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State of Exhaustion After Supreme Court's Impression Products v. Lexmark - What Impact on Structuring Sales and Licensing Transactions?

Recorded on: Jun. 28, 2017
Running Time: 01:08:45

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Taken from the briefing State of Exhaustion After Supreme Court's Impression Products v. Lexmark - What Impact on Structuring Sales and Licensing Transactions? recorded June 2017 in New York.

On May 31, 2017, the United States Supreme Court issued its opinion in Impression Products, Inc. v. Lexmark Int’l, Inc. In Impression Products the Court granted review on two questions related to the patent exhaustion doctrine, which holds that the initial authorized sale of a patented item terminates all patent rights to that item. The questions presented were:

1. Whether a sale that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy, and

2. Whether, in light of the holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2016) that the common law doctrine barring restraints on alienation that is the basis of exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article – authorized by the U.S. patentee – that takes place outside of the United States exhausts the U.S. patent rights in that article.

In an opinion viewed by some as “pro-consumer” and “pro-competitive” (see, e.g. “The Supreme Court Just Bolstered Your Right To Repair Stuff,” Wired Magazine, June 2, 2017), but by others as likely to result in higher prices and/or reduced product availability (see, e.g., "Patent Exhaustion at the Supreme Court: Industry Reaction to Impression Products v. Lexmark", ipwatchdog.com, May 30, 2017), the Court (again) reversed the Federal Circuit and held "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." Further expanding the impact of a first sale, the Court also held that exhaustion occurs as a result of the fact of a sale, not the location of a sale. “[T]he patentee elects to give up title to an item in exchange for payment.” Patent rights cannot continue to attach to a good as it flows through a market post sale. The implications of this Opinion will be significant across many industries.

Lecture Topics [01:08:45]

Please listen to Ira Jay Levy of Goodwin Procter LLP and Joseph Yang of PatentEsque Law Group, LLP, long-time co-chairs of the PLI Advanced Licensing Agreements Program, in a discussion concerning the:

  • Background of patent exhaustion
  • Real world impact of exhaustion pre-Lexmark
  • Lexmark case:
    • Lead up to the Supreme Court
    • Supreme Court opinion
  • Real world impact of Lexmark
    • What does it mean for IP transactions?
    • What does it mean for existing agreements?
  • What’s next for patent exhaustion?

Presentation Material

  • Impression Products, Inc. v. Lexmark International, Inc.
    Ira Jay Levy, Joseph Yang
  • The State of Exhaustion After Supreme Court's Impression Products v. Lexmark - What Impact on Structuring Sales and Licensing Transactions?
    Ira Jay Levy, Joseph Yang
Speaker(s)
Ira Jay Levy ~ Goodwin Procter LLP
Joseph Yang ~ PatentEsque Law Group, LLP
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