Intellectual Property Client Alert, March, 2016

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...