Impression Prods., Inc. v. Lexmark Int'l, Inc.
Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. ___ (2017), is a decision of the Supreme Court of the United States on the exhaustion doctrine in patent law in which the Court held that after the sale of a patented item, the patent holder cannot sue for patent infringement relating to further use of that item, even when in violation of a contract with a customer or imported from outside the United States.[1] The case concerned a patent infringement lawsuit brought by Lexmark against Impression Products, Inc., which bought used ink cartridges, refilled them, replaced a microchip on the cartridge to circumvent a digital rights management scheme, and then resold them. Lexmark argued that as they own several patents related to the ink cartridges, Impression Products was violating their patent rights. The U.S. Supreme Court, reversing a 2016 decision of the Federal Circuit, held that the exhaustion doctrine prevented Lexmark's patent infringement lawsuit, although Lexmark could enforce restrictions on use or resale of its contracts with direct purchasers under regular contract law (but not as a patent infringement lawsuit). Besides printer and ink manufacturers, the decision of the case could affect the markets of high tech consumer goods and prescription drugs.[2]
Lexmark International, Inc. makes and sells printers and toner cartridges for its printers. Lexmark owns a number of patents that cover its cartridges and their use. Lexmark sold the cartridges at issue in this case—some in the United States and some abroad.
Lexmark's domestic sales were in two categories. A "Regular Cartridge" is sold at "list price" and confers an absolute title and property right on the buyer.[a] A "Return Program Cartridge" is sold at a discount of about 20 percent, and is subject to post-sale restrictions: The buyer may not reuse the cartridge after the toner runs out and may not transfer it to anybody else. The first branch of the case turns on the legal status of these post-sale restrictions.
Lexmark manufactured the toner cartridges with microchips in them, which send signals to the printers indicating toner level. When the amount of toner in a cartridge falls below a certain level, the printer will not operate with that cartridge. Also, the printer will not operate with a Return Program Cartridge that has been refilled by a third party. Thus, Lexmark's technology prevented violation of the post-sale restriction against refilling the Return Program Cartridges. The Regular Cartridges do not have this anti-refill feature and can therefore be refilled and reused (but they cost 20 percent more).[b]
"To circumvent this technological measure," however, "third parties have 'hacked' the Lexmark microchips. They created their own "unauthorized replacement" microchips that, when installed in a Return Program cartridge, fool the printer into allowing reuse of that cartridge. Various companies[c] purchase used Return Program Cartridges from the customers who bought them from Lexmark. They replace the microchips with "unauthorized replacement" microchips, refill the cartridges with toner, and sell the "re-manufactured" cartridges to resellers such as Impression Products for marketing to consumers for use with Lexmark printers. Lexmark had previously argued in Lexmark International, Inc. v. Static Control Components, Inc. that replacing these microchips violated copyright law and the Digital Millennium Copyright Act (DMCA), but both federal and the Supreme Court have ruled against Lexmark, affirming that replacing the microchips is not in violation of copyright.
The second branch of the case involves cartridges that Lexmark sold outside the US. While some of the foreign-sold cartridges were Regular Cartridges and some were Return Program Cartridges, this branch of the case does not involve any distinction among the two types of imported cartridges.
