Businessman Takes Lexmark To U.S. Supreme Court — But Skips The Argument
By Robb Mandelbaum.
Eric Smith had his day in court on Tuesday — in the Supreme Court, that is. Smith's company Impression Products refills and then resells printer cartridges, and the printer manufacturer Lexmark International doesn't approve. For years, Lexmark has marshaled the artillery of intellectual property law against companies like Impression Products, as well as their suppliers; Smith began receiving cease and desist letters in 2010. Most of the remanufacturing industry settled with Lexmark, but Impression Products, a company with just 25 employees and between $10 and $15 million in revenue, found good lawyers instead.
At stake in the case is the right to purchase something that's already been sold once without fear of a lawsuit from the person who holds the patent on that article. Businesses large and small exercise that right whenever they purchase components for assembling a sophisticated device like a laptop or a smart phone, or when they trade in new or used goods. (Consumers do likewise when they buy an iPhone or stereo receiver on Craigslist or eBay.) The legal expression for this principle is "patent exhaustion" — the notion that the patent-holder makes its money on the first sale of the article, and after that, the buyer is free to do as he or she wishes with it.
Patent exhaustion, also known as the "first-sale doctrine," dates back centuries in English common law as a means to encourage commerce and innovation, and has been reaffirmed by the U.S. Supreme Court several times. But in this case, the federal circuit appeals court, ruling for Lexmark, carved out a big exception to patent exhaustion in domestic sales and ruled that the doctrine doesn't apply at all in foreign sales. (You can read more about the background to this case in my preview of the argument published last November.) Lexmark appealed to the Supreme Court, which agreed in December to take up the small business' case, to the delight of patent law theorists everywhere. https://www.forbes.com/sites/robbmandelbaum/2017/03/25/businessman-takes-lexmark-to-supreme-court-but-skips-the-argument/#6067ec8f27a9