Lexmark holds a number of patents covering printer toner cartridges that it sells for use in its printers. It offers some of its cartridges as “return cartridges,” and sells them at an approximately 20 percent discount if the end-user agrees to use the cartridge only once. Lexmark sued several parties for patent infringement, alleging that those parties sold, among other things, unauthorized “remanufactured” cartridges that were originally sold by Lexmark but later refurbished by third parties. Defendant Impression Products twice moved to dismiss Lexmark’s case on the theory that Impression’s cartridges did not infringe Lexmark’s patents due to patent exhaustion. The district court denied Impression’s first motion to dismiss, holding that extraterritorial sales of patented products did not exhaust patent rights despite the Supreme Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013), which held that extraterritorial sales exhausted copyright rights. But the district court granted Impression’s second motion to dismiss because, under Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), Lexmark’s post-sale use restrictions did not prevent its U.S. sales from exhausting its patent rights.
Impression appealed the denial of its first motion to dismiss, arguing that Kirtsaeng applies in patent cases and Lexmark’s sales outside the U.S. exhausted its patent rights. Lexmark cross-appealed the court’s grant of Impression’s second motion to dismiss, arguing that Quanta does not apply to Lexmark’s U.S. sales that incorporated a post-sale use restriction.
A panel of the Federal Circuit heard oral argument on March 6, 2015. Prior to issuing a panel decision, the full court ordered the case to be heard en banc and requested that the parties file new briefs addressing two specific questions: (1) in light of Kirtsaeng, should the court overrule its precedent to the extent it holds that a sale of a patented item outside the U.S. never gives rise to U.S. patent exhaustion, and; (2) in light of Quanta, should the court overrule its precedent to the extent it holds that sale of a patented article under a lawful re-sale restriction does not give rise to patent exhaustion. The court invited the U.S. Department of Justice to file an amicus brief and will likely hear oral argument later this year.
Lexmark Int’l, Inc. v. Impression Prods., Inc., No. 2014-1617, -1619 (Fed. Cir. Apr. 14, 2015) (per curiam).