United States: Federal Circuit Reaffirms Its Longstanding Patent Exhaustion Precedents In Lexmark. v. Impression Products (Fed. Cir. Feb. 12, 2016) (En Banc)

Under the doctrine of patent exhaustion, otherwise referred to as the "first sale doctrine," the initial authorized sale of a patented item exhausts a patent owner's rights to further control the sale, offer for sale, or use of the item. Bowman v. Monsanto Co., 133 S. Ct. 1761 (2013). In other words, once a patented article is sold to a buyer in a sale authorized by the patentee, the buyer, or any subsequent purchaser of the article, is free to use or resell the article without restraint from patent law. The doctrine of patent exhaustion thus seeks to prevent patent holders from receiving any overcompensation or potential double recovery, under the assumption that the patent owner has already received a just reward from the initial sale. Procedurally, an accused infringer can raise patent exhaustion as an affirmative defense in a patent infringement action.

While the doctrine of patent exhaustion seems relatively straight-forward and simple in theory, real-world applications of the doctrine have been anything but straight-forward or simple. This is not surprising since economic transactions and license agreements are becoming more complex in today's ever constantly changing society and ever increasingly competitive markets. Additionally, there are only a handful of modern Supreme Court and Federal Circuit decisions dealing with patent exhaustion. Further, the available cases often fail to provide sufficient guidance as to the scope and reach of exhaustion as applied to the myriad of factual situations that can arise in modern commercial transactions involving patented products or processes.

In an effort to bring much needed clarity to patent exhaustion issues, the Federal Circuit handed down a 10-2 en banc decision in the closely followed and highly anticipated case Lexmark International, Inc. v. Impression Products, Inc., Nos. 14-1617, -1619 (Fed. Cir. Feb. 12, 2016).


Lexmark International, Inc. makes and sells printers and toner cartridges, and also owns a number of patents that cover its toner cartridge technology. Lexmark offers buyers a choice of purchasing a "Regular Cartridge" at full price without any restrictions, or purchasing a "Return Program Cartridge" at a discounted price subject to a single-use and no-resale restriction.

Impression Products, Inc. acquired "Return Program Cartridges" for sale domestically and abroad, and had an overseas third party physically modify the cartridges to configure them for re-use. The modified cartridges were then imported and resold in the U.S. without Lexmark's authorization. Lexmark sued Impression in the District Court for the Southern District of Ohio for patent infringement, alleging that Impression directly violated Lexmark's single-use and no re-sale restriction. Impression responded with a motion to dismiss based on the patent exhaustion defense, arguing that because Lexmark already sold those toner cartridges domestically and abroad, Lexmark was precluded from suing for infringement despite the single-use and no-resale restrictions placed on the "Return Program Cartridges."

In advancing its defense, Impression argued that two prior Federal Circuit patent exhaustion 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), were overruled, respectively, by two Supreme Court cases, Quanta Computer, Inc. v. LG Electronics, Inc., 533 US. 617 (2008) and Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013).

The district court agreed with Impression that Quanta overruled Mallinckrodt, and dismissed Lexmark's infringement claim relating to the restricted cartridges sold in the U.S. The district court, however, disagreed that Kirtsaeng overruled Jazz Photo, and denied Impression's motion to dismiss Lexmark's infringement claim involving the cartridges sold overseas. Both parties then appealed.

Domestic Sale Issue

In Mallinckrodt, which involved domestic sales of patented articles, the Federal Circuit held that use restrictions, such as "Single Use Only" conditions, do not exhaust patent rights "[u]nless the condition violates some other law or policy." See Mallinckrodt, 976 F.2d at 708. As noted above, Impression had argued that Mallinckrodt no longer remains good law because it was implicitly overruled by Quanta.

In Quanta, LG owned patents that cover computer chips. LG had licensed Intel to manufacture and sell chips that used the patents. The licensing agreement included a disclaimer provision stipulating that no license was given to Intel's customers to combine the licensed Intel products with non-Intel components in ways that practiced the LG patents. In addition, a separate Master Agreement required Intel to notify its customers that they were not licensed to practice the LG patents by combining Intel products with non-Intel products. The Supreme Court held that Intel's sale of the chips to its customer and computer maker, Quanta, exhausted LG's patent rights. More specifically, the Court noted that because the patent license agreement itself permitted the licensee, without any conditions or limitations, to "make, use, [or] sell" products, the sale between Intel and Quanta exhausted LG's patent rights, thus allowing Quanta to freely use the patented chips purchased from Intel.

In an attempt to clarify any tension between Mallinckrodt and Quanta, the Federal Circuit in Lexmark emphasized that the Supreme Court's Quanta decision focused on the sale of a patented item by a manufacturing licensee—not by a patentee. Additionally, the Federal Circuit further distinguished the two cases by clarifying that Quanta did not involve a sale subject to a restriction, but rather involved a licensee's sales not subject to any conditions or limitations. As such, the Federal Circuit held that Quanta did not overrule Mallinckrodt, and that Lexmark's single-use or no-sale restrictions did not exhaust its patent rights.

Foreign Sale Issues

Impression further argued that Lexmark's foreign sales of its patented toner cartridges precluded Lexmark from alleging infringement based on the toner cartridges that were physically modified overseas and imported into the U.S. Even though Jazz Photo held that U.S. patent rights are exhausted only by a first sale in the U.S., and not sales made abroad, Impression argued that Kirtsaeng overruled Jazz Photo.

The Federal Circuit in Lexmark rejected this argument, holding that Kirtsaeng was a copyright case that focused on whether foreign copies of a copyrighted work were subject to the first sale doctrine embodied in Section 109(a) of the Copyright Act, and noting that there is no corresponding language in the Patent Act. The Federal Circuit further noted that while Kirtsaeng held that such foreign sales of copyrighted works did indeed exhaust a copyright owner's exclusive distribution right, Kirtsaeng was limited to copyrighted works and is not controlling as to patent exhaustion. Thus, the Federal Circuit upheld Jazz Photo and reaffirmed that patent exhaustion doctrine is territorial, such that "United States patent rights are not exhausted by products of foreign provenance." Jazz Photo, 264 F.3d at 1094. As a result, Lexmark's foreign sales of the toner cartridges did not exhaust its patent rights.


In dissent to the Federal Circuit's decision, Judge Dyk argued that Kirtsaeng created a presumptive exhaustion rule in which a patentee's failure to secure its patent rights would result in automatic exhaustion. Additionally, the dissent argued that the majority opinion upholding Mallinckrodt is irreconcilable with Quanta, where Supreme Court precedent supports a finding that patent rights are always exhausted upon the first authorized sale. The dissent went so far as to declare that "the majority's justification for refusing to follow Supreme Court authority establishing the exhaustion rule misconceives our rule as a subordinate court."

Lexmark's Implications and Practice Tips

At first glance, Lexmark's holdings are undoubtedly a significant victory for patent holders. One particularly important outcome in this regard is that, by using a contractual restriction at the time of first sale, patent owners may avoid exhaustion and thus retain the ability to sue downstream consumers for patent infringement.

With Lexmark's strong dissent and still apparent tensions with Quanta, however, Supreme Court review appears likely. Until then, Lexmark provides some practice tips, especially for subsequent and downstream purchasers. To limit the risk of substantial liability for patent infringement, businesses that regularly purchase products covered by U.S. patents should carefully consider whether and to what extent exhaustion applies. This is particularly important with many patentees now expanding into global markets and conducting sales and transactions locally and overseas simultaneously. This globalization increases the complexity of determining whether the first authorized sale occurred in the U.S. or abroad, and thus whether patent exhaustion is an issue. In addition, a purchaser of U.S. patented items from the patentee through global transactions would be well advised to negotiate a waiver of the patentee's U.S. rights to exclude. This is especially true if the purchaser intends to import the items into the U.S. after refurbishment or incorporation into other products.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

Events from this Firm
13 Sep 2018, Other, Los Angeles, United States

Liisa will be giving opening remarks and presenting, "Big Data and Online Behavioral Advertising (OBA): An Advertiser’s Perspective Origins of big data and how to legally acquire data."

26 Sep 2018, Seminar, San Francisco, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series.

28 Sep 2018, Other, Los Angeles, United States

Leaders today don't just have to worry about nefarious cybercriminals getting "inside" their firewalls; there's an entire ecosystem of SAAS partners, third party vendors and suppliers, and all the hardware from switches to POS terminals that need to be monitored.

Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions