Today, the Supreme Court issued its decision in Impression Products v. Lexmark Int’l that draws a bright line for triggering the patent exhaustion doctrine when products are sold and leaves post-sale activity restrictions subject to any contractual rights between the parties, not patent law. This decision is sure to have patent owners and licensees reviewing their existing licensing agreements and tweaking future ones. The decision also provides another reason why patent owners may license their patents at an end product level, rather than a component level, to ensure that they have direct patent law remedies against the end product manufacturer that otherwise may be exhausted and unavailable if the patent is licensed at a component level.
The Supreme Court summarized its decision as follows:
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 rights 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.
Importantly, the decision focuses on whether patent rights exist after an authorized sale. The decision does not mean that the sale extinguishes other non-patent law remedies that a patent owner may have after the sale, such as remedies under contract law.