NOTICE: This opinion is subject to
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SUPREME COURT OF THE UNITED STATES
_________________
No. 15–1189
_________________
IMPRESSION PRODUCTS, INC., PETITIONER
v. LEXMARK INTERNATIONAL, INC.
on writ of certiorari to the united states
court of appeals for the federal circuit
[May 30, 2017]
Chief Justice Roberts delivered the opinion of
the Court.
A United States patent entitles the patent
holder (the “patentee”), for a period of 20 years, to “exclude
others from making, using, offering for sale, or selling [its]
invention throughout the United States or importing the invention
into the United States.” 35 U. S. C. §154(a). Whoever
engages in one of these acts “without authority” from the patentee
may face liability for patent infringement. §271(a).
When a patentee sells one of its products,
however, the patentee can no longer control that item through the
patent laws—its patent rights are said to “exhaust.” The purchaser
and all subsequent owners are free to use or resell the product
just like any other item of personal property, without fear of an
infringement lawsuit.
This case presents two questions about the scope
of the patent exhaustion doctrine: First, whether a patentee that
sells an item under an express restriction on the purchaser’s right
to reuse or resell the product may enforce that restriction through
an infringement lawsuit. And second, whether a patentee exhausts
its patent rights by selling its product outside the United States,
where American patent laws do not apply. 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.
I
The underlying dispute in this case is about
laser printers—or, more specifically, the cartridges that contain
the powdery substance, known as toner, that laser printers use to
make an image appear on paper. Respondent Lexmark International,
Inc. designs, manufactures, and sells toner cartridges to consumers
in the United States and around the globe. It owns a number of
patents that cover components of those cartridges and the manner in
which they are used.
When toner cartridges run out of toner they can
be refilled and used again. This creates an opportunity for other
companies—known as remanufacturers—to acquire empty Lexmark
cartridges from purchasers in the United States and abroad, refill
them with toner, and then resell them at a lower price than the new
ones Lexmark puts on the shelves.
Not blind to this business problem, Lexmark
structures its sales in a way that encourages customers to return
spent cartridges. It gives purchasers two options: One is to buy a
toner cartridge at full price, with no strings attached. The other
is to buy a cartridge at roughly 20-percent off through Lexmark’s
“Return Program.” A customer who buys through the Return Program
still owns the cartridge but, in exchange for the lower price,
signs a contract agreeing to use it only once and to refrain from
transferring the empty cartridge to anyone but Lexmark. To enforce
this single-use/no-resale restriction, Lexmark installs a microchip
on each Return Program cartridge that prevents reuse once the toner
in the cartridge runs out.
Lexmark’s strategy just spurred remanufacturers
toget more creative. Many kept acquiring empty Return Program
cartridges and developed methods to counteract the effect of the
microchips. With that technologicalobstacle out of the way, there
was little to prevent the re-manufacturers from using the Return
Program cartridges in their resale business. After all, Lexmark’s
contractual single-use/no-resale agreements were with the initial
customers, not with downstream purchasers like the
remanufacturers.
Lexmark, however, was not so ready to concede
that its plan had been foiled. In 2010, it sued a number of
remanufacturers, including petitioner Impression Products, Inc.,
for patent infringement with respect to two groups of cartridges.
One group consists of Return Program cartridges that Lexmark sold
within the United States. Lexmark argued that, because it expressly
prohibited reuse and resale of these cartridges, the
remanufacturers infringed the Lexmark patents when they refurbished
and resold them. The other group consists of all toner cartridges
that Lexmark sold abroad and that remanufacturers imported into the
country. Lexmark claimed that it never gave anyone authority to
import these cartridges, so the remanufacturers ran afoul of its
patent rights by doing just that.
Eventually, the lawsuit was whittled down to one
defendant, Impression Products, and one defense: that Lexmark’s
sales, both in the United States and abroad, exhausted its patent
rights in the cartridges, so Impression Products was free to
refurbish and resell them, and to import them if acquired abroad.
Impression Products filed separate motions to dismiss with respect
to both groups of cartridges. The District Court granted the motion
as to the domestic Return Program cartridges, but denied the motion
as to the cartridges Lexmark sold abroad. Both parties
appealed.
The Federal Circuit considered the appeals en
banc and ruled for Lexmark with respect to both groups of
cartridges. The court began with the Return Program cartridgesthat
Lexmark sold in the United States. Relying on its decision in
Mallinckrodt, Inc. v. Medipart, Inc., 976 F. 2d
700 (1992), the Federal Circuit held that a patentee may sell an
item and retain the right to enforce, through patent infringement
lawsuits, “clearly communicated, . . . lawful
restriction[s] as to post-sale use or resale.” 816 F. 3d 721,
735 (2016). The exhaustion doctrine, the court reasoned, derives
from the prohibition on making, using, selling, or importing items
“without authority.” Id., at 734 (quoting 35
U. S. C. §271(a)). When you purchase an item you
presumptively also acquire the authority to use or resell the item
freely, but that is just a presumption; the same authority does not
run with the item when the seller restricts post-sale use or
resale. 816 F. 3d, at 742. Because the parties agreed that
Impression Products knew about Lexmark’s restrictions and that
those restrictions did not violate any laws, the Federal Circuit
concluded that Lexmark’s sales had not exhausted all of its patent
rights, and that the company could sue for infringement when
Impression Products refurbished and resold Return Program
cartridges.
As for the cartridges that Lexmark sold abroad,
the Federal Circuit once again looked to its precedent. In Jazz
Photo Corp. v. International Trade Commission, 264
F. 3d 1094 (2001), the court had held that a patentee’s
decision to sell a product abroad did not terminate its ability to
bring an infringement suit against a buyer that “import[ed] the
article and [sold] . . . it in the United States.” 816
F. 3d, at 726–727. That rule, the court concluded, makes good
sense: Exhaustion is justified when a patentee receives “the reward
available from [selling in] American markets,” which does not occur
when the patentee sells overseas, where the American patent offers
no protection and therefore cannot bolster the price of the
patentee’s goods. Id., at 760–761. As a result, Lexmark was
free to exercise its patent rights to sue Impression Products for
bringing the foreign-sold cartridges to market in the United
States.
Judge Dyk, joined by Judge Hughes, dissented. In
their view, selling the Return Program cartridges in the United
States exhausted Lexmark’s patent rights in those items because any
“authorized sale of a patented article . . . free[s] the
article from any restrictions on use or sale based on the patent
laws.” Id., at 775–776. As for the foreign cartridges, the
dissenters would have held that a sale abroad also results in
exhaustion, unless the seller “explicitly reserve[s] [its] United
States patent rights” at the time of sale. Id., at 774, 788.
Because Lexmark failed to make such an express reservation, its
foreign sales exhausted its patent rights.
We granted certiorari to consider the Federal
Circuit’s decisions with respect to both domestic and international
exhaustion, 580 U. S. ___ (2016), and now reverse.
II
A
First up are the Return Program cartridges
that Lexmark sold in the United States. We conclude that Lexmark
exhausted its patent rights in these cartridges the moment it sold
them. The single-use/no-resale restrictions in Lexmark’s contracts
with customers may have been clear and enforceable under contract
law, but they do not entitle Lexmark to retain patent rights in an
item that it has elected to sell.
The Patent Act grants patentees the “right to
exclude others from making, using, offering for sale, or selling
[their] invention[s].” 35 U. S. C. §154(a). For over 160
years, the doctrine of patent exhaustion has imposed a limit on
that right to exclude. See Bloomer v. McQuewan, 14
How. 539 (1853). The limit functions automatically: 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., at 549–550. 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). The sale “terminates
all patent rights to that item.” Quanta Computer, Inc. v.
LG Electronics, Inc., 553 U. S. 617, 625 (2008) .
This well-established exhaustion rule marks the
point where patent rights yield to the common law principle against
restraints on alienation. The Patent Act “promote[s] the progress
of science and the useful arts by granting to [inventors] a limited
monopoly” that allows them to “secure the financial rewards” for
their inventions. Univis, 316 U. S., at 250. But once a
patentee sells an item, it has “enjoyed all the rights secured” by
that limited monopoly. Keeler v. Standard Folding Bed
Co., 157 U. S. 659, 661 (1895) . Because “the purpose of
the patent law is fulfilled . . . when the patentee has
received his reward for the use of his invention,” that law
furnishes “no basis for restraining the use and enjoyment of the
thing sold.” Univis, 316 U. S., at 251.
We have explained in the context of copyright
law that exhaustion has “an impeccable historic pedigree,” tracing
its lineage back to the “common law’s refusal to permit restraints
on the alienation of chattels.” Kirtsaeng v. John Wiley
& Sons, Inc., 568 U. S. 519, 538 (2013) . As Lord Coke
put it in the 17th century, if an owner restricts the resale or use
of an item after selling it, that restriction “is voide, because
. . . it is against Trade and Traffique, and bargaining
and contracting betweene man and man.” 1 E. Coke, Institutes of the
Laws of England §360, p. 223 (1628); see J. Gray, Restraints on the
Alienation of Prop-erty §27, p. 18 (2d ed. 1895) (“A
condition or conditional limitation on alienation attached to a
transfer of the entire interest in personalty is as void as if
attached to a fee simple in land”).
This venerable principle is not, as the Federal
Circuit dismissively viewed it, merely “one common-law
jurisdiction’s general judicial policy at one time toward
anti-alienation restrictions.” 816 F. 3d, at 750. Congress
enacted and has repeatedly revised the Patent Act against the
backdrop of the hostility toward restraints on alienation. That
enmity is reflected in the exhaustion doctrine. The patent laws do
not include the right to “restrain[ ] . . . further
alienation” after an initial sale; such conditions have been
“hateful to the law from Lord Coke’s day to ours” and are
“obnoxious to the public interest.” Straus v. Victor
Talking Machine Co., 243 U. S. 490, 501 (1917) . “The
inconvenience and annoyance to the public that an opposite
conclusion would occasion are too obvious to require illustration.”
Keeler, 157 U. S., at 667.
But an illustration never hurts. Take a shop
that restores and sells used cars. The business works because the
shop can rest assured that, so long as those bringing in the cars
own them, the shop is free to repair and resell those vehicles.
That smooth flow of commerce would sputter if companies that make
the thousands of parts that go into a vehicle could keep their
patent rights after the first sale. Those companies might, for
instance, restrict resale rights and sue the shop owner for patent
infringement. And even if they refrained from imposing such
restrictions, the very threat of patent liability would force the
shop to invest in efforts to protect itself from hidden lawsuits.
Either way, extending the patent rights beyond the first sale would
clog the channels of commerce, with little benefit from the extra
control that the patentees retain. And advances in technology,
along with increasingly complex supply chains, magnify the problem.
See Brief for Costco Wholesale Corp. et al. as Amici
Curiae 7–9; Brief for Intel Corp. et al. as Amici
Curiae 17, n. 5 (“A generic smartphone assembled from
various high-tech components could practice an estimated 250,000
patents”).
This Court accordingly has long held that, even
when a patentee sells an item under an express restriction, the
patentee does not retain patent rights in that product. In
Boston Store of Chicago v. American Graphophone Co.,
for example, a manufacturer sold graphophones—one of the earliest
devices for recording and reproducing sounds—to retailers under
contracts requiring those stores to resell at a specific price. 246
U. S. 8 –18 (1918). When the manufacturer brought a patent
infringement suit against a retailer who sold for less, we
concluded that there was “no room for controversy” about the
result: By selling the item, the manufacturer placed it “beyond the
confines of the patent law, [and] could not, by qualifying
restrictions as to use, keep [it] under the patent monopoly.”
Id., at 20, 25.
Two decades later, we confronted a similar
arrangement in United States v. Univis Lens Co.
There, a company that made eyeglass lenses authorized an agent to
sell its products to wholesalers and retailers only if they
promised to market the lenses at fixed prices. The Government filed
an antitrust lawsuit, and the company defended its arrangement on
the ground that it was exercising authority under the Patent Act.
We held that the initial sales “relinquish[ed] . . . the
patent monopoly with respect to the article[s] sold,” so the
“stipulation . . . fixing resale prices derive[d] no
support from the patent and must stand on the same footing” as
restrictions on unpatented goods. 316 U. S., at 249–251.
It is true that Boston Store and
Univis involved resale price restrictions that, at the time
of those decisions, violated the antitrust laws. But in both cases
it was the sale of the items, rather than the illegality of the
restrictions, that prevented the patentees from enforcing those
resale price agreements through patent infringement suits. And if
there were any lingering doubt that patent exhaustion applies even
when a sale is subject to an express, otherwise lawful restriction,
our recent decision in Quanta Computer, Inc. v. LG
Electronics, Inc. settled the matter. In that case, a
technology company—with authorization from the patentee—sold
microprocessors under contracts requiring purchasers to use those
processors with other parts that the company manufactured. One
buyer disregarded the restriction, and the patentee sued for
infringement. Without so much as mentioning the lawfulness of the
contract, we held that the patentee could not bring an infringement
suit because the “authorized sale . . . took its products
outside the scope of the patent monopoly.” 553 U. S., at
638.
Turning to the case at hand, we conclude that
this well-settled line of precedent allows for only one answer:
Lexmark cannot bring a patent infringement suit against Impression
Products to enforce the single-use/no-resale provision accompanying
its Return Program cartridges. Once sold, the Return Program
cartridges passed outside of the patent monopoly, and whatever
rights Lexmark retained are a matter of the contracts with its
purchasers, not the patent law.
B
The Federal Circuit reached a different result
largely because it got off on the wrong foot. The “exhaustion
doctrine,” the court believed, “must be understood as an
interpretation of” the infringement statute, which prohibits anyone
from using or selling a patented article “without authority” from
the patentee. 816 F. 3d, at 734 (quoting 35 U. S. C.
§271(a)). Exhaustion reflects a default rule that a patentee’s
decision to sell an item “presumptively grant[s] ‘authority’
to the purchaser to use it and resell it.” 816 F. 3d, at 742.
But, the Federal Circuit explained, the patentee does not have to
hand over the full “bundle of rights” every time. Id., at
741 (internal quotation marks omitted). If the patentee expressly
withholds a stick from the bundle—perhaps by restricting the
purchaser’s resale rights—the buyer never acquires that withheld
authority, and the patentee may continue to enforce its right to
exclude that practice under the patent laws.
The misstep in this logic is that 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.” United States v. General Elec.
Co., 272 U. S. 476, 489 (1926) (emphasis added). The right
to use, sell, or import an item exists independently of the Patent
Act. What a patent adds—and grants exclusively to the pat-entee—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.
The Federal Circuit also expressed concern that
preventing patentees from reserving patent rights when they sell
goods would create an artificial distinction between such sales and
sales by licensees. Patentees, the court explained, often license
others to make and sell their products, and may place restrictions
on those licenses. A computer developer could, for instance,
license a manufacturer to make its patented devices and sell them
only for non-commercial use by individuals. If a licensee breaches
the license by selling a computer for commercial use, the patentee
can sue the licensee for infringement. And, in the Federal
Circuit’s view, our decision in General Talking Pictures
Corp. v. Western Elec. Co., 304 U. S. 175 ,
aff’d on reh’g, 305 U. S. 124 (1938) , established that—when a
patentee grants a license “under clearly stated restrictions on
post-sale activities” of those who purchase products from the
licensee—the patentee can also sue for infringement those
purchasers who knowingly violate the restrictions. 816 F. 3d,
at 743–744. If patentees can employ licenses to impose post-sale
restrictions on purchasers that are enforceable through
infringement suits, the court concluded, it would make little sense
to prevent patentees from doing so when they sell directly to
consumers.
The Federal Circuit’s concern is misplaced. A
patentee can impose restrictions on licensees because a license
does not implicate the same concerns about restraints on alienation
as a sale. 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. But a license is not
about passing title to a product, it is about changing the contours
of the patentee’s monopoly: The patentee agrees not to exclude a
licensee from making or selling the patented invention, expanding
the club of authorized producers and sellers. See General Elec.
Co., 272 U. S., at 489–490. Because the patentee is
exchanging rights, not goods, it is free to relinquish only a
portion of its bundle of patent protections.
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. That licensee’s sale is treated,
for purposes of patent exhaustion, as if the patentee made the sale
itself. The result: The sale exhausts the patentee’s rights in that
item. See Hobbie v. Jennison, 149 U. S. 355 –363
(1893). A license may require the licensee to impose a restriction
on purchasers, like the license limiting the computer manufacturer
to selling for non-commercial use by individuals. But if the
licensee does so—by, perhaps, having each customer sign a contract
promising not to use the computers in business—the sale nonetheless
exhausts all patent rights in the item sold. See Motion Picture
Patents Co. v. Universal Film Mfg. Co., 243 U. S.
502 –507, 516 (1917). The purchasers might not comply with the
restriction, but the only recourse for the licensee is through
contract law, just as if the patentee itself sold the item with a
restriction.
General Talking Pictures involved a
fundamentally different situation: There, a licensee “knowingly
ma[de] . . . sales . . . outside the
scope of its license.” 304 U. S., at 181–182 (emphasis added).
We treated the sale “as if no license whatsoever had been granted”
by the patentee, which meant that the patentee could sue both the
licensee and the purchaser—who knew about the breach—for
infringement. General Talking Pictures Corp. v. Western
Elec. Co., 305 U. S. 124, 127 (1938) . This does not mean
that patentees can use licenses to impose post-sale restraints on
purchasers. Quite the contrary: The licensee infringed the
patentee’s rights because it did not comply with the terms
of its license, and the patentee could bring a patent suit against
the purchaser only because the purchaser participated in the
licensee’s infringement. General Talking Pictures, then,
stands for the modest principle that, if a patentee has not given
authority for a licensee to make a sale, that sale cannot exhaust
the patentee’s rights.
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.
III
Our conclusion that Lexmark exhausted its
patent rights when it sold the domestic Return Program cartridges
goes only halfway to resolving this case. Lexmark also sold toner
cartridges abroad and sued Impression Products for patent
infringement for “importing [Lexmark’s] invention into the United
States.” 35 U. S. C. §154(a). Lexmark contends that it
may sue for infringement with respect to all of the imported
cartridges—not just those in the Return Program—because a foreign
sale does not trigger patent exhaustion unless the patentee
“expressly or implicitly transfer[s] or license[s]” its rights.
Brief for Respondent 36–37. The Federal Circuit agreed, but we do
not. An authorized sale outside the United States, just as one
within the United States, exhausts all rights under the Patent
Act.
This question about international exhaustion of
intellectual property rights has also arisen in the context of
copyright law. Under the “first sale doctrine,” which is codified
at 17 U. S. C. §109(a), when a copyright owner sells a
lawfully made copy of its work, it loses the power to restrict the
purchaser’s freedom “to sell or otherwise dispose of
. . . that copy.” In Kirtsaeng v. John Wiley
& Sons, Inc., we held that this “ ‘first sale’ [rule]
applies to copies of a copyrighted work lawfully made [and sold]
abroad.” 568 U. S., at 525. We began with the text of §109(a),
but it was not decisive: The language neither “restrict[s] the
scope of [the] ‘first sale’ doctrine geographically,” nor clearly
embraces international exhaustion. Id., at 528–533. What
helped tip the scales for global exhaustion was the fact that the
first sale doctrine originated in “the common law’s refusal to
permit restraints on the alienation of chattels.” Id., at
538. That “common-law doctrine makes no geographical distinctions.”
Id., at 539. The lack of any textual basis for
distinguishing between domestic and international sales meant that
“a straightforward application” of the first sale doctrine required
the conclusion that it applies overseas. Id., at 540
(internal quotation marks omitted).
Applying patent exhaustion to foreign sales is
just as straightforward. Patent exhaustion, too, has its roots in
the antipathy toward restraints on alienation, see supra, at
6–8, and nothing in the text or history of the Patent Act shows
that Congress intended to confine that borderless common law
principle to domestic sales. In fact, Congress has not altered
patent exhaustion at all; it remains an unwritten limit on the
scope of the patentee’s monopoly. See Astoria Fed. Sav. &
Loan Assn. v. Solimino, 501 U. S. 104, 108 (1991)
(“[W]here a common-law principle is well established,
. . . courts may take it as given that Congress has
legislated with an expectation that the principle will apply except
when a statutory purpose to the contrary is evident” (internal
quotation marks omitted)). And differentiating the patent
exhaustion and copyright first sale doctrines would make little
theoretical or practical sense: The two share a “strong similarity
. . . and identity of purpose,” Bauer & Cie v.
O’Donnell, 229 U. S. 1, 13 (1913) , and many everyday
products—“automobiles, microwaves, calculators, mobile phones,
tablets, and personal computers”—are subject to both patent and
copyright protections, see Kirtsaeng, 568 U. S., at
545; Brief for Costco Wholesale Corp. et al. as Amici
Curiae 14–15. There is a “historic kinship between patent law
and copyright law,” Sony Corp. of America v. Universal
City Studios, Inc., 464 U. S. 417, 439 (1984) , and the
bond between the two leaves no room for a rift on the question of
international exhaustion.
Lexmark sees the matter differently. The Patent
Act, it points out, limits the patentee’s “right to exclude others”
from making, using, selling, or importing its products to acts that
occur in the United States. 35 U. S. C. §154(a). A
domestic sale, it argues, triggers exhaustion because the sale
compensates the patentee for “surrendering [those]
U. S. rights.” Brief for Respondent 38. A foreign sale
is different: The Patent Act does not give patentees exclusionary
powers abroad. Without those powers, a patentee selling in a
foreign market may not be able to sell its product for the same
price that it could in the United States, and therefore is not sure
to receive “the reward guaranteed by U. S. patent law.”
Id., at 39 (internal quotation marks omitted). Absent that
reward, says Lexmark, there should be no exhaustion. In short,
there is no patent exhaustion from sales abroad because there are
no patent rights abroad to exhaust.
The territorial limit on patent rights is,
however, no basis for distinguishing copyright protections; those
protections “do not have any extraterritorial operation” either. 5
M. Nimmer & D. Nimmer, Copyright §17.02, p. 17–26 (2017). Nor
does the territorial limit support the premise of Lexmark’s
argument. Exhaustion is a separate limit on the patent grant, and
does not depend on the patentee receiving some undefined premium
for selling the right to access the American market. A purchaser
buys an item, not patent rights. And exhaustion is triggered by the
patentee’s decision to give that item up and receive whatever fee
it decides is appropriate “for the article and the invention which
it embodies.” Univis, 316 U. S., at 251. The patentee
may not be able to command the same amount for its products abroad
as it does in the United States. But the Patent Act does not
guarantee a particular price, much less the price from selling to
American consumers. Instead, the right to exclude just ensures that
the patentee receives one reward—of whatever amount the patentee
deems to be “satisfactory compensation,” Keeler, 157
U. S., at 661—for every item that passes outside the scope of
the patent monopoly.
This Court has addressed international patent
exhaustion in only one case, Boesch v. Gräff, decided
over 125 years ago. All that case illustrates is that a sale abroad
does not exhaust a patentee’s rights when the patentee had nothing
to do with the transaction. Boesch—from the days before the
widespread adoption of electrical lighting—involved a retailer who
purchased lamp burners from a manufacturer in Germany, with plans
to sell them in the United States. The manufacturer had authority
to make the burners under German law, but there was a hitch: Two
individuals with no ties to the German manufacturer held the
American patent to that invention. These patentees sued the
retailer for infringement when the retailer imported the lamp
burners into the United States, and we rejected the argument that
the German manufacturer’s sale had exhausted the American
patentees’ rights. The German manufacturer had no permission to
sell in the United States from the American patentees, and the
American patentees had not exhausted their patent rights in the
products because they had not sold them to anyone, so “purchasers
from [the German manufacturer] could not be thereby authorized to
sell the articles in the United States.” 133 U. S. 697, 703
(1890) .
Our decision did not, as Lexmark contends,
exempt all foreign sales from patent exhaustion. See Brief for
Respondent 44–45. Rather, it reaffirmed the basic premise that only
the patentee can decide whether to make a sale that exhausts its
patent rights in an item. The American patentees did not do so with
respect to the German products, so the German sales did not exhaust
their rights.
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. pat-ent 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.
The theory behind the Government’s
express-reservation rule also wrongly focuses on the likely
expectations of the patentee and purchaser during a sale.
Exhaustion does not arise because of the parties’ expectations
about how sales transfer patent rights. More is at stake when it
comes to patents than simply the dealings between the parties,
which can be addressed through contract law. Instead, exhaustion
occurs because, in a sale, the patentee elects to give up title to
an item in exchange for payment. Allowing patent rights to stick
remora-like to that item as it flows through the market would
violate the principle against restraints on alienation. Exhaustion
does not depend on whether the patentee receives a premium for
selling in the United States, orthe type of rights that buyers
expect to receive. As a result, restrictions and location are
irrelevant; what matters is the patentee’s decision to make a
sale.
* * *
The judgment of the United States Court of
Appeals for the Federal Circuit is reversed, and the case is
remanded for further proceedings consistent with this opinion.
It is so ordered.
Justice Gorsuch took no part in the
consideration or decision of this case.
SUPREME COURT OF THE UNITED STATES
_________________
No. 15–1189
_________________
IMPRESSION PRODUCTS, INC., PETITIONER
v. LEXMARK INTERNATIONAL, INC.
on writ of certiorari to the united states
court of appeals for the federal circuit
[May 30, 2017]
Justice Ginsburg, concurring in part and
dissenting in part.
I concur in the Court’s holding regarding
domestic exhaustion—a patentee who sells a product with an express
restriction on reuse or resale may not enforce that restriction
through an infringement lawsuit, because the U. S. sale
exhausts the U. S. patent rights in the product sold. See
ante, at 5–13. I dissent, however, from the Court’s holding
on international exhaustion. A foreign sale, I would hold, does not
exhaust a U. S. inventor’s U. S. patent rights.
Patent law is territorial. When an inventor
receives a U. S. patent, that patent provides no protection
abroad. See
Deepsouth Packing Co. v.
Laitram Corp.,
406 U. S. 518, 531 (1972) (“Our patent system makes no claim
to extraterritorial effect.”). See also 35 U. S. C.
§271(a) (establishing liability for acts of patent infringement
“within the United States” and for “import[ation] into the United
States [of] any patented invention”). A U. S. pat-entee must
apply to each country in which she seeks the exclusive right to
sell her invention.
Microsoft Corp. v.
AT&T
Corp., 550 U. S. 437, 456 (2007) (“[F]oreign law alone,
not United States law, currently governs the manufacture and sale
of components of patented inventions in foreign countries.”). See
also Convention at Brussels, An Additional Act Modifying the Paris
Convention for the Protection of Industrial Property of Mar. 20,
1883, Dec. 14, 1900, Art. I, 32Stat. 1940 (“Patents applied
for in the different contracting States . . . shall be
independent of the patents obtained for the same invention in the
other States.”). And patent laws vary by country; each country’s
laws “may embody different policy judgments about the relative
rights of inventors, competitors, and the public in patented
inventions.”
Microsoft, 550 U. S., at 455 (internal
quotation marks omitted).
Because a sale abroad operates independently of
the U. S. patent system, it makes little sense to say that
such a sale exhausts an inventor’s U. S. patent rights.
U. S. patent protection accompanies none of a U. S.
patentee’s sales abroad—a competitor could sell the same patented
product abroad with no U. S.-patent-law consequence.
Accordingly, the foreign sale should not diminish the protections
of U. S. law in the United States.
The majority disagrees, in part because this
Court decided, in
Kirtsaeng v.
John Wiley & Sons,
Inc., 568 U. S. 519, 525 (2013) , that a foreign sale
exhausts U. S.
copyright protections. Copyright and
patent exhaustion, the majority states, “share a strong
similarity.”
Ante, at 14 (internal quotation marks omitted).
I dissented from our decision in
Kirtsaeng and adhere to the
view that a foreign sale should not exhaust U. S. copyright
protections. See 568 U. S., at 557.
But even if I subscribed to
Kirtsaeng’s
reasoning with respect to copyright, that decision should bear
little weight in the patent context. Although there may be a
“historical kinship” between patent law and copyright law,
Sony
Corp. of America v.
Universal City Studios, Inc., 464
U. S. 417, 439 (1984) , the two “are not identical twins,”
id, at 439, n. 19
. The Patent Act contains no
analogue to 17 U. S. C. §109(a), the Copyright Act
first-sale provision analyzed in
Kirtsaeng. See
ante,
at 13–14. More importantly, copyright protections, unlike patent
protections, are harmonized across countries. Under the Berne
Convention, which 174 countries have joined,[
1] members “agree to treat authors from other
member countries as well as they treat their own.”
Golan v.
Holder, 565 U. S. 302, 308 (2012) (citing Berne
Convention for the Protection of Literary and Artistic Works, Sept.
9, 1886, as revised at Stockholm on July 14, 1967, Arts. 1, 5(1),
828 U. N. T. S. 225, 231–233). The copyright
protections one receives abroad are thus likely to be similar to
those received at home, even if provided under each country’s
separate copyright regime.
For these reasons, I would affirm the Federal
Circuit’s judgment with respect to foreign exhaustion.
