Supreme Court Sets New Rules for Patent Exhaustion Doctrine: In a Highly Anticipated Decision, the Supreme Court Reverses Federal Circuit and Holds That Patent Exhaustion Is “Uniform and Automatic” — a First Sale, Whether Domestic or Foreign, Exhausts U.S. Patent Rights and Such Rights Cannot Be Employed to Impose Post-Sale Restrictions on the Buyer

Sullivan & Cromwell LLP - May 31, 2017

In Impression Products, Inc. v. Lexmark International Inc., the U.S. Supreme Court ruled that the sale of a patented product authorized by the patentee exhausts all patent rights to the product, regardless of any restrictions on the product’s use or resale that the patentee seeks to impose, either directly or through a license in connection with the sale.  The Supreme Court also held that an authorized sale outside the United States, just as one within the United States, exhausts all U.S. patent rights.  The Supreme Court’s ruling clarifies the scope of its 2008 decision in Quanta Computer, Inc. v. LG Electronics, Inc. and overturns longstanding Federal Circuit precedent that (i) had permitted patentees to reserve rights through otherwise lawful post-sale restrictions, and (ii) had held that sales abroad do not exhaust U.S. patent rights.