The recently argued US Supreme Court case, Impression Products v. Lexmark International, has “potentially momentous importance for modern commerce,” per the respected SCOTUSblog .
With a description like the one above, one may assume that the case involves a more controversial topic or product than the seemingly benign printer cartridges. However, the issue in the case, which involves a patent owner’s right to control the use of its product after it has been purchased, has implications that go far behind refilling ink.
Jeff John Roberts’ March 20, 2017 article for Fortune, “What Today’s Supreme Court Case Means for Business” (you can find Roberts’ full article here) provides a succinct background of the pertinent facts of the case.
According to Roberts, “the printer giant Lexmark, which earns much of its revenue from cartridge sales, sued a small West Virginia company for selling refills of its cartridges without permission. That smaller company, Impression Products, disabled a chip in the cartridges so that Lexmark printers did not realize they were unauthorized refills.” Roberts explained, “this lets consumers save money on toner, but it poses a threat to Lexmark’s business model.”
An appellate court found in favor of Lexmark, and concluded that Impression’s activities amounted to an unauthorized use of the company’s patented technology. Impression appealed, and oral arguments were heard in the Supreme Court on Tuesday, March 21st.
According to Roberts, “in its victory at the appeals court, Lexmark relied on a technical argument about the 1952 Patent Act that revolves around the word ‘authority.’” Roberts explained, “basically, Lexmark says the law means that it can enforce its patent rights even after a sale if the user engages in unauthorized activity.”
On the other hand, Impression’s argument relies on a patent principle known as “exhaustion.” Roberts describes exhaustion as a legal concept dating back to the Civil War era, meaning that after a patent owner sells its product, its rights over that product are finished.
So why does this matter to us? If Lexmark convinces a majority of the Court that it has a right to limit the resale or modification of its cartridges, opponents argue that other companies, such as car, drug, technology, and apparel companies, to name a few, could theoretically impose their own restrictions after the sale of their products. For example, “A [patent owner could sell] pharmaceuticals ‘only to be swallowed whole,’ or a radio ‘only for use on Sundays,’ and sue someone who splits his pills or forgets the day of the week for patent infringement … Less fancifully, a patentee could sell a car with a ‘no resale’ restriction and shut down the market for used cars,” wrote a group of law professors in a brief submitted in support of Impression.
On the other hand, Lexmark supporters argue a decision in favor of Lexmark could protect the end consumer and the reputation of the patentee. Specifically, in its February 22, 2017, Amicus Curiae brief in support of respondent Lexmark, the Intellectual Property Owners Association argued, “allowing a patentee to exercise control over end products incorporating patented technology by imposing restrictions on, for example, quality or re-sale, protects the consuming public and the patentee’s reputation”.
A decision is set to be rendered in June. We will definitely want to stay tuned for this one.