by Dennis Crouch
The en banc holding of Lexmark v. Impression[1] is simple – the principles of Mallinckrodt[2] and Jazz Photo[3] are re-affirmed. In particular, the court reaffirmed (1) that a seller can use its patent rights to block both resale and reuse of a product and (2) that authorized sales of a product abroad does not exhaust the US patent rights associated with that product. As Prof. Rantanen explained, although the holding is simple, the ten-member majority panel took 90+ pages to describe how its conclusions conform with 19th – 21st century Supreme Court precedent and why the patent laws should operate differently than the copyright regime in these cases.
The presumptions are of some importance for those operating on the ground. Here, the US court will presume that foreign sales of a product do not exhaust the US patent right. Thus, an importer must obtain a release/license of those rights to avoid liability (assuming a valid and otherwise infringed patent). Of course, that license right may be implied based upon providing notice of the importation intent. In addition, depending upon the location of sale, UCC 2-312 (or its foreign equivalent) may create a presumption of license depending upon the situation.
With regard to limits on domestic resale/reuse, the presumption continues to be that a bare sale without express restriction is delivered free from any resale or reuse restrictions. However, once the restriction is in place, it appears to be bound to the product and thus binding upon subsequent owners who have no contractual agreement or relationship with the patentee. Under the UCC, a bona fide purchaser of a good takes “good title” presumably free of any encumbrance (such as a reuse restriction). UCC 2-403(1). However, as state-law, the UCC is trumped by Federal Patent Law which is the source of encumbrance here. The common law has a long history of prohibiting these types of encumbrances on personal property, but for the Federal Circuit, the patent right overwhelms that tradition.
A Supreme Court petition is likely in this case. The problem though is that Impression is a rather small generic-cartridge company and lacks the funds to hire a top Supreme Court counsel – perhaps especially important here because of the 200 years of Supreme Court precedent relating to the issues at hand. That said, Ed. O’Connor (Impression’s litigation counsel) previously represented Independent Ink in the 2006 Illinois Tool Works case before the Supreme Court.
= = = = =
[1] Lexmark Intern., Inc. v. Impression Products, Inc., App. No. 2014-1617, ___ F.3d ____ (Fed. Cir. February 12, 2016) (en banc). En banc order available at 785 F.3d 565 (Fed. Cir. 2015).
[2] Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992).
[3] Jazz Photo Corp. v. International Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001)
The holding of Lexmark is directly contrary to the holding of the Supreme Court in Bobbs-Merrill. There is no way that the Supreme Court will not summarily trash this Federal Circuit opinion.
The wiki version does not agree with you, Ned.
To that point: “The court did not hold that a contract or license imposed on the first sale could not create an obligation. In this case, there was no contract between the owner and the original purchaser, and there was not privity of contract between the owner and any third party.”
See link to en.wikipedia.org
As I pointed out in the seed discussion, Monsanto could have insisted that any further down the road transactions have included in them the same types of protections that Monsanto pressed against direct seed purchasers.
They could have pressed this as a requirement of the initial purchase (akin to the Copyleft clause in certain versions of software).
They did not.
Thus, as I have pointed out, the sale of next gen seed was undertaken with no strings and no notice – and this type of no strings and no notice sale happened TWICE in the Monsanto-Bowman fact pattern, first from the original purchasers of original seed from Monsanto to the grain silo operators, and then from the grain silo operators so anyone in the world (including Bowman).
Neither of these sales had notice.
Both of these sales were fully unfettered (leastwise to the buyers at the time of purchase).
Listen, anon, I totally agree with you that Farmers should not be held to be infringers if they grow plants from seed they own and sell that crop.
The Supremes held otherwise. They were wrong. But just let Monsanto take it victory to the extreme and Congress WILL act. Trust me.
I am HOPING that such “taking to the extreme” happens for several lines of legal logic that clearly show that the US Supreme Court is way out of line when it comes to patent law.
One sec, I’m going to change that. BRB
LOL
Even without that, the case itself does not HOLD what Ned is saying that it holds.
anon, it held that a restriction included in a book does not
“qualify the title of a future purchaser by the reservation of the right”
so that the copyright hold might have a remedy of infringement.
Impression is third party, not in privity with Lexmark. It violates a use restriction imposed by contract on purchasers of Lexmark cartridges, a use restriction of which it may or may not have had notice, although it seem to have conceded it had notice.
“Thus, we do not have before us the questions that would arise, whether under principles governing bona fide purchasers or otherwise, if a downstream re-purchaser acquired a patented article with less than actual knowledge of such a restriction.”
Id at * 13.
It resells the cartridges. It has been held to have infringed because its title included the condition as if it ran with the chattel.
There seems to be no basis to distinguish Bobb-Merrill. That case simply found nothing in a statutory exclusive right to vend any right to sue downstream commerce for violation of a restriction.
Ned,
See the response below at 4.2.1.1.2.1
To your statement here of “There seems to be no basis to distinguish Bobb-Merrill. ” this court was explicit as to basis and is the same exact reply to your other statement of
“The same reasoning applies to the patent statute”
The court (not saying here they were correct) draws an opposite understanding of the fact that no such similar codification happened in patent law, Ned.
The court statement that Bobb’s-Merrill does not apply because copyrights and patents are different is not reasoning.
Actually Ned, it is expressly reasoning.
It may not be the reasoning that you want to see – but please, let’s not define something by what you merely want.
J,
The point of the wiki remains correct, and just highlights Ned’s over reading of the case.
There is NO absolute right of the patent holder to force any such restraining clause in a contract.
That is just NOT the same that the patent holder cannot try to make it a clause, or that the patent holder MUST sign a deal if the other side refuses to admit such a clause.
I know, I was only kidding. I mean I agree with Ned, but I don’t dispute your reading isn’t fair.
?
anon, from Lexmark at 9, “Impression
Products, Inc. later acquired the cartridges at issue in
order to resell them in the United States—the restricted
ones after a third party physically modified them to
enable re-use in violation of the single-use/no-resale
restriction.”
Impression was not in privity with Lexmark. There was no issue of contract law involved here. The sole issue is whether the restriction at issue applies to third party Impression. In Bobbs-Merrill, the notice was in the book. In this case, it is not clear how Impression was notified of the restriction. The issue is whether their violation of the restriction of a contract to which they are not privy is patent infringement.
Bobbs-Merrill is clear authority on that point.
On the larger issue of selling something with restrictions is legal under either contract law or patent law, that issue not squarely before us here. But Coke would say that post sale restrictions do not run with the chattel. Bobbs-Merrill is consistent. Lexmark is inconsistent.
I have shown you below that the lack of such a codification was taken to be the opposite of what you want the law to be, Ned.
Ugh!
Bobbs-Merrill was decided before 109(a) was passed. Its reasoning applies to patents as well as copyrights.
Again Ned – that is just not what the court here said.
(and note, that just because a prior court ventured into writing statutory law – or attempted to do so – does not mean that a later court must accept that line of reasoning. This court here was pretty explicit on basing its decision on a statutory basis)
Ned – look at post 7.1.2.2.
Anon, no matter how you squirm, the Federal Circuit did not justify its ignoring of Bobb’s-Merrill on any rational basis.
Ned,
I am not the one squirming and making up definitions (like what is or what is not “reasoning” – or here, what is a “rational basis”)
I am not the one squirming and ig noring the differences between statutory law and common law.
No my friend, that would be you.
…and you have never answered me as to whether you understand the difference between statutory law and common law….
Here might be a good time to start to understand that difference.
“ But Coke would say that post sale restrictions do not run with the chattel. Bobbs-Merrill is consistent. Lexmark is inconsistent.”
And Monsanto…?
😉
(your reply above at 7.1.1.1 crossed “in the mails”)
Is Supreme Court litigation really that expensive compared to the cost already sunk?
You don’t need to hire Seth Waxman to win. Honestly, as good as these specialists are, they are probably over-priced. There are plenty if really talented attorneys out there.
But I am not part of the SCOTUS bar, maybe I’m wrong.
J, when only 3% of petitioned cases are accepted, it is best to have those who have a lot of personal experience with the Supreme Court writing these petitions — ex Supreme Court clerks. They can tailor the message, and they write well. Besides, the current clerks and Justices know who these folks are, and trust them.
Not hiring experience counsel may be a waste of time as the most important factor in getting the petition granted is who the counsel are.
That this is true is unquestionable. That this is stupid is also unquestionable.
Which “system of favors” does that sound like…?
😉
“Besides, the current clerks and Justices know who these folks are, and trust them.”
I really don’t believe it. I understand that some can specialize in this practice, and for criminal law it might be especially important, but for a patent case… well, the Federal Circuit is going to grab the Court’s attention. In such situation, or cases where there is a circuit split, the law does most of the work.
I mean, if the Supreme Court really pays special attention to its own clerks, that’s corruption.
“if the Supreme Court really pays special attention to its own clerks, that’s corruption.”
I will guarantee you J that this will sail right over Ned’s head.
J, corruption or not, it is a fact of life.
Not sure what the filter did not like…
…as I said J – Ned chooses here to c1ench tight his eyes.
He just does not seem able to comprehend your point.
Probably a subject for a different post, but I wonder how our rules regarding security interests should come into play — i.e., should the rights retained by the patentee be properly seen as a security interest under Article 9 of the UCC. That would be an important determination because, if so, a patentee would need to record that interest in order for it to be valid over a subsequent bona fide purchaser who obtained title to the good without notice of the restriction on use.
Dennis, indeed. But we need to look at this cases for what it really is:
Patent misuse: the unlawful extension of patent laws to protect downstream commerce otherwise unprotectable under the law of property.
Ned,
No – it need NOT rise to the level of “patent misuse.”
It may do so, but such is NOT the driver here.
The government might turn things around here if it sued Lexmark for antitrust violations. It needs to do something so that it can be made a party and take this up directly.
Again Ned – your reply is a non sequitur to the underlying issue.
It really is NOT a driver of patent misuse.
Applying this to the seed fact pattern, are you assuming a security interest would exist in the case where Monsanto failed to include specific protections for post-first generation seeds?
There is an underlying assumption here that one can sell his product and keep it too, such that one could sue under contract law for breach of contract if a buyer of a cartridge fails to perform the conditions of the “sale.” I think this assumption is completely false.
This same “idea” is being promoted by the likes of software vendors who know that a sale cannot have post use restrictions but instead call their sales “licenses.” But they are not licenses if they look like a sale, act like a sale, and quack like a sale. A license requires an obligation of return or continuing royalties. A sale is not.
The line blurring of sales and licenses is not only in the software arena, Ned.
And here I think we are in agreement – this line is being intentionally blurred and not to the benefit of the consumers.
I would think a healthy dose of “contracts of adhesion” would (and should) be applied to licensing efforts that merely masquerade as a license in order to avoid the consequences of a sale.
I do notice that you have not weighed in on the fact pattern I produced now on two threads… Is this because our joint venture of unleashing a ravenous genetically enhanced fish into the oceans to displace all other fish and give us a corner on the world’s fish market is still underway….? 😉
anon, you can hold your own on patented, wild fish. Someone needs to think things through a bit clearer on that front.
But you are right that there is a larger push from the likes of IBM, the business software people, etc., to be able to sell things and to impose post-sale use restrictions. The common law says such things are illegal, and the common law IS U.S. law unless overturned by statute. Pennock v. Dialogue at 18, 20.
One observes that Lexmark was once a division of IBM.
Not sure what you are saying as to “hold my own”….
Does that mean that you concur with the implications of the fact pattern that I laid out?
anon, I have not been following those threads. Just let us say that we agree there is a fundamental problem with patenting living things that spread across the planet on their own.
I invite you to follow those threads, as I delve into more than what was just before the Court and draw in the discussion of aspects of this Lexmark case.
It is (far) less an assumption Ned and (far) more a reality.
Yes, there are certain items that have been forbidden to be put in a contract basis.
But by no means is such a total and complete ban of the practice.
Not even close.
anon, have you read Bobbs-Merrill?
Ned, have you read this case?
Bobbs-Merrill at 349-350
“The precise question, therefore, in this case is, does the sole right to vend (named in § 4952) secure to the owner of the copyright the right, after a sale of the book to a purchaser, to restrict future sales of the book at retail, to the right to sell it at a certain price per copy, because of a notice in the book that a sale at a different price will be treated as an infringement, which notice has been brought home to one undertaking to sell for less than the named sum? We do not think the statute can be given such a construction, and it is to be remembered that this is purely a question of statutory construction. There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book.
In our view the copyright statutes, while protecting the owner of the copyright in his right to multiply and sell his production, do not create the right to impose, by notice, such as is disclosed in this case, a limitation at which the book shall be sold at retail by future purchasers, with whom there is no privity of contract. … The owner of the copyright in this case did sell copies of the book in quantities and at a price satisfactory to it. It has exercised the right to vend. What the complainant contends for embraces not only the right to sell the copies, but to qualify the title of a future purchaser by the reservation of the right to have the remedies of the statute against an infringer because of the printed notice of its purpose so to do unless the purchaser sells at a price fixed in the notice. To add to the right of exclusive sale the authority to control all future retail sales, by a notice that such sales must be made at a fixed sum, would give a right not included in the terms of the statute, and, in our view, extend its operation, by construction, beyond its meaning, when interpreted with a view to ascertaining the legislative intent in its enactment.”
I supplied the Wiki response already.
anon, per Bobbs-Merrill, the right to be the sole vendor of copies cannot be extended to make third parties infringers by a notice attached placing conditions on use. Section 109(a) was a codification of this holding.
The same reasoning applies to the patent statute. Noting in it allows one to control subsequent sales through notice. Nothing. To be consistent with Bobbs-Merrill, the Feds holding in Lexmark must be wrong.
“The same reasoning applies to the patent statute”
The court (not saying here they were correct) draws an opposite understanding of the fact that no such similar codification happened in patent law, Ned.
(believe it or not Ned, when a Judge makes a common law type of ruling about statutory law, the statutory law is NOT automatically changed to be the common law)
This is one important aspect of the difference between statutory law and common law that I expect you to understand.
For Anon and MM’s ‘repair vs make’ argument, here’s another hypothetical…
…My car has gas tank. That gas tank can be removed (I’ve worked on this before, it’s not a fun task, but it can be done). The tank is a solid distinct item, and can have patents on it.
How would the ruling affect someone trying to say I could only buy my gas at 7-11 because of the patents on the gas tank fly? Some variations :
1) Ford puts it in my lease documents.
2) Ford puts it in my purchase contract.
3) Ford doesn’t put it in either, but a 3rd party owning the patent says I can’t.
Below, Malcolm comments that the immediate case of the printer cartridge contract controlling the replenishment aspect is akin to a “repair” case.
I am not fully convinced of that.
Sure, repair cases (for example, the soft top for a car), does have aspects of one component of a configuration being separable and “exchangeable.”
But I think that only gets you so far because the nature of the component is itself different.
Repair includes the notion that the item needs to be repaired for a normal state of operation. The repair activity itself is not deemed normal, but is necessary to makes things “right” as opposed to a different notion of makes thing “whole.”
With printer cartridges, the view is that the component in question is an expendable component fully expected to be exchanged at some point (and often, exchanged quite often and numerous times) in the normal course of operations.
No one who runs out of cartridge ink says, “Damm, my printed is broken and needs repair.”
That difference of expectations is a difference in kind, not one of degree.
What if the printer cartridge breaks?
My post is clearly meant to delineate between the printer cartridge case and the repair cases.
Your question is not germane to that post.
But, if the break is along the lines of a break to any other component that would need repair, then the repair cases may be pertinent.
If on the other hand “break” is related to a purposeful design feature meant to thwart the different in kind replenishment scenario, we have an instance that is still different than normal repair cases.
Or is this too complicated for you to follow along?
It seems that it should depend upon what is patented as well.
How so?
How does the patent on one feature of the cartage translate to reloading the ink? If “making the product anew” had meaning, wouldn’t the patent have to be on the ink?
Doesn’t this nullify patent exhaustion generally whenever a patented article is serviced on any level? Buffing the paint? Changing the oil?
Mr. Snyder is correct in so far as the type of service matters.
Service designed as an expected part of normal operation (replenish an item designed to need to be replenished) is simply different in kind from service that repairs.
This is the point below that Malcolm does not grasp.
“anon” No one who runs out of cartridge ink says, “Damm, my printed is broken and needs repair.”
What happens is they recognize that the printer isn’t functioning. They might then realize (or hope!) that it’s because something is depleted which can be replenished. That solution to the problem is more like a “repair” than “rebuilding the printer” or “making a printer.”
Again, you miss the very point Malcolm.
There is a difference in kind between “not functioning” because an expected item being replenishable needs to be replenished and a true repair.
You are trying to make the situation into an “either or” situation and force-fitting the replenish into the “repair mode.”
It does not fit.
Your attempt is ill-conceived.
It is akin to saying that an inchworm is more like a whale than a blade of grass. Perhaps true at some level, but meaningless for all intents and purposes.
I think we have discovered what MM is so grumpy. Everything in his world keeps breaking. His car breaks every 500 miles or so. His cell phone and laptop break every day or two. Even his body breaks 3 times a day.
He is “grumpy” because of the cognitive dissonance inherent in his supposed (he claims that he is a patent attorney) line of work which involves obtaining property rights, while at the same time nearly every post he makes shows his utter disdain for the concept of such property rights (his Left bias).
Your distinction is completely arbitrary anon; consider a clutch job on a car. We know that clutches may wear out, but they may not in the life of the car. When they do need replaced, they may or may not need a new thrust bearing, throw-out washer etc. The “service” and “repair” are co-mingled.
Beyond that, and even beyond the obvious problems of introducing unknown restrictions into the stream of commerce, is the utterly disproportional costs involved for a downstream “infringer” who may buy an item for $10 and be exposed to the tens or hundreds of thousands of dollars in legal fees minimally concurrent with any involvement in patent litigation.
When you combine this heedless jurisprudence with the abject nuttiness of design patent law/damages, the software follies will look like a sideshow in creating political pressure to reform a then-totally delegitimized patent system.