United States: Federal Circuit Holds That Restricted Sales And Foreign Sales Do Not Exhaust Patent Rights: Lexmark International, Inc. v. Impression Products, Inc.


In Lexmark International, Inc. v. Impression Products, Inc., the en banc Federal Circuit held that (1) the sale of an article under clearly communicated and otherwise lawful restrictions on use and resale avoids patent exhaustion and preserves the patentee's rights to pursue infringement remedies both against the buyer and downstream buyers with knowledge of the restrictions, and (2) a patentee's or licensee's foreign sales of a patented article do not exhaust the U.S. patent rights in the article sold, even if no reservation of those rights accompanies the sale.  The 10-2 decision comes as a surprise to many observers, at least as to its restricted sales holding, as it creates some tension with recent Supreme Court authority on intellectual property exhaustion.


Lexmark International, Inc. manufactures and sells printers and toner cartridges covered by multiple Lexmark patents.  Lexmark sells toner cartridges in the United States and foreign markets under two programs: a "Regular Cartridge" program, under which cartridges are sold at full price and without restriction on resale or reuse of the cartridge; and a "Return Program Cartridge" program, under which cartridges are sold at a 20% discount, but subject to no-resale and no-reuse restrictions.  The parties stipulated that "Lexmark ha[d] an express and enforceable contractual agreement with each of its end-user customers," and it was undisputed that end users and resellers of "Return Program Cartridges" received adequate notice that cartridges may not be used more than once and may be transferred only to Lexmark.  Lexmark also seeks to enforce these restrictions through a microchip in the cartridge.

Impression Products, Inc. is a small West Virginia-based business that acquires spent cartridges for refilling and sale in the United States.  These refilled cartridges included restricted "Return Program Cartridges" that had been altered by microchip replacement to circumvent Lexmark enforcement.

Lexmark sued Impression for patent infringement, alleging that Impression's refurbishment and sale of domestically sold "Return Program Cartridges" infringed Lexmark's patents.  Lexmark also alleged infringement by all imported foreign-sold cartridges—both under the "Regular" and "Return" Programs.  Impression argued that Lexmark's patent rights had been exhausted by Lexmark's first sale of the cartridges domestically and abroad. 

Impression's argument that Lexmark had exhausted its patent rights challenged a pair of Federal Circuit cases: Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992) and Jazz Photo Corp.v. International Trade Comm'n, 264 F.3d 1094 (Fed. Cir. 2001).  In Mallinckrodt, the Federal Circuit heldthat a sale that is "validly conditioned under the applicable law governing sales and licenses" avoids exhaustion and "may be remedied by action for patent infringement."  In Jazz Photo, the appellate court held that U.S. patent rights are exhausted only by a first sale in the United States, not abroad.

On motion to dismiss, the District Court for the Southern District of Ohio agreed with Impression that the re-sale of cartridges originally sold in the United States was permissible despite Lexmark's no-reuse and no-resale restrictions.  The court adopted as a premise that both the first purchaser of the cartridges and Impression had adequate notice of the no-resale and no-reuse restrictions before they made their purchases.  Nonetheless, relying on the Supreme Court's decision in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), the district court held that the exhaustion defense applied because the initial sales were still authorized.  The district court viewed Quanta, which held that an authorized and unrestricted initial sale exhausts patent rights, as implicitly overruling Mallinckrodt.

As for the cartridges originally sold overseas and then imported, the district court rejected Impression's argument that Lexmark's patent rights had been exhausted in light of the Supreme Court's holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013).  Under Kirtsaeng, the copyright owner's right to restrict the sale or distribution of a particular copy of a copyrighted work in the United States is exhausted if the copy was lawfully made, whether in the United States or abroad.  The district court distinguished Kirtsaeng as rooted in a statutory provision of copyright law that does not exist in patent law.  Following Jazz Photo, the district court held that foreign sales do not exhaust U.S. patent rights.

On appeal, the Federal Circuit sua sponte ordered en banc hearing of the case.

The Federal Circuit's Holding

In a 10-2 decision authored by Judge Taranto, the en banc Federal Circuit disagreed with the district court that Quanta had overruled Mallinckrodt.  Deeming Mallinckrodt still good law, the appellate court reversed the district court's holding that the exhaustion doctrine permitted re-sale of the originally domestic sold products.  But it affirmed the trial court's ruling that Kirtsaeng did not overrule Jazz Photo, such that the foreign sales do not exhaust the right to prevent subsequent resales in the United States.

In discussing Lexmark's restricted sales, the majority emphasized that the sale in Quanta had been made by a licensee rather than the patentee and that the licensee's authorizations were unrestricted.  The appellate court therefore distinguished Quanta on the basis that there were "no patentee sales" and "no restrictions on the sales made by the licensee."

The Federal Circuit then re-affirmed Mallinckrodt based on two main arguments: (1) its understanding of patent exhaustion as a conferral of "authority" under Section 271(a) of the Patent Act, and (2) it would be odd for a licensee's sales not to be exhausted under the Supreme Court's decision in General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175 (1938), but for the patentee's own sales to be exhausted.

The Federal Circuit began by noting that, under Section 271(a) of the Patent Act, any making, using, or selling of a patented article "without authority" constitutes infringement.  With this background, the appellate court explained that the "exhaustion doctrine ... must be understood as an interpretation of § 271(a)'s 'without authority' language."  "Authority," to the court, refers to a grant of permission by the patent owner, and the patent owner may limit this grant by imposing conditions or restrictions.  Thus, the appellate court concluded that "[a] sale made under a clearly communicated, otherwise lawful restriction as to post-sale use or resale does not confer on the buyer and a subsequent purchaser the 'authority' to engage in the use or resale that the restriction precludes" and does not exhaust the patentee's rights as to such conduct.

Also, the Federal Circuit said it did not believe that exhaustion should turn on whether the patentee or a licensee had sold the patented articles.  In General Talking Pictures, a buyer had purchased a patented article from a licensee who had a restricted license to sell the article within a particular field of use.  Both the licensee and the buyer knew that the licensee had no license to convey the right to use the article in this particular field.  The Supreme Court held that the licensee had infringed the patent by selling the article for use outside of the particular field of use, and that the buyer had no exhaustion defense based on this unauthorized sale.  In Lexmark, the Federal Circuit saw no reason why a practicing-entity patentee should have less of an ability to restrict the downstream use of its products than a patentee who licensed the right to make and sell the product to others.  Re-affirming Mallinckrodt, the appellate court emphasized that a "patentee may preserve its patent rights by otherwise-proper restrictions when it makes and sells patented articles itself and not only when it contracts out manufacturing and sales," provided that downstream users have adequate notice.

Addressing the foreign-sold printer cartridges, the Federal Circuit affirmed the district court's holding that Jazz Photo remains good law despite Kirtsaeng.  The Federal Circuit reiterated that Kirtsaeng was a copyright case rooted in a statutory provision with no Patent Act analogue.  Additionally, the appellate court noted that Kirtsaeng did not address "whether a foreign sale is properly treated as conferring authority to engage in otherwise-infringing domestic acts."  As a result, Lexmark's foreign sales did not exhaust Lexmark's U.S. patent rights, and foreign buyers were not authorized to import the cartridge for sale or use in the United States.  Notably, the court emphasized throughout the opinion that the domestic exhaustion principle "does not preclude an accused infringer from establishing that the U.S. patentee actually gave it a license, expressly or by implication."  The majority said Impression did not preserve such an argument because it had agreed to forego an implied-license defense.

Judge Dyk, joined by Judge Hughes, dissented from the Lexmark majority and echoed the government's positions in its amicus brief.  In their view, Mallinckrodt was wrong when decided and is irreconcilable with Quanta.  According to the dissent, the majority's focus on whether a patentee-seller had "authorized" the use or resale of the articles it sold was "simply irrelevant."  Rather, the dissent viewed the doctrine of patent exhaustion as an inherent limit on the scope of the patentee's exclusive rights—one that does not depend on whether the buyer's use has been expressly or impliedly authorized.  The dissent also posited that an unrestricted "foreign sale [should] result in exhaustion," but that an authorized seller could avoid such exhaustion by explicitly reserving its U.S. patent rights.

Tension With Quanta

There seems to be a reasonable possibility of Supreme Court review of Lexmark for several reasons.  Chief among these are the business community's and the government's strong interest in the case, the decision's en banc nature, and its tension with Quanta and re-affirmation of Mallinckrodt.

Quanta expressly distinguished implied licenses and exhaustion, holding that disclaimers of license rights are "irrelevant" where "the right to practice the patents is based not on implied license but on exhaustion."  While Quanta did not directly address Mallinckrodt, the two decisions have significant tension with respect to their approach to exhaustion.  By characterizing exhaustion as a grant of "authority" that a patentee-seller can grant or deny, the Federal Circuit appears to treat exhaustion like an implied license—one that the patentee can disclaim by "clearly communicate[d]" restrictions.  The Supreme Court in Quanta, by contrast, recognized that "[t]he longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item."

In Quanta, sales by the licensee included a notice that disclaimed rights with respect to the combination of licensed products with other components.  The Federal Circuit's holding in Lexmark raises the question of whether that mere disclaimer notice might avoid exhaustion under the patentee-seller's own patents, even though the Supreme Court held it to be insufficient to avoid exhaustion under the patents licensed to the seller.  Moreover, the Federal Circuit's approval of patent remedies against downstream users after initial restricted sales may create the very danger "of allowing . . . an end-run around exhaustion" where "any downstream purchasers . . . could nonetheless be liable for patent infringement" that the Supreme Court frowned upon in Quanta.  The Supreme Court may well seize the opportunity to clarify these tensions and the patent exhaustion doctrine generally.

Lexmark's Significance for Businesses

Pending Immersion's decision to seek (and the Supreme Court's decision to grant) review of Lexmark, the decision requires that patentees and licensees be mindful of the tension between the decision and Quanta and exercise caution in relying on former.  If Lexmark stands, it will benefit businesses that depend on patent monetization and that have a strong interest in differentiated downstream licensing models.  Businesses that regularly purchase patented products or components in the worldwide market, on the other hand, may face "a cloud of uncertainty over every sale," as the dissent forewarned.

Besides the tension with Quanta, the Lexmark decision leaves other important questions unanswered. 

One question is what arrangement between a seller and buyer is sufficient to deny "authority."  It was undisputed in Lexmark that there was "an express and enforceable contractual agreement" between Lexmark and each end-user, and that the no-resale and no-reuse restrictions were binding on end users.  Yet throughout the Lexmark opinion, the majority suggests that restrictions may be sufficient if "clearly communicated"—even if well short of a contractual meeting of the minds.

The indication that "clear communication" is sufficient to avoid exhaustion may go even beyond Mallinckrodt.  In Mallinckrodt, the Federal Circuit had explained a patentee may pursue a patent infringement action where the purchase has violated licensing terms "[i]f the sale . . . was validly conditioned under the applicable law such as the law governing sales and licenses."  This suggests that any restriction must be part of a contract, not a mere notice, between the patentee and the initial buyer.  The Federal Circuit reiterated this point in Jazz Photo, noting that the "package instructions [were] not in the form of a contractual agreement by the purchaser to limit reuse of the cameras."  As a result, "[t]here was no showing of a 'meeting of the minds' whereby the purchaser, and those obtaining the purchaser's discarded camera, may be deemed to have breached a contract or violated a license limited to a single use of the camera." Jazz Photo, at 1108.  It is unclear if the Federal Circuit intended an expansion of the patentee-seller's ability to avoid exhaustion.

Another question is what "clear communication" requires.  The Federal Circuit appears to limit infringement claims against subsequent downstream buyers to those "having knowledge of the restrictions."  The appellate court did not elaborate on what defenses a subsequent downstream purchaser without knowledge may have, assuming no exhaustion.  The court only mentions in passing that "we do not have before us the questions that would arise, whether under principles governing bona fide purchasers or otherwise, if a downstream re-purchaser acquired a patented article with less than actual knowledge of the restriction."

Finally, Lexmark highlights the question of whether the focus on "clear communication" is a two-way street for patentees seeking to limit downstream rights.  The Federal Circuit suggested repeatedly that buyers' knowledge of the licensee's field of use limitation may be required for a licensee's sale to be non-exhaustive.  While General Talking Pictures did not clearly resolve this question, many licensors have assumed that sales by a licensee outside of its licensed field are unauthorized altogether and are therefore non-exhaustive regardless of the purchaser's knowledge of the field of use limitation.  Lexmark's emphasis on the buyer's knowledge, even if dicta, adds to the uncertainty concerning this issue.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.