by Dennis Crouch
I was surprised at the en banc Federal Circuit’s decision in Lexmark to re-affirm Mallinckrodt — giving a seller power to block future resale and reuse of a patented product. My surprise is grounded in the longstanding tradition in American property law of promoting the free-flow of commerce by refusing to enforce servitudes that limit the alienation or use of goods. To be clear, courts have often enforced contracts between willing parties to this end, but those same courts have refused to allow restrictive covenants to cling to the good and bind any subsequent purchaser. Here, the court held that this type of restriction is enforceable for Lexmark, but only because Lexmark’s product is covered by patent rights.
Apart from the law, the policy issues are incredibly important and relate to the continued increase in both (1) disposable/non-reparable products on the market and (2) manufacturer control over the repair market for products that are reparable by patenting the replacement part itself. In the auto industry, insurance companies and consumers have been fighting this issue for years – pushing lawmakers to negate design patents covering spare-parts when used to limit the supply of less-expensive parts.
In my ideal system, we encourage the creation of high quality and long lasting goods that are reparable (or refillable) at a local level. The best and most direct way to offer this encouragement is outside the patent system. However, the Lexmark decision gums-up the works by creating a cloud over the third-party repair/refill marketplace — a market that is already such a shadow of its former self.
First, thank you for covering this topic. I have been in the printing and imaging industry for over 20 years, and nothing has kept the industries attention more than this case.
To truely understand this case, however, I believe you have to understand the market, products offered, and the underlying drivers for Lexmark to levy this in the first place. I believe Lexmark started down this road many years when it was first feeling pressure from cheaper, locally remanufactured, consumables. At that time, they decided to offer a reduced price if the consumer would agree to return the empty toner back to Lexmark for recycling, and, yes, in some instances, recycling for re-use.
At the consumer level, however, this was seem primrily as a cheaper consumable and never returned the empty to Lexmark when it was consumed. At about this same time, the Chinese manufactures began moulding and manufacturing counterfeit and “knock-off” products for sale into the US. This became so rampant, that, when Lexmark shopped 1000 e-tailers and retailers in the US, they saw a significant percentage of products being sold were actually never made by Lexmark in the first place.
You can imaging the implications of this. How can patent rights ever be consumed, if the product was not manufactured, sold or endorsed by the patent owner in the first place.
By upholding this ruling, the courts are doing 2 things:
1 – It is NOT ok to make counterfeit products under any circumstances. This is upheld by understanding Lexmark’s rights to enforce that the product being remanufactured or repaired in the local market was first sold or manufactured by Lexmark.
2 – It upholds the right to repair by not standing in the way of someone who wants to do so. Lexmark must allow the right to repair.
I believe that anyone who learns all of the facts surrounding this case and really digs in, will see that the entire US economy benefits from this decision. Especialy the consumer.
Jeff: Lexmark started down this road many years when it was first feeling pressure from cheaper, locally remanufactured, consumables.
That “pressure” is also known as “competition.” It’s a fundamental aspect of capitalism, which is the most awesome -ism ever. In theory, consumers benefit when competition results in “cheaper locally remanufactured consumables.”
Chinese manufactures began moulding and manufacturing counterfeit and “knock-off” products for sale into the US.
Last time I checked, there’s a bunch of laws already in place to protect companies and consumers from counterfeit products.
How would the consumer benefit?
I had a Dell printer once where we bought a refilled ink cartridge. The Dell printer refused to work with the cartridge, so we threw the printer in the trash and never bought anything from Dell again. (And I do not remember ever seeing any “contract” with the printer that said I couldn’t buy refilled cartridges.)
Now, when we buy a printer, we look at this issue and only buy printers that allow other printer cartridges to be used.
Dennis, I’m sorry, but “your ideal world” ain’t the real world.
Lexmark (and its customers) think that the best allocation of costs and profits is to price the printer low, and set higher prices on the printer cartridges. The “repair and replace” market for cartridges doesn’t exist unless the printers sell in the first place. Both parties evaluated the printer transaction before it took place, and decided that the printer with its life-of-product costs and benefits was beneficial to both parties.
Why do so many academics think they know so much more about economics and business than the real world does? So much more about what’s good for the parties than the parties themselves knew?
In the real world, essentially everything that happens happens for one reason–profits. Profits are not “gumming up” the system; profits are the fundamental motive force that makes the system work.
Yes, the patent system has to balance an awful lot of different policy interests. Profitability of innovators isn’t the only interest to be considered. But I am constantly flabbergasted at the degree to which non-profit-sector academics simply brush aside the first requirement for every economic transaction–profitability. And the “revealed preferences” of the parties–they made clear that they liked the arrangement.
Flabbergasted…?
Really?
This is nothing more than the Left-bias that (gasp) someone wants to make money and that just has to be “bad.”
The double-Oh Noes of property not in the commune and making money on that property…
In related news:
link to washingtonpost.com
I guess at least in this country we only label patent claims as witches that are trying to claim abstract ideas that exist in the spirit world.
A second observation —
Ten years ago I used to represent one of the big photocopier companies. We used to get a lot of warranty claims from users that had used after-market toner cartridges that gummed up the printer, and ruined the printer.
This is a perfectly rational way for Lexmark to protect itself from just the paperwork costs–let alone the hardware costs–imposed by substandard toner. Toner is really complex stuff, and the printer company has to have good quality control over the toner that gets loaded into the printer, at least if the printer company is going to offer a warranty.
Is not the simple path simply to note that the warranty is contingent on the use of proper parts (even replenishable ones)?
Anon —
In the real world, there are two problems with that. (1) People lie on warranty claims. (2) The paperwork costs of warranty claims–even declining them –is very high.
If the printer company is going to offer a warranty at all, they have to shut down this source of warranty claims.
You run into the problem then of attempting a “real world” shortcut that impacts rights.
Not every business shortcut in the real world is proper.
Boundy In the real world, there are two problems with that. (1) People lie on warranty claims.
LOLOLOLOL
Thank goodness “in the real world” companies that own patents and sell products never ever mislead their customers.
The paperwork costs of warranty claims–even declining them –is very high.
And there’s no way to reduce that cost! Unpossible!
If the printer company is going to offer a warranty at all, they have to shut down this source of warranty claims.
Or they can cease to offer a warranty after the first cartridge expires because “people lie”. Or cease to offer any warranty at all. The huge amounts of money that are saved can be passed on to consumers in the form of a reduced cost for the printer, or passed on to shareholders, or both. It’s a win-win!
Boundy: We used to get a lot of warranty claims from users that had used after-market toner cartridges that gummed up the printer, and ruined the printer.
That seems like the world’s easiest problem to address.
This is a perfectly rational way for Lexmark to protect itself from just the paperwork costs
Nobody is suggesting that companies can’t void their warrantees if you use a replacement/refurbished component.
One might exercise the right to create code and inplement such on a replacement chip which removes such limitation on refill-ability nonsense that appears to be a nuisance in a chattel to which they have gained title, and acting upon said right in the pursuit of one’s happiness, renders moot the original manufacturer’s fantasy about their business model in the wild. If Henry Ford had created a one-piece automobile that John Rockefeller’s fuel hose was unable to penetrate, but only by the Ford Trust filler hoses, we’d need to back-date and import the John Robert’s court to make that car go only on one-way corporate roads.
nat,
I enjoyed your “several layers deep” writing here.
Thank you. My classroom law education is comprised solely of attending every session of Apple v Samsung I and II where Quinn Emanuel kicked and a here’s shout-out to Bill Lee of WilmerHale. They were my professors along with Judge Lucy H. Koh.
I could name the other stars at Quinn Emanuel; they know who they are and upon request… but brevity is the soul of wit and this plate is full.
stars at Quinn Emanuel; they know who they are
Love it when the truth leaks out.
?
I just thought of how to put the problem in terms even an academic can appreciate —
All of the interesting stuff in the patent system (in any intellectual property regime, actually) is within a “multi-period game.” In this case, the whole game includes initial concept, the cost of turning that idea into a product with reliability testing, marketing, manufacturing, distribution, then the sale of the printer, then the sale of the toner cartridge.
The blinders-on Lemley/Drefus/Samuelson/Sarnoff/Rai “ideal world” academics try to optimize or reduce costs for one step in that chain, isolated from the entire multi-period game.
Sorry David, I am not liking your analogy.
First and foremost, the patent system itself is just not designed for that entire game.
Adhering to your analogy too closely only invites the incorrect “must make” line of thinking into the game.
That is just not how the U.S. patent system was devised – just not how the Quid Pro Quo deal is structured.
I don’t understand — never heard of “must make” line of thinking so I don’t follow.
Parties in a multi-period game have the option to not start — Lexmark didn’t have to make printers at all, and will only choose to do so if they see profitability as the end result of the end-to-end multi-period game. Is that the answer to your question?
You just laid out a full “sequence” that includes the “positive” aspect of actually making a product.
Patent law does NOT cover that full sequence – and is not intended to cover that full sequence (that’s why patent law is a negative right, not a positive right to practice)
Without some specificity, this comment is not helpful.
The specific, David, is that your full spectrum involves MORE than what the patent system aims for.
There is no aim in the patent system that necessitates that a product be put into production.
The patent right itself is not a right to produce anything – the positive right.
Instead, the patent right is a negative right.
I trust that this difference is understood by you – and that that understanding is specific enough.
Your full spectrum plays into the hands of those that would like to make patent infringement into some type of business deal that excuses infringement as some type of de minimus infraction along the lines of simple broken contracts (efficient breach).
Without some specificity, this comment is not helpful.
It’s pretty simple, actually. Your earlier comment mentioned marketing, manufacturing, distribution, etc., and suggested that these things were somehow relevant to the patentee. That’s a big no-no in the orthodox religion of ultra-patent-maximalism, as practiced by anon, because we don’t want any hint of a suggestion that a patentee might actually practice its own invention.
DanH,
Your spin is all wrong.
Whether someone decides to practice their invention is not something that I am all “up in arms about as am ultra-patent-maximalist.”
You want to have a product? Have at it.
But please understand that actual law and system of patents that the US put into place does not mandate that you have a product.
There is a H U G E difference here that your desire to be glib rather forgets to take into account.
You do no one any favors by overlooking this, and even worse – casting aspersions on the wrong party.
To be perfectly blunt: please stop trying so very hard to be an arse.
anon —
The patent system is tuned for the entire game, and has immense effect throughout the multi-period game, even though the overt effect operates at only a few isolated points.
Analogy: products liability. Even though “the law” only “operates” where there’s a product failure that results in injury, the law of products liability is tuned to balance the obligation of the manufacturer to design and manufacture with due care, to allow the manufacturer to be in business, and obligate the purchaser to exercise due care.
Similarly, even though the patent “law” only operates overtly in an infringement litigation, it affects, and is tuned to balance as best we can, the entire multi-period game.
Tuned for the entire game is just not so, Mr. Boundy.
There is NO requirement in patent law that one has to make a product.
Until you can “tune” that, I am afraid that what you are hearing from yourself is out of tune.
The patent law is so tuned, by not requiring practice of the invention. This has always been one of the available tuning parameters, and Congress chose to tune the patent system as it saw fit, by not adopting such a rule.
The Supreme Court came along in eBay and said that the probability of obtaining an injunction reflects whether patentee is practicing or nonpracticing.
The reason is simple–it’s an absurd rule. Universities, Elias Howe (inventor of the stitch that made sewing machines possible), Charles Goodyear, many of the inventors of the techniques that make modern cell phones possible, many of the biotech startups around me in Cambridge MA, are all non-practicing. Cell phones are an interesting example–an innovation that comes from a neutral non-practicing entity is far more acceptable to the equipment manufacturers, precisely because it comes from a neutral. But the innovation won’t happen if there’s no way to profit from it, and for non-manufacturers, a patent is the only way to obtain that profit.
That is 0xym0ron1c.
You want to say that it includes your entire spectrum specifically because US patent law has NEVER required the entire spectrum.
As my Boston friends say, “You cannot get there from here.”
..and relying on Supreme Court decisions to “inject” policy is merely a sign of broken scoreboards….
That is NOT how the statutory law of patent law is designed.**
**with rare exceptions, as I have shared in the past, where the legislature appropriately has shared its designated constitutional authority.
No, I didn’t say that. I said that the patent system takes the factor into account, and has reached a balance that Congress considers appropriate, by treating practicing and nonpracticing inventors alike, except for probability of injunction. Lots of balances are included without a legal “requirement” at the precise point of operation–often there’s a provision that operates here that creates an incentive there.
Your comment on Supreme Court suggests that there’s enough lack of familiarity with American government that I’m not going to be able to teach you what you need to know to look at this in any sophisticated way. So I’ll stop here. Thanks for reading my post.
As I said, Mr. Boundy, I am not keen on your analogy because it is a flawed analogy.
You want to include more than the patent system in your analogy, when you just should not.
This is NOT to say that the patent system is the be all and end all of policy and the entire system of innovation (which has been defined in some innovation literature as having the additional steps of putting an invention into production).
All I am doing here is telling you that your analogy is flawed – and telling you exactly why it is flawed. The patent system – and the patent right – is just not what your analogy dictates it to be.
As to the Supreme Court broken scoreboard situation, I take it that you think that the Supreme Court can never be wrong – which I posit is wrong in and of itself. Let me remind you that the American Government – in its system of checks and balances and recognition of what is the supreme law of the land does NOT place the judicial system (and that includes the Supreme Court) ABOVE the Constitution.
It just is not so.
There is NO requirement in patent law that one has to make a product.
Ding, ding, ding! There it is. I told you, David, even suggesting that a patentee might make a product is verboten.
Regarding working, working was a requirement in England. Bracha, Oren. Owning ideas: A history of Anglo-American intellectual property. Diss. Harvard Law School Cambridge, Massachusetts, 2005 at note 39. link to law.utexas.edu
“Working” as that legal term is understood in context here is not “meeting the stated functionality.”
It is more in line with having a product and putting that product on the market.
Even as DanH gleefully – and errantly – snipes at me for correctly stating the law and its history (great job there Prof – you need that pointed out to you explicitly too? – not as if you did not read this – as you read enough to edit out my response – more of that “delightful” lack of objective balance that I see as the “enforced rule” here), the concept of a patent right that is also a “must make product” simply does not reflect US patent law.
And there are plenty of good reasons why this is just not so, reflecting (among other things) the negative right nature of the patent (to contrast with the positive nature of having a product) and the fact that the US system is geared to improvement patents – and that such can be on items still protected under patent law to others, and that actually making might necessarily infringe on someone else’s (negative) rights.
And yet, my being clear about this brings out repeated – and thus what can only be taken as deliberate misstatements (and “go figure” – by the sAme ones that typically merely react against my posts without substance or care for the content of my posts).
Ned,
This might be a better link:
link to law.utexas.edu
I’m puzzled by your statement “the patent system itself is just not designed for that entire game.” Can you please explain?
The patent system has myriad policy balances, which exist precisely because of the multi-period, multi-party game. (Another important party in the game is the investor that puts up the capital to start the play.)
The game was retuned by the AIA to favor big, multi-national market incumbents over other players, but it’s still a game whose rules attempt to take the entire game into account and optimize the global outcome.
In what part of that do you believe otherwise?
Comment above (in reply to 12.3.1.1.1.1) appears to have been caught in the filter.
“Global” is also incorrect in more than one way, Mr. Boundy.
David, you are talking contract law. Dennis is talking property law.
The suit here is against a third party not privy to any contract. The question is do they have title, because if they do, under the property law, they have it free from all restrictions on use or resale.
Now Lexmark may void its warranty if its customers violate its terms, but that provides no legal excuse to sue a third party doing what it has a legal right to do.
Ned Lexmark may void its warranty if its customers violate its terms
Even a patent worshipping attorney like David Boundy should be able to understand that.
Hi Ned,
I happened upon this interview with Justice Kagan: link to youtube.com
She spoke a couple times about the specialized practice, but go to minute 52. I think she speaks to what I was saying… its because they are good, but there is no special preference. She said earlier in the interview its more about circuit splits.
Circuit splits was tried for nearly thirty years prior to the establishment of the CAFC.
It did not work.
Blindly going back and doing the same thing will yield the same result.
While my point was more on, does a company basically have to pay for an expensive Supreme Court attorney, I’m happy to discuss this.
I think that there are several issues with having a subject-matter court.
First, I think there is an echo chamber effect and group think, which I think is overall a bad thing.
Second, CAFC will reach into other areas of law that it is not its specialty, such as contracts, and tend to make Federal Common Law.
Third, CAFC is put under the SCOTUS microscope more than other courts. SCOTUS usually waits until a circuit split, indeed some Justices do not vote for cert. unless there is a meaningful circuit split. But with CAFC, it can’t do that, making SCOTUS’s job harder in this area of law.
Kagan was a professor at the Univ. of Chicago Law School? Like the O-man himself?
J, She argued that the reason the former clerks are so effective at the cert stages is
1. They are good lawyers; and
2. They are given the best cert cases to begin with.
She did mention that they also knew what buttons to push. (But of course, that is very important.)
And she all but admitted that it was the quality of the lawyering that gets cert approved. Badly written or argued legal positions are not going to be accepted for cert.
All that I agree with. But it is different than what you said, that they “trust their former clerks.”
Going back, I pointed out that being a small company shouldn’t stop a business, after all that litigation to get to that point, from getting a good enough attorney to get cert if the law is on their side, ESPECIALLY if it is an appeal from CAFC.
It seemed that the issue was that some lawyers, not accustomed to SCOTUS practice, do not adjust enough to what the justices are looking for. You don’t have to be a former clerk to make this adjustment.
J, the most important people in the determination of whether your case even gets the attention of the justices are the clerks. It is they that have the biases in favor of their own kind.
You say that based on, what? Former clerks are getting more grants of cert positions? Even if it were true, that can be explained by the fact that businesses are feeding more cases to those clerks.
Well, J, I was told this by a former clerk of course.
Now Kagan says the court likes good lawyering. However, she also said that the court relies on its clerks for bringing to their attention petitions and amicus briefs they should read. Now, what about those clerks? Same thing, they like good lawyering. But they do not have the time to go check all the cites to see if they are accurate. So, this is where the trust issue comes in.
By the way, that is contrary to what Justice Kagan said in that interview.
Profits made between consenting parties are wonderful.
Profits made on asymmetric information where one side can not be expected to reasonably consent are not wonderful.
Daily consumers of printer ink are not generally understood to know the ins and outs of printer manufacturing economics. Cancer patients are not expected to comparison shop for chemotherapy drugs.
Rent-seeking by manipulations of legal processes are frictional losses to an economy- like invalid patents and nonsensical invasion of patent law into the settled laws of commerce. Those rents may be profits, but they are far from virtuous.
It’s often the academics who have the time, freedom, and interest in telling the rent-seekers and the public that they are full of it.
Why do right wing zealots have such a problem understanding and accepting the concept of consent? Don’t answer that….
I am pretty sure that David Boundy is not a right wing zealot.
Why do left wing zealots feel the need to demonize their opponents?
😉
(also, to assume as you do that the Left academia do not bring their own agenda to the table is f00lishly p0llyanna – and then to accuse “full of it” is itself “full of it”)
What is your point here Malcolm?
Do you not agree with what I have stated?
Do you want some other paradigm to be controlling?
When you do nothing but make an empty snide comment, you only cement the fact that you are this site’s single largest blight.
Nice “ecosystem,’ Prof.
MM —
re:favor big, multi-national market incumbents over the tr0lls I prefer to represent
In every case I’ve been involved in, where there’s a big guy, or a multi-national, or a dominant market incumbent, or a tr0ll, on either side of the case, in every single one I’ve represented the defendant. If you google “David Boundy patent startup” you will see that I’ve been an advocate for the new market entrant or disruptive innovator in every one of my public statements. In my only current litigation matter, I’m representing a defendant against a troll.
I hope you’ll understand that it’s highly unlikely that I will ever take you seriously enough to reply to you again.
David
Well Mr. Boundy, you can reply to make sport of him and show just how “off” his views are.
He provides nearly unlimited material for doing so.
😉
Boundy: you will see that I’ve been an advocate for the new market entrant or disruptive innovator in every one of my public statements
Oh, really? Are you advocating here on behalf of new companies that want to enter the market of providing refilled ink cartridges to consumers? If so, you could have fooled me.
My point is that the purpose of the AIA — and the IPR and CBM regime in particular — was certainly not to “benefit big corporations” but to kneecap the worst abusers of the system. There is an important distinction between the two purposes, even if “big corporations” do, in fact, find some “benefit” from the changes. Small corporations will benefit as well. Characterizing the AIA as some sort of handout to big corporations at the expense of everyone else is the sort of ridiculous myth that patent maximalists love to repeat to themselves. It’s right up there with “everything is abstract and therefore ineligible”.
In my only current litigation matter, I’m representing a defendant against a troll.
That’s awesome! I hope you get rid of the case on summary judgment under 101. That’s another change that benefits everybody. Does it benefit “big corp” most of all? Probably. But that’s definitely beside the point.
Lastly, this concept of “disruptive innovation” is some incredibly thin sauce. I understand it’s a trendy term among a certain class of patent-obsessive who think they are working on behalf of the Most Important People Ever. But beyond it’s seems to be mostly a pile of baloney.
MM, the effect might be kneecapping the trolls, but good patents whose validity has been sustained multiple times are being railroaded as well.
Ned,
Get in touch with Ron Katznelson to help you gain the proper perspective on the so-called “Tr011” boogeyman.
Then realize that the ends do not justify the means, so even IF the ends included “only ‘Tr011s’,” you STILL have to proceed by proper means.
the effect might be kneecapping the trolls, but good patents whose validity has been sustained multiple times are being railroaded as well.
The fact that patents generally would become marginally more difficult to enforce was a known outcome that was taken into consideration when the law was written.
Good patents remain good patents. People are still licensing them. People are still asserting them when they are not licensed. And people are still profiting from them. This, too, was understood when the law was written.
“New companies that want to enter the market of providing refilled ink cartridges” are not innovators. So no, I do not advocate for them.
Ah yes – but the “balance” that consumers want – and a weakness in your stated position that I noted – is that the balance is not limited to innovators.
Quite in fact, one of the primary reasons behind the Quid Pro Quo for limited times is that at a certain time, what was innovative belongs to the commons and SHOULD BE copied freely. A view that eliminates the benefits of non-innovation and copying is just not a complete view.
David Boundy: the “revealed preferences” of the parties–they made clear that they liked the arrangement.
I’m pretty sure that at least some of the parties that purchased the after-market toner cartridges at reduced cost also “liked that arrangement.”
Of course, the mere fact that people “buy into” a marketing scheme like Lexmark’s doesn’t mean that “they like the arrangement” or that it’s an ideal arrangement or that the arrangement can’t be improved upon. That’s why people should always question the results provided by “the market.” It’s a mistake to presume that capitalism necessarily produces the best result for all the “parties”.
I can’t imagine why so many profit-obsessed patent attorneys seem so inclined to forget that …
Your focus on snark (and anti-capitalism) has forced you to miss a better comeback here, Malcolm.
That better comeback is that the market actions (the emergence of the different providers of the replenishable product) have spoken directly AGAINST what Mr. Boundy has claimed.
If what Mr. Boundy claimed were in fact true, the emerging market would not have gained the ground that it has.
And to a certain not small extent, this same comment applies equally well to the rather polite post by Jeff at 13.
David – Thanks for this comment. I certainly would not want to defend all academics. And here, I do not think that you fully understood my point. In particular, I am generally fine with this agreement between the parties regarding how the purchased goods can be used. My problem is how that agreement placing a servitude upon the chattel then gums-up the downstream market in a way that seemingly binds future purchasers of the good – even those that purchase without notice of the restriction on use.
“even those that purchase without notice of the restriction on use.”
Are you assuming that notice is not provided with the printer itself?
I do not know the answer to this point, whether or not the printer itself highlights the options of the array of replenishables with any fair notice therein. But if I were the party engaging in such a “razor blade” model, and had the options available of more than one cost point based on single use or not, I sure as sh00ting would have that in the larger device as well as on the replenishable items.
And you’re assuming the shrink wrap notice is valid/enforcable.
Not necessarily so, patentcat (I made no comment on the form of the license).
Dennis at 12.7 and Martin Snyder at 12.5 and Ned at 12.4:
Why? Real property is often sold with restrictive covenants–view easements, homeowners’ association covenants, etc. Similarly, in the days of physical media, the physical copy of software was sold with the intellectual property encumbered by a license with lots of restrictions. Nothing wrong with that. Why should this be different? Lexmark sells the cartridge, the cartridge embodies IP, and the IP is supplied under a restrictive license. It’s an arrangement that puts the costs on the parties that derive the greatest benefit–it’s classic price discrimination by metering. It’s simply an efficient arrangement for allocating price and cost to those that use the most.
These days, everyone with any knowledge of the real world knows that printers are cheap and ink is expensive. At least in the case of printers, “those without notice of the restriction” are so underinformed about the world in general that a “knowledge” requirement in order to sell the cartridges would “gum up” the market. What do you want, require a signature at the point of purchase for every cartridge sold rather than a notice on the wrap?
David Boundy:
Dennis at 12.7 and Martin Snyder at 12.5 and Ned at 12.4:
Why? Real property is often sold with restrictive covenants–view easements, homeowners’ association covenants, etc.
1. It is English common law that actually is American common law unless overridden by statute that restrictions on resale do not run with chattels. Even if real property may have restrictions that run from titleholder to titleholder, such is not the case with chattels and never has been. Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363-1364 (2013). As you know, the original exhaustion cases are based upon the general principle that the titleholder of the chattel receives it free of restrictions on use and resale and the patent laws must be so construed as well unless Congress expressly says otherwise.
2. Bobbs-Merrill was based on the first sale doctrine. Ibid. That case specifically held that the right to vend did not extent to controlling second sales. It was exhausted on the first sale.
3. Similarly, the patent laws have been so construed. There is no right to control second sales under the patent law.
4. The attempted use of the patent laws to sue title holders of a chattel from reselling it, or repairing and then reselling it, have to be viewed, to me at least, as patent misuse that can and should affect the enforceability of the patents of concern, and might even be the basis of antitrust violations.
Similarly, in the days of physical media, the physical copy of software was sold with the intellectual property encumbered by a license with lots of restrictions. N what the hell othing wrong with that. Why should this be different? Lexmark sells the cartridge, the cartridge embodies IP, and the IP is supplied under a restrictive license. It’s an arrangement that puts the costs on the parties that derive the greatest benefit–it’s classic price discrimination by metering. It’s simply an efficient arrangement for allocating price and cost to those that use the most.
1. One cannot both sell a copy of software and also license it. The owner of a copy as a right to resell it. One cannot impose post-sale restrictions on the right to resell that copy based upon the copyright laws, or based upon the law of property.
2. You assume that all these software licenses are effective even when the software owner is purporting to sell a copy of the software. At best what the software owner can do is condition his further services upon compliance with the software license terms and conditions. But nothing in the copyright law and nothing in the common law allows the software owner to impose post sale use or resale restrictions on the owner of a copy.
3. Both Kirtsaeng and Bobbs-Merrill support the above.
These days, everyone with any knowledge of the real world knows that printers are cheap and ink is expensive. At least in the case of printers, “those without notice of the restriction” are so underinformed about the world in general that a “knowledge” requirement in order to sell the cartridges would “gum up” the market. What do you want, require a signature at the point of purchase for every cartridge sold rather than a notice on the wrap?
Long ago the Supreme Court decided that one cannot, under the patent laws, condition the sale of a patented item based the purchaser continuing to receive unpatented supplies from the patentee. That is patent misuse if not an antitrust violation.