Federal Circuit Reaffirms U.S. Patent Rights Not Lost if Product First Sold Overseas
On February 12, 2016, the U.S. Court of Appeals for the Federal
Circuit ("Federal Circuit") ruled in a 10-2 decision that
foreign sale of a U.S. patented product does not exhaust the
patentee's U.S. patent rights in the product sold. The Federal
Circuit is the sole appellate-level court with the jurisdiction to
hear patent case appeals.
The decision is Lexmark Int'l v. Impression Prods.,
No. 2014-1619, 2016 U.S. App. LEXIS 2452, at *84 (Fed. Cir. Feb.
12, 2016) and involves Lexmark International, Inc.
("Lexmark"), a maker and seller of printers and toner
cartridges. Lexmark sold the cartridges at issue abroad and in the
U.S. Impression Products, Inc. ("Impression") acquired
some of the cartridges sold abroad, which had been
refurbished/recycled to allow for reuse, and resold them in the
U.S. without Lexmark's authorization. Lexmark sued Impression
for patent infringement under 35 U.S.C. § 271. Impression did
not dispute the validity or enforceability of Lexmark's
patents. Instead, Impression invoked the doctrine of patent
exhaustion and argued that as Lexmark had sold its patented
products abroad without communicating a reservation of U.S. patent
rights, it therefore had conferred authority on subsequent buyers
to import the cartridges and sell and use them in the U.S. The
exhaustion doctrine provides that the patentee loses all patent
rights to a particular product when the patentee first makes or
authorizes an unrestricted sale of that product.
This issue was addressed by the Federal Circuit in 2001 in
Jazz Photo Corp. v. International Trade Comm'n, 264
F.3d 1094 (Fed. Cir. 2001) wherein it held that overseas sales did
not trigger patent exhaustion in the U.S. This latest review of the
continued validity of that decision arose due to a 2013 decision by
the U.S. Supreme Court in Kirtsaeng v. John Wiley & Sons,
Inc., 133 S. Ct. 1351 (2013) wherein the court held that
lawful sales abroad exhausted the copyright owner's exclusive
rights in the U.S. The issue in the Lexmark case was, in part,
whether the analysis that was applied to the Copyright Act should
also be applied to patented articles.
The Lexmark Court affirmed Jazz Photo and
distinguished Kirtsaeng. The Federal Circuit held that
there is no legal rule that U.S. rights are waived, either
conclusively or presumptively, simply by virtue of a foreign sale,
either made or authorized by a U.S. patentee. In addition,
exhaustion under copyright law and under patent law requires
separate analysis and conclusion in one does not carry over to the
other. Furthermore, Kirtsaeng analyzed a
copyright-specific statute (i.e., 17 U.S.C. § 109(a)) which
has no counterpart in the Patent Act and, therefore, the
Kirtsaeng decision was not applicable. Finally, the
Federal Circuit held that a foreign sale of a U.S.-patented
article, when made by or with the approval of the U.S. patentee,
does not exhaust the patentee's U.S. patent rights in the
article sold, even when no reservation of rights accompanies the
sale. The Federal Circuit remanded the case for entry of a judgment
of infringement for Lexmark.
The decision is important for providing clarity as to protection
of U.S. patented items, which had been called into question as a
result of the Kirtsaeng decision. At the same time it may
also cause companies to re-think purchasing items they know to be
the subject of U.S. patent rights from foreign sources. But, we
expect a request to be made to the United States Supreme Court to
review this decision in light of the fact that there is now a clear
difference between the way the exhaustion doctrines are treated
between Copyright and Patent law. And while generally, the Supreme
Court only reviews a very select few of the cases presented for
review, this case does appear ripe for Supreme Court review.
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