Juelsgaard Clinic Amicus Brief Urges Supreme Court to Protect Innovation and Consumers

The Juelsgaard Intellectual Property and Innovation Clinic filed an amicus curiae brief in the Supreme Court last week urging the Court to protect innovation and consumers by clarifying a doctrine known as “patent exhaustion.” Clinic students Katherine McNutt, ’17 and Michael Hoosier, ’18 represented SLS Professor Mark Lemley and 29 other intellectual property professors and the American Antitrust Institute on the brief in Impression Products, Inc. v. Lexmark International, Inc. The brief asks the Court to ensure that once a patent owner authorizes the sale of a patented item, the purchaser may freely use, resell, recycle, or otherwise dispose of that item without fear of patent infringement liability. After an authorized first sale of a patented item anywhere in the world, a patent owner can no longer use patent law to try to control what is done with the item.

Patent exhaustion is a longstanding doctrine in patent law which provides that once a purchaser has paid a patent owner a royalty for a patented item—like a phone or a car—the owner’s patent rights in that item are used up or “exhausted.” When patent owners make the first sale of a patented item, they may set the price of that item, but the item is then released into the stream of commerce where it is no longer subject to control under the patent laws. The Clinic’s brief provides the expert perspectives of 30 intellectual property law professors to the Supreme Court for consideration in this case and urges the Court to maintain the freedom of purchasers to use, resell, recycle or destroy patented items the same ways they can their other, unpatented possessions.

Exhaustion serves the underlying goal of the patent system to “promote the Progress of Science and the useful Arts,” and stimulates the broad spread and use of patented goods to the public. Consumers and society as a whole benefit from exhaustion rules, which support innovation and the free movement of items in commerce. Without patent exhaustion, patent owners could stifle innovation and consumer freedom by threatening or bringing patent suits for violations of any post-sale restriction.

In this case, Respondent Lexmark sold patented printer cartridges with a label informing purchasers that they could use the cartridges only once, and then either throw them away or return them to Lexmark for recycling. As described in the amicus brief, the Federal Circuit ignored established Supreme Court patent exhaustion precedent and permitted Lexmark to enforce these restrictions against the first purchaser, and all subsequent purchasers (including resellers like Impression) by suing them not just for breaching a contract, but for patent infringement.

The Clinic’s amicus brief argues that the Federal Circuit’s misguided decision restricts competition in markets for used goods; burdens ordinary consumers with searching for and obeying patentees’ potential restrictions, even for used goods; and gives the patent owner more rights than are necessary to incentivize innovation. The brief explains that after a patent owner makes an authorized first sale it is contract law, not patent law, that provides the proper remedy for any breach of the owner’s post-sale restrictions. This is true even when that sale happens abroad—a concept known as international patent exhaustion. The brief points out that when the Federal Circuit rejected international exhaustion, it ignored the Supreme Court’s decision in Kirtsaeng v. John Wiley & Sons, which reaffirmed longstanding principles underlying both copyright and patent exhaustion that allow consumers to dispose of the patented items they purchase however they wish.

Without international exhaustion, consumers might not even be able to buy patented items abroad and bring them back into the U.S. for purely personal use without facing possible patent infringement liability. A consumer who bought a car in Canada and drove it into the United States could be liable for patent infringement to all U.S. patentees who held patents on different components of the car.

This merits brief is the third submitted in this case by Juelsgaard students.  Last spring, McNutt and Madeleine Laupheimer, ’16, drafted a law professors’ amicus brief urging the Supreme Court to review the Federal Circuit’s decision.  Laupheimer drafted an earlier amicus brief when the case was still before the Federal Circuit asking it to limit post-sale restrictions and to acknowledge international patent exhaustion.