used to tell the truth”); Enesco, 146 F.3d at 1086–87 (holding that the first sale doctrine did not apply to the extent the product manufacturer sought to compel disclosure of how the product was repackaged but did apply to the extent further relief was sought); see also Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 130 (1947) (citing Prestonettes and explaining that “full disclosure” of alterations to a manufacturer’s product “gives the manufacturer all the protection to which he is entitled”). In addressing the role of disclosure at oral argument, the parties disagreed about whether FCA had adequately disclosed its relationship with, and qualification to use, Bluetooth technology. Because the district court never reached this fact-intensive issue, we remand for the district court to address it in the first instance.

 

 

In addition to precedent, that conclusion is supported by influential treatises. See McCarthy on Trademarks and Unfair Competition § 25:35.50 (“Use of an ingredient trademark is proper so long as consumers are not confused or deceived into thinking that the maker of the ingredient is responsible for the nature or quality of the finished product.”); Callmann on Unfair Competition, Trademarks and Monopolies § 22:51 (4th ed. 2021) (“The seller of the finished product is allowed to use the supplier’s mark to identify the source of such parts or materials. . . .  But the manufacturer of the new product or combination may not mislead the public regarding the extent of the new product composed of that ingredient. . . .”).

 

 

Relying on our statement in Au-Tomotive Goldthat the first sale doctrine is “generally focused on the likelihood of confusion among consumers,” 603 F.3d at 1136, the SIG also argues that summary judgment can be affirmed because the district court determined that a triable issue exists as to likelihood of confusion. The first sale doctrine “accommodates between the strong and potentially conflicting forces” of, on the one hand, protecting good will and preventing confusion, and on the other, “preserving an area for competition by limiting the producer’s power to control the resale of its product.”  Sebastian, 53 F.3d at 1075. In the context of pure resales, that balance is easily struck because “confusion ordinarily does not exist when a genuine article bearing a true mark is sold.” NEC Elecs. v. CAL Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987). But under Prestonettes and Enesco, in the context of incorporated products, how those conflicting purposes are reconciled will depend in some way on how a seller uses the mark of the incorporated product in connection with a new product. While our jurisdiction is not strictly limited to the certified question, see Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 205 (1996), the district court is better positioned to address these questions in the first instance with the benefit of briefing and specific analysis of how FCA uses the SIG’s marks.

 

 

Accordingly, we VACATE the district court’s grant of summary judgment to the SIG on the first sale issue and we REMAND for further proceedings.

 

 

For the same reason, we decline to reach the other alternate ground on which the SIG asks us to affirm – the exceptions to the first sale doctrine.  Because the district court concluded that the first sale doctrine was categorically inapplicable in the incorporation context, it never addressed the SIG’s arguments on the exceptions. The district court may consider these arguments on remand.

 

 

 

 

Secondary authorities: McCarthy on Trademarks and Unfair Competition § 25:35.50; Callmann on Unfair Competition, Trademarks and Monopolies § 22:51 (4th ed. 2021).

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, April 6, 2022, Bluetooth SIG Inc. v. FCA US LLC, Docket No. 21-35561, for Publication)

 

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.

Kirtsaeng v. John Wiley & Sons, Inc.

Copyright: first sale doctrine: the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad: the “exclusive rights” that a copyright owner has “to distribute copies. . . of a copyrighted work,” 17 U. S. C. §106(3), are qualified by the application of several limitations set out in §§107 through 122, in­cluding the “first sale” doctrine, which provides that “the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or oth­erwise dispose of the possession of that copy or phonorecord,” §109(a); “first sale” doc­trine’s common-law history; (§602(a)(2) makes foreign-printed pirated copies sub­ject to the Copyright Act); (§104 says that works “subject to pro­tection” include unpublished works “without regard to the author’s nationality or domicile,” and works “first published” in any of the nearly 180 nations that have signed a copyright treaty with the United States); the common-law “first sale” doctrine, which has an impeccable historic pedigree, makes no geographical distinctions. Nor can such distinctions be found in Bobbs-Merrill Co. v. Straus, 210 U. S. 339, where this Court first applied the “first sale” doctrine, or in §109(a)’s predecessor provision, which Congress enact­ed a year later (U.S. S. Ct., 19.03.13, Kirtsaeng v. John Wiley & Sons, Inc., J. Breyer).

Copyright : doctrine de la première vente : cette doctrine s'applique aussi en cas de copies faites légalement à l'étranger. Ces copies peuvent donc être ensuite importées et vendues aux Etats-Unis, même à un prix inférieur à celui pratiqué aux Etats-Unis. Dite doctrine trouve sa source dans la common law, est fermement établie, et dispose que le propriétaire légitime d'une copie d'une œuvre soumise au copyright peut en disposer librement, y compris la vendre, tout cela sans le consentement du titulaire du copyright. Remarques additionnelles au sujet du copyright : les copies pirates imprimées à l'étranger sont soumises à la loi sur le copyright. Cette loi protège aussi les œuvres non publiées, sans considération de la nationalité ou du domicile de l'auteur, et protège aussi les œuvres dont la première publication a eu lieu dans un des 180 Etats avec lesquels les Etats-Unis sont liés par un traité.