Federal Circuit: sale of products abroad does not exhaust patent rights
A US patent owner’s rights are not exhausted when a protected product is sold outside the country’s borders, the US Court of Appeals for the Federal Circuit has ruled.
The en banc federal circuit sided with Lexmark on Friday, February 12, that Impression Products had infringed its patents by selling modified products that were obtained abroad before being imported to and sold in the US.
In addition, the court ruled that a patent owner can impose resale restrictions on a protected product.
Lexmark sells refillable printer cartridges both in the US and internationally. For a discounted rate, customers can buy a cartridge containing a microchip that restricts users from refilling the cartridge with ink when empty. The microchip controls the cartridge’s communication to the printer that it cannot be used again.
The discounted chips are sold under a no resale restriction by Lexmark.
Impression obtained the cartridges and imported them into the US.
Lexmark sued Impression at the US District Court for the Southern District of Ohio for patent infringement. In a counterclaim, Impression said Lexmark’s patent rights had been exhausted.
A mixed ruling from the Ohio court prompted both parties to appeal to the federal circuit.
In a 10-2 decision, the court sided with Lexmark and ruled that the sale of a patented product abroad does not exhaust a party’s rights.
Judge Richard Taranto, writing the majority opinion, said: “A foreign sale of a US patented article, when made by or with the approval of the US patentee, does not exhaust the patentee’s US patent rights in the article sold, even when no reservation of rights accompanies the sale.
“Loss of US patent rights based on a foreign sale remains a matter of express or implied licence,” he concluded.
Taranto added that a patent owner can also impose resale restrictions on a patented product.
He wrote: “When a patentee sells a patented article under otherwise proper restrictions on resale and reuse communicated to the buyer at the time of sale, the patentee does not confer authority on the buyer to engage in the prohibited resale or reuse."
Judge Timothy Dyk, writing a dissent, said that the burden should be on the patentee to inform the unsuspecting buyer with a notice of its rights.
“If a patentee wishes to reserve its US rights, it should be required to do so unmistakably. The patentee is in a better position to reserve its rights than the purchaser is to enquire into any reservation,” he wrote.
