Issue: Intellectual Property
Court: U.S. Supreme Court
Term: October 2016
Oral Argument: March 21, 2017
Opinion: Chief Justice Roberts
Lower Court: U.S. Court of Appeals for the Federal Circuit
The "patent exhaustion doctrine"--also known as the "first sale doctrine"-- holds that "the initial authorized sale of a patented item terminates all patent rights to that item." Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008). This case presents two questions of great practical significance regarding the scope of this doctrine on which the en banc Federal Circuit divided below:
1. Whether a "conditional sale" that transfers title to the patented item while specifying post-sale restrictions on the article's use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the
patent law's infringement remedy.
2. Whether, in light of this Court's holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351, 1363 (2013), that the common law doctrine barring restraints on alienation that is the basis of exhaustion doctrine "makes no geographical distinctions," a sale of a patented article authorized
by the U.S. patentee that takes place outside of the United States exhausts the U.S. patent rights in that article.
The RLC joined an amicus brief asking the U.S. Supreme Court to reverse the Federal Circuit’s decision, which placed unworkable limitations on patent exhaustion. The Federal Circuit’s view of the first-sale doctrine creates complications, uncertainties, and inefficiencies in global supply chains and hinders innovation. The RLC brief asks the Court to reaffirm long-standing legal precedent holding that Congress did not intend to allow patent holders to use U.S. patent laws to enforce post-sale restrictions on lawfully purchased goods. If left unchanged, the Federal Circuit’s decision will hinder the free flow of goods and will harm consumers and businesses alike.
The Court held 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, and that an authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act.
Procedural History and Case Documents: