The Supreme Court Rules That Patent Rights Are Exhausted by a Sale, In the U.S. and Abroad
The Supreme Court issued a 7-1 ruling in Impression Prod., Inc. v. Lexmark Int'l, Inc.[1] that eliminated the ability for a patent holder (“patentee”) to enforce, through patent law, post-sale restrictions on an authorized domestic or international sale of a patented item. The Court reasoned that the patentee’s rights under the Patent Act must yield to the common law principle against restraints on alienation.
Patent exhaustion, a patent law doctrine and defense to patent infringement, states that once a patented item is sold by the patentee, the patentee can no longer enforce its patent rights against the purchaser of that item. Before this decision, the patentee could impart post-sale restrictions on the purchaser, such as “single use only” or “do not refill.” If not followed, the purchaser could be liable for patent infringement. The Supreme Court, in finding that the Federal Circuit misinterpreted the doctrine of patent exhaustion, unequivocally stated that “restrictions and location are irrelevant for patent exhaustion; what matters is the patentee’s decision to make a sale.”[2]
While patent law is no longer available as a means to enforce post-sale restrictions, patentees may utilize other avenues to protect sales and safety of their patented items:
Patent exhaustion, a patent law doctrine and defense to patent infringement, states that once a patented item is sold by the patentee, the patentee can no longer enforce its patent rights against the purchaser of that item. Before this decision, the patentee could impart post-sale restrictions on the purchaser, such as “single use only” or “do not refill.” If not followed, the purchaser could be liable for patent infringement. The Supreme Court, in finding that the Federal Circuit misinterpreted the doctrine of patent exhaustion, unequivocally stated that “restrictions and location are irrelevant for patent exhaustion; what matters is the patentee’s decision to make a sale.”[2]
While patent law is no longer available as a means to enforce post-sale restrictions, patentees may utilize other avenues to protect sales and safety of their patented items:
- Lease options of a patented product are still available as opposed to a sale of an item to customers. A lease may allow a patentee to restrict the use (and reuse) of the patented item. In addition, the lease could require the lessor to return the patented item or allow for a penalty for not returning the patented item.
- Patentees may consider reviewing foreign sales strategy and foreign patent strategy to ensure patented items purchased at lower prices by entities in foreign countries are not being imported into the U.S., thus competing with the domestic supply chain.
- FDA guidance exists to determine the safety concerns of reprocessing a single-use device, even after gaining initial approval for the commercial sale of the patented item. FDA has also issued guidance regarding the importation of first sale and reprocessed products to avoid placing consumers at risk by importing foreign-sourced products, ingredients, and components.
[1] No. 15-1189, 2017 WL 2322830 (U.S. May 30, 2017).
[2] Id.
