United States: Supreme Court Holds That Sale By Patentee Exhausts Patent Rights Regardless Of Restrictions Or Location Of Sale

In Impression Products, Inc. v. Lexmark International, Inc., the Supreme Court held today 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. 581 U.S. ___ (2017), slip. op. at 2. The decision overturns Federal Circuit case law holding that (1) a patentee may bypass the exhaustion doctrine by selling an item under an express restriction on the purchaser's right to use or resell the product, and (2) a patentee does not exhaust its rights under United States patents when selling its product abroad. Id. at 1-2. Chief Justice Roberts delivered the opinion for the Court, in which Justices Kennedy, Thomas, Breyer, Alito, Sotomayor, and Kagan joined. Justice Ginsburg filed an opinion concurring with the decision regarding restrictions on sales, but dissenting with respect to the territorial exhaustion issue. Justice Gorsuch took no part in the consideration or decision of the case.


Lexmark manufactures and sells printers and toner cartridges covered by multiple Lexmark patents in the United States and foreign markets. Toner cartridges are sold under two programs: a "regular" program, under which cartridges are sold at full price and without restriction on resale or reuse of the cartridge; and a "return" program under which cartridges are sold at a 20% discount, but subject to single-use and no-resale restrictions. Impression is a small business that acquires spent toner cartridges originally sold in the United States and abroad for refilling and sale in the United States, including restricted return program cartridges that are altered by microchip replacement to circumvent Lexmark enforcement. Lexmark sued Impression for patent infringement in connection with both United States and foreign toner cartridges. Impression argued that Lexmark's patent rights had been exhausted by Lexmark's first sale of the cartridges both domestically and abroad. Id. at 2-3.

In Lexmark International, Inc. v. Impression Products, Inc., 816 F.3d 721 (Fed. Cir. 2016), 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 first buyer and downstream purchasers with knowledge of the restrictions, and (2) a patentee's or licensee's foreign sales of a patented article do not exhaust the United States patent rights in the article sold, even if no reservation of those rights accompanies the sale. 581 U.S. ___ (2017), slip. op. at 4-5.

The Supreme Court granted certiorari to consider the Federal Circuit's decisions with respect to both domestic and international exhaustion and reversed. Id. at 2, 18.

With respect to the single-use/no-resale restrictions in Lexmark's contracts with customers, the Court held that while these restrictions may have been enforceable under contract law, the patent exhaustion doctrine does not entitle a patentee to retain patent rights in an item it has elected to sell. The Court relied principally on the common law's well-established refusal to permit restraints on the alienation of chattels and a string of the Court's decisions in the area of patent exhaustion culminating recently in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008). 581 U.S. ___ (2017), slip. op. at 6. Importantly, the Court corrected the Federal Circuit's reasoning in the underlying appeal, explaining that the exhaustion doctrine is not a presumption about authorization that comes along with the sale of a product, but is instead a limit on the scope of the patentee's rights and thus may not be avoided by contract. Id. at 9-10. The Court's decision has the effect of overruling the Federal Circuit's long-questioned and much-criticized decision in Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992), which held that exhaustion could be avoided by conditioning the sale on restrictions as to post-sale use or resale.

The Court discussed the impact of its holding on sales by licensees, observing that so long as a licensee complies with the license when selling an item, the patentee has, in effect, authorized the sale. As is the case with sales by patentees, an authorized sale by a licensee exhausts the patent, though the Court noted that a license may require the licensee to impose a contractual restriction on purchasers. On the other hand, consistent with the Court's decision in General Talking Pictures Corp. v. Western Elec. Co., 304 U.S. 175, aff'd on reh'g, 305 U.S. 124 (1938), where a licensee does not comply with the conditions of a license in selling an item, the patentee may bring an infringement suit against the licensee or the purchaser. 581 U.S. ___ (2017), slip. op. at 11-13.

With respect to sales abroad, the Court held that an authorized sale outside the United States, just as one within the United States, exhausts all rights in the patent, again noting the common law's refusal to permit restraints on alienation of chattels and the Court's recent precedents. The Court cited, among other decisions, its recent holding in Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013), which found international exhaustion in the context of copyright law. 581 U.S. ___ (2017), slip. op. at 13-14. The Court's decision overruled the Federal Circuit's blanket rule that foreign sales do not trigger exhaustion, announced in Jazz Photo Corp. v. International Trade Comm'n, 264 F.3d 1094 (Fed. Cir. 2001).

Importance of the Decision

The Federal Circuit's decision in Lexmark created tension with the Court's recent authority on intellectual property exhaustion announced in Quanta and Kirtsaeng, so the result in this case is not unexpected.

The Court's decision will be viewed by many, especially in the electronics industry, as relieving a great deal of uncertainty as to whether the purchase of patented components in the worldwide market exhausts the patents of manufacturers and their licensors. These purchasers will gladly welcome the decision and concur with the Court's observation that "extending patent rights beyond the first sale would clog the channels of commerce, with little benefit from the extra control that the patentees retain." 581 U.S. ___ (2017), slip. op. at 7-8.

On the other hand, the decision may prove problematic for companies that have a strong interest in differentiated downstream licensing models, such as in the pharmaceutical industry. Licensing models built around field-of-use licenses now face the challenge of how to protect against the use and resale of products that are sold by the licensee under authorization within the designated field, but are used or resold downstream into other, unauthorized fields. The Court's decision suggests that the exhaustion doctrine is absolute and that infringement remedies will not be available against such downstream purchasers, but leaves open the possibility of contractual remedies for breach of field restrictions. Fashioning appropriate contractual restrictions and mechanisms for successfully imposing such restrictions on downstream purchasers that are not in privity with the patentee or licensee will require creativity and discipline in commercial dealings.

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.

Similar Articles
Relevancy Powered by MondaqAI
O'Melveny & Myers LLP
Masuda, Funai, Eifert & Mitchell, Ltd.
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
O'Melveny & Myers LLP
Masuda, Funai, Eifert & Mitchell, Ltd.
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