Lexmark Oral Arguments: A Boon to the Sticker Industry?

by Dennis Crouch

This is a follow-up on my earlier post on the oral arguments here:

The Cost of Getting the Law Right

On March 21, 2017, the Supreme Court heard oral arguments in the patent exhaustion case captioned Impression Prods., Inc. v. Lexmark Int’l., Inc., Docket No. 15-1189.  [Transcript: 15-1189_6468]  The two questions presented focus on downstream reuse/resale of a patented product and challenge the Federal Circuit’s rulings that: (1) a US patent is not exhausted when the patented product is sold subject to a no reuse/resale provision but instead can be asserted against downstream users/resellers who violate those original provisions; and (2) a US patent is presumptively not exhausted by an authorized and otherwise unreserved foreign sale of the patented product.  Petitioner Impression Prods., buys after-market ink cartridges, refills them and resells them and the patentee, Lexmark, is attempting to use patent rights to block that form of competition.

We can expect Justice Breyer to side with petitioners in this case:

JUSTICE BREYER: I think, that Lord Coke and his great principle of no alienation [restrictions] on chattels is being laughed at.

Truthfully, most of the oral arguments involve Justice Breyer explaining to other members of the court that Lexmark’s approach violate’s Lord Coke’s 300 year old maxims – “that’s been the kind of basic legal principle for an awfully long time.”  Lexmark’s primary answer: “the common law changed a lot after Lord Coke.”  In the two most recent IP Decisions by the Court – Star Athletica and SCA Hygiene – the majority ruled in favor of the IP rights-holder over Justice Breyer dissents in both cases.

Apart from Justice Breyer’s ‘heat’, the rest of the bench was clearly cold on this case – with few questions being asked of any of the parties.

 

In 2013, the Supreme Court decided the parallel copyright case of Kirtsaeng – siding with the accused infringers on the issue of international exhaustion.  A major difference though, is that exhaustion is codified by the copyright statute – but not in the Patent Act.

JUSTICE KENNEDY: Why hasn’t this been codified? . . . Too buys or what?  . . .

Arguing for the petitioner, Andrew Pincus avoided the question and instead focused on the long history of precedent.

MR. PINCUS: I think the Court’s enunciation of the rule in the cases prior to 1952 was very clear and specific. There’s really no doubt that when Congress enacted the law in 1952, it did so with the knowledge that there was the principle that I’ve recited, and the Bowman recitation is consistent with many, many decisions of this Court dating back to the 1800s that say the same thing, that when there is an authorized sale, the patent rights are exhausted. The Court said in some cases, the — the article falls out of the patent laws and all that applies is State law.

And most importantly, the Court’s sole decision upholding these sort of restrictions, A.B. Dick was expressly overruled a few years later in the motion picture patents case. So we not only have the Court’s consistent enunciation of the doctrine, we have the fact that there was this deviation and then an immediate correction.

Answering this same codification question for the Government, Mr. Stewart pointed to an implicit exception in 35 U.S.C. 154(a)(1). That provision provides “the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.”

MR. STEWART: The Court’s historic cases in the domestic exhaustion field have located the exhaustion principle in the language of the predecessors of what is now 35 U.S.C. 154(a)(1). That is the provision of the Patent Act that says the patent owner has the right to exclude others from making, using, selling, offering for sale, or importing the patented invention. And in addressing predecessor versions of that language, this Court said those exclusive rights in essence don’t encompass the right to control resale or use of a lawfully sold article.

Finally, upon his turn to argue Mr. Trela suggested the statute goes further – it “provides that infringement occurs when someone makes, sells, uses, offers to sell, or imports into this country a patented article without authority from the patent owner.”

The Lexmark oral arguments actually began with a realization that a loss here for the patentee is not a total loss because an enforceable contract may remain.

MR. PINCUS: The contract law, with its limitations, would allow the enforcement those restrictions if they were a valid contract. This is all about whether the patent law remedies apply.

[later]  CHIEF JUSTICE ROBERTS: Why is normal contract law and normal State law inadequate, for your purposes?

MR. TRELA: If your only remedy is contract and you can’t enforce these limitations downstream . . . there’s going to be an arbitrage.

JUSTICE BREYER: Why can’t you enforce the contract downstream?

MR. TRELA: Well, because you — you don’t have privity, Justice Breyer.

JUSTICE BREYER: Then why don’t you require the person who sells it to just resell it with the requirement that they promise not to, you know, whatever it is? . . . one of the reasons that it’s hard to get away with that is the antitrust laws in the contract area. And another reason is because Lord Coke said 300 years ago, you know, you get into a lot of trouble when you start trying to restrict this buyer who’s got the widget and he would like to use it as he wishes. Now, that’s been the kind of basic legal principle for an awfully long time.

 

Justice Alito offered some perspective on the extraterritoriality aspects of the case – noting the preference of the court for interpreting US statutes to avoid extraterritorial application.

JUSTICE ALITO: And it’s somewhat surprising to me that none of the briefs in this case talk about our cases regarding extraterritoriality. In recent years, we have said that a statute does not apply outside the United States unless it says that it applies outside the United States. I don’t see why that shouldn’t be the same for a common-law rule like the rule here. And if what’s involved here is the application of U.S. patent law abroad, where is the clear statement that the exhaustion rule applies outside of the borders of the United States? I don’t see where that can be found.

MR. PINCUS: Your Honor, I don’t think this is a question of extraterritorial application anything — any more than the issue in Kirtsaeng was a question of extraterritorial application of the Copyright Act.

The question here is whether the patentee’s acts outside the United States have an impact on its ability to enforce its rights within the United States. No one is saying that the sales outside the United States are governed by the U.S. patent law, they’re obviously not, just as the sales outside the United States under the Copyright Act are not governed by the Copyright Act.

In thinking through the patent infringement claim, one question is that of notice.  What notice is required to limit resale/reuse? Is notice only required at the point of first-sale, or must notice also be provided to subsequent purchasers.

JUSTICE KENNEDY: Can they put a sticker on the products — “Do not sell”? This would be a great boom to the sticker business, right?

Hard for me to predict an outcome at this point, but get your stickers ready.

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

56 thoughts on “Lexmark Oral Arguments: A Boon to the Sticker Industry?

  1. It looks like the commenting lid has been shut on all threads newer than this one.

    Maybe a different local university coffeehouse needs to be visited this weekend to get that “just do it on a machine” thing working correctly.

    😉

  2. Looking at 35 USC 261, to brush up on property rights in patents, my eye was caught by the following.

    “The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States.”

    Assuming this non-lawyer reads this correctly, the following scenario seems possible. Also maybe relevant in thinking about issues around “exhaustion”.

    Suppose for the sake of argument that I am Mr. Smith of Pennsylvania, and I have invented a wonderfully useful machine called a flubber. I have applied for and been granted a patent on this invention.

    I grant and convey to Ms. Jones a portion of my property, namely the exclusive right to make, use, sell, offer for sale or import flubbers in the state of Wyoming.

    I grant and convey to Mr. Robinson another portion of my property, namely the exclusive right to make, use, sell, offer for sale or import flubbers in the state of California.

    I would presume that this would have made reasonable sense a hundred or more years ago, because it would be more difficult to keep track directly of possible infringement activities in Wyoming or California, and maybe an outright sale of rights would be more convenient than a license. Do patentees do this sort of thing today?

    One implication of this would be that I would myself no longer have any right to make flubbers in Wyoming or California without license from Ms. Jones or Mr. Robinson.

    Then suppose that Joe Soap buys a flubber in Wyoming, and takes it to California. Does he have the right to use it in California without a license from Mr. Robinson?

    Are there cases reading on this situation?

    1. Distant, I was going to point you to the original exhaustion case, but you found anyway. Once the patent owner transfers ownership of a chattel to another, he has lost control of the chattel and I would think it would apply equally as well to the law generally. After all, Lord Coke was talking about the law generally not about patent law.

      1. Thanks!

        Michell v. Hawley (83 US 544 (1872) ) nothing to the contrary.

        Actually Mitchell v. Hawley is a case of an unauthorized sale. The patentee, Taylor, authorized Bayley the right to make and use and to license to others the right to use said machines (italics in the original opinion). Thus Bayley was not entitled to vend the machines he made. Thus if title in those machines passed from Bayley to the respondents, then it did so as a result of an unauthorized sale. Therefore there would be no exhaustion under the standard formulation of the first sale doctrine. The opinion seems to me to suggest that a valid title was not conveyed. The opinion for the Court seems to me to suggest that no valid title to the machines constructed by Bayley was conveyed: “No one in general can sell personal property and convey a valid title to it unless he is the owner or lawfully represents the owner.” “Notice to the purchaser in such a case is not required, as the law imposes the risk upon the purchaser, as against the real owner, whether the title of the seller is such that he can make a valid conveyance.”

        So it seems that the two cases that CAFC, Lexmark and Lexmark’s amici rely most upon both involve unauthorized sales that were known, or should have been known, to the parties at the time of the sale, to be unauthorized. They do not represent authorized sales accompanied by usage restrictions that infringed under patent law.

        Michell v. Hawley on the web here:

        link to supreme.justia.com

        1. DP,

          When you have time, go and read about the Monsanto v. Bowman case.

          Pay attention to what Monsanto included in their contract (to authorized buyers) – and importantly, what they did not include – i.e., letting an additional generation of the item loose into the public stream of commerce with NO constraints.

          Then we can talk about sales involving the nexus of the patent…

          1. Difficult to read about the Bowman v. Monsanto case when the briefs seem no longer to be available on the case page at the SCOTUS blog.

            Monsanto sold the first generation of seeds to Bowman. But Bowman could not “make” (i.e., produce by agriculture) the second generation of seeds without a license from Monsanto, because, as soon as they sprouted, the second generation were within Monsanto’s patent monopoly (using the term “patent monopoly” in the non-pejorative sense regularly used in SCOTUS opinions). So Bowman could not sell the second generation without authorization from Monsanto, he did not have authorization to sell to another farmer, but he could and did sell to a grain elevator. That authorized sale exhausted the patent right, bringing the second generation of seeds outside the “patent monopoly”.

            Bowman buys seeds from the grain elevator. Because they had previously been sold to the grain elevator through authorized sales, Monsanto’s patent rights in this second generation were exhausted. Bowman was therefore free to buy them from the grain elevator and use them for any lawful purpose that would not infringe anybody’s patent. But, to vary Breyer’s hypotheticals at oral argument, it would not be lawful for him to grow them in order to uproot them once they emerged above ground, and then use the roots to manufacture illegal hallucinogenic drugs. And he infringed Monsanto’s patent when he “made” the third generation of seeds. (He would also have infringed had he converted natural soybean seeds into patent-infringing seeds through some remarkable new process not yet discovered.) Because “making” an item, without authorization, that falls within the “patent monopoly” infringes the patent. So the third generation of seeds infringed as soon as they started developing on the plants grown from the second generation. There was no exhaustion in that third generation. There could not have been, because they hadn’t at that stage been sold to anybody, and certainly Monsanto would not have authorized their sale! And Bowman had no license from Monsanto to produce the third generation. So Bowman lost. To win, he would have had to have made good on the theory that the second generation “embodied” all subsequent generations.

            That is the theory of Bowman v. Monsanto that I absorbed by reading the transcript of the oral argument as soon as it was available, listening to the recording the following day, and absorbing the opinion when it was delivered by Justice Kagan. Confirmed on re-reading recently.

            And the one brief I did locate yesterday was Monsanto’s brief in opposition to grant of certiorari, where they identified this theory of the case as a theory on which they would win, as indeed they did.

            1. Monsanto did NOT sell the first generation seeds to Bowman.

              That would make for a rather
              B o r i n g
              fact pattern, as Bowman would then be a (direct) privy to the contract that Monsanto itself drafted.

              1. Also, please pay special attention to the use of a seed for the natural use of planting that seed (which ties directly to the nexus of the patent; which are the rights involved).

                You are going to have to do more than merely read Monsanto’s “theory of the case” – you are going to have to critically review that theory.

                Here, the Supreme Court did NOT do that critical evaluation (as many on these boards did not).

                1. To start with…

                  “I admit that I aimed the gun and pulled the trigger. But it was the laws of nature that took the bullet, and planted it in the police officer’s heart. I was powerless to intervene.”

                  “I only gave the stone the smallest of shoves. It was balanced on the edge of the cliff, and it was the force of gravity that provided it with the momentum to land on and crush to death my worst enemy, who just happened to be standing below at the bottom of the cliff an an inopportune moment.”

                2. Anon,

                  Noting where you are going in response to Ned Heller, I would stipulate that the “first generation” of seeds is irrelevant. In other words, that the disposition of the case should be unaffected by whether or not Bowman had or had not at some point purchased seeds from Monsanto. Any authorized sale of seeds to the grain elevator by any farmer would have exhausted patent rights in those seeds. The presence of some of the “first generation” of seeds sold specifically to Bowman on behalf of Monsanto is only relevant to the case in so far as, under SCOTUS exhaustion principles, Monsanto had no remaining interest in those seeds.

                3. Your stipulation as to what is irrelevant is itself irrelevant.

                  That first sale – and critically the terms (and lack thereof) are extremely critical.

            2. Distant, Monsanto authorized licensees to sell crops to grain elevators as commodity seed. Commodity seed was not guaranteed to be quality seed, it was used for feed purposes and other purposes, and for planting late-season crops.

              Bowman bought the commodity seed, planted it, used Roundup to kill off plants of unpatented variety, kept enough seed to replant next year, and sold the excess to others knowing that it was of the patented variety.

              The Supreme Court held that while Bowman may have had a right to plant commodity seed for a lot of purposes, he did not have a right to do what he did because he was effectively making new seed of the patented variety and selling a competition with Monsanto.

              1. Ned – but follow the exhaustion and what Monsanto did – and critically did NOT – cover in what was allowed to freely (and fully) enter the stream of commerce. Hint: Monsanto had NO control on ANY use of the seed being sold by the grain elevators (regardless of the attempted spin as to what that grain merely may be used for.

                Monsanto drafted a contract that allowed the (next generation) grain to be sold into the flow of commerce without any further restriction on the entity purchasing that grain (the grain elevators), and then the additional sale of the grain elevator to Bowman was a complete sale / no privity and no conditions.

              2. Ned,

                Also remember that the Round-Up pesticide itself had been patented and was off-patent, meaning that its use should have been completely immaterial to this case. That the Court focused on the fact of its use was plain legal error.

                They merely bought into the dust cloud kicked up by Big Corp Monsanto.

                Perhaps Monsanto’s “voice” (as in Dollar$) extends to more than just writing reports for the EPA…

              3. selling a competition with Monsanto.

                Was he really?

                Was he selling the seed to prospective first time buyers? The 80-plus year old farmer had that type of network set up?

                You are now just making things up, Ned.

                This is just more like Wickard in that Bowman merely was not beholding to buy from Monsanto for his own next year planting.

      2. Brief comments on other cases looked at.

        Early twentieth century cases seem to complement one another nicely.

        Dr. Miles – no patent, only secret recipe, hence no protection from patent laws. Spurious agency system in which “agents” are permitted by license to sell to one another. Price fixing illegal.

        Motion Picture Patents – overruled A. B. Dick to reinstate standard exhaustion doctrine.

        General Talking Pictures – no authorized sale, and moreover sale known to both parties to be unauthorized at time of sale, hence no exhaustion.

        General Electric – the “patent monopoly” protects an extensive but genuine licensing and agency system which ensures that the sale to end users is the first sale, therefore control of prices does not fall foul of antitrust laws given that, at least in this instances, control of prices in favor of the patentee is within the scope of what the patent laws are intended to facilitate.

        Univis – sales to licensees takes lens blanks outside the “patent monopoly”, as they “embody” the patent, and price fixing not permissible, and case remanded so that licenses can be suppressed.

      3. Just realized – I had a further comment which is awaiting moderation. It mentioned the name of the case that was overruled by Motion Picture Patents v. Universal Film, as did a previous comment on another posting that also required moderation!

  3. I expect the obtuse eight to err, yet again: they will ignore the statute and replace the statutory language with their own rule that foreign sales exhaust US patent rights.

  4. The desire to sell stuff without selling it is evergreen, and when you introduce computers: MAGIC happens. See here that John Deere Co. has been jacking-around owners of tractors, and as a result, those owners are buying black market cracked software to avoid the monopolistic practices.

    So while the state contract remedy is still available, it may become less available as this kind of abuse is legislated against. Let me tell you who the politicians of America are loath to cross: the farmers of America. I can’t see the USSC opening this can of worms for everything sold domestically.

    link to motherboard.vice.com

    1. Martin, I was also thinking that the Supreme Court might have had enough of the Federal Circuit and might just be willing to given them a piece of their minds in the most polite and subtle way, of course.

      Perhaps the best way to do this, now that I am thinking about it a bit, is to let Breyer write the opinion.

  5. Casual thoughts on an alternative to stickers.

    The following should not be taken as advocating or rooting for international non-exhaustion.

    There is an arguable case that the international scene is different for patents as opposed to copyrights. There is presumably more uniformity with respect to copyright in traditional media (e.g., books, as opposed the cheerleading uniforms), resulting from the Berne Convention etc.

    With regard to patents, an “invention” may be eligible subject-matter in one country but not in another, or else satisfy novelty requirements in one country but not another.

    Maybe the following idea is impracticable. But could the U.S., say, provide, through legislation, that if an owner of a U.S. patent wishes to reserve rights with respect to a product sold abroad, they have to register this with the U.S. International Trade Commission? Then, should disputes arise under the patent laws, the ITC would adjudicate. After all the ITC currently assesses invalidity and infringement of patents. One possibility is that the holder of the U.S. patent would state that they are selling a particular article of commerce in, say, Angria; there are no enforceable patent rights protecting the article in Angria; and therefore they reserve their U.S. patent rights in the article unless and until an authorized sale in the U.S. exhausts the patent right.

    1. There is no such thing as a “One World Order” patent and both patents and copyrights are “Sovereign-Centric.”

      You are trying too hard to preach the Trans-National desired end state.

  6. If the court sides with Lexmark, the court will have created such a loophole that the doctrine of exhaustion in patent law would essentially cease to exist. They will have overturned the apple cart of prudence by thumbing their noses at the wisdom of Lord Coke and the common law. They will be legislating from the bench a sea change that may have large unforeseen consequences.

    Do not expect the court to be so rash.

    1. …because the Court has not shown any proclivity for doing whatever the Court wants to do, regardless of any actual words from Congress or history….

      Oh wait,..

    2. It was weird how cold the bench was. I suspect that is because they are more interested in the foreign exhaustion, and not the domestic one. Why?, because its pretty clear the Fed Cir is wrong on the domestic front.

      1. J, if they thought that that was the only interesting question, they surely were not going to side with Lexmark as that would be a radical departure. Rather, I think they were rather miffed that they once again have to unanimously overturn the Federal Circuit for not “getting it” and not following clear Supreme Court precedent. Perhaps Roberts will write the opinion and give the Feds a bit of a tongue lashing.

        1. By interesting I mean the only question that is a close call. They don’t need to ask the arguers if the Fed. Cir. is wrong. They don’t feel the need to ask questions to convince their colleagues to rule against Lexmark.

          The only tough question I see on it is Justice Kennedy’s question on whether they should “expand” the doctrine of exhaustion. Unless you can present me how Impression is arguing to expand the doctrine, then I don’t see them ruling for Lexmark at all on the first question.

          With that said, if I am right (and I don’t know what they are thinking), I’m still surprised at the restraint of the justices. Makes me miss Justice Scalia…

    3. Uh… Ned, I think you got it backwards. Siding with Impression Products, not Lexmark, would be the huge change in the law.

    4. I am almost certainly flogging a dead horse here, but I have been wading through page after page of Taranto in his CAFC Lexmark opinion, endlessly harping on about General Talking Pictures.

      What on earth is the illogicality that the majority in CAFC claim to see with regard to differing treatment of licensees and patentees.

      The patentee Peter has a wonderful invention, which he wants to exploit commercially, but he wants above all to ensure that Fred does not get the right to use the invention.

      He chooses a licensee, Leslie, to make and sell an item embodying his invention. His contract with Leslie permits Leslie to sell items embodying the invention to anyone but Fred. If Leslie sells to Fred, then that is an unauthorized sale, and Fred cannot use the invention without patent infringement. But according to CAFC “logic”, it is illogical that Leslie can make an “unauthorized” sale to Fred, but the patentee Peter lacks the power to make an “unauthorized” sale himself to Fred.

      Proceeding further, suppose that Peter is paranoid about the possibility of the invention getting into the hands of Fred. If permissible under general law (contract, antitrust etc.), Peter could contract with his licensee Leslie to require that, before selling an item embodying the invention to a customer Colin, Colin is required to enter into a contract with Peter, said contract binding Colin not to sell to Fred. If Colin first enters into this contract with Peter then Leslie is authorized to sell items embodying the invention to Colin. And if Colin then sells that item to Fred, then Fred is in the clear, not being in privity of contract with Peter, but Peter can sue Colin for breach of contract, assuming that the contact is legal under general law. If Peter were to sell such items directly to Colin, then Peter could, as a precondition of sale, require Colin to enter into a contract with Peter, assuming that the contract is legal under general law.

      In what sense is Peter “losing” rights by selling himself, rather than licensing Leslie to sell in accordance with a contract that Peter makes with Leslie?

      1. Distant, trying to explain the tortuous logic of the Federal Circuit trying to defend the indefensible (their prior cases) is a task only pious monks would take on simply to do penance.

        On international exhaustion, the better rule would apply one rule to end users and another to distributors. The distributor would not actually “own” the chattel for patent purposes, making his unauthorized imports infringing. The end user, having received title from the patent owner, cannot infringe by importing, using or selling the chattel in the US.

    5. International non-exhaustion, when one thinks about it, is really weird.

      Let us say that a Chinese firm has patented an improvement to a wrist watch in U.S.A., Europe, Japan and Australia. I buy the watch in Germany from a distributor authorized by the watch manufacturer in China to sell the watch. The sale gives me the automatic right to use the watch, or sell it to somebody else, whilst I remain in Europe. But if I get on a plane to New York, I have to disable the watch as soon as I enter U.S. airspace, because, under non-exhaustion, there has been no “authorized sale” exhausting the patent monopoly in the watch.

      1. Yep. Hordes of patent lawyers will be stationed on our borders, serving travelers with infringement complaints. I think it’s already starting. You must bring this development to Justice Breyer’s attention immediately.

      2. Distant, on further reflection, I do not think the Supreme Court is going to rule differently than they did in Kirtsaeng. I believe it is already the case that trademark law cannot prevent importation of genuine goods sold to the buyer by the trademark owner or his licensee. Thus why would patent law be any exception to the general rule?

        Here is a piece from WIPO discussing the overall issue.

        link to wipo.int

        1. “I believe it is already the case that trademark law cannot prevent importation of genuine goods sold to the buyer by the trademark owner or his licensee.”

          I believe you are incorrect. There have been several cases about gray-market imports being prohibited over things like warranty differences (one year in the US, two in the EU, therefore the products are “different”), quality standards being different (whatever that big British chocolate company is — the product they sell under the identical trademark in the U.S. is different from their British version), and even packaging language differences (some French perfume powder case).

        2. I haven’t looked into trademark law. Maybe there is a statutory provision?

          I think (though I haven’t recently checked) that the 1952 act, in addition the old trio of exclusive rights to “make”, “use” and “vend”, added the exclusive rights to “offer for sale” and to “import”. Copyright has a statutory exhaustion provision; in patent law exhaustion is justified (if I and others are correct) on statutory interpretation of the exclusive right to “vend” in the light of established principles of real property law. Given the number of goods that are encumbered by patent rights, maybe the law, properly constructed, implies that nobody can bring the majority of items of commerce into the U.S. without the permission of the patent holder. It is possible that SCOTUS could decide to this effect, and say that, if this is problematical, then it is the responsibility of Congress to shoulder its responsibility to complete the codification of established law and regulate by statute in this area.

          1. Unravel that if “patents are not property” (think sticks in the bundle of property rights) is controlling.

            Basic foundations to such things as “exhaustion” which are built on the notion of sticks in the bundle of property rights will need to change if the foundation of “patents are not property rights” becomes the foundation of US patent law.

            This will be no small task, and it is worth noting that these “unforeseen” consequences are very much foreseeable.

          2. Coke’s rule that the sale of a chattel exhausts all rights the owner had in the chattel is not one of real property law. It his recognition of the law common practice of the people of England. Common Law.

            Even today, one cannot sell a chattel and retain any right to control use or resale. The notion that one can, expressed in the opinions of the Federal Circuit, is a primary source of their error.

            1. Actually, it very much IS one of real property law.

              Why you are attempting to draw a distinction that does not exist is almost as bewildering as your refusal to understand the concept of “sticks in a bundle” as that concept applies to property law.

          3. Anon’s 1.5.2.2.1 prompted thoughts on the bundle of rights, and exhaustion.

            I plan to follow up in a later comment, but I would simplify by putting international exhaustion out of the picture, and focusing on the traditional trio of “make, use and vend”.

            Before I leave international exhaustion, over to copyright and some reasons why I like Kirtsaeng.

            Academic publishers are well-practiced at developing lock-in and eviscerating second-hand markets etc. They also segment the market internationally.

            No doubt those who argue for big IP owners would say that segmenting the market is good, and increases social welfare. People in the US are generally more able, or more used to shelling out more for textbooks, people in Europe less so, and people in India even less affluent, so, to ensure the maximum number of people get the benefit, you charge most in the US, less in Europe, and probably even less in India and Thailand. But Europe and India have university students from affluent backgrounds who are well able to pay what Americans are charged. On the other hand there would be plenty in the US who struggle financially to afford the fees, textbook prices etc. to put themselves through College. Thus whilst academic publishers will say that their aim is to make what they produce accessible to the greatest number, and that makes it “fairer” to charge more in countries where many people are accustomed to pay me, and charge less in countries where people cannot or will not pay so much, nevertheless varying the price from continent to continent does not ensure that, at the level of students as individuals, those who can and would pay more end up paying more, and those who cannot or will not pay more end up paying less. And of course the same argument applied with respect to patent rights.

            I should be following in more directly to Anon’s 1.5.2.2.1 below.

          4. Thoughts generated by Anon’s 1.5.2.2.1.

            Patents grant exclusive rights to “make”, “use” and “vend” the invention. Are these independent rights in the “bundle of exclusive rights”? Are they equally integral to the invention? Or maybe does one of these rights have a greater nexus with the “invention” than the others?

            Consider Adams v. Burke. The coffin maker in Boston has been assigned exclusive rights to make, use and vend coffin lids within a 12 mile radius of Boston. Someone else has those exclusive rights outside the 12 mile radius. He sells a coffin to the undertaker, Burke, and SCOTUS has vindicated Burke’s right to use and sell the coffin anywhere in the US. Suppose the coffin maker wishes to make arrangements to have himself buried 24 miles from Boston in one of his own coffins. Does he have the right to do so? Would he gain the right, if he sold a coffin with a patented lid to the undertaker Burke, and then bought it back again?

            Another scenario. A farmer, Peter, buys a tractor from tractor-maker Ron Beere. Suppose he had to pay separately for rights to use the tractor? Suppose that, after two years, Peter decided to sell the tractor to his cousin Paul, who has a farm fifty miles from Peter. Is it fair to expect Paul to pay Ron Beere to get the rights to use the tractor?

            My answer is “No”. Peter paid for usage rights indefinitely, but was only able to enjoy them for two years. Paul only had the opportunity to use the tractor after Peter had used it for two years. So, in fairness, the usage right ought to transfer with the tractor.

            To be continued.

          5. Continued from 1.5.2.2.1.

            According to 101, an invention has to be “new and useful”. Thus if someone makes a machine or manufacture embodying an invention, that machine or manufacture is ready for use. Similarly if a vendor sells the invention, we suppose that the invention is ready for use. So a machine embodying an invention is useful for practicing the invention. For simplicity, restrict to machines. The inventor’s justification for demanding a royalty is that he has made available to the public something useful that the public did not enjoy before.

            So if an authorized vendor sells a machine, then any royalty that goes to the patentee (or the assignee of the patent) is not for the materials that make up the machine. Nor is it a recompense for the work done in assembling the machine. The licensee manufacture is solely responsible for sourcing the materials and assembling them into the machine. The royalty to the patentee, considered as a recompense for making the invention available to the public, can only be considered fair if it is payment for the patented use of the machine. Thus, in the context of a sale by a licensee, the royalty is paid by the licensee to the patentee in return for authorization to sell a usable machine. And if the patentee demands a licensee fee from the vendee for authorization to use the machine, or devises a tie-in enforced through a patent right, then the patentee is being paid at least for the use of the machine.

            So, according to this analysis, the right to use the invention is the one that is most directly bound up with the essence of the invention.

            (Is Anon next going to invite me to think about State Street?)

            1. (Is Anon next going to invite me to think about State Street?)

              Nope – I actually have never depended on that case for my legal positions.

              I can just so much more easily just go to the words of Congress.

              😉

            2. But I might ask you to consider those words of Congress – specifically in 35 U.S.C. 100 (something our mutual friend Ned for some very well known reason never seems able to do).

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