US Supreme Court to decide important patent exhaustion questions on foreign sales and post-sale restrictions

by Dentons


On Friday, December 2, 2016 the US Supreme Court decided to review a case involving two important patent exhaustion questions: (1) can foreign sales exhaust US patent rights and (2) can patent law be used to enforce restrictions on the use of patented items after the first authorized sale. Impression Products, Inc. v. Lexmark International, Inc., 816 F.3d 721 (Fed. Cir. 2016), cert. granted (US Dec. 2, 2016) (No. 15-1189).

Earlier this year, the Federal Circuit decided en banc that foreign sales do not exhaust US patent rights and that otherwise lawful post-sale restrictions are permissible on the use of patented items after the first authorized sale. The Federal Circuit’s decision drew numerous amicus filings, including by the United States government, which argued that the decision was incorrect on both counts because (i) foreign sales should exhaust US patent rights unless the US rights are expressly reserved and (ii) post-sale restrictions are not permissible after the first authorized sale of a patented item.

Briefing and arguments should occur in the first half of 2017. A decision will likely issue by the end of the Supreme Court term in June 2017. If the Supreme Court reverses the Federal Circuit, the decision may have far reaching consequences. In the meantime, there are steps patent owners and accused infringers can take to prepare.

Potential impact and consequences of Supreme Court review

The Federal Circuit has maintained since 2001 that foreign sales cannot exhaust US patent rights. Numerous significant commercial contracts assume that “no-foreign exhaustion” is the default rule. Likewise, the Federal Circuit has permitted post-sale restrictions on the use of patent items to be enforced via patent law since 1992. Patent owners have relied on these doctrines and have used post-sale restrictions to control after-market use of their products. The Supreme Court has now been asked to reconsider both rules, which could upend decades of standing precedent and have a significant impact on the longstanding business operations of many companies and individuals.

How companies and individuals can protect themselves

In planning for the Supreme Court decision, patent owners may consider several steps to protect themselves, including careful planning and appropriately structured restrictions. Accused infringers should watch this case closely and continue to take full advantage of situations in which a patent holder fails to protect its rights adequately.

Patent exhaustion questions are highly fact-dependent. Parties and counsel addressing these questions must give careful and thoughtful consideration to the particular language of any sales contracts and license agreements involved, and to the particular circumstances of any sales, including foreign sales. Dentons lawyers are well-versed in this subject matter and stand ready to assist you in the United States and abroad with patent exhaustion questions and other patent issues.

Summary of Federal Circuit’s opinion

We begin with a useful summary of the patent exhaustion issues presented in the Impression Products v. Lexmark case and the Federal Circuit’s en banc decision from February 2016, which is now being reviewed by the US Supreme Court. By way of background, patent exhaustion (also known as the “first-sale doctrine”) limits the scope of patent rights by terminating all patent rights to a patented item after the first authorized sale of that item under patent owner’s authority. The patent exhaustion doctrine, for example, allows resale of patent items in the secondary market without interference from the patent owner. The issues presented en banc to the Federal Circuit were (1) whether patent owners could impose by contract post-sale restrictions on the use of a patented item after the first authorized sale, and (2) whether foreign sales of a patented item can exhaust US patent rights.

The 99-page Federal Circuit majority opinion held in a split decision that (1) patent exhaustion can be avoided by otherwise lawful post-sale contractual restrictions, and (2) foreign sales of a patented item are not presumed to exhaust patent owner’s rights in the United States. This ruling gives patent owners greater control over the use of their patented products after the first sale. The dissent argued post-sale restrictions cannot prevent exhaustion of patent rights and foreign sales will exhaust a patent owner’s rights in the United States absent an express reservation.

Factual background

Lexmark sold printer cartridges in the United States under two pricing models: some were sold at full price with no restrictions and some were sold at a discounted price with restrictions on resale and reuse. Defendant Impression Products purchased depleted restricted-use cartridges inside and outside the United States, and refilled and resold them in the United States. Impression Products presented a patent exhaustion defense on the basis that Lexmark sold the restricted-use cartridges to Impression Products, and thus Lexmark’s patent rights had been exhausted whether those sales occurred within or outside the US Impression Products further argued the restricted-use agreement should not permit Lexmark to enforce its patents for cartridges it authorized to be sold to Impression Products.

Post-sale restrictions

On the issue of post-sales restrictions, the district court found the Federal Circuit’s 1992 decision in Mallinckrodt, Inc. v. Medipart, Inc., which held valid a post-sale restriction requiring a buyer to return a patented nebulizer after a single use, was silently overruled by the Supreme Court’s 2008 decision in Quanta Computer, Inc. v. LG Electronics, Inc., and ruled in favor of Impression Products. The Federal Circuit disagreed and reversed.

The Federal Circuit held a sale that includes a clearly communicated, otherwise lawful restriction on the post-sale use or resale of a patented item does not provide the buyer or a subsequent purchaser with any authority beyond that provided in the initial restricted sale. Accordingly, use or resale of a patented item in violation of a post-sale restriction is unauthorized and is an infringement of the patent owner’s rights. The Federal Circuit distinguished Quanta as at least two steps removed: The Supreme Court did not address a sale made by a patent owner that was subject to a post-sale restriction, and did not distinguish between the activities of a patent owner and those of a licensee. Rather, the patent owner in Quanta granted unrestricted authority to sell to a licensee that was not exceeded in the sales that were found to invoke exhaustion. Citing older Supreme Court case law (General Talking Pictures Corp. v. Western Electric Co. (US 1938)) finding no-exhaustion for items sold by a licensee outside an authorized field of use, the Federal Circuit concluded there was no basis for denying a patent owner the same ability to reserve certain rights to itself and to limit the use or resale of a patented item after its initial sale.

Foreign sales

On the issue of exhaustion based on foreign sales, the district court ruled that the Supreme Court’s 2013 decision in Kirtsaeng v. John Wiley & Sons, Inc., which held that foreign sales of copyrighted items exhausted the copyright owner’s rights in the United States, did not apply to patent law, as there is no corresponding codification of the exhaustion doctrine in patent law as is present in Section 109(a) of the Copyright Act. The Federal Circuit agreed and reaffirmed its 2001 decision in Jazz Photo Corp. v. International Trade Commission, holding that foreign sales of patented items do not presumptively exhaust the patent owner’s rights in the United States. The Federal Circuit found Kirtsaeng inapplicable because it dealt with interpretation of the Copyright Act, not the judicially created doctrine of patent exhaustion.


The Supreme Court granted certiorari and will consider whether foreign sales exhaust US patent rights and what affect post-sale restrictions have on a patent owner’s ability to enforce its patents on patented items after the first authorized sale. A decision may issue by the end of the Supreme Court term in June 2017.

DISCLAIMER: 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.

© Dentons | Attorney Advertising

Written by:


Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.