In what has become a biannual tradition, the Supreme Court of the United States reversed a United States Court of Appeals for the Federal Circuit decision in the near unanimous Impression Products, Inc. v. Lexmark Int’l, Inc. decision (Justice Ginsburg dissented-in-part). The decision was premised on the patent exhaustion doctrine. The patent exhaustion doctrine is a common law counterweight against the manufacturer of a patented product. Basically, once the patentee sells the product in commerce, the doctrine removes patent-based restrictions on the product, permitting the buyer to use or resell the product without infringing the subject patent.
The background relates to printer toner cartridges. Anyone with a printer knows the common story, you go out and buy a printer, which is stupidly inexpensive, but of course, the printer comes with a “starter toner cartridge”, industry speak for a toner cartridge “near E” straight from the factory. So, after a couple of print jobs, the toner cartridge is spent and you are off to the local office supply store, or more likely, Amazon, to buy a new one. But low and behold, the real toner cartridge is much more expensive, and sometimes costs more than the actual printer with the starter cartridge. To put it politely, the margin on these toner cartridges is quite good.
Where there is a consumer in need, participants in the free market will happily answer, and many participants have, by taking old toner cartridges, refilling them, and selling them on the market. This has become a game of cat and mouse with the patentee manufacturers and the toner remanufacturers. For example, in one effort, the patentee manufacturers have added ID chips on the toner cartridges, and programmed the printers to look for only authentic new toner cartridges. It worked for while, but then the toner remanufacturers circumvented the countermeasure.
The next move by the patentee manufacturers was to add contractual limitations to the purchase agreements, limiting the buyer’s rights to resell the product. Using this tactic, the patentee manufacturers sued the toner remanufacturers for patent infringement, contending an unauthorized reselling of the toner cartridge constitutes patent infringement. The Federal Circuit agreed, and the decision was appealed. One of the issues on appeal was whether a contractually limited sale invoked the patent exhaustion doctrine, which the Supreme Court ruled in the affirmative. Another issue was whether the patent exhaustion doctrine was invoked for foreign sales, which was also ruled in the affirmative.
In short, any authorized sale will invoke the patent exhaustion doctrine, and the patentee manufacturers cannot chase the toner remanufacturers under patent law. Of course, this decision does not affect the contractual rights of the patentee manufacturers under state law.
Because of this, if your business is considering remanufacturing a patented product, you should seek counsel of a qualified patent attorney, who can advise you of potential court action.