



Score one for the little guys. In a precedent-setting decision handed down this morning, the U.S. Supreme Court ruled that a company’s patent rights are forfeited once they sell an item to a consumer under the “first sale” doctrine. This idea was central to Impression Products, Inc. v Lexmark Int’l, Inc. and is a major blow to companies that sell their printers for (relatively) low prices and then recoup any losses on the sale of expensive ink and toner cartridges.

Lexmark originally set its sights on Impression Products, which is a small company that specializes in remanufacturing print cartridges for resale at prices much lower than what a customer would pay for a “genuine” Lexmark product. These cartridges often have no noticeable difference in performance compared to genuine ink or toner cartridges — the only real difference is that customers can save a lot of money by going the remanufactured route. This secondary market for cartridges not only has implications for regular Joes looking to save a buck, but also businesses that are always looking to cut costs.

While other toner remanufacturing companies settled out of court under the threat of legal action from Lexmark, Impression Products decided to take a stand and ended up at the U.S. Supreme Court, where justices handed the small company a landslide victory. According to Bloomberg, the justices ruled in favor of Impression Products 8-0 or 7-1, depending on certain aspects of the case. Only Justice Ruth Bader Ginsburg dissented partially, saying that patent rights should not be exhausted for products sold overseas.

"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," wrote Chief Justice John Roberts. In his opinion, Chief Justice Roberts contended that Lexmark’s heavy-handed approach to discouraging cartridge remanufacturers only emboldened them to find new and innovative ways to circumvent the company’s defenses.



“Many kept acquiring empty Return Program cartridges and developed methods to counteract the effect of the microchips. With that technological obstacle out of the way, there was little to prevent the remanufacturers from using the Return Program cartridges in their resale business,” said Chief Justice Roberts. “After all, Lexmark’s contractual single-use/no-resale agreements were with the initial customers, not with downstream purchasers like the remanufacturers.”

"Lexmark pushes its patent rights to the limit. It tried to restrict the use or resale of patented products after they have already been sold,” added Case Collard, a partner at international law firm Dorsey & Whitney that specialists in IP disputes. “Imagine if you could not resell the patented iPhone that you purchased because Apple continued to enforce its patent rights after it sold the product. This is what Lexmark tried to do with its printer cartridges.”

“The Supreme Court confirmed it applies to sales made in the US and abroad,” Collard added. “If a patent-holder like Lexmark wants to limit the rights of a purchaser, perhaps they can do so under contract law, but once they have made a sale, they can no longer bring an action under the patents statutes.”

We reached out to Lexmark for a statement on today’s ruling, but have not yet received a response.