Impression v. Lexmark: Patent Rights Exhausted by Sale, Domestic or Abroad

By Jason Rantanen

Impression Products, Inc. v. Lexmark International, Inc. (2017) – Download opinion

In a  straightforward and almost unanimous opinion authored by Chief Justice Roberts, the Supreme Court reversed the Federal Circuit on both domestic (8-0) and international exhaustion (7-1).

The Supreme Court’s opinion is summed up by a single sentence early on. “We conclude that a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.”  Slip Op. at 1.  The underlying  rationale is offered a bit later: “Patent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace.”  Slip Op. at 11.  With these two pronouncements, the Supreme Court has in one swoop both simplified patent law and added new complexities, challenges and opportunities to the innovation ecosystem.

Impression v. Lexmark involved, at its core, the question of whether restrictions placed on a patented product could be enforced through an infringement suit–often a more viable legal mechanism for the patent owner than an an action for breach of contract.

Under Federal Circuit precedent, the answer for over two decades was yes.  The theory relied upon by the Federal Circuit in decisions such as Malkinkrodt, and reaffirmed by the en banc court in Lexmark v. Impression, was that the patent owner could decide to give away only some of its patent rights when it sold or authorized the sale of a patented product.  As a result, the patent owner could sue a party who violated those restrictions for patent infringement because, the theory went, the purchaser did not possess the relevant set of patent permissions–the “sticks” in the “bundle of rights” that the patent owner possessed.  Thus, for example, a patent owner could place a single-use only restriction on an ink cartridge or medical device and sue for infringement if the device were reused.  In short, the exhaustion rule was effectively default rule of patent law that the parties could contract around.

The Supreme Court rejected this approach, basing its conclusion on common law principles of ownership as reflected in its 1853 decision in Bloomer v. McQuewan.  “For over 160 years, the doctrine of patent exhaustion has imposed a limit on [patentees’ right to exclude others from making, using, offering for sale, or selling their invention].”  Slip Op. at 5-6. “When a patentee chooses to sell an item, that product ‘is no longer within the limits of the monopoly’ and instead becomes the ‘private, individual property’ of the purchaser, with the rights and benefits that come along with ownership.”  Id., quoting Bloomer. While a patent owner may impose contractual restrictions, those restrictions are a matter of contract law, not patent law.  “A patentee is free to set the price and negotiate contracts with purchasers, but may not, ‘by virtue of his patent, control the use or disposition’ of the product after ownership passes to the purchaser. United States v. Univis Lens Co., 316 U. S. 241, 250 (1942) (emphasis added).”  Once  a patent owner sells a patented product, it has obtained the patent reward and may no longer rely on patent law.  Referencing its opinion in Kirsaeng v. John Wiley & Sons, Inc., 568 U.S. 519, 538 (2013), the Court observed that exhaustion has “an impeccable historic pedigree,” a backdrop against which Congress has repeatedly revised and fine-tuned the patent law.

The Federal Circuit’s error was that it started from the wrong place: interpreting the  infringement statute.  But “the exhaustion doctrine is not a presumption about the authority that comes along with a sale; it is instead a limit on ‘the scope of the patentee’s rights.'”  Slip Op. at 10, quoting United States v. General Elec. Co., 272 U. S. 476, 489 (1926) (emphasis added).   The sale transfers the foundational rights to use, sell or import the product sold; it simultaneously exhausts the patent rights:

The right to use, sell, or import an item exists independently of the Patent Act. What a patent adds—and grants exclusively to the patentee—is a limited right to prevent others from engaging in those practices. See Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U. S. 24, 35 (1923). Exhaustion extinguishes that exclusionary power. See Bloomer, 14 How., at 549 (the purchaser “exercises no rights created by the act of Congress, nor does he derive title to [the item]by virtue of the . . . exclusive privilege granted to the patentee”). As a result, the sale transfers the right to use, sell, or import because those are the rights that come along with ownership, and the buyer is free and clear of an infringement lawsuit because there is no exclusionary right left to enforce.”

Exhaustion applies regardless of whether the patent owner sells the product or a licensee–even a licensee subject to restrictions by the patent owner.  “A patentee’s authority to limit licensees does not, as the Federal Circuit thought, mean that patentees can use licenses to impose post-sale restrictions on purchasers that are enforceable through the patent laws. So long as a licensee complies with the license when selling an item, the patentee has, in effect, authorized the sale.” Slip Op. at 11-12.

“In sum, patent exhaustion is uniform and automatic. Once a patentee decides to sell—whether on its own or through a licensee—that sale exhausts its patent rights,regardless of any post-sale restrictions the patentee purports to impose, either directly or through a license.”

The Court also held that foreign sales exhausted U.S. patent rights–in other words, a system of global exhaustion.  This conclusion, too, was bolstered by a common law policy against restraints on the alienation of chattels.

Justice Ginsburg concurred with the Court’s holding on domestic exhaustion but dissented with respect to international exhaustion.  She would hold that “A foreign sale…does not exhaust a U.S. inventor’s U.S. patent rights.”

What about Contracts? The Court’s Impression decision means that post-sale restraints on products will need to be enforced via contract rather than patent law.  That matters because contract law is subject to a number of constraints, including both privity and various public policy-based limitations on enforcement.  Patent law is not so limited.  Outside of the core questions of infringement and validity, enforcement of patents is subject to relatively few such constraints–misuse being one rare (and rarely successful) exception.  In addition, enforcement under contract law means that many cases involving post-sale restrictions will ultimately be decided by state supreme courts or other federal courts of appeal rather than by the Federal Circuit.

What’s left? Lexmark strikes a powerful blow against post-sale restrictions on products by negating the threat of infringement to enforce those restrictions.  But it hardly eliminates such restrictions–to the contrary, the Court is clear that such restrictions may still be enforced under contract law.  In addition, the Court’s opinion revolves around sales of products.  Left unanswered is the role that patents will continue to play in non-complete transfers–licenses of a good or service rather than a sale.

 

Previous Patently-O Commentary:

 

 

277 thoughts on “Impression v. Lexmark: Patent Rights Exhausted by Sale, Domestic or Abroad

  1. I noticed the truth leaking out down below. Worth repeating:

    Confused: [P]eople can only be categorised as “infringers” based upon their acts, and not upon any other form of status.

    Let’s not forget this.

    1. In context, that statement by Confused was nonsensical.

      He seemed to want to draw a distinction to my comment at 5 June, 9:11 am, but comes up with this weird “categories of people” notion.

      His view stems from some notion that a sale just does not count as a form of consent – but tellingly, he shares no such patent law (from anywhere) that includes this “right” to prevent a legitimate secondary market.

      Somehow he conjures up a patent right in which the consistent understanding of exhaustion is (conveniently) set aside.

      He wants to others move on and ignore a point that he has no answer to.

      A first dip is just not good enough for him – he wants his second dip, and he wants that second dip to (somehow) be a matter of a patent right – without actually explaining what patent law it is that creates this second dip right.

      Umbrage to anyone who dares question (or persists in asking a penetrating question)!

      1. Anon. Enough already with your circular logic! Let me explain how it appears from my perspective.

        Step 1: You assume that there is an immutable principle that means that all forms of so-called “double-dipping” are wrong.

        Step 2: You apply that principle to imports from other markets.

        Step 3: You dismiss all arguments against Step 2 on the grounds that those arguments are inconsistent with the principle of Step 1.

        I guess this is why you are so resistant to arguments that point out the very good (policy-based) reasons why exhaustion, which we can all agree is reasonable within a single market, is highly undesirable when it comes to imports from other markets.

        Maybe it would aid your understanding on this point if I flipped the situation on its head.

        As far as I understand, the “principle” outlined in SCOTUS’ decision is not tied to any specific characteristic of US patent law. So, if (according to you) that principle is an inherent part of US patent law, should it not also be a part of non-US patent laws? If so, how are you going to convince courts outside of the US that they have been getting things wrong on international exhaustion for so many years? What black-letter law or principles of international law would you cite? … and if there is nothing that you can point to here, then what does this tell your assumption that there is an all-pervasive, immutable rule that prevents “double-dipping”?

        1. Confused – you keep on saying “circular” when there is no “circular” there, and only consistency.

          Your immediate comment regarding “Step 1” is not correct.

          No one said anything about “immutable.” That being said, double-dipping IS wrong. That’s the nature of the term. You not liking that nature just does not change that nature.

          I have asked for some (any) cogent reasoning why double-dipping would not be wrong, and to date, all that I have seen is reasons why people may want double-dipping. But reasons for wanting such do not – and cannot – make the act “not wrong.”

          I even ask (nicely at that) for those wanting this “other view” to at least show the connection with patent law that provides a patent right directed to controlling secondary markets.

          You – not unsurprisingly – remain silent on that point.

          I ask for dialogue that is on point.
          I welcome dialogue that is on point.
          Thus, your claims of me “dismiss all arguments” is patentably false.

          It is not that I am resistant to “arguments that point out the very good (policy-based) reasons why exhaustion, which we can all agree is reasonable within a single market, is highly undesirable when it comes to imports from other markets.” – on the contrary, it is because you are so enamored with your wants that you refuse to see that your “reasons” are self-serving and simply lack a tie into any of patent law, property law, or the basic meaning of exhaustion. YOU want to remove the natural consequence of secondary markets, but you have provide NO cogent legal tie as to why such actions should be allowed to subvert each of patent law, property law and the basic (consistent) meaning of exhaustion.

          You act as if your “want” is enough.

          It is not.

          If you want to continue to try to protect something not protected by patent law with an attempt to insert inconsistencies into a basic term’s meaning, YOU have to do a lot better.

          As far as your latest attempt to switch the onus to me (when it is you that is failing to make the case to insert inconsistencies), that attempt is flatly rejected as the attempt at deflection that it is.

          As I have already pointed out – and directly asked of you – where does ANY patent law provide the basis for the double-dipping that you so earnestly want?

          You only want to imply with your “flipped situation” that you do not have to prove your case. This is nothing more than what you have already attempted to do (to NOT prove your case).

          I do not accept such a flipped situation.

          The following points still stand:
          meanings of terms under consideration are naturally consistent
          patent law (anywhere) does not provide for a legal basis for double dipping
          property law (anywhere) does not provide for a legal basis for double dipping
          The “want” to have double dipping and insert an unnatural control of the natural consequence of secondary markets is the “want” that needs to be made a case for.
          Making that case needs to address each of the earlier points.

          NONE of this is “circular.”

          Here is a hint: stop spending so much time falsely labeling the situation and attempting to spin the situation so that you do not have to make your case, and spend more time actually making your case.

          1. LOL. The principle of exhaustion represents an exception to the rights that would otherwise be conferred by a patent. Is it therefore not putting the cart before the horse for you to ask me to cogently explain why an EXCEPTION (which, by the way, has no basis in black-letter law) does not apply to a particular situation? Is the onus not on you to explain why it does apply?

            In any event, my answer is simple: a plain reading of the black-letter law leads to the conclusion that importation without the patentee’s consent is an infringement.

            Now, I concede that there can be exceptions from infringement for certain acts. For example, I don’t think that anyone could argue that there should not be exceptions for private and non-commercial acts (such bringing home, for personal use, a patented item that you purchased abroad). Such exceptions would be fully consistent with TRIPS Article 30, as they would not prejudice the legitimate interests of the patentee. However, large volume, commercial parallel imports are a different question entirely and it is those with which I have a problem (for the reasons previously elucidated).

            (To clarify, and as I have previously stated, I have no problem with domestic exhaustion – as there is only a single market involved.)

            Do you accept the “flipped” situation now?

            With regard to reasons why it would not be wrong to sell at different prices in different markets (which you rather subjectively label as “double-dipping”), you seem to have forgotten about all of the cogent arguments that myself and others on this thread have advanced, relating to the undesirable (and frankly absurd) effects of international exhaustion. I won’t bother repeating myself, as you don’t seem to be listening.

            1. The principle of exhaustion represents an exception to the rights that would otherwise be conferred by a patent. Is it therefore not putting the cart before the horse for you to ask me to cogently explain why an EXCEPTION (which, by the way, has no basis in black-letter law) does not apply to a particular situation? Is the onus not on you to explain why it does apply?

              No.

              It is NOT an exception otherwise applied.

              It is a natural item beyond patent law and belonging to property law.

              as to “ a plain reading of the black-letter law leads to the conclusion that importation without the patentee’s consent is an infringement.

              Great – but I have already pointed out your error on this. The “consent” is only needed on those things that the patentee has not elsewise obtained the benefit of the bargain in the first dip.

              No one is arguing about the propriety of the first dip.

              You also get this part wrong:

              With regard to reasons why it would not be wrong to sell at different prices in different markets (which you rather subjectively label as “double-dipping”),

              NO ONE is arguing that a patentee can do whatever they want as to asking different prices in different markets – and that is NOT what is meant by the second dip.

              Quite in fact, the Supreme Court case most definitely does NOT state that a patentee cannot set different places in different markets.

              They can still do so.

              What the patentee CANNOT do is grab the (actual) second dip and try to control the natural secondary market and try to apply patent rights to an item that no longer (note: this is NOT an exception, but a natural result of property law) they have any right to.

              You misfire – and misfire badly.

              No wonder that you are confused.

              😉

              1. It is a natural item beyond patent law and belonging to property law.

                Wait a second, this cannot be right.

                First, property law in this country is a matter of state, not federal law. If exhaustion really were a matter of property law then the SCotUS would have no power to decide the issue, and we would not have one rule for exhaustion in this country, but 50 different rules.

                Second, our property law in the U.S. is mostly a matter of common law, and therefore is essentially the same as the U.K., Canada, Ireland, Australia, New Zealand, etc.. However, the Lexmark rule is not the law in any of those other countries. How, then, do you figure that this is simply a natural outgrowth of property law? To the contrary, it seems like a deformation of the common law on this point.

                1. Greg, congress is deemed to legislate consistently with the common law. But, in the case of patents, this is the laws of England at the time the US was created.

                  Read Pennock once again.

                2. But Ned, I was responding to Anon’s assertion that exhaustion is not a matter of patent law. I do not disagree with your point, but rather with Anon’s.

                3. Greg,

                  The “divide and conquer” approach won’t work because you cannot try to talk ONLY about property law – or ONLY about patent law – or ONLY about what the consistent meaning of the words in the concept of exhaustion mean.

                  And you gloss over “mostly” to arrive at a “same as” when OUR law is very much its own with the emphasis on NO restraint on the alienation of chattels (with the abhorrence of ‘hidden strings’) that is OUR common law.

                  Deformation?

                  That would be no. An emphatic no.

                4. And you gloss over “mostly” to arrive at a “same as” when OUR law is very much its own with the emphasis on NO restraint on the alienation of chattels (with the abhorrence of ‘hidden strings’) that is OUR common law.

                  When I said “mostly,” I was thinking of statutes in all 49 common law states that provide that a deed “to Greg” instead of “to Greg & his heirs” conveys the whole fee (unlike at common law, where “to Greg” conveys only a life estate). There is no distinction between U.S. common law and (e.g.) U.K. common law regarding the alienation of chattels, so your assertion that the difference in U.K. and U.S. law can be explained as a function of property law is unconvincing. Besides, as I noted above, your explanation would end up with the result that the Supreme Court’s ruling on this point is without binding effect. The New York Court of Appeals is the last word on New York property law. The California Supreme Court is the last word on California property law. There is no such thing as “U.S. property law,” so if exhaustion really is a matter of property law—not patent law—then the U.S. Supreme Court’s declarations on exhaustion are subject to reversal (without further review) by any state Supreme Court that cares to tackle the matter.

                  We both know that this is not the case. The reason that this is not the case, however, is because exhaustion is a matter of patent law, not property law.

                5. Further,

                  As much as you want the “bumper sticker” effect of “There is no such thing as ‘U.S. property law,’” certainly aspects of property law DO rise to the level of federal law (for example, think takings law).

        2. Confused international exhaustion is not as bad as you think when you consider that the seller is in control of when title passes. Thus seller can arrange that title passes only when it reaches the end-user; and this is going to limit the problem of mass reimportation of new products in competition with the sales of the patent owner.

          I am thinking that Supreme Court had in mind the end-user who buys a product in one country and then moves with that product to a different country. You should not be put in position to be an infringer by the simple of act of moving from one location to another.

          1. For a domestic case, SCOTUS (Taft Court), in 1926 deemed perfectly legal what seem to be fairly elaborate arrangements to ensure that title passes only when sold to the end user. See United States v. General Electric Co. 272 U.S. 476 (1926):

            link to supreme.justia.com

          2. Ned, as you will see from my comment earlier today, I believe that moving (personally) an item from one country to another would be exempted from patent infringement – on the grounds that it counts as private and non-commercial use.

            Large-scale importation and re-sale are different matters entirely, though. They are clearly commercial and so should not be exempted from patent infringement (and indeed are not in any other territory that I can think of).

            1. Confused, no it is not different as the seller can control when title passes. Actually, the Supreme Court has already had a case in point. See, United States v. General Electric Co. 272 U.S. 476 (1926) linked by Distant.

              Thus, the seller can control large sale importations of new goods.

              Used goods? No.

                1. Anon, Confused is, shall we say, a little confused where the LEGALLY BINDING “rule” comes from that prevents patentees from asserting their rights in respect of what you call “secondary markets”. If there is indeed such a “rule”, you will also need to persuade me that it is not displaced by the black-letter provisions of patent law.

                2. You want to assert “their rights” when property law already dictates that there are no “their rights” where you think “their rights” are.

                  As to “what I call the secondary market” – I am NOT the one that coined that term, nor its common understanding that you seem oblivious to.

                  That’s just not a ‘me’ problem – that is most definitely a YOU problem.

                  I don’t have to persuade you on Jack – you can be (and are) free to be wrong as you ever have been – and I have already addressed – twice now – your error as the black-letter provisions of patent law that do NOT hold as you think that they do.

              1. A European planet (see, for example, Article 31(a) of the Community Patent Convention – which, whilst it never came into force, forms the foundation for the law of infringement for many European countries). I quite forget that such sensible provisions have not been enacted in US patent law. Perhaps that is part of the problem here?

                Curiously, you seem to assume that principles from common law (relating to the law of property) trump black-letter law of the US patent statute. I assume that there is a reason for this – which reason is the cause for our divergent views.

                1. Lol – a European one – that explains some of your confusion.

                  Also, as I indicated, you have been wrong in your “black letter” view on US patent law.

                  From the start.

                  The problem is that you are spouting off on something that you do not know and then disagreeing with someone who does know based on your Euro-view only.

                2. I also see (now) where your prior reference to a COM patent comes in….

                  Link: link to eur-lex.europa.eu

                  I do hope that you realize that the larger discussion here (and the item that you were b1tch1ng about) are NOT COM patents….

              2. Anon, for someone who claims to welcome dialogue you sure do have a penchant for diatribe, invective and monologue.

                Was it remiss of me to make a (tangential) comment about an exemption from infringement before reminding myself of what, on reflection, is a rather surprising omission from US patent law? Yes, it was.

                Does that mean that I don’t know what I’m talking about when it comes to the pros and cons of international exhaustion? Well, that remains to be seen… but I have certainly heard nothing from you that persuades me that you have any better grasp of the issues at stake.

                You point out that Lexmark does not involve COM patents. But why is that relevant? What is to prevent the principle of international exhaustion as outlined in SCOTUS’ decision from applying to any category of patented product / article?

                A patent is intended to provide, as a “reward” for the disclosure of an invention, a monopoly of limited duration in a particular territory for the commercial exploitation of that invention. The “reward” is intended to allow the patentee to (more than) recoup his costs for the research invested in developing the invention and/or to act as a stimulus to invent.

                In the light of the above, a US patent should provide the patentee with a limited term monopoly on the commercial exploitation of his invention in the US. It therefore frustrates the fundamental purpose of that patent to not allow the patentee to stop 3rd parties from doing the very thing (commercially exploiting the invention) that should be the exclusive preserve of the patentee.

                The “gloss” on this is, of course, the concept of exhaustion of rights. This concept is applied when it is desired to allow free movement of goods that have been sold by the patentee.

                Now, SCOTUS refers to (pretty ancient) case law and common law to support its conclusion that exhaustion applies to both domestic and foreign sales. In doing so, they effectively decide that the principles that they derive from those sources override the rights afforded to the patentee by black-letter US patent law.

                But the question I would pose is why should common law principles (especially principles that have been established in cases that do not relate to international trade and/or patent law) override a fundamental purpose of US patent law when, as is the case with international exhaustion, doing so unreasonably conflicts with a normal exploitation of the patent and unreasonably prejudices the legitimate interests of the patent owner?

                Should SCOTUS therefore not have considered the consequences of allowing international exhaustion to either:
                (a) effectively destroy a patentee’s monopoly in the US; or
                (b) restrain the actions of the patentee outside of the US (eg by obliging the patentee not to sell his product in territories where market characteristics – such as the absence of patent protection in those territories – mean that he can only command a much lower price than is possible in the US)?

                1. Your insertion of COM patents is telling – as that type of patent is explicitly different in a critical dimension.

                  COM patents is the explicit exception that proves the rule.

                  You want to look at me for “diatribe, invective and monologue” as you yourself launch into that very thing that quit frankly was skipped because it was clear that THAT was all that you were doing.

                2. And yes, I did notice that once again you claim “black letter law” when NO SUCH US LAW has been shown by you.

                  Maybe start with that…

                  (and by start, I mean do more than repeat a fallacy)

                3. You are suffering from the same type of “secondary markets must not exist” fallacy that Greg is suffering from.

              3. Wow! Lots more heat from you but no light whatsoever.

                What sense am I to make of your comment that “COM patents is the explicit exception that proves the rule”? A little more explanation, please.

                You say that such patents are “explicitly different in a critical dimension”, but what on earth does that mean? And are you conceding that international exhaustion applied to the products of such patents would indeed be unduly harsh on the patentees? If so, can you understand why such patentees might rightfully feel hard done to by SCOTUS’ decision? If not, then what are you saying?

                I notice that you tend to avoid answering the questions that I pose, seemingly preferring to “respond” by merely repeating your assertions and nit-picking where you believe that you can criticise. However, I would have a lot more respect for you if you engaged with the points and questions that I raise, rather than merely taking an “oppositional” stance. We’re not in court, after all.

                To show you what I mean, I will directly answer a question that you have raised. Where is the black-letter law of infringement to which I have referred? Well, 35 U.S.C. 271 is a good place to start.

                Are you able to respond in kind? If so, then how about responding (constructively) to the questions in my comment from 06:01 today?

                1. Please pardon potential (re)post…

                  You clench tight your eyes and beg for light….

                  That’s a YOU problem.

                  The light has already been provided for you. You just don’t want to accept that light because you want something else – you want to have as inherent in a patent (somehow) the ability to control natural secondary markets.

                  The Euro COM section (which I provided, even though you were the one using that section), clearly spells out a particular feature of COM patents that just does not apply to patents in general. The section you yourself reference (Article 31(a) states : “acts done privately and for non-commercial purposes” is NOT a standard part of patent law.

                  For at least US patent law, infringement is infringement even if done by a private person and for non-commercial purposes – outside of certain well-delineated exceptions which do NOT come into play in our larger discussion [as those exception do not involve secondary markets].

                  And please, you have to do more than merely cite a law section to back up your view (given as you have been absolutely wr0ng and tried to insert a Euro COM exception as the general rule).

                  As to that particular section of US law that you “feel” is black letter in support of your attempted double dip and control of secondary markets – you omit understanding of the part “whoever without authority” and the understanding of the first dip that no one is arguing about.

                  Selling of the chattel protected by the patent IS the authority. [THAT is your first dip].

                  As for “Are you able to respond in kind? If so, then how about responding (constructively) to the questions in my comment from 06:01 today?

                  Asked and answered – see my replies at 6:50 through 6:59, immediately above.

                  You may want to start opening your eyes.

                2. As to that… black letter in support of your… control of secondary markets – you omit understanding of the part “whoever without authority”…

                  And with good reason he omits that. The SCotUS just told us (slip op. at 9–10) last week that “without authority” is a red herring, and the CAFC’s previous attempt to ground exhaustion in that particular statutory language is the very source of the CAFC’s previous (so-called) error on this point.

              4. Ah, by “COM patent”, you mean “Community patent” (ie something which, if you had been paying close attention to my comments, you will realise does not exist) and not “Compound patent”… which is what I had previously taken you to mean (due to my prior references to patented drugs).

                No offence intended but, for future reference, it might help if you focussed a little more on the clarity of your communications.

                I also think that you need to have a word with yourself about what does and does not constitute “a standard part of patent law”. If you are referring to patent laws across the world (which is the only interpretation that would make sense of your comment), then you might want to take a gander at a representative selection non-US laws. To quote a book by Hiroko Yamane on interpreting TRIPS:
                “Limitations on or exceptions to patent rights, such as … acts done privately and for non-commercial purposes … exist in most countries’ laws or have been recognised by the courts”.

                For example, from a quick check, in addition to European countries, China, Japan and Australia all have either limitations excluding, or explicit exemptions for, private and non-commercial use of an invention.

                Seems that the exception and the rule are perhaps the reverse of what you claim, no?

                At least we have made some progress, though. It is now abundantly clear to me how you interpret 35 U.S.C. 271. That is, you interpret the foreign sale by the patentee to automatically provide the requisite “authorisation” for importation and re-sale.

                Whilst SCOTUS’ decision may be consistent with that view, you will permit me to have my own (principled) reasons for believing their decision on this point to be wrong-headed. It’s not that I don’t understand how they reached that conclusion, it is just that I believe they did not consider the broader context – and hence the reasons why they should have reached a different conclusion for ex-US sales.

                Alas, like SCOTUS, it appears to me that you are either unwilling or incapable of considering the broader context. Thus, there is nothing left for me to do but reflect upon the peculiarities of US law – where “principles” from common law can override the statue even in situations where this produces a result that is at odds with the fundamental purpose of the statute. An odd state of affairs indeed!

                1. YOU were the one that was not clear and that attempted to inserted a different type of patent into the conversation and you want ME to “[be] focussed a little more on the clarity of your communications.

                  That’s some chutzpah there.

                  While I am absorbing the notion that other countries may have in fact chosen differently, such choices do NOT impact “at odds with the fundamental purpose of the statute.” when it is the US statute in the spotlight.

                  The bottom line remains the same: you are fighting for the ability to double-dip and merely want to control secondary markets for things that you have already enjoyed a first dip (of deciding to sell) AND impose restraints in order to control the very thing that you have ‘let go.’

                  Don’t get mad at me for pointing out that such is not our way.

                  Don’t get mad and accuse others of “not getting the bigger picture” when what you mean is that YOUR “bigger picture” – YOUR want of control of secondary markets – is NOT a US thang.

                  And most definitely do not say that the statute is odds with the fundamental purpose of the statute when it is not.

                  NO ONE is trying to take away that first dip and THAT is the fundamental purpose of the statute.

                  NOT the second dip.

                2. While… other countries may have in fact chosen differently, such choices do NOT impact “at odds with the fundamental purpose of the statute.” when it is the US statute in the spotlight.

                  But the reason why those other jurisdictions have chosen a different rule is because the rule that the SCotUS just gave us is at odds with the fundamental purpose of the statute. The point of patent laws is to incentivize. If you lessen the profits that can be earned with a U.S. patent, then you lessen the incentives that the patent laws provide, thus contradicting the original purpose of the laws.

                  There is no getting around the fact that the reason that inventors want patents is because patents allow the inventor to charge more for the invention than the market would bear without patents. This is inherently an anti-consumer measure, but we consumers willingly tolerate it because we know that it is the price that we pay for increased choice and variety.

                  It is true that we can have lower prices by reducing the scope of rights that a patent provides (as the SCotUS has just done), but fundamentally if you pay less, you are going to get less. We are now providing fewer incentives with a U.S. patent, and therefore we should expect less innovation and consumer choice.

                  That is a perfectly fair decision for a community to take, but the correct organ to take that decision is Congress, not the Court. If the Court had the humility merely to apply the law instead of inventing it out of whole cloth, they would have applied the same statutory stare decisis reasoning that they applied in Kimble and said “Jazz Photo has been the law for over a decade, and Congress had the chance to change it in the AIA but did not, so we will not disturb it.”

                3. is at odds with the fundamental purpose of the statute.

                  No it is not – no matter how many times you want to try to obscure the fact that NO ONE is trying to take away the First Dip (which is the fundamental purpose of the statute).

                  The fundamental purpose of the statute is simply NOT a protection of that second dip by inserting an inconsistent view of exhaustion in the hopes of controlling a natural secondary market.

                4. And if you are going to use Kimble as some type of example to follow, you are even deeper in the weeds than I thought.

                5. [T]he First Dip… is the fundamental purpose of the statute…

                  The (so-called) “first dip” is not the end of the statute, but rather a means toward the end. The end of the statute is discovery and disclosure. By allowing the patentee to set prices so as to maximize profits, one incentivizes the patentee to pursue the end (discovery and disclosure) that we as a society desire. If you really think that the first sale is the end in itself, you badly misunderstand what patents are about and why Congress enacted a statute in the first place.

                  If the patentee is empowered to set prices market-by-market at a profit-maximizing price, then the patentee will make X profits. If the patentee is only empowered to set one price across all markets, then the patentee will make Y profits, where Y will always be less than X in practice.

                  There exists, therefore, a category of R&D (call it “K”) that is so expensive that it can only be justified under a legal regime where the patentee is legally empowered to earn X profits. By switching us to a legal regime in which the patentee is only empowered to earn Y profits, the SCotUS has effectively ensured K-projects will not be pursued.

                  It is true that the patent laws as currently (i.e. post-Lexmark) fashioned will still serve as an incentive for that category of R&D (call it “M”) that can be profitably undertaken in return for Y profits. In that sense, Lexmark is—as you contend—not totally at odds with the purpose of the statute. If all you want from a patent statute is M-level innovation, the statute will serve that purpose. The statute used, however, to incentivize both M- & K-level innovation. Now it only incentivizes M-level and discourages K-level. That is a sub-optimal way to run a patent system, and that move from optimal to sub-optimal was given to us not by Congress (the branch, as you are typically eager to remind us) empowered to make these decisions, but rather by the Court (who really has no business making such a switch on its own say so).

                6. Greg,

                  You are getting lost in the weeds and are now making things up completely.

                  NO ONE is arguing against the First Dip.

                  And yet you respond as if I am arguing against the First Dip.

                  The “fundamental” is the First Dip, and as should be clear to you, any attempt on your part to insinuate that as some type of issue is pure obfuscation.

                  Slow down,
                  take a deep breadth,
                  and read again what I have actually written.

                  You are – yet again – merely advancing your want of control of secondary markets (the Second Dip) as some inevitable conclusion of allowing (promoting?) the First Dip.

                  That is simple fallacy.

                  Just as it was fallacy of you to think that “ability” must somehow be more than ability and must be a guarantee of geographical price distinction (regardless of any natural market effects – notably the emergence of a secondary market).

                  You confuse yourself with a mere “want” of not just profit, but maximized profit.

                  Quite frankly, there is NO guarantee of profit anywhere in patent law – at any level (“M,” “K,” “Y,” or “X”).

                  You seek with an emotive word “optimal” that which is NOT provided. And certainly, such is just not “fundamental.”

                  It is both a logical and a legal error in your position that control of secondary markets somehow must accompany the First Dip.

                7. Please Pardon the Potential (re)Post….

                  Greg,

                  You are getting lost in the weeds and are now making things up completely.

                  NO ONE is arguing against the First Dip.

                  And yet you respond as if I am arguing against the First Dip.

                  The “fundamental” is the First Dip, and as should be clear to you, any attempt on your part to insinuate that as some type of issue is pure obfuscation.

                  Slow down,
                  take a deep breadth,
                  and read again what I have actually written.

                  You are – yet again – merely advancing your want of control of secondary markets (the Second Dip) as some inevitable conclusion of allowing (promoting?) the First Dip.

                  That is simple fallacy.

                  Just as it was fallacy of you to think that “ability” must somehow be more than ability and must be a guarantee of geographical price distinction (regardless of any natural market effects – notably the emergence of a secondary market).

                  You confuse yourself with a mere “want” of not just profit, but maximized profit.

                  Quite frankly, there is NO guarantee of profit anywhere in patent law – at any level (“M,” “K,” “Y,” or “X”).

                  You seek with an emotive word “optimal” that which is NOT provided. And certainly, such is just not “fundamental.”

                  It is both a logical and a legal error in your position that control of secondary markets somehow must accompany the First Dip.

      2. he shares no such patent law (from anywhere) that includes this “right” to prevent a legitimate secondary market.

        You are begging the question here. No one doubts that the law should not prevent “legitimate” secondary markets. The question at stake is whether a secondary market composed of gray market goods is “legitimate” (“legitimate: accordant with law or with established legal forms and requirements a legitimate government, from Latin lex, law”)? To call the secondary market thus composed is to beg the question.

        Somehow he conjures up a patent right in which the consistent understanding of exhaustion is (conveniently) set aside. (emphasis in original)

        What you are calling “consistent” is that the law should operate in the same way inside the U.S. borders as it operates outside the U.S. borders. By that standard, nearly all legal principles in patent law are “inconsistent.” By definition, the U.S. borders are the point at which the effect of U.S. patent law changes. Inside the borders, U.S. patents have one effect, outside the borders they have a different effect. There is nothing “inconsistent” about supposing that this commonplace state of affairs should apply to exhaustion in the same way that it applies to any other aspect of the U.S. patent laws.

        1. You are begging the question here. No one doubts that the law should not prevent “legitimate” secondary markets.

          In reverse, that point is not nearly as clear as your assertion. In fact, both you and Confused make statements evincing the opposite.

          Secondly, I am in no way “begging the question.” You keep on wanting to use this argument, and that argument just does not fit what I am doing.

          Third – you are misapplying the notion of sovereign law being different and US law applying to actions being affected by a US (property) right. Your “standard,” or at least the standard that you want to say that I am saying, is not accurate.

          As to “There is nothing “inconsistent” about supposing that this commonplace state of affairs should apply to exhaustion in the same way that it applies to any other aspect of the U.S. patent laws.” – once again you are seeking to insert inconsistencies with ZERO backing. You jump from a sovereign-to-sovereign difference and then merely ASSUME that the US view on exhaustion should be different for domestic and foreign sales affecting a US property aspect.

          I will say this at least: on the other thread you do start getting warmer in talking about the laws of other sovereigns and how they have decided to apply exhaustion. It would be nice though if you could provide some cites for those items, as I would enjoy learning that other sovereigns do have laws on their books as dealing with property, once that property has been willingly sold by a seller, that somehow does not provide what in the US is commonly understood that a sales of property entails.

          1. You… merely ASSUME that the US view on exhaustion should be different for domestic and foreign sales affecting a US property aspect.

            I do not “assume” any such thing. Indeed, I balk at the word “should” here. There is no “should” with regard to the choice between domestic or international exhaustion. Each community must choose for itself how exhaustion works, and that choice is legally arbitrary. There are policy implications that result from the choice one way or the other, and therefore it makes good sense to consider what policy outcomes the community prefers. Whichever policy the community prefers, however, is simply a matter of taste. There is no policy that the community should prefer over and above the community’s tastes and preferences for policy outcomes.

  2. International exhaustion for patented products? Absurd! The whole point of patents is that they are territorial rights. This decision effectively treats the whole world as a giant single market / free trade area, which it most definitely is not.

    On the practical side, the rest of the world probably has more to fear from this than the US. Parallel trading of pharmaceuticals (where drugs sold in a “low price” country are imported, re-packaged and re-sold by a 3rd party in a “high price” country) has already produced some undesirable effects in the European single market. In particular, it has caused shortages of some medicines in the “low price” countries. Because of the huge (additional) volume of drugs that is now likely to travel west over the pond, such shortages are only likely to get a lot worse.

    It looks like the Supreme Court just did not think this one through. Also, it seems to be yet another example of SCOTUS (as in killing the Myriad claims on the wrong grounds) failing to understand the broader perspective in which US patent law operates.

    1. It looks like the Supreme Court just did not think this one through.

      As usual.

      Also, it seems to be yet another example of SCOTUS (as in killing the Myriad claims on the wrong grounds) failing to understand the broader perspective in which US patent law operates.

      Also, as usual.

      On the upside, while the international exhaustion was a big mistake, killing off conditional sales was a good thing. This case, in other words, was a mixed bag.

      1. Again with the “big mistake” conclusion without the cogent legal “means” to get to that conclusion.

        Still double dipping as somehow being a “good thing”….

        1. Again with the “big mistake” conclusion without the cogent legal “means” to get to that conclusion.

          You know, my daughter also tugs on my sleeve just to get my attention, even though she does not have anything of substance to tell me. That said, she is much cuter than a one-eyed, blue medusa-duck, so one is more inclined to excuse the pointlessness of the effort when she does it.

          That said, if you really want an argument with which to engage, I have given you one in 14.2.1.1.1.2. Why not attend to that*, instead of wasting your time on nonsense like 23.1.1?

          * To be fair, it is possible that you have already penned a brilliant take-down of my 14.2.1.1.1.2, and I simply do not see it because of the confounded filter. If so, I will simply hope that it appears sometime before this thread goes dead, when its emergence will go unnoticed.

    2. . This decision effectively treats the whole world as a giant single market / free trade area, which it most definitely is not.

      Actually, what it does is simply apply a consistent meaning of the word exhaustion.

      It is the secondary effects of that consistent application that appear to have people up in arms.

    3. pardon potential (re)post…

      This decision effectively treats the whole world as a giant single market / free trade area, which it most definitely is not.”

      Actually, what it does is simply apply a consistent meaning of the word exhaustion.

      It is the secondary effects of that consistent application that appear to have people up in arms.

      1. The principle of exhaustion of IP rights usually only applies within a single market. This is important because only within a single market are there (reasonably) consistent laws that are overseen by a common court, as well as consistent regulations pertaining to the marketing of the patented goods.

        The parallel that SCOTUS draws with copyright is therefore particularly unconvincing. Unlike patents, there is no need to apply for CR protection (hence “global” CR protection is pretty much automatic). Also, unlike some patented goods (such as pharmaceuticals), copyrighted works are not heavily regulated or subject to various national (reimbursement) price controls. This means that there are good reasons to conclude that the “global” market for patented goods has very different characteristics to the “global” market for copyrighted works – which characteristics demand different treatment.

        This conclusion (again!) calls into question whether SCOTUS’ decision is consistent with TRIPS.

        Article 28(1)(a) of TRIPS indicates that the patent proprietor shall have the right “where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or IMPORTING for these purposes that product”.

        Whilst Article 30 of TRIPS does allow for some limited exceptions to this right, it seems to me that it would be hard to argue that allowing for exhaustion of rights across numerous, distinct (and very different) markets hardly represents a “limited” exception… and certainly not one that does not “unreasonably prejudice the legitimate interests of the patent owner”. After all, as others have pointed out, allowing for global exhaustion of rights prejudices the interest of the patentee in marketing his product in another country where he is unable (eg for reasons relating to price regulation or earlier expiration of patent protection) to obtain a price anywhere near as high as that for his product in the US.

        In conclusion, whilst SCOTUS may well think that it is simply applying “consistent” principles, it has failed to consider that there are good reasons (including obligations under TRIPS) why the principle of international exhaustion should never be applied to patents.

        1. confused,

          You are incorrect in wanting to constrain the meaning of the term to only mirror a Sovereign’s internal laws.

          The parallel to copyright does not “fail” or is otherwise not germane based on this. There is a difference in codification, but that codification does not reach where your argument want to reach.

          The fact is that you want to acknowledge the presence of global markets, and then turn around and be selective about the meaning of a term, want to insert an inconsistency in the meaning of that term, and then want to pretend that THAT inconsistency needs no special treatment. Demand special treatment? Just because you want it so? That is simply not there in the meaning of the word itself.

          ALL that you inconsistency does is protect (or tries to protect) an aspect that NO sovereign protects with patent law: the control of secondary markets.

          TRIPS is perfectly fine with the consistent use of the word “exhaustion.” Put simply: you want to double dip – and that my friend is NOT an interest of the patentee that flows from being a patentee. There is no prejudice of something that never was there in the first place (there being operative from patents).

          1. Given that SCOTUS is relying merely upon a “principle” (ie a judge-made concept and not black-letter statute), I would have thought that it would have been perfectly reasonable for the court to consider whether it is justified to apply (unchanged) a principle developed in one context to different rights that have different considerations (and legal constraints).

            With this in mind, why is it that you think that the principle of exhaustion is somehow cast in stone, such that it must be applied in exactly the same manner no matter how different the legislation governing the rights (and associated products) in question?

            “TRIPS is perfectly fine with the consistent use of the word “exhaustion.””

            How is that? Would you care to explain by reference to the provisions of TRIPS (and preferably avoiding yet more pointless repetition of the phrase “double-dip”)?

            It is a perfectly legitimate interest to sell a patented product at a price that a national / regional market will bear. Thus, forcing a patentee to choose between selling at only one (global) price or selling in only one market (a choice rendered inevitable by international exhaustion) prejudices that legitimate interest.

            1. That you feel the double dip remark to be pointless shows that you have not considered what that point means

              Please do me a favor and show that you understand three things that come along with that so-called pointless comment.

              1) show that you understand what a first dip is in the benefit of the bargain of an entity selling an item for the price that the entity fully agrees to;

              2) show me that you understand the concept of a secondary market, and (importantly) show me where you think it is in patent law that control over a secondary market is made to be a right of the patent right; and finally

              3) show me where in TRIPS this (at this point non-existent) patent-induced ability to control secondary markets is stated as requiring a non-consistent meaning to the word “exhaustion.”

              This ALL resolves down to an attempted control of secondary markets.

              No one is arguing against a first dip.

              No one is arguing against “It is a perfectly legitimate interest to sell a patented product at a price that a national / regional market will bear.

              But your own “logic” of the choice of the second somehow being some right to control the secondary market (your aversion to the term “double dip” notwithstanding), as somehow being violative of some right is simply a fallacy.

              As I have mentioned all along, I “get” why people may want to be able to control secondary markets.

              I really do.

              But that is just not what any patent law anywhere has ever included in the scope of patent rights.

              1. Please read more carefully. It was pointless REPETITION that I would prefer you avoid. I get your complaint about “double-dipping”, and so would like you to move on.

                With regard to your numerous references to a “secondary market”, you seem to use that phrase to cover both re-sale within one market (to which I have no objection) and importation of product from one market into another. Have I understood you correctly on this point? If so, I would take issue with your underlying assumption that there is a right for third parties (without the consent of the patent proprietor) to buy a patented product in one market, export it to another market and re-sell it there.

                Unless you are referring to a single, regional market (such as the European Single Market), there really is no black-letter provision of patent law or (inter)national law that affords third parties such a right. Given that no such right exists in law, then it is not correct to assume that there is a “market” for 3rd parties that involves the international import / export of patented goods.

                In this context, your reference to the ability of patentees to control a “secondary market” makes no sense – as there is no basis in law for the so-called “secondary market” in question.

                TRIPS provides a patentee with a right to prevent importation (without his consent) of a product covered by his patent. Notable by its absence is any qualification in TRIPS regarding the source of that product. Thus, logically, the product in question could be sourced from the patentee in another country… but (under TRIPS) that would not take away the right of the patentee to prevent importation to which he does not consent.

                Now, relying only upon the provisions of TRIPS (and their interpretation according to the Vienna Convention), can you please explain to me how it is that SCOTUS’ judgement is consistent with TRIPS?

                1. LOL – you want me to move on while your ignore the point put on the table?

                  That’s sort of like “Gee, your point defeats what I am trying to do, but do you have any other argument that I might have a chance against?”

                  As to imports, you do understand that what is protected with the patent exclusion of imports is imports by infringers (i.e., imports of NON-secondary market items).

                  Your wanton here of something else – and it is only a wanting – is exactly the type of control of secondary market that is NOT contained in ANY patent law for ANY country.

                  That is why I asked you for some legal point backing up what you merely want.

                  Your TRIPS reference then fails for this very reason, as you are attempting to slide into the control of TRIPS items that the seller has already relinquished any rights to.

                  That pesky word of exhaustion simply applied – and applied consistently.

                  So maybe I won’t have to repeat that first argument if you, you know, actually address that first argument.

                  I await your cogent and on-point replies to 23.3.1.1.1.1.

              2. “what is protected with the patent exclusion of imports is imports by infringers (i.e., imports of NON-secondary market items)”

                What kind of twisted logic is that? It is only ACTS that infringe, not categories of people. In other words, people can only be categorised as “infringers” based upon their acts, and not upon any other form of status. It is therefore plain as the nose on your face that someone who imports a patented product without the consent of the patent proprietor is an “infringer” under Article 28(1)(a) of TRIPS.

                Frankly, I am beginning to realise that you are impervious to logic. I mean, what basis do you have for your assertion that sale by the patentee in one country exhausts the patentee’s rights in all other countries? The answer, of course, is the SCOTUS decision and your adherence to the “principles” outlined in that decision. But it is precisely this “basis” that I am arguing is inconsistent with an international agreement (TRIPS) that the US has ratified. It is therefore illogical (and also at odds with the Vienna Convention) for you to point to that case law and those “principles” as a foundation for interpreting provisions of TRIPS.

                Let me spell it out: you need something other than US case law (and alleged “principles” thereof) upon which to build your arguments… as otherwise they become entirely circular.

                1. There is nothing circular in being consistent in a basic meaning of the word “exhausted.”

                  Once again, you are the one (merely) wanting something different, something NOT consistent, and something that only serves to defend something that NO patent system anywhere includes as a patent right.

                  Maybe you can start there: show me one patent system that retains all rights after a sale.

                  Just one.

                  Shouldn’t be too hard for you, right?

                2. Let me ask you, Curious, whether you would seriously sue for infringement an end-user who purchased an item in one country and then took it to another country?

                  Suppose I sell you my patented yacht in London. Would you seriously expect me to sue you for patent infringement if you sailed to New York?

                3. Let me ask you, Curious, whether you would seriously sue for infringement an end-user who purchased an item in one country and then took it to another country?

                  I do not speak for Confused, but I can say for myself that I am not troubled about the guy who buys a patented wristwatch for $200 in Mexico, and brings it home on his wrist to the U.S., where it would ordinarily retail for $1200. This sort of one-at-a-time importation is never going to affect the market price in the U.S. to any material extent. I am more concerned about gray market dealers who operate at scale.

            2. Curious, you have to understand that the principle involved here is consists of sales to end-users. I am not certain that the principal extends to distribution channels were title may not pass until delivery. Also, the patent owner does not have to sell at all to any distributor known to be dealing gray market goods.

              Emphasizing once again, I think the decision only applies to sales end users.

              1. I think the decision only applies to sales end users.

                Two responses:

                (1) Do you mind pointing to what language in the opinion leads you to that supposition? I confess, I did not see anything that appeared to me to so limit the holding.

                (2) If Lexmark really is that limited, there are going to be some really steep damages awards emerging in the next few years, as gray market importers move existing overseas inventory into the U.S. market.

                I expect that the effect of this decision on U.S. prices of most patented goods will be fairly minimal in the long term. The U.S. market is simply so much more valuable than (e.g.) the Mexican market that it will make more sense to take the loss in the Mexican market by raising Mexican prices to equal the U.S. price, than to lose profits in the U.S. market by keeping a lower price in Mexico.

                In the short term, however, there are untold piles of inventory outside our borders on sale at lower prices. There will be a rush of gray market wholesalers to buy up this inventory and bring it into the U.S. market, where they can make a tidy profit underselling the patentee’s own retailers. If it really is the case that gray market wholesalers are not covered by this decision, they are going to be in for a rude awakening.

                1. Ned’s critical point there was “not taking title.”

                  I do not think that you and he are thinking of the same retailers based on that point alone.

        2. This conclusion (again!) calls into question whether SCOTUS’ decision is consistent with TRIPS.

          Article 28(1)(a) of TRIPS indicates that the patent proprietor shall have the right “where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or IMPORTING for these purposes that product”.

          I happen to agree that domestic exhaustion is the better rule, but I confess that I do not find the TRIPS argument convincing. It proves too much. The strong reading you are giving to the TRIPS text would forbid not only international exhaustion, but also domestic exhaustion.

          You call out “importing” for special attention, but “selling” is also in that list. If it violates TRIPS to allow the importation of goods sold abroad, then presumably it also violates TRIPS to permit the sale of goods sold within a jurisdiction’s own borders. After all, if I buy Ford Cmax in Arkansas and then turn around and resell it in Florida, I am a “third part[y] not having the owner’s consent… selling…” the patented hybrid engine.

          I think that we have to read the TRIPS language against the background assumption of an implicit “except where exhaustion applies.” To the best of my knowledge, every TRIPS signatory has some sort of exhaustion principle in their law. It would be strange to imagine that they all willingly signed on to do away with exhaustion, and yet none of them has taken the least step to do so.

          1. LOL….

            Implicit…?

            Is this the same “implicit” wherein because of what you want (secondary market control), you want to insert a non-consistent reading of item not present into the basic meaning of exhaustion…?

            1. Implicit…?

              Good point. Why quibble over the implications of the quoted portions of the TRIPS agreement to exhaustion, when there is another TRIPS article that addresses exhaustion explicitly.

              Article 6

              For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.

              In other words, there simply is no standard (domestic, regional, or international) installed by the TRIPS agreement. This issue is explicitly reserved for national consideration, so it is untenable to argue that our Court might just have put us out of compliance with TRIPS.

              1. I can agree that no one can force the US to change its law by using dispute resolution at the WTO. However, this does not change the fact that there is a plain reading of TRIPS that contradicts the “logic” of the SCOTUS decision on international exhaustion.

                1. Your “plain reading” is not there.

                  I have shown you why and you do not like what I have shown you.

                  Nevertheless, that why still exists.

                  (Here’s a hint: you overlook the meaning of the word “consent” in the TRIPS item you refer to:

                  Article 28(1)(a) of TRIPS indicates that the patent proprietor shall have the right “where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or IMPORTING for these purposes that product”.

                  Consent comes from the plain (and consistent) meaning of the word “exhaust.” I am not the one trying to go in circles here Confused – I am the one merely using the normal meaning of a term in a consistent manner and NOT trying to (implicitly or otherwise) insert some NON-consistent meaning based on a location of sale that is nowhere found in the meaning of the term.

                  NONE of your “reasons said above” help you because all of your “reasons said above” rely on you inserting the non-consistent meaning and then turning around and pretending that such an insertion is “normal.”

                  All of your bellyaching and wanting me to do more, when all I am doing is relying on a consistent meaning of a term is downright hilarious as YOU are the one that need to do more in order to show why a non-consistent insertion should be entertained.

                  And yes, I am still waiting for you to address the point that you don’t like repeated, but nonetheless, refuse to address.

                2. I have shown you why and you do not like what I have shown you.

                  That’s just the trouble. You have not shown Confused (or anyone else) any such thing. It is not a matter of not liking it. The quod est demonstrandum simply has not been adduced.

                  You have brought a goat and called it a dragon. Several of the rest of us have looked at it carefully and can see only a goat. Your response has been to shout and spit and pound the table insisting that it really is a dragon, and that we must be blind, or else that we are operating in bad faith to gainsay the assertion.

                  Well, fair enough. It is hard to say whether you really think you have a dragon, or whether you just want to see if you can cow someone into submission by force of bald assertion. One way or another, there are several people here who simply will not be fooled into thinking that the goat is a dragon.

                3. Consistent application of the meaning of terms in a phrase is its own QED.

                  The ONLY reason you continue to struggle with this Greg, is that you want to protect the double dipping and control of secondary markets that NO patent right anywhere in and of itself provides for.

                4. And I am not the one trying to call one thing something else – that would be those who demand that an inconsistent reading of terms that lack any notion of “where sold” somehow “gains wings and spits fire” just because that is what they WANT that term to include (inconsistently).

                  What is it that troubles you so about the consistency of the meaning of a term, anyway?

                5. What is it that troubles you so about the consistency of the meaning of a term, anyway?

                  I assure you, I am not scared of your goat. He seems harmless enough, if perhaps a bit muddled.

          2. Greg, domestic exhaustion (or exhaustion within a single market) would be permitted under TRIPS Article 30 as a “limited” exception to the patentee’s rights that does not “unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties”.

            For the reasons outlined above, the same cannot be said of international exhaustion – which is seriously prejudicial to “normal exploitation of the patent” and “the legitimate interests of the patent owner”.

            1. And yet, you have STILL failed to account for the argument that you don’t like repeated…..

              The argument does not go away just because you don’t like it and cannot get around it.

  3. Meanwhile, the EFF is hard at work cutting off zombie Oracle’s head:

    link to eff.org

    The Federal Circuit’s decision was every bit as bad as some of its oft-criticized patent law decisions. Treating APIs as copyrightable has a profound negative impact on interoperability and innovation. And it goes against decades of tradition and common practice in the software world.

    Fortunately for technologists and innovation, the U.S. Court of Appeals for the Ninth Circuit issued a significant ruling that undermines the Federal Circuit’s decision about whether processes and methods of operation like APIs can be copyrighted. In a case about Bikram yoga poses, the Ninth Circuit applied a section of the Copyright Act that forbids copyright protection of ideas, processes, systems, and similar concepts. The court said that a “sequence” of 26 yoga poses and two breathing exercises, performed in a particular order, was not subject to copyright protection. If a system of yoga poses isn’t copyrightable, then a system of APIs for operating a computer program definitely isn’t.

    It must be sooo frustrating to discover that you can’t own and control everything. I feel so much pity for the rich and powerful right now. How can they control the little people if they can’t own everything? Boo hoo.

    1. >It must be sooo frustrating to discover that you can’t own and control everything. I feel so much pity for the rich and powerful right now. How can they control the little people if they can’t own everything?

      The changes in patent law have favored the big corporations. Everyone that has an ounce of integrity agrees with that.

      How much do you get paid to push this propaganda?

      1. By “rich and powerful” he’s referring to whitey (including individual inventor whitey) Night, not corps. Corps are ok to lefties now since they cower to their agenda and give them $$$ for political action.

  4. Some commentators have posted about gray market drugs. But gray market goods are not only drugs.
    They can be cameras and other goodies. The marketing departments of multinationals will now have to treat all geographic markets for patented goods the same.

    1. There is no “FDA” there, so we will get to see if the “branded market” oblivion situation is a viable theory.

    1. This should comport perfectly well.

      Why do you ask?
      Do you know of cases with which exhaustion has been applied differently?
      (I fully grant that such may exist, and that seeing those cases now would be interesting).

      See also: link to usitc.gov

      1. Does the sale of the article exhaust only COM patents or method of making patents, method of treating, method of using patents? 337(B)(ii) contemplates as actionable articles made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent.

        Is I sell the widget in a foreign country, and did not sell the rights to make or have made that widget in the foreign country, can I still use 337 to prevent the product from coming back into the US?

        1. Your question appears clear and not clear at the same time.

          The clear part is dealing with the item of the widget sold. That widget is exhausted so the answer is no, you cannot use 337 to prevent the item from coming back into the US.

          The unclear part is that you seem to want to ask more than just the clear part, with your comments on “COM” patents (?) and other things.

          I not sure if there is a question there for me to answer…

        2. xtian, to the extent the item sold embodies the invention covered by a patent, the relevant patent is exhausted. Quanta overruled the Federal Circuit who had held that the sale of a item does not exhaust method patents. Quanta held that method patents are also exhausted to the extent that the item sold embodies the essential elements of the method.

          You might want to look at the facts in Quanta to better understand this. But in Unives Lens, the invention, covered by a number of patents, were bifocals, and the lens blanks sold by the licensee had the raw bifocal properties. The finishers simply applied the specific prescription of a patient, which was routine according to the assumed facts. Thus the lens blanks embodied the essential elements of the invention.

  5. The odd thing about the foreign sales is whose rights are exhausted? So, we get this odd result. A competitor could produce and sell your product in a market where you don’t have a patent for cheaper than you. Why? Because if you sell it then it could be imported to the US with no fear of patent infringement, but if they sell it you could sue. So, your competitors will be able to undersell you in any market where the value of the product is substantially less in the foreign country than in the US.

    Consider how odd that is. And, clearly means that the holding is wrong. You don’t get such strange results when holdings are consistent with reality.

    This kind of reminds me of the Rise and Fall of the Roman Empire. During the fall part it was better not to be a citizen of Rome.

        1. It seems to be a snide remark. I think exhaustion on a foreign sale is just ridiculous. It encourages shell companies and strange licensing.

          It disadvantages US companies by adding to their sale of the product an exhaustion component for the US. Just weird.

    1. Night, all this points out is why the USTR is always advocating that other countries adopt strong IP laws.

      But realistically, even with patents in every country, the drug companies are faced with price regulations that force discounting.

      I suspect Pharma will seek some sort of legislative overrule.

    2. Night Writer,

      I submit that your lack of participation in the dialogue may come from a lack of time, or perhaps a lack of ability to get through the moderation filter, but I am interested in your responses that have made it through for the dialogue on this topic.

      Your post here in particular has been shown to be logically flawed. It is just not odd at all that a seller choosing to sell at a price the seller sets then must contend with a natural secondary market for which patents do not – and never have been – meant to control.

      The attempt at some arbitrary and inconsistent treatment of exhaustion violates the natural consistency of what the term exhaustion means, and merely seeks to put in place the ability to double dip and control secondary markets.

      Your analogy to the Rise and Fall of the Roman Empire is misplaced.

      1. Your post here in particular has been shown to be logically flawed.

        Indubitably, this is the consensus conclusion. Ten out of ten people named “anon” agree that the demonstration of logical flaws is conclusive.

  6. IANAL, but very curious if anyone thinks this might affect packaged OEM software as it seems this might put a stop to Microsoft going after resold OEM Windows package bundles.
    Thank you, Mike.

    1. It applies to any patented article sold in a foreign jurisdiction.

      Software may be licensed separately. Whether a license is actually a sale is an interesting question and the answer to it will be even more important now.

    2. Software patents are a hair away from extinction anyway.

      All it takes is a good lawyer and a client who either isn’t conflicted or who wants to take the case to the Supremes. But it’s an easy case to win, especially if the usual suspects turn up on the other side.

  7. Let me throw out an idea that struck me while reading the Court’s opinion.

    It held that where a patent owner sells an item abroad, it has exhausted its US patent rights.

    It also cited an old case that when an item is sold abroad under a foreign patent owned by a completely unrelated company, then of course the US owner has exhausted nothing and can prevent the importation of that item.

    I immediately thought about an in-between situation. Let’s say a company researcher invents something and gets patent protection in both the US and a foreign country. He could assign the US patent to his US employer, and the foreign patent to a foreign affiliate. Each could then manufacture or license the patent rights in their respective country and items could be manufactured under each respective patents For example, XYS USA, Inc. owns the US patent, and XYZ Germany GmbH owns the German patent, and manufactures and sells the invention in Germany under its own patent. Both companies are owned by XYZ Worldwide Ltd.

    Does US patent exhaustion apply? Can XYZ USA Inc. prevent the importation of the items made and sold in Germany under the US patent?

    (In trademark law, there is the concept of related companies whereby all affiliates worldwide are treated as a single entity. So if a foreign affiliate manufactures an item under its trademark in a foreign country, then it is consider genuine under US law, even if a US affiliate owns and uses the trademark.)

  8. Commenting on the rhetoric of the opinion. Consider the following two paragraphs regarding international exhaustion:

    BEGIN QUOTE

    Finally, the United States, as an amicus, advocates what it views as a middle-ground position: that “a foreign
    sale authorized by the U. S. patentee exhausts U. S. patent rights unless those rights are expressly reserved.” Brief for United States 7–8. Its position is largely based on policy rather than principle. The Government thinks that an overseas “buyer’s legitimate expectation” is that a “sale conveys all of the seller’s interest in the patented article,” so the presumption should be that a foreign sale triggers exhaustion. Id., at 32–33. But, at the same time, “lower courts long ago coalesced around” the rule that “a patentee’s express reservation of U. S. patent rights at the time of a foreign sale will be given effect,” so that option should remain open to the patentee. Id., at 22 (emphasis deleted).

    The Government has little more than “long ago” on its side. In the 1890s, two circuit courts—in cases involving the same company—did hold that patentees may use express restrictions to reserve their patent rights in connection with foreign sales. See Dickerson v. Tinling, 84 F. 192, 194–195 (CA8 1897); Dickerson v. Matheson, 57 F. 524, 527 (CA2 1893). But no “coalesc[ing]” ever took place: Over the following hundred-plus years, only a smattering of lower court decisions mentioned this express-reservation rule for foreign sales. See, e.g., Sanofi, S. A. v. Med-Tech Veterinarian Prods., Inc., 565 F. Supp. 931, 938 (NJ 1983). And in 2001, the Federal Circuit adopted its blanket rule that foreign sales do not trigger exhaustion, even if the patentee fails to expressly reserve its rights. Jazz Photo, 264 F. 3d, at 1105. These sparse and inconsistent decisions provide no basis for any expectation, let alone a settled one, that patentees can reserve patent rights when they sell abroad.

    END QUOTE

    Note that Chief Justice Roberts seems to place the CAFC decision in Jazz Photo, with regard to the weight afforded to it, on a par with the two cited circuit court cases from the 1890s. Given the “sparse” distribution of cases restriction international exhaustion, the CAFC decision seems, to the eyes of SCOTUS, equally insignificant. Maybe the CAFC, and commentators in the patent community, imagined that the CAFC had a particular responsibility to settle and “modernize” patent law doctrines, discarding “judge-made” law from earlier times, and that its holdings carried particular authority in determining the contours of patent law? But if SCOTUS ever shared that perspective, that seems no longer to be the case.

    1. Maybe the CAFC, and commentators in the patent community, imagined that the CAFC had a particular responsibility to settle and “modernize” patent law doctrines, discarding “judge-made” law from earlier times, and that its holdings carried particular authority in determining the contours of patent law? But if SCOTUS ever shared that perspective, that seems no longer to be the case.

      Two things to note for you, DP:

      1) the CAFC was created by Congress to do exactly what you are ascribing here as “imaginings” of the CAFC and the commentators in the patent community.

      2) There has always been a “p1$$ing match” between the Supreme Court and Congress (and here, the CAFC as the proxy of Congress) when it came to legal policy decisions in patent law.

      Given these two items, and taking into account my other on point observations of the addict that the Supreme Court is, the only real long term solution for Congress to clearly establish – and maintain – the authority given to it in the Constitution as regarding the statutory law that is patent law is for Congress to use a separate Constitutional power that it has: jurisdiction stripping.

      You may not recall that such a power, properly in the hands of Congress, can be applied to any court – including the Supreme Court for matters that are not of original jurisdiction for the affected court.

      Patent appeals are not a matter of original jurisdiction for the Supreme Court.

      Of course, to comply with the actual holding of the Marbury case, which provides the power of judicial (NOT only Supreme Court) review, any jurisdiction stripping would need to land the cases in a proper Article III court.

      The current one – as you may well imagine – has been like a cage full of simians, fire-hosed into a state of bizarroness, and thus my calls for jurisdiction stripping are typically accompanied by a call from Congress to set up a new (and untainted) Article III patent court.

  9. Solving some problems via contract law just isn’t realistic from the perspective of the manufacturer/patent owner. If I sell to Distributor A in China, Distributor A resells to Distributor B in China, and Distributor B then imports into the US for sale then I have to sue Distributor A?

    In the area of software and computer enabled products we may see increased reliance on license keys, lock-out mechanisms, and credentials. Companies will track and disable products used in the wrong territory. Lexmark will include features in their printers that break the ink cartridges so they can’t be reused.

    Innovation on ways to keep property from being alienable. At least it’s billable work.

    1. Solving some problems via contract law just isn’t realistic from the perspective of the manufacturer/patent owner.

      News flash: it’s not all about “the patent owner”. This is a key point in this case and it’s also an overarching theme in the case law for literally years now. Kinda odd that it keeps getting missed … until you consider the highly selective and self-interested group that comments at patent blogs.

      Innovation on ways to keep property from being alienable.

      LOL Promote the “progress.”

      At least it’s billable work.

      Hey, you can bill for anything. Wanna file some claims on a “new button” on an “electronic display”? How about a “new field” where you “enter information” about your property rights? No problem. Just be sure to cash the check quickly and when the patent floats belly up after you look sideways at it, you can blame “the community” for misleading you (“everybody was doing it, except for the people that weren’t”).

      1. I understand that it’s not necessarily about the patent owner, but the patent owner/manufacturer who makes the market, maintains the market through product improvements, services the product, trains the channel, etc. is important.

        The solution isn’t going to be contract damages – the solution is going to be implementing controls that will physically limit the free distribution and use of products. Before some business had to pay damages or a royalty.

        1. the patent owner/manufacturer who makes the market, maintains the market through product improvements, services the product, trains the channel, etc. is important.

          They are no important than anybody else.

          [shrugs]

          the solution is going to be implementing controls that will physically limit the free distribution and use of products

          Or maybe just accept the fact that there is competition for better products and compete on those terms.

          Oh but wait! This isn’t about better products, is it?

    2. H2H, Lexmark had just such a hardware/software lockout scheme, and it did not work. See the Supreme Court opinion. That is why the chose the system they chose in the first place.

      Now, how would you feel if car makers sold you cars tying the right to use your car to receiving service regularly from their facilities? If you failed to comply, and of course, resistance is, as they say, futile, the car maker could simply turn your car off by not resetting a timer that is constantly timing out and that only they can reset.

      Would you ever by a car from such a company?

      Why in the world would you buy a printer from a company that did the same thing?

      Now, if a company began to have monopoly power in the relevant market so that it could impose such a restraint, it would probably be violating the Clayton Act, Section 3.

      1. There are certainly limits, but what might not be acceptable in one market may be acceptable in another. For example, a certain smart-phone manufacturer’s attempts to render OEM peripherals unusable with their products.

        But in the context of territorial restrictions, there are ways to restrict alienation without seeming sleezy. For example, if your car has one of these new touch control panels and you originally sell the automobile in China with a Chinese GUI – refuse to let a downstream purchaser install an English GUI.

        This restricts my ability to make markets. If I sell to a Chinese Distributor for $1 and they can resell to a Chinese end-user for $10 or a US end-user for $100(or a US distributor for $50) – they are going to sell in the US. If the US pays $100 the World pays $100.

      2. the car maker could simply turn your car off by not resetting a timer that is constantly timing out and that only they can reset

        Thank goodness robot cars won’t work like that.

        On the other hand, think of all the abducted children that could be saved if everyone’s car gets turned off except for the police. Freedom! Gosh, it smells especially great today.

  10. Will printer cartridges now be more expensive outside the US since the sale exhausts US patent rights and so the patent owner must charge for the full value of the “patent reward”?

      1. One interesting result of this decision is that accountants may not let GAAP companies stuff the international channel and take revenue secure in the knowledge that importation into the US market could be “blocked” by a US patent.

      2. I do not think that is is justbe more careful about whom it sells to.”

        No matter how careful, this is more about attempts to control a secondary market.

        If you sell into a primary market, you cannot expect to control the secondary market that arises from the properly exhausted items sold.

        The Monsanto case is exactly about such an instance (no matter what dust the Court kicked up) but with the item being not only a self-replicating item, but the nexus of the patent being concerned with – and necessarily activated by – a use that includes that very self-replication.

        It is obfuscation to try to focus on other tangential uses that are also captured in the exhaustion as if ALL legitimate uses are somehow not exhausted. Attempts to draw a comparison to non-self-replicating items then fail to accurately portray actual uses of the attempted comparison.

        1. The Monsanto case is exactly about such an instance (no matter what dust the Court kicked up)…

          If you want to hold this as a private opinion, fair enough, but I think that it would be professionally very dangerous to advise a client on the presupposition that Lexmark has somehow undercut Bowman.

          Let us weigh up the evidence for and against the idea that Lexmark supersedes Bowman (please feel free to add points to either list that you think I will have missed):

          For:

          (1) Very broad language in Lexmark (slip op. at 10 “As a result, the sale transfers the right to use…, and the buyer is free and clear of aninfringement lawsuit because there is no exclusionary right left to enforce”) indicates that the buyer of a good may use the good purchased without threat of a lawsuit.

          Against:

          (1) The same language cited as the only evidence in the “for” category tells us that the buyer may use the good purchased. But Bowman was not using the seed purchased from Monsanto. Bowman was using seed that someone else had made. By contrast, Impression Prods. was using the selfsame cartridges that Lexmark had manufactured. In other words, the two cases are factually quite distinguishable over the most material dimension at play in Bowman.

          (2) The Chief Justice, who authored Lexmark joined Justice Kagan’s Bowman opinion without any additional comment.

          (3) Justice Kagan joined the Chief’s Lexmark opinion without any reservations about any untoward effect that Lexmark might have on Bowman‘s continued validity.

          (4) There is a legal presumption against the conclusion that the Court overturns or even modifies its own prior precedents sub silentio. Shalala v. Ill. Council on Long Term Care, 529 U.S. 1, 18 (2000).

          Now, weigh those four data points on the contra side against the one on the pro side. Put yourself in the shoes of a district court or circuit judge—with no axe to grind—looking at those various data points. Only a masochist who enjoys being reversed on appeal would hold, in view of the evidence, that Lexmark supersedes Bowman.

            1. I disagree, but of course my disagreement is wholly beside the point. The really important consideration is whether a district court judge or circuit judge will think that those considerations are evidence of what the law is? For my part, I would feel more comfortable talking to the judge about the points raised in 14.1.2.1 than about any of the folderol that you are tossing off on this thread.

          1. One additional data point: If you Shepardize 133 S. Ct. 1761 today, you see a blue octagon with a white “A,” not a red octagon.

    1. This H2H I think will be a big issue. Now any foreign sale will have to be considered in light of the fact that they could be imported into the US without fear of patent suits.

      Consider that in countries where you don’t have a patent that your sale of the product is different than the sale of the same product by a competitor as your product comes with an exhaustion in the US patent system. Clearly that is ridiculous.

      1. Why do you assume that a US entity choosing to sell in another country deserves to be able to add a “patent tax” in order to maintain an artificial arbitrage?

        The entity is choosing to sell. He sells at the price he chooses.

        Your own assumptions here do nothing but say “it’s ok” to stiff US citizens and allow the seller to get into a market where under straight up competition, the US seller would actually have to compete on price (without making up that difference with artifically higher domestic prices. If the price pressure – based on the entity’s own decision creates the arbitrage, then why the H do you think such should be sanctioned? There is zero reason to allow the entity to both sell and then turn around and avoid the direct result of that sale, enforcing global arbitrages that make US citizens suffer.

        1. Why do you assume that a US entity choosing to sell in another country deserves to be able to add a “patent tax” in order to maintain an artificial arbitrage?

          Two points:

          (1) Why is the arbitrage “artificial”?

          (2) How is the “patent tax” in your hypo meaningfully different from the “patent tax” in any other market situation in which a patent is involved.

          You do not need a patent to be allowed to sell your invention. An inventor would be able to sell even if there were no patent laws on the books. Without a patent, however, one would not be able to charge anything more than the marginal cost of production, because in a competitive market that is the highest price the market will bear. The whole reason we issue patents is to allow sellers to set their prices at the highest price that consumers would be willing to pay, rather than at the marginal cost of production.

          The highest price that a Mexican consumer is willing to pay is (usually), however, lower than the highest price that an American consumer is willing to pay. The old Jazz Photo rule allowed companies to set prices in each market in a way that allows the company to maximize revenue—which is all that a patent is supposed to do.

          You are, of course, perfect right to refer to this as a “patent tax,” but no more so than when a seller sells only in the United States, and sets the price higher than the marginal cost of production.

          All on-patent pricing is a “patent tax.” If you object to paying such a “patent tax” you really should object to patents themselves, rather than merely to the international arbitrage that they made (or at least used to make) possible.

          1. The higher prices are for the domain to which the patent protection exists – you blew off the answer above at 19.1.

            Maybe you want to think a little instead of just reacting to a post by anon…

            1. Yes, let us explore your answer at 19.1.

              Q: How does getting a (e.g.) Canadian patent affect the exhaustion impact of a sale made in Canada under Lexmark?

              A: No effect at all.

              WikiWidget (WW) owns US 10,101,101 (‘101), which claims red widgets. If WW sells a red widget in Canada, it really does not matter—for purposes of Lexmark exhaustion analysis—whether WW does or does not own a corresponding CA patent claiming the same subject matter. WW’s U.S. rights are exhausted.

              How, then, is your 19.1 answer relevant?

            2. The higher prices are for the domain to which the patent protection exists…

              Yes. This is rather trivially true, but unassailably correct. One can only exact a “patent tax” in a jurisdiction in which one owns a patent. How does that resolve the contradiction into which you have dug yourself?

              Patents exist to empower the patented to charge a price above the marginal cost of production. It is perfectly fair to describe the delta between the on-patent price and the marginal cost of production as a “patent tax,” but this description applies equally to the import market and the purely domestic market.

              Why is the patent tax wrong (or at least undesirable) in one circumstance but not the other?

  11. I question whether post-sale use or resale restrictions are enforceable under contract law. The very common law relied upon by the Court says that such restrictions are void.

    1. Think of entrustment. You want to repair jewelry and the store accidentally sold it. Store definitely breached, but the third party gets title.

      We can accept restrictions when there is privity… that’s what contract law is. It’s the unexpected patent suit with several degrees of separation that clogs things up

    2. Think of entrustment. You want to repair jewelry and the store accidentally sold it. Store definitely breached, but the third party gets title.

      We can accept restrictions and consequences when there is privity… that’s what contract law is. It’s the unexpected lawsuit with several degrees of separation that the law despises

  12. Ok, here goes.

    I hereby issue a fully pre-paid lease to said patented printer, said lease to terminate, upon the abuse (by drilling a hole and refiling an ink cartridge), by leasor or any third party. And now I sue the third party for patent infringement (for purporting to “sell” my patented ink cartridge) and conversion (for stealing my property – the ink cartridge – which becomes un-leased when you drill hole and fill).

    1. If it looks like a duck, walks like a duck, and quacks like a duck, is it a swan just because I say it is a swan?

      Read the case Distant cited. It is very consistent with Bobb Merril.

  13. “Patent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace.”

    Unless it is a seed.

    1. …being used for the primary use of what a seed is…

      …as well as having a nexus with the very use envisioned for the patented advance…

      😉

      1. Oh lookie, it’s li’l Gregor Mendel! the primary use of what a seed is

        Depends on the seed, doesn’t it? Maybe it’s a bit confusing if you are actually a plant and not a human being (that would explain a lot, by the way).

        The Supreme Court: Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission…

        No idea why this is so confusing for some folks. But let’s pretend that it is the most confusing thing ever! Then we can whine about the Supreme Court. Oh, if only there was some way to get those Supremes out of patent law entirely then the Most Important People Ever could get what they want and we would all sleep so much better. We might be able to sleep as well as Justice Kennedy does, even.

        LOL

        1. “No idea why this is so confusing for some folks.”

          Let me try to explain it to you.

          If Bowman is not allowed to manufacture patented seeds, why is Lexmark allowed to manufacture patented ink cartridges?

          But here is the bigger mystery and source of confusion. Why are YOU, of all people, on the side of Monsanto?

          1. If Bowman is not allowed to manufacture patented seeds, why is Lexmark allowed to manufacture patented ink cartridges?

            Lexmark isn’t allowed to manufacture patented ink cartridges.

            Any other questions? I mean, do you have any serious questions?

            The dust kicking is kind of silly.

            1. “Lexmark isn’t allowed to manufacture patented ink cartridges.”

              Maybe you should reread the article. That’s what its boils down to, as long as they use components originally sold by the patent owner at least.

              I wonder what would be the ruling if there were a third party involved, that disassembled the used cartridges into smaller sub-componets and sold those to Lexmark and Lexmark reassembled them back into ink cartridges from an earlier stage in the manufacturing process. Would they be infringing then?

                1. As designed and originally sold, mere refilling does not work.

                  So no, there is no such “just refilling.”

                2. Except the patent over those particular materials is exhausted…

                  So, turns out all they are doing is “refilling”

                3. J: “
                  So, turns out all they are doing is “refilling”

                  No. The act of what they are actually doing is not a function of whether or not the patent is exhausted.

                  The fact of the matter is simply that this is NOT a case of “mere refilling.”

                  There is no spin around that fact.

                4. there is no such “just refilling.”

                  Eventually “anon” will get around to denying the universe. All in the service of “strong patents”! Very serious stuff.

                5. I see what you are saying. The physical act is more than refilling.

                  So the fact they removed the chip and repurposed them means that Impressions is a bad bad person? Even if they are, why does that matter?

                6. Closer, but still off, J.

                  I pass no such judgement on whether they are a “bad” person (much less a “bad bad bad” person 😉 ), and the additional actions MAY matter because a real difference is in play between “just filling” and “more than just filling.”

                  Going after someone “just filling” – especially when what is being filled is something designed to be replenishable – will most likely get the person seeking to stop the other (your words: bad bad bad) person laughed out of court. Circumventing controls and changing the components in order to “just fill” MAY seem more “culpable” to a court.

                  At least with the “adders,” an argument could be attempted (and note that I am NOT saying that this is a good argument) that “repair” is occurring.

        2. Actually, there is a bit in the S.Ct. quote that I’m struggling with. s. 271 says “(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.”

          The S.Ct. appears to say he can “sell” (not infringement due to exhaustion), engage in some types of “use” by eating, feeding to animals (not infringement due to exhaustion). So what is the principled distinction between another type of “use” planting (infringement, not exhausted) and/or “making” (infringement, not exhausted)?

          1. what is the principled distinction between … planting [an unpurchased seed for the purpose of making more seed] (infringement, not exhausted) and/or “making” (infringement, not exhausted)?

            There isn’t one.

            The thing about seeds is that when you plant them, you make more seeds. I know it’s super complicated. But once you keep this fact in mind, the distinction between these cases is pretty clear.

            1. MM, but making more seeds is by itself not infringement if Bowman had not treated those seeds with RR to purify the product, etc. If Bowman had simply planted the mixed seed and not used RR, there would probably have been no issue.

              1. This is not correct. Monsanto’s claims cover the recombinant DNA molecule in the RoundUp Ready seeds. As soon as the DNA is replicated (which occurs long before the glyphosate selection step) the patent is infringed.

                1. Greg, not in Bowman’s case. The court’s ruling was that Bowman infringed by creating additional seeds.

                  He started with X amount of patented seed and, after planting and harvesting and using RR, he ended up with X+ amount of the patented seed.

                2. 6, perhaps. But obtaining additional seed (of the patented variety) was required for infringement. I would think that Monsanto could not prove that additional seed of the patented variety (plant X, harvest X+) were the results of simple planting and harvesting of commodity seed that contained unknown amounts of the patented variety.

                  What Bowman did was use RR to kill off the unpatented variety so that he harvested only the patented variety. Having done that, he could dispense entirely with buying the patented variety from Monsanto. Thus the use of RR was actually critical to the result.

          2. [W]hat is the principled distinction between another type of “use” planting (infringement, not exhausted) and/or “making” (infringement, not exhausted)?

            Please permit me to offer two thoughts (which are, perhaps, worth no more than you have paid for them).

            (1) Think back to the days when Edison owned a patent on the incandescent light bulb. If you purchased one of Edison’s patented bulbs, you were free to take it home and disassemble it to study its component parts and how they were assembled. Based on this study, you might be physically and intellectually able to reverse engineer the bulb and build more new bulbs, but you would not be legally entitled to do so. This is, I believe, a fairly uncontroversial summation of the law on exhaustion.

            Now flash forward to the Roundup Ready seeds. By analogy, you are free to plant the seeds and to grow new soybean plants. You are not free (except by Monsanto’s say-so) to let those plants go to maturity and produce new seeds. This is nothing more than an application of the same rules that have obtained for well over a century by the time that Mr. Bowman brought his case to the Supreme Court.

            As it happens, Monsanto knows that no one will want to buy the patented seeds if they are not allowed to let the nascent plants go to maturity and produce a new crop of seeds, so Monsanto agrees to this much and no more. You are not permitted to make new copies of a patented invention, but Monsanto grants you a very limited permission to make one set of new copies, but no more. There is nothing about this that is in any wise inconsistent with previous law. This is simply the same law of exhaustion that has always been applied, applied now to the technologically original circumstance of a self-replicating technology. The law as applied, however, is bog-ordinary law, no different than the rule applied in Bloomer or Univis or any other case.

            (2) As for the principle, I would urge one to remember the big picture. The patent law is enacted as an incentive to innovation, and therefore whenever you are confronting a novel situation to which to apply the patent law, you should ask yourself “which answer to this question of first impression will do more to incentivize innovation?”. If the Court had held that Bowman really were shielded by the exhaustion doctrine, that would cut the legs out from any incentive to develop self-replicating technologies. Therefore, one should distinguish among “eat” and “re-sell” and “plant in ground” as regards exhaustion, because “eat” and “re-sell” have only minimal impact on the incentive effects of the patent law, but “plant in ground” has a potentially very large, negative effect.

            1. Except for the fact that one and no more is allowed – by Monsanto – to be put into the stream of commerce with no strings attached.

              And yes, the Supreme Court erred by omitting this from their decision.

              1. Except for the fact that one and no more is allowed – by Monsanto – to be put into the stream of commerce with no strings attached.

                I guess I do not quite see what point you hope to make here.

                Imagine that Thomas Edison had stamped a little note on the side of the boxes of light bulbs that said that the purchasers of a box of five bulbs is allowed to make another five—at the purchaser’s own expense and in the purchaser’s own facilities—so long as the work is done only on Tuesdays. Would you find this to be problematic, that Mr. Edison is attaching conditions to when the purchasers is permitted to make new bulbs, even though the existing bulbs were sold into the stream of commerce without conditions attached?

                1. You are not thinking Greg – the fact of the matter with this (Especially this) item is that a normal, natural and indeed primary use is “make.”

                  You are in error to try to draw a parallel to an item that does not include the “use” = “make.”

                2. [T]he fact of the matter with this (Especially this) item is that a normal, natural and indeed primary use is “make.”

                  Fine. This is a perfectly sensible argument for the proposition that there should be a special exception to exhaustion law for self-replicating technologies. This is not even the beginning of an argument, however, for the proposition that what you are describing is the law.

                3. You mean, EXCEPT FOR this most recent case and its use of the phrase “all uses”….?

                  Oops.

                  Note as well that such just is NOT a “special exception.” Such use predates mankind.

                4. Note as well that such just is NOT a “special exception.” Such use predates mankind.

                  As thusly phrased, this is a plain non sequitur. The putative conclusion does not follow from the premise. What is the connection you perceive between the two?

            2. “Cutting the legs out” is a nice way of saying that the Court made a policy decision and changed the law of exhaustion for those items whose natural primary use is that very self-replication.

              There are other ways to invent (sterile after the first gen, for example).

              You base your “should” on a desired policy not in accord with any understanding by Congress – and as already demonstrated – directly at odds with the present case.

              You are still doing that pretending that the Court does not write itself into corners thing…

              1. There are other ways to invent (sterile after the first gen, for example).

                Two points:

                (1) You would have to invent the technology for sterile-after-the-first-generation yourself. No one has yet invented a commercially viable gene that makes possible the concept that you have in mind. Despite the hype in the press back in the 1990s, the so-called “terminator gene” never really worked.

                (2) Even if one had such a technology at one’s disposal, I am not sure why this point is relevant. The exhaustion law functions the same regardless of whether one has some self-help remedy to achieve the same end.

                The question at stake in Bowman was how the exhaustion law applied to those seeds. The Court answered that question, and thus we now know that the exhaustion doctrine ends Monsanto’s control over the exact seeds that it sells, but not over the next generation of seeds newly made by the purchaser. The issue of whether there was some technical fix that Monsanto could have used to stop Bowman’s operations is rather beside the point.

                1. You are still missing the point – much as did the Court.

                  THOSE seeds were placed into the stream of commerce (the ones that Bowman bought from the graineries – not the ones he replicated generation over next), and the placement into the stream of commerce was an aspect that Monsanto chose NOT to control in its agreement with (proper) first time purchase. That controlled choice by Monsanto is a point where exhaustion inures to THOSE seeds.

                  All of this is contained in what you may denigrate as “folderol” but only appears that way to you because of your own inadequacies.

                  YOU need to employ critical thinking to what the Court has done; what the Court has said, and just as importantly what the Court has omitted from what it has done and said.

                  You are still not doing that.

                  You are still acting like the Court cannot write itself into a corner.

            3. If you sell something that self-replicates it is only expected that the use of “make” is a normal use.

              Monsanto drew up the agreement for post sale control.

              Just because they did not want to force a perpetual restriction on that very item (nexus with their invention) that they already obtained a premium on, and set themselves up with a weak contract, does not mean that the natural use of the replicating item sold somehow gets special treatment.

              THAT is the direct take away from THIS case.

              Greg – ALL of these points were laid out in great detail on this blog prior to and after that case.

              You would do well to not just lean on what the Court did (because the Court did not do the right thing).

              The fact of the matter is that their not doing the right thing then immediately shows itself in the very next case the Court has decided.

              You have to be purposefully deluding yourself to not be seeing the rather evident conflicts in the exhaustion of ALL uses (including for self-replicating items, the use of “make”) that the Court lumps together (and criminal, you cannot say that the use of seed for self-replication is not one of those uses).

              If you want to follow your “logic” to its absurd conclusion, eliminate ALL exhaustion.

              1. [T]he natural use of the replicating item sold [does not] somehow get[] special treatment.

                Ah, but that is exactly the point I have been trying to make up and down this thread. Monsanto did not get any sort of “special” treatment. Bowman applied bog ordinary exhaustion law principles to Monsanto’s patent rights.

                Imagine you own a patent on an improved blacksmith’s hammer. If I buy one of your hammers, am I then authorized to use it to forge more of your patented hammers? No. The purchase of one patented article does not entitle the buyer to manufacture more such articles. The law could hardly be otherwise, lest patents be sapped of all power to incentivize innovation.

                So too, if one buys a bag of Monsanto’s patented seeds, is one thereby authorized to use them to make more seeds? No, and for all the same reasons. Exhaustion has never extended so far as to permit one to make additional copies of the purchased article. Far from Monsanto asking for special treatment, what you are arguing is special treatment for Bowman, who was asking for a new right to be included in the exhaustion doctrine which had never before obtained.

                You would do well to not just lean on what the Court did (because the Court did not do the right thing).

                As noted elsewhere on this thread, what the law is and what it should be are two separate questions. Regarding what the law is, how can you say that the Court got it wrong? There is no statute governing exhaustion. This is pure common law. By definition, the law of patent exhaustion is whatever the Court says it is. As regards what the law should be, how do you purport to know that the Court ought to have broken with over a century of precedent to carve out a special rule for self-replicating technologies? Is there any obvious reason to believe that the existing rules are unjust or inadequate?

                1. Once again – it is plain error to treat “use” = “make” as not a part of items that are self-replicating.

                  Your hammer example is a fallacy and is quite disingenuous on this point.

          3. Z, you seem to be under the impression that the Supreme Court ruled in Bowman that mere planting of the commodity seed purchased from the grain elevators was an infringement.

            Correct?

    2. Nonsense. Bowman acknowledges that the actual seed sold may move through the market unclouded by the patent (133 S. Ct. at 1766, “Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans”). His only problem comes when he makes new seeds. This is not a difficult distinction to understand. Bowman may do whatever he wants with the seeds that he buys. He infringes, however, if we makes new seeds. Same rule as with disc brakes, or polymer resins, or printed circuit boards, or any other patented technology that you care to name.

      1. Use does not equal make in any of those other examples though.

        Not only is that a difference here, the primary use of seeds IS…

        …planting them.

        It is also tied directly to the nexus of the patent (and why Monsanto is able to charge what it charges) the very first time it sells a seed (that is then planted).

        So…. your claim of “Same rules as with…” is just not quite correct.

        You really need to read THIS case again, Greg. THIS case is saying something completely different than the takeaway from the Monsanto case. You are focusing FAR too much on the “that use of the exhausted item is MAKING NEW SEEDS” and not focusing enough on the “THAT USE OF THE EXHAUSTED ITEM is making new seeds.”

        1. Please use more caps! It gets very persuasive that way and totally doesn’t look like you’re hyperventilating a pile of nonsense.

        2. …and yes, the plain fact of the matter that an item that is a self-replicating item is being sold is an important qualifier.

          Not only is a premium charged, but the premium charged is FOR use of that (known) self-replicating nature.

          This is why the context of the sale with the nexus of the invention is important when we are discussing exhaustion.

          1. This is why the context of the sale with the nexus of the invention is important when we are discussing exhaustion.

            This reads to me like the thesis of a law review article, and considered from that point of view, I really take no exception to the assertion. If you think that the law should consider the disclosed utility when assessing exhaustion of a patent, that is a fair position to adopt. I happen to disagree, but I can concede that there are points in favor of the proposed rule.

            The problem I see so far, however, is that you are asserting that Lexmark conflicts with (implicitly overrules?) Bowman. That is a statement not about what the law should be, but rather about what the law is. Considered from that point of view, you really cannot be more wrong.

            Bowman is still good law. It is not even a little bith compromised by today’s Lexmark decision. Any reading of Lexmark that proposes a conflict with Bowman is an overreading.

          2. “anon” the plain fact of the matter that an item that is a self-replicating item is being sold is an important qualifier

            You’re kidding. Really?

            Golly you learn something new here every day.

            LOL

        3. THIS case is saying something completely different than the takeaway from the Monsanto case.

          This case is not really tackling any of the same questions as Bowman. You can read the both of them all day until your eyes go crossed, and you are not going to spot a necessary contradiction. I know that you believe that Lexmark‘s mention of “no right left to enforce” necessarily impugns the logic of Bowman, but this is simply an illustration of the sound legal principle that “opinions are to be read in the light of the facts of the case under discussion. To keep opinions within reasonable bounds precludes writing into them every limitation or variation which might be suggested by the circumstances of cases not before the Court. General expressions transposed to other facts are often misleading.” Armour & Co. v. Wantock, 323 U.S. 126, 133 (1944).

          As Mr. Justice Jackson warned against, you have transposed a very general expression (“no right left to enforce”) onto a different and unrelated set of facts, and just as Justice Jackson foresaw, you have misled yourself into a legal dead-end.

          1. It is not my legal dead end…

            It is not an overreading of the present case.

            It is you NOT doing as I asked: taking a critical look at BOTH what the Court said and what it conveniently did not say in the Monsanto case that YOU need to do.

            And no, this is not a prospective view of what the law should be, but IS an integrated view of what the law (as written by the Court) is.

            Please do not pretend that the Supreme Court does not write itself into knots. There is zero credibility with such pretending.

            1. Please do not pretend that the Supreme Court does not write itself into knots. There is zero credibility with such pretending.

              Come now. You know that I do not regard all SCotUS cases as philosophically consistent. I am only too happy to concede that the Court can and does write itself into knots.

              The answer to the question of whether it can do so, however, does not tell us much one way or the other about whether it has done so here.

              More to the point, for purposes of answering the question “what is the law on this point?” (not, “what should the law be?”), the only relevant question is: “if I show up in court today with a Bowman style fact pattern, will the court apply Bowman, or will it regard Bowman as implicitly overruled by Lexmark?”

              If you plan to advise your clients to regard Bowman as overruled—or even substantially modified—by Lexmark, I would encourage you to substantially increase your malpractice coverage first.

              1. I am only too happy to concede that the Court can and does write itself into knots.

                Except you are doing the very opposite thing here; and then on top of it STILL pretending that you are not.

            2. [T]his is… an integrated view of what the law (as written by the Court) is.

              Fair enough. Perhaps you would like to cite your best case for the proposition that “the context of the sale with the nexus of the invention is important when we are discussing exhaustion.”

              Where has an appellate court of relevant jurisdiction ever employed that rule to reach its holding?

  14. “As a result, the sale transfers the right to use, sell, or import because those are the rights that come along with ownership, and the buyer is free and clear of an infringement lawsuit because there is no exclusionary right left to enforce.”

    What about manufacture? Wasn’t this dispute about manufacturing? Wasn’t this dispute about taking a used cartridge as a component and filling it with ink thereby manufacturing a new one and thereby infringing the patent?

    What about Bowman? Doesn’t this ruling imply the farmer is able to plant Roundup Ready seeds that he grew, or bought on the open market, rather than from brand M?

    1. I take your point, below, that it seems strange to call it “repair” when you put ink into an empty cartridge, but calling it “manufacture” seems even stranger. To borrow your examples, when I fill up the tank in my car, would you say that I just bought a “new” car, or that I had “manufactured” an automobile? When I eat lunch, am I somehow born anew in the eating?

      It may well be that Lexmark has nothing to do with the repair/remanufacture dichotomy, in which case my mentioning that dichotomy is a red herrring. If so, however, then this case has nothing to do with Bowman, so mentioning that case is equally a red herring.

      1. What would be the ruling, and what would be your view, if there were a third party involved, that disassembled used cartridges into smaller sub-componets and sold those to Lexmark and Lexmark reassembled them back into ink cartridges from an earlier stage in the manufacturing process. Would they be infringing then?

      2. To borrow your examples, when I fill up the tank in my car, would you say that I just bought a “new” car, or that I had “manufactured” an automobile? When I eat lunch, am I somehow born anew in the eating?

        What about when you alter a program on your computer so the program works more stably when running some other program that was recently updated? Is that making a new computer? Does the answer change if the update is called “fixing a bug”, i.e., does the alteration qualify as “a repair” in the case?

        Just askin’. 😉

    2. Doesn’t this ruling imply the farmer is able to plant Roundup Ready seeds that he grew

      Nope. He’d be making new seeds if he did that.

      able plant seeds he bought on the open market

      Not if he’s making infringing seeds.

      1. The started with separate components, combined them and shipped claimed cartridges out the door. Much the way the original manufacture did.

        1. And the patented components… were they physically made and molded from plastic in their own factory, or did they come from Lexmark?

          1. As I understand it, the container portion came from the customers of Lexmark.

            I’m not aware of any loop hole that lets one manufacture and sell a patented item from used components. Are you?

              1. What if the patented invention included toner and what the accused infringer bought as raw material did not include toner?
                They added toner, making a new infringing product and sold it?

                What if there were a third party involved, that disassembled used cartridges into smaller sub-componets and sold those sub components to to the accused infringer and the accused infringer reassembled them back into ink cartridges from an earlier stage in the manufacturing process. Would they be infringing then?

        1. As noted elsewhere (if the posts are ever allowed to see the light of day), the notion of “They refilled them” is substantively incomplete and akin to a mere half-truth.

  15. Kudos (almost) to Martin Snyder, who (almost) predicted today’s outcome back on 31 Jan, and (if you will forgive my unseemly boasting) kudos to me for correctly predicting that Justice Ginsburg would be the fly in the international exhaustion ointment here.

    1. …and you forgot (gee, what a surprise) kudos to anon that nails the underlying exhaustion doctrine principles.

      You are welcome.

      😉

      …and in trying to limit the no-dialogue edit flag, your comment below of “The fact that the answer is itself problematic illustrates why domestic exhaustion was the better rule.” is merely self-circular and conclusory. WHY is that answer “itself problematic?” WHY is this a step in the wrong direction?

      There is NO “sapping” patent rights. There IS an elimination of double-dipping ON those patent rights, and an elimination of the artificial arbitrage that so often resulted in the US subsidizing sales in other parts of the world. By the way, that (eliminating that artificial subsidizing) is a good thing.

      Also, to your comment of parroting what the Court scrivened, you are NOT paying attention as I asked you to. Buying the smokescreen and chugging the Kool-Aid are not signs of critical thinking.

      Please Greg – THINK for yourself and dig into those exhaustion doctrine fundamentals.

      The “make new copies” IS the primary use of seed. It also has a direct nexus with the invention and the use envisioned in the first sale.

      The Court saying it (and you repeating it) does not actually make it so.

      Additionally, IF you want to be correct as to somehow no exhaustion attaches, then ALL the graineries are necessarily engaged in patent infringement by selling that selfsAme product.

      Every last single one.

      1. There IS an elimination of… artificial arbitrage that so often resulted in the US subsidizing sales in other parts of the world. By the way, that (eliminating that artificial subsidizing) is a good thing.

        Maybe. As I said below to ac, I think that people expecting that this means that U.S. consumers get to buy drugs at E.U. prices will be surprised to discover that patents are not the only legal barrier creating an arbitrage opportunity. The FDA is also a barrier to gray-market drugs.

        There is NO “sapping” patent rights. There IS an elimination of double-dipping ON those patent rights…

        You take issue with my talking of “unwarranted,” and then you toss around “double-dipping”? Honestly, be serious, do.

        If you make it the rule that price discrimination across international borders is not permitted, then the result is that companies are no longer able to set prices to maximize revenues. Given that the whole point of patents is to enable companies to set prices in such a way as to maximize revenues (that is the quo that a company receives in exchange for its disclosure quid), I cannot imagine what you mean in saying that “[t]here is NO ‘sapping’ patent rights.” This does not totally destroy the value of the patent, but it lessens the value, to be sure.

        1. Double-dipping IS an entirely honest word to be used in this discussion.

          How else would you explain the attempt to profit twice (in the patent sense) from a single sale?

          Honestly, I don’t get why you are getting so up in arms on this.

      2. The “make new copies” IS the primary use of seed.

        Because “anon” says so! And he’s allergic to beans. Hence the loneliness.

      3. “There is NO “sapping” patent rights. There IS an elimination of double-dipping ON those patent rights, and an elimination of the artificial arbitrage that so often resulted in the US subsidizing sales in other parts of the world. By the way, that (eliminating that artificial subsidizing) is a good thing.”

        Anon, what do you mean by subsidizing sales in other parts of the world? I don’t understand it in the context of your double-dipping comment.

        1. Subsidizing means what it states.

          Currently, because a larger profit is obtainable in the US, companies can afford to sell “at a loss” in other markets without fear of the corrective actions of secondary market effects.

          Well, that was before this case took away that ability to double dip (obtain the benefit of the bargain for selling at a chosen price AND also carry on with patent protection against items that the patentee has chosen to place into the stream of commerce).

      4. Buying the smokescreen and chugging the Kool-Aid are not signs of critical thinking.

        At the risk of belaboring the obvious, tossing around a lot of empty buzzwords is not much evidence of critical thinking either.

        Please Greg – THINK for yourself and dig into those exhaustion doctrine fundamentals.

        Sage advice, no doubt. We will all do well to think for ourselves and dig into fundamentals.

        1. Buying the smokescreen…

          Mixing metaphors, while not exactly evidence against critical thinking, does not leave the reader with a lot of confidence that the writer has actually considered the position being advanced all that carefully.

            1. We can all do well to cultivate an appreciation for Mr. Berra’s wit. My Portuguese teacher was in Yogi Berra’s class (although he was just “Lawrence Berra” back then) in fifth grade. He has some great stories that he tells us about the young Berra.

    2. If there is more kudos to go round, then I suggest some for Ned Heller.

      Quoting from 1.2.1 on the Lexmark Oral Arguments: a Boon to the Sticker Industry? posting:

      “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.”

    3. Fish in a barrel Greg- thanks for the shout-out.

      You were perceptive to realize that Notorious RBG would retain her consistency on the territorial question.

      I’m pleased to see the court functioning well and predictably, especially as a check of the CAFC, which manages some real feats of sophistry in their policy making; and without a doubt, this was a major policy case.

    1. Rich’s Specter, the Federal Circuit was never even close with complying with Supreme Court precedent here. The result here was long foreordained.

      But, in the meantime, patent owners could double dip with impunity and did so. The disk drive industry was adversely affected big time by patent owners licensing the sale of components and then suing their customers for using those components.

      Good riddance to this very bad doctrine of the Federal Circuit. They long ago walked off the planet and into some fog only because of their arrogance and refusal to follow the Supreme Court.

      1. Rich’s Specter, the Federal Circuit was never even close with complying with Supreme Court precedent here. The result here was long foreordained.

        I certainly agree with this assertion as regards the conditional sales issue. Malinckrodt never really passed the smell test.

        I am harder pressed to see my way clear, however, to agreeing that a smackdown was “long overdue” on the domestic/international exhaustion question. What old SCotUS precendent do you think should have given the Jazz Photo court to understand that they were off on the wrong foot?

  16. Ginsburg isn’t without her logic. The natural result of the ruling is that at least one country will dissent on the patentability of an item, and that will have the effect of taking the actual inventor (according to the rest of the world) out of the country. If it sells the article there it doesn’t get the patent monopoly benefit yet exhausts its patent rights everywhere.

    Of course, its hard to argue with the logic that “[T]he Patent Act does not guarantee a particular price, much less the price from selling to American consumers” and “[Exhaustion occurs because] the patentee elects to give up title to an item in exchange for payment.” Patent rights are rights to exclude, and the fact that one can’t make money on the issue probably speaks more to someone’s business acumen and the market rather than the patent right.

      1. Don’t sell the article there.

        Yes, that is the answer to the problem. The fact that the answer is itself problematic illustrates why domestic exhaustion was the better rule.

        Presumably we want U.S. manufacturers to be able to sell abroad without compromising the value of their U.S. patent rights. The new international exhaustion rules saps the force of the incentive that the U.S. patent is supposed to provide.

        On a scale of 1 to 10 in terms of adverse effects on the patent system, this is probably no more than a 3. That is to say, I expect that this new rule represents only a small step in the wrong direction. Still, why take even a small step in the wrong direction?

        1. Presumably we want U.S. manufacturers to be able to sell abroad without compromising the value of their U.S. patent rights. The new international exhaustion rules saps the force of the incentive that the U.S. patent is supposed to provide.

          Exactly wrong.

          The incentive is being treated exactly the same (now), and it is the lack of international exhaustion that would create a non-equilibrium position allowing the (continued) (ab)use of having US citizens subsidize an artificially low foreign price.

          For as much as you stated that you share my dislike of this, you have done nothing but defend that desired “End.”

          1. [T]he lack of international exhaustion that would create a non-equilibrium position allowing the (continued) (ab)use of having US citizens subsidize an artificially low foreign price.

            It is in the nature of a patent that it allows a seller to set the price for a good or service at the price that will maximize profits. If a seller sets one price in the U.S. and a lower price in Mexico, that is because this differential price scheme maximizes profits. If you say that sellers ought not to be allowed to do this, then you are—in effect—saying that sellers ought not to be allowed to set their prices to maximize profits. But, as noted above, the whole point of patents is to allow a seller to set prices to maximize profit. This is the quo that the patentee receives in exchange for the disclosure quid.

            In other words, if you think that it is wrong (an “(ab)use”) for a seller to set prices so as to maximize profits, then why do you favor patents at all? I gather that you do not understand this (or are, at any rate, too publicly committed to the opposite position to admit that you understand), but your position here is fundamentally incoherent.

            Patents serve a socially useful purpose for precisely the same reason (and to precisely the same extent) that international price discrimination serves a socially useful purpose. There is no argument against the social utility of international price discrimination that is not equally well an argument against the social utility of patents. Either it is socially useful to allow an inventor to reap the highest financial reward that the market will bear, in return for the invention & disclosure, or it is not. You really cannot sustain an argument that one of these is good but the other bad.

            I am not surprised that the Supreme Court (which clearly—as presently constituted—takes a dim view of patents) should take up a position against international price discrimination. I am a bit harder pressed, however, to understand why someone who purports to favor patents should take up such a position.

            1. NOTHING about exhaustion (anywhere, let alone in one location versus another location) has a nexus with your “setting prices” “theory” here.

              ALL of these sales that we are talking about are sales voluntarily made by the patent holder, and at prices that the patent holder agrees to.

              You are STILL attempting to double sip and treat that double dipping as if nothing is amiss.

              This (Supreme Court decision) is NOT a statement that prices cannot be set differently in different parts of the world. This (Supreme Court decision) is a statement that you exhaust your patent rights when you decide to sell.

              The decision to sell remains the decision of the patent holder.
              As does the decision where to sell.
              As does the decision for how much to sell.

              The artificial arbitrage of NOT applying exhaustion based on a factor of “where” has been rectified. The ability to double dip has been removed.

              I “get” that you feel that this is somehow “not right,” but none of your defenses have shown why double dipping should be considered to be proper.

              Your argument as to “Either it is socially useful to allow an inventor to reap the highest financial reward that the market will bear, in return for the invention & disclosure, or it is not” simply attempts too much.

              The market will STILL bear what the market will bear – just now without the forced ability to double dip and stick US citizens for the ability to price lower in other sovereigns.

              Your surprise likely stems from the fact that you think that you understand the relationship between the two theories and that their similarities outweigh any differences.

              You are (again) simply wrong.

              One is a pure business model for profit maximization – totally absent from any nexus with innovation.

              The other is geared explicitly as an innovation reward mechanism.

              They simply do not have the same social benefit calculus, and your surprise stems from your own lack of grasping these things.

              1. This (Supreme Court decision) is NOT a statement that prices cannot be set differently in different parts of the world.

                Er, yes it is. The lowest price that the patentee sets anywhere in the world will now be the highest price that the patentee can charge in the U.S. Any attempt to charge a higher U.S. price will be arbitraged away.

                1. You confuse market effects with the ability (still present) for the patent holder to set the prices however they want to set them.

                  Your ascribe a statement to the Supreme Court that is simply not there.

                  Any arbitraging away will be by the natural action of secondary markets – control of which is in NO WAY a part of the sticks in the bundle of patent rights.

                  Greg – you are point blank wrong. Again.

                  Further – you have already whined about “improper term” of double dipping and I have already explained to you that the term is 100% accurate and appropriate (your hyperlink did not work, so I am not sure what you are misinterpreting and using as a foundation for your personal attack).

                  Further still, my argument does NOT boil down to “Your argument boils down to “it is alright for the patentee to make more than just the marginal cost of production, but not too much more,”

                  That just is not my argument. I am certainly not the one setting any “arbitrary or subjective discretion – and quite the opposite, my position allows the market itself to set that rate – something ELSE that you have whined about.

                  Aside from your own whining and your own ad hominem (silly? really?) maybe it is you that should lecture less and pay more attention to providing substantive and cogently connected legal arguments.

                  You are clearly not there.

                2. You confuse market effects with the ability (still present) for the patent holder to set the prices however they want to set them.

                  Confuse? Brother, there is no ability to “set” a price at a point that market will not pay. If I invent a cadmium ion battery that takes a charge 30% faster than the batteries that Apple & Samsung are currently using, I can set my price at $55/unit, patent or no. However, if I do not have a patent, then some other manufacturer can sell the same battery for $35, and good luck to me in actually convincing my customers to pay that $55 price.

                  In other words, the reason why an inventor tries to acquire a patent is not so that the inventor can set a price higher than marginal cost of production. The inventor wants a patent so that he can get a price higher than marginal cost of production.

                  Your answer that “the ability [is] still present… for the patent holder to set the prices however they want to set them” is no answer at all. You are still evacuating the from the patent the whole reason why most patentees actually want the patent in the first place, all in service of an ideology that somehow the patentee is asking “too much” if they charge the U.S. consumers as much as the U.S. market will bear.

                3. there is no ability to “set” a price at a point that market will not pay.

                  To the contrary, there is every ability to set such a price.

                  You may mean to say something else, but inoculating yourself against arbitrage is NOT a part of the patent right.

                  You are STILL wanting to insert some sort of secondary market control where no such cogent legal right for said control exists.

                  Controlling secondary market effects and the ability for a seller to set a price are two very different things.

                  One you have – and still have.
                  The other you never had (properly that is – with the consistent view of the meaning of the word “exhaustion”, albeit the “want” to have has always been present) – and still do not have.

                  Read again my post at 2 June, 6:23 pm. Tell me explicitly what statement therein is not correct. Do not tell me that you don’t like what I have to say (I already know that you do not like the inability to control secondary markets). Instead tell me what statement of mine is in error. THEN we can discuss whether or not what you think is in error is actually in error.

                4. To the contrary, there is every ability to set such a price.

                  If you mean merely that the patentee is still free after Lexmark to slap stickers on her goods that say “$55,” heedless of whether anyone will pay $55, you are certainly correct. That “ability” remains unaffected. However, the inventor has that “ability” even without a patent. The reason why an inventor seeks a patent is not merely so that she might write fanciful numbers on the product, but so that she might write numbers and have people agree to pay at the price specified in those numbers.

                  Under last week’s ruling the highest price a patentee can command in the U.S. is the lowest prices that the patentee charges anywhere else in the world. That fact dramatically lowers the profits that many patentees can hope to earn on their inventions. If you sap the financial reward, you vitiate the incentive that the patent is intended to provide. That is what Lexmark achieves—a greatly reduced incentive from patents.

                5. If you mean merely that the patentee is still free after Lexmark to slap stickers on her goods that say “$55,” heedless of whether anyone will pay $55, you are certainly correct.

                  What else would ability mean?

                  I see that you then drop right back into your fallacy argument and pretend that a first dip somehow magically WAS NOT OBTAINED.

                  Somehow you keep on wanting to talk about secondary markets as if they should not exist…..

                  Your parade of horribles is simply untrue, and you would have it that you MUST be able to control secondary markets in order that the first dip remains meaningful.

                  You keep on kicking up the same dust that I have already dispelled, Greg.

                  Stop.
                  Listen.
                  Understand.
                  Integrate.

              2. I “get” that you feel that this is somehow “not right,” but none of your defenses have shown why double dipping should be considered to be proper.

                If you will insist on loaded terminology like “double dipping,” that is your own look out, but please spare me hypocritical laments about the “unfairness” of loaded terminology in future.

                The reason why different prices in different markets is proper is because that is how a patentee maximizes profits. The desire to achieve profit maximization is the reason why someone seeks a patent in the first place.

                Your argument boils down to “it is alright for the patentee to make more than just the marginal cost of production, but not too much more,” where the determination of what constitutes “too much” is left entirely in your own, subjective discretion.

                This is the same logic that gives us price caps and march-in rights. The only way one can sanely hold the line against such anti-market mischief is to maintain consistently that the patentee is entitled—during the term of the patent—to make as much as the market will bear in the absence of fraud or coercion.

                You insist that it is morally wrong for the patentee to earn a profit in the U.S. excess of what the patentee earns in Mexico, even if the patentee can extract that U.S. profit without fraud or coercion. Therefore, your position is inconsistent with that one sane line. Either you believe that the patentee is entitled to what profits he can earn or you do not, and evidently (to read what you write), you do not.

                The market will STILL bear what the market will bear…

                No, it will not. Under a domestic exhaustion regime, the patentee is allowed to charge in the U.S. a price that maximizes profits in the U.S. and a price in Mexico that maximizes profits in Mexico. Under an international exhaustion regime, the patentee can only charge the price that maximizes profits in the U.S. (which is, in turn, a price that lowers profits in Mexico), because if the patentee charges in Mexico the price that maximizes profits in Mexico, then that will—through arbitrage—effectively become the price in the U.S., thus failing to maximize profits in the U.S.

                In other words, the total profits are always less under an international exhaustion regime than under a domestic exhaustion regime.

                … just now without the forced ability to… stick US citizens for the ability to price lower in other sovereigns.

                Is that the economic model you have in mind when you make this argument—that companies are “sticking” the U.S. consumer with the Mexican consumer’s deficiency?

                Well, at least this explains why you are taking the position you are taking. Still and all, that is a rather silly premise from which to begin your reasoning.

                Do you think that Samsung would lower prices in the U.S. if it could make more money in Mexico? That is to ask, even though U.S. consumers are evidently willing to pay ~$720 for a Galaxy 8, do you suppose that Samsung would say to itself “if we can get the Mexicans to cough up a little more per phone, let’s charge the Americans a little less than the amount that they are willing to pay”?

                Does it not seem more likely that Samsung is going to charge U.S. consumers every last penny that U.S. consumers are willing to pay, quite regardless of the price that Mexicans (or Greeks, or Koreans, of Argentines, etc) are willing to pay?

                1. I was able to see the link – and yet again, you are just wrong in how you are trying to portray the exchanges here.

                  You linked to me pointing out that the words you chose were not correct. That was NOT “lamenting about loaded language.”

                  I DID later in the conversation remark about YOUR whining about loaded language though.

                  It is becoming amazing just how wrong you are on SOOOO many points in our discussions.

                  Even your attempts at deflections are off kilter.

                  Here’s a bit of advice for you: if you cannot beat the arguments I present, acknowledge that fact.

                2. [I]f you cannot beat the arguments I present, acknowledge that fact.

                  Excellent advice for all concerned, no doubt.

          2. US citizens subsidize an artificially low foreign price…

            There is nothing “artificial” about a lower price in Mexico than in the U.S. Think of the Laffer curve.

            Imagine that I own a patent on a watch that costs $5 to manufacture and market. If I set my price for my patented wristwatch at $0/watch, I will taken in $0 in profits. If I set the price at $10/watch, the profits I bring in will be higher than the profits at the $0 price point. If I set the price at $20/watch, it is likely (albeit not certain) that the profits will be higher than at the $10 price point. There is a law of diminishing returns here, however. If I set the price at $1 million/watch, the profits will be essentially zero, because no one will buy my cheapo wristwatch at that price.

            In other words, there is an inflection in the slope of the curve as you plot profits as a function of sale price. The location of that inflection point is going to be different in the U.S. market than in the Mexican market, owing to the fact that U.S. consumers have (on average) more disposable income than Mexican consumers.

            In other words, if there is a price difference between Mexico and the U.S. in a non-regulated market (wristwatches, mobile phones, etc), this does not reflect a cross-market “subsidy.” The seller is not charging the U.S. consumer a higher price to “make up” the lower price that is charged to the Mexican consumer. Rather, this simply reflects the fact that the price that will maximize profits in Mexico is lower than the price that will maximize profits in the U.S.

            Any talk of a “subsidy” at play in this two-market price difference simply reflects a cloudy misunderstanding of the relevant economics.

              1. There is no statute for patent exhaustion. This is purely judge made law, crafted on the basis of policy concerns. I have presented policy arguments.

                Because there is no statute, all legal analysis comes down to an exposition of precedent. There is no SCotUS precedent on the question of domestic vs international exhaustion. What little precedent there is on this point is circuit precedent, and I have cited that (Jazz Photo).

                1. You remain incorrect, and there need not be a statute for patent exhaustion to understand that exhaustion – as that term is defined – simply does not carry with it any sense of “where sold” change in meaning.

                  You are STILL trying to insert a change, a change that is inconsistent with the very meaning of the term, and you are still wanting to do this as some type of default.

                  These actions serve one purpose: to protect a double sip and to control a natural secondary market that would arise as the consistent meaning of the word exhaustion is applied.

                  Your attempt to rely solely on Jazz Photo as the end all and be all shows a marked lack of critical thinking, and I would dare to use your own critique, exemplifies you making a bumper sticker result of the Jazz Photo case.

                  Legal analysis does not end with finding and citing a case that you think aligns with your point. It certainly does not end with whitewashing what the critical term includes – and does not include.

                2. These actions serve one purpose: to protect a double sip and to control a natural secondary market that would arise as the consistent meaning of the word exhaustion is applied.

                  That is two purposes. Well, I suppose the first is just a bit of fatuous question begging, so we can safely ignore it. I guess maybe it really is just, as you say, one purpose.

                  In any event, one cannot engage in international price discrimination without exercising some measure of control over the secondary market, so I can scarcely disagree with the purpose you name? What of it? How does this observation move us closer to establishing whether or not the Court got this one “right”?

                  Your attempt to rely solely on Jazz Photo as the end all and be all shows a marked lack of critical thinking…

                  Every time you write the words “critical thinking,” I am reminded of Inigo Montoya. You keep using that word. I do not think it means what you think it means.

                  Legal analysis does not end with finding and citing a case that you think aligns with your point.

                  Definitely not. If I keep coming back to Jazz Photo, it is not merely because it happens to be one precedent that suits my side of the discussion. I come back again and again to Jazz Photo because—before Tuesday—it was the only authoritative U.S. precedent on point, or at least the only one of which I am aware. Do you know another we should be discussing?

                3. [T]here need not be a statute for patent exhaustion to understand that exhaustion – as that term is defined – simply does not carry with it any sense of “where sold” change in meaning.

                  Right. We are in agreement on this point. The mere word “exhaustion” does not specify domestic exhaustion or regional exhaustion or international exhaustion. The word itself does not suffice to clarify the extent of the doctrine.

                  My point, however, was that you were asking in 7.1.1.1.2.1 for a legal analysis, and that is what I have been giving you all along. Because there is no statute here—there is no way to separate legal analysis from either (1) policy analysis or (2) reflection on lower court precedent. These are as close as you can get to a “legal” analysis on a point on which neither the Congress nor the SCotUS had previously spoken.

                4. The phrase

                  The mere word “exhaustion” does not specify domestic exhaustion or regional exhaustion or international exhaustion.

                  is not congruent with

                  The word itself does not suffice to clarify the extent of the doctrine.

                  You insert a lack of clarity where there is none. Consistency, it appears, is anathema to you.

                  You are not engaged in a legal analysis.
                  You are engaged in an attempt at propaganda spin.

        2. Further, there is NO such “supposed to provide” for sales to be able to hold onto rights exhausted.

          Where did you get that notion that exhaustion is somehow supposed to be different?

    1. The problem, Greg, for drug companies selling abroad are socialist, do- gooder price regulations. This is going to permit smart operators to buy drugs sold by the patentee abroad at much lower prices and to reimport them and sell them at lower prices, but at a good profit, in America. All one would have to do is convince the FDA that these drugs are the same as those sold in the US, which shouldn’t be that hard.

      That means, the drug companies are going to have to get serious about socialism outside the US. Cutting whole countries off from patented drugs if they do not back off their regulations might be a way to go.

      But it does look like the commie-socialists from the UN are in control of the agenda here and all does not look good for the drug companies.

      It is interesting that the most liberal justice on the Supreme Court understands the difficulties the majority decision puts on the likes of the drug companies.

      1. That means, the drug companies are going to have to get serious about socialism outside the US.

        This strikes me as an overestimation of the political power of Big Pharma. If Pharma actually had the political clout that you imagine (i.e., that Pharma could—if it ‘got serious’—convince other wealthy nations to raise their price caps, or eliminate the caps entirely), then those price caps would already be gone. The reason why those price caps exist is because Pharma has neither the lobbying clout nor the political power—no matter how “serious” it “gets”—to convince non-U.S. developed nations to raise their prices caps.

        No, there are really only two outcomes that are likely to prevail now. (1) The FDA stands as an import barrier in place of patents, and the status quo continues (where we massively subsidize drug prices in other nations, including nations where they are easily wealthy enough to pay their own way). (2) The FDA lets the lower priced drugs in, at which point the current business model of branded pharma implodes.

        If it is #2 that obtains, this will be a great thing for the generic drugs industry, and the end of the branded drugs industry. There is one good thing and one bad thing that would be sure to result in this scenario. The good thing is that current drugs would become much cheaper for U.S. consumers. The bad thing is that the drugs we have will be (with a few exceptions) the only drugs we will ever have for the foreseeable future.

        On the other hand, the possible second upside of scenario #2 is that there are a lot of very smart chemists, microbiologists, physiologists, (etc) working in branded pharma right now, and if it ceases to be financially possible for them to continue working in pharma, then they will go to work in other fields. This could result in a golden age of materials science, biotech, athletic training, (etc), as that talent disperses into the marketplace and finds its next most productive use.

    1. The term “bad law” seems the wrong choice of words here. If you mean merely that Bowman gave us a bad rule, that is your own opinion and you are very well entitled to it. If you mean, however, that Lexmark somehow undermines the Bowman rule, you will want to go back and re-read Bowman more carefully. There were contractual conditions printed on the Monsanto packaging, just like Lexmark’s conditions on its packaging in this case. Neither Bowman nor Lexmark, however, turned on the contents of these conditions, so that particular similarity between the two cases is rather beside the point.

      The Court has long held that it is fine to repair your existing stock of a patented article, but buying a patented article does not entitle you to manufacture more of that article. Here, Impression Prods. is simply refilling the existing cartridge. If Impression Prods. starts its work with 100 Lexmark cartridges, it ends with no more than 100, which sounds more like “repair” than “manufacturing.” By contrast, Mr. Bowman started with 100 seeds and finished with 10000. That sounds a great deal more like “manufacture” than “repair.”

      Nothing about today’s decision casts doubt on the distinction between “repair” and “new manufacture” that sits at the heart of Bowman. Therefore, there is no reason to suppose that Bowman remains anything other than good law. Indeed, it would be strange that Justice Kagan (who spoke for a unanimous court in Bowman) would have consented to join the Chief Justice’s opinion in full—without even a line in concurrence—if there were any reason to believe that today’s opinion somehow unsettled the Bowman rule.

      1. You jump too soon to criticize me (yet again), Greg.

        It is you that needs to return to the Monsanto decision and see BOTH what the Court stated there – and what they (conveniently) omitted.

        …and the Monsanto case had nothing to do with any repair doctrine.

        1. [T]he Monsanto case had nothing to do with any repair doctrine.

          Bowman v. Monsanto Co., 133 S. Ct. 1761, 1766 (2013):

          [T]he [exhaustion] doctrine restricts a patentee’s rights only as to the “particular article” sold; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item. “[T]he purchaser of the [patented] machine … does not acquire any right to construct another machine either for his own use or to be vended to another.” Mitchell v. Hawley, 16 Wall. 544, 548, 21 L.Ed. 322 (1873); see Wilbur-Ellis Co. v. Kuther, 377 U.S. 422, 424, 84 S.Ct. 1561, 12 L.Ed.2d 419 (1964) (holding that a purchaser’s “reconstruction” of a patented machine “would impinge on the patentee’s right `to exclude others from making’ … the article” (quoting 35 U.S.C. § 154 (1964 ed.))). Rather, “a second creation” of the patented item “call[s] the monopoly, conferred by the patent grant, into play for a second time.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 346, 81 S.Ct. 599, 5 L.Ed.2d 592 (1961). That is because the patent holder has “received his reward” only for the actual article sold, and not for subsequent recreations of it. Univis, 316 U.S., at 251, 62 S.Ct. 1088. If the purchaser of that article could make and sell endless copies, the patent would effectively protect the invention for just a single sale. Bowman himself disputes none of this analysis as a general matter: He forthrightly acknowledges the “well settled” principle “that the exhaustion doctrine does not extend to the right to `make’ a new product.” Brief for Petitioner 37 (citing Aro, 365 U.S., at 346, 81 S.Ct. 599).

          Unfortunately for Bowman, that principle decides this case against him. Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission…

      2. Repair? An empty ink cartridge is broken? My car is out of gas, is it broken too? I’m hungry, should my health insurance cover lunch?

        If the patent rights were exhausted when the seed was sold, how is it they get reincarnated when the seed is planted?

        1. Because naturally you repair something by using that something for its primary use….

          A use that (literally) quite naturally consumes the item…

          Oh wait…

        2. My car is out of gas, is it broken too?

          Nope. And thanks to the Supreme Court, you won’t have to worry about ever having to re-purchase “your car” in order to feel confident that you can fill your tank without infringing.

          Of course, if the PCA (Patent Cl0 wns of America) get their way, you might have to worry about infringing a method of filling your tank while thinking about how much money you need to withdraw from the ATM. Jobs!

  17. SCOTUS got this right on both counts. The FedCir’s first-sale doctrine has always been nonsensical.

    Especially in a consumer-oriented, mass-sale goods, this effectively wipes out attempts on territorial and fields of use restrictions. Good!

    I never really understood people who’d advocate the something like a car manufacturer could limit a resale market by saying a car was patented and thus subject to some license agreement.

  18. Well, there goes the pharma (and other industries). We all knew it was only going to be a matter of time…

    1. I think that this goes too far. There used to be two barriers to patented drugs coming into the U.S. market. The first was patents, and the second was FDA. Even now that the SCotUS has compromised that first barrier, there is still the second, and one barrier is enough. In other words, I expect that this decision will have less effect on pharma than one might at first expect.

      1. What (hopefully) this does is end the Pharma practice of using inflated prices in the US to subsidize its foreign sales.

        And yes, that would be a good thing.

        1. I resent, as much as you do, the fact that we in the U.S. are made to subsidize drug prices in the entire rest of the world. As I explained, however, I doubt that this case will quite end that state of affairs. One needs a change in FDA law as well as in patent law to reach the result that you are describing.

      2. One slight problem – the FDA is still controlled by the administration. Thus, the government is typically in control of the procedures for stopping violations. This means also that whoever is in control of the FDA has the power to respond as they see fit, even if there are private complaints. Unlike patents, where an aggrieved party is able to take matters (somewhat) into their own hands and respond by initiating a lawsuit, it depends on the will of the federal employees – who may march to a different tune (e.g., see what is happening at the EPA).

        1. Yes, this is a very fair point. The patent barrier was less changeable according to which way the political winds were blowing than is the FDA barrier. Now that there is no longer a patent barrier to backstop the FDA barrier, I expect that the FDA barrier will turn into something of a political football.

  19. In other news, SCOTUSblog reports that “The court called for the views of the acting solicitor general today in patent case about lost profits arising from prohibited combinations occurring outside of the United States (case page here).”

    WesternGeco LLC v. ION Geophysical Corp.

    link to scotusblog.com

  20. Ginsburg is right. A foreign sale shouldn’t exhaust domestic rights. Basically, the SCOTUS is just in a ream the patentee mode. Burn baby burn.

    1. I agree that domestic exhaustion was the better rule. Unfortunately, once Kirtsaeng came down the way it did, today’s switch to international exhaustion was pretty much inevitable. By this point, one rather gives up hope of the Court getting IP cases right any more often than the proverbial blind squirrel find a nut.

      I would like to think that the Congress will revise the statutes (both patent & copyright) to correct this mistake, but somehow I am not holding my breath.

                1. Maybe you do not have a reply that holds up to the understanding of the term “exhaustion” as lacking any notion of “where sold,” that holds up to the understanding that a first dip is NOT being argued about, and that holds up to the fact that it is the second dip and the attempted control of a natural secondary market that your position resolves to in your conclusory statement of “International exhaustion is a mistake.

                2. As Greg (and his Euro buddy Confused) have failed to address the direct and simple point that what they are attempting to do is inject into the First Dip the ability to control secondary markets (the Second Dip), that point – that critical point – remains their greatest weakness in this discussion.

                3. Please Pardon Potential (re)Post…

                  As Greg (and his Euro buddy Confused) have failed to address the direct and simple point that what they are attempting to do is inject into the First Dip the ability to control secondary markets (the Second Dip), that point – that critical point – remains their greatest weakness in this discussion.

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