Exhaustion and Conditional Sales

The Supreme Court has again relisted Impression Products petition for writ of certiorari – further raising the prospect that the exhaustion case will be heard.  Ticking almost all of the boxes, Impression has top Supreme Court counsel (Andy Pinkus); Support from the SG; Prior Supreme Court cases in tension with the Federal Circuit’s holdings; and Plenty of Amicus Support.  The court will again consider the petition at its December 2 conference.

The following two questions are presented:

  1. Whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy; and
  2. Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc. that the common law doctrine barring restraints on alienation that is the basis of exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article – authorized by the U.S. patentee – that takes place outside of the United States exhausts the U.S. patent rights in that article.

My hope is that the court will use this as an opportunity to clarify the unduly confusing Quanta decision.

Other Supreme Court News: Cert denied in DBN and DataTreasury. December 6 oral arguments in LifeTech.

45 thoughts on “Exhaustion and Conditional Sales

  1. 6

    I think with Scalia it was necessary to distinguish between his social views (backward) and his legal views (sensible). Unfortunately, I don’t think there’s ever been anyone on the bench that didn’t let the former influence the latter. This should not have as big an influence on patent law as in some other areas.

    1. 6.1

      Alun, I was stunned when I recently found out that Scalia was the very first Roman Catholic on the Court. The first.

      Catholics would tend to be conservative in their social views.

      (As an aside, the primary reason we did not annex Mexico in 1848 was because Mexicans were Catholic.)


          Thanks Dennis.

          Revealing. The Court, until Scalia died, had 6 Catholics and 3 Jews.

          I would think that the next appointee, whoever, should be a protestant.


                I’ve said it before and I’ll say it again: Justice Theodore Anthony Nugent.

                Now if you’ll excuse me I need some mouthwash.

                1. I see that you (like I) do not like Ned’s “choose a Protestant.”

                  But at the same time, you seem to bristle at the mere thought of choosing a single Justice from outside of the rarefied liberal Ivy League bastions….?

                  “inclusion” is not really inclusion if you only want to include those that agree with you. Diversity does not mean only those that are Politically Correct.


            I would think that the next appointee, whoever, should be a protestant.

            Wow! Really thinking outside the box there.

  2. 5

    Question 2) brings to mind the notion from property law of sticks in a bundle.

    One can alienate less than a full bundle, but if the seller sells without making this clear, he has sold the full bundle.

    1. 5.1

      Is that consistent with selling a patent and failing to sell the potential recoveries for pre-sale infringement?

  3. 4

    Question 1) brings back to mind the Monsanto case (and how the question of post sale restrictions – as flawed as they were – were skirted by the Court).

    Monsanto’s own drafted post-sale restrictions opened the door to farmers who had bought from Monsanto to sell the yield of the bought grain’s next generation into the open market without restrictions.

  4. 3

    My hope is that the court will use this as an opportunity to clarify the unduly confusing Quanta decision.

    Yes, that is a worthy hope, and this would be a good case to do it. Regrettably, the SCotUS does not lately seem interested in bringing clarity to patent law. They usually take a case only to unsettle settled doctrines and muddy the waters. They like decisions that function in patent-law the same way that drive-by shootings function in gang wars—shake things up and make people take notice, without actually resolving any of the underlying issues at stake.

    Still and all, hope springs eternal. Maybe this really will the rare case where some clarity is achieved.

    1. 3.1

      Note that it’s the CAFC who unsettled things here. Also true of the CAFC’s LifeTech decision (which will be reversed 8-0).

      And also true of the CAFC’s decision in Mayo (which was reversed 9-0).

      1. 3.1.1

        And also true of the en banc CAFC’s decision in Medicines Co. v. Hospira (if you subscribe to Merck’s position that the CAFC’s ‘totality of the circumstances’ test for what constitutes an on-sale bar creates confusion about when a confidential non-public transaction is, in fact, a bar under 102(b)).

    2. 3.3

      Greg, when a decision does not set down clear rules or state clearly why the case was decided, the decision is not law, but equity, where factors are weighed. Scalia railed against this nonsense. Kennedy’s decision in Bilski is a good reason example.

      Hopefully, writing clear and clearly understandable decisions should be a central requirement for any upcoming Supreme Court justice.

      1. 3.3.1

        It is, of course, entirely possible for a law to include clear rules that require consideration of multiple factors. Even a law that required consideration of a hundred factors could be perfectly clear. It depends on the factors.

        Remember that “clarity” is (arguably) the quintessential issue about which lawyers argue the most.


          Clarity – in any type of law – is indeed important.

          Almost as important as understanding which branch of the government has been authorized to write which law to begin with.

          In the case of the Supreme Court scrivening new 101 law, the Supreme Court has failed on both accounts.

      2. 3.3.2

        Bilski certainly is not the only such recent case Ned.

        When the Court refuses to define the key term (e.g., “Abstract”) and hand waves another key phrase (e.g., “significantly more”) you do not even achieve “equity.”

        Instead, you have the Court’s own scrivening to meet their desired Ends (legislating from the bench) being Void for Vagueness.

      3. 3.3.3

        Scalia railed against this nonsense.

        Yes, he did, and God bless him. I may have disagreed with Justice Scalia on a whole host of issues, but this is one where I think he was exactly correct. As he famously said:

        We will have totality of the circumstances
        tests and balancing modes of analysis with us forever—and for my
        sins, I will probably write some of the opinions that use them. All I
        urge is that those modes of analysis be avoided where possible;
        that the Rule of Law, the law of rules, be extended as far as the
        nature of the question allows; and that, to foster a correct attitude
        toward the matter, we appellate judges bear in mind that when we
        have finally reached the point where we can do no more than consult
        the totality of the circumstances, we are acting more as factfinders
        than as expositors of the law.

        This strikes me as exactly correct.

        Kennedy’s decision in Bilski is a good reason example.

        Or Justice Kennedy’s decision in Festo, or his decision in KSR, or his decision in TrafFix Devices

        Hm, one begins to see a pattern emerging here.


          Let’s see if you can guess the “identify” of a prolific poster who has openly mocked the notion of the Rule of Law…


            Kennedy might go on for years.

            After all, I heard he’s “sleeping better” now, along with the rest of the DC c0cktail party set. Yay!


              As I recall that input from another poster, that poster did not identify which Justice he had had a conversation with, and it was you, Malcolm, that ASSumed that the Justice was Justice Kennedy.

              Being smarmy about propagating your own nonsense is a bit inane.

                1. I do not recall if the person making the comment indicated a gender of the Justice involved.

                  Other than that, the individual identity was not shared.

                  Of course, this does not change the point presented at – your inanity (and let’s not forget your more recent accusation against me and how what you do here is like what you accused me of – and yes, that does sound familiar because it is your number one meme).

      4. 3.3.4

        [W]riting clear and clearly understandable decisions should be a central requirement for any upcoming Supreme Court justice.

        From your lips to God’s own ears.


          Wow, Ned Greg and I all in agreement.

          I would posit further that this thought should be applied especially strongly to those areas of law that the Constitution went out of its way to delegate authority to a certain branch of the government to write that law.

          It is a bedrock notion (and one anyone associated with law should be well aware of): there are critical differences between statutory law and (judge-made) common law.

      5. 3.3.5

        Name a SC case for 101 that was clear. I can’t name one. They’re abominations of tortured logic to fit a desired result.


          Some are worse than others.

          Better ones would be Chakrabarty and Diego, while the refuting of what Stevens had wanted to do with Bilski serves as a type of disaster averted.


          Mayo was clear as day, provided that you understand the facts and issues and aren’t reading it with some mythological nonsense (e.g., “no claim dissection!”) baked into your brain.

      6. 3.3.6

        Thomas Egerton, writing as Lord Chancellor (Earl of Oxford’s Case [1661] ) observed:

        “The cause why there is a Chancery is, for that men’s actions are so diverse and infinite, that it is impossible to make any general law, which may aptly meet with every particular act, and not fail in some circumstances”

        We can’t remove equity entirely without removing justice for some Ned.
        It should be used rarely, under controlled conditions, by qualified jurists; but that’s always the problem, isn’t it?


          English observations of 1661 do not apply to US jurisprudence concerning the separation of powers and specifically to allocations of authority to write the statutory law that is patent law.


              As is the difference between statutory law and common law, Ned.

              And yet, you seem entirely unwilling to address or accept that difference (and that difference is clearly more pertinent to discussions of patent law).

              Your turn.


          Martin, agreed. But equitably jurisdiction/remedy requires that there be no adequate legal remedy.


            Ned because we combined equity and law, there is a fuzzy zone that rests with individual jurists. Especially in the higher courts, questions may have political content that cannot be neutralized.

  5. 2

    Cert denied in DBN and DataTreasury

    Were those eligibility cases?

    Re “Other Supreme Court news” that’s patent related, SCOTUSblog listed this “Petition of the Day” recently:

    Merck & Cie v. Watson Laboratories, Inc.

    Issue: Whether the “on sale” bar found in Section 102(b) of the Patent Act applies only to sales or offers of sale made available to the public, as Congress, this court, and the United States have all made clear, or whether it also applies to non-public sales or offers of sale, as the U.S. Court of Appeals for the Federal Circuit has held.

    Petition here: link to scotusblog.com

    Also this article in The Economist about a Texas de@th penalty case going up to the Supremes raises an over-arching issue which would seem to be extremely relevant to the future health of our patent system:

    link to economist.com

    In a shifting political climate where respect for scientific consensus is no longer a sure bet, Texas maintains that it can choose from a range of standards for intellectual disability, including one drawn from the pages of a novel.

    [hat tip to SCOTUSblog]

    Also saw this:

    Tony Mauro interviews a lawyer whose view that the late Justice Antonin Scalia “harmed his own legacy with language in his opinions that lacked empathy and was hurtful to segments of the public” sounded a note of dissent at the recent Federalist Society convention celebrating Scalia.

    Who was the lawyer? Whoever he/she was: nicely done.

    1. 2.1

      re the Justice Scalia comment: Toni Massaro, professor and former dean of the University of Arizona James E. Rogers College of Law

  6. 1

    This is probably not the case (nor the governmental body) to also unravel “leases” that are truly sales in disguise.

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