Lexmark Wants to Overturn Ruling Vs. Impression Products Over Ink Ctgs

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Lexmark Wants to Overturn Ruling Vs. Impression Products Over Ink Ctgs

 user admin 2014-10-23 at 1:10:51 pm Views: 758
  • #41340

    Lexmark Wants to Overturn Ruling Vs. Impression Products Over Ink Ctgs
    Quanta Doesn't Nix Restricted Sales, Lexmark Tells Fed. Circ.
    By Aaron Vehling.

    Law360, New York (October 22, 2014, 4:00 PM ET) — Lexmark International Inc. on Tuesday urged the Federal Circuit to overturn a decision that the company’s inkjet cartridge return program is invalid under patent law, arguing that a U.S. Supreme Court ruling the lower court relied on did not overrule the appeals court’s previous finding on restricted sales.

    The printer company said in its opening appeals brief in its infringement suit against cartridge reseller Impression Products Inc. that an Ohio federal judge wrongly concluded that a 2008 high court decision in Quanta overruled the appeals court’s earlier decision approving single-use restrictions, such as those Lexmark offers when it offers customers a discount on ink cartridges when they return spent products instead of getting them refilled.

    “Quanta was a narrow decision that … did not hold that post-sale use restrictions in general are unlawful,” Lexmark said. “To the contrary, the Quanta opinion on its face reaffirms that only an unrestricted sale exhausts patent rights.”

    Both Lexmark and Impression Products have filed appeals of U.S. District Judge Michael Barrett’s March opinion, which also found that Lexmark had not exhausted its patent rights when it sold cartridges abroad — products that Lexmark alleged Impression refurbished and resold domestically.

    Impression Products’ had argued that the single-use restriction Lexmark imposed on customers in its return program was intended solely to prevent competition and thus exhausted its rights. Lexmark argued that in a 1992 decision called Mallinckrodt Inc. v. Medipart Inc., the Federal Circuit said such restrictions were valid and enforceable.

    Judge Barrett concluded that the 1992 decision was overruled by the Supreme Court's 2008 decision in Quanta Computer Inc. v. LG Electronics Inc., which held that authorized sales exhaust patent rights and prevent patentees from controlling post-sale uses.

    Sales under the return program "took the cartridges outside the scope of the patent monopoly despite the notices contained on those cartridges, and Lexmark may not now rely on patent law to hold Impression Products liable for infringement," he wrote.

    In its appellate brief, Lexmark argued that Judge Barrett misconstrued the meaning of the law when giving Quanta controlling precedent. It also argued that the judge relied on incorrect facts in his finding.

    Judge Barrett had found that the restricted cartridges and the unrestricted software sold in Quanta were the same — that absent a contractual obligation, sales of ink cartridges by resellers were fully authorized and unrestricted — and therefore Quanta overruled Mallinckrodt. But Lexmark said, its return-program cartridges do bind customers to a contractual single-use.

    In addition, Lexmark said, Quanta made distinctions between restricted and unrestricted post-sale uses. The justices had specifically highlighted and approved of their decision in another case, General Talking Pictures, which authorized conditional patent licenses that impose post-sale use restrictions, Lexmark said.

    In its own appeals brief, filed in September, Impression Products urged the Federal Circuit to overturn Judge Barrett’s decision about ink cartridges first sold abroad.

    When he ruled that Lexmark had not exhausted its patent rights on sales of ink cartridges initiated in foreign countries, Judge Barrett cited as controlling the Federal Circuit’s 2001 Jazz Photo Corp. v. International Trade Commission decision, which held that patents only become exhausted, depriving the patent owner of the right to sue for infringement, when the first sale occurs in the U.S.

    But Impression Products said the high court's decision last year in Kirtsaeng v. John Wiley & Sons Inc. — that foreign sales exhaust the rights of copyright holders and bar infringement suits — is controlling precedent. Although Judge Barrett agreed with Lexmark that that case only applies to copyrights and so it can’t apply here, Impression Products said that is misguided.

    Edward O'Connor of The Eclipse Group LLP, which represents Impression Products, told Law360 on Wednesday that nixing Kirtsaeng overlooks the fact that Kirtsaeng gives a “general principle” that all U.S. and foreign sales should be treated the same unless there is a specific exception in a statute.

    “There is nothing in copyright statutes nor in patent statutes that discuss foreign versus U.S.-first sales,” O’Connor said.

    Impression Products is the sole remaining defendant in the case in which Lexmark accused several companies of infringing its ink cartridge patents when they sold refurbished or “cloned” cartridges for Lexmark printers, according to court filings.

    A representative for Lexmark was not immediately available on Wednesday for comment.

    Lexmark is represented by Timothy C. Meece, V. Bryan Medlock, Jason S. Shull and Audra C. Eidem Heinze of Banner & Witcoff Ltd.; Steven B. Loy of Stoll Keenon Ogden PLLC; and Constantine L. Trela and Benjamin J. Beaton of Sidley Austin LLP.

    Impression Products is represented by Edward O'Connor of The Eclipse Group LLP.

    The case is Lexmark International Inc. v. Impression Products Inc., case number 14-1617, in the U.S. Court of Appeals for the Federal Circuit.

    –Additional reporting by Ryan Davis. Editing by Chris Yates.
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