As a follow-up to my posts yesterday on the U.S. Supreme Court’s decision in Impression Products v. Lexmark, I thought I would refer readers to some interesting blog posts that have been published since yesterday in addition to Jason Rantanen’s on Pate…Continue Reading ...
After what was described as the biggest World Health Assembly ever, with the highest number of agenda items and the highest attendance, it seemed that all’s well that ends well at the closing ceremony earlier today. A notable fact during this assembly has been the rising volume of voices from developing countries, joined by developed countries on issues related to access to affordable, safe, and efficacious medicines. Resolutions and decisions were adopted, many with hopes of better addressing challenges such as antimicrobial resistance, cancer, substandard and falsified medical products, medicines access and shortages and more.Continue Reading ...
Jenner & Block’s demand in the arbitration was for more than $10.2 million in hourly fees, which amounted to more than 70% of the net recovery obtained by Parallel Networks in the Oracle case and more than 110% of the net recovery obtained by Parallel Networks in the QuinStreet case. Jenner & Block justified this extraordinary amount by claiming that it had expended more than 24,000 billable hours in the Delaware Cases during the 18 months that it had represented Parallel Networks….
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Does glyphosate, better known under its brand name RoundUp, increase the risk of cancer in humans, or not? Yesterday, some World Health Organization members, while hailing a draft resolution on cancer later adopted, underlined a lack of coordination on…Continue Reading ...
An ITC administrative law judge issued a final initial determination finding Section 337 patent infringement violations committed by various entities, including Philadelphia-based telecom firm Comcast Corporation (NASDAQ:CMCSA), in light of two patents…Continue Reading ...
It is not a mystery, cancer has been spreading for decades, in particular in low and-middle income countries, and is not stopping its course in the foreseeable future. Members of the World Health Organization in committee yesterday adopted a resolution…Continue Reading ...
The Supreme Court of the United States on May 30, 2017 adopted a rule of international exhaustion of patent rights for the United States in Impression Products v. Lexmark International, No. 15-1189. The near-unanimous decision authored by Chief Justice…Continue Reading ...
In Mylan Institutional LLC v. Aurobindo Pharma Ltd., the Federal Circuit reviewed a preliminary injunction based in part on a finding of likelihood of success in establishing infringement under the doctrine of equivalents. Although the district court had applied the “function-way-result” test, the Federal Circuit suggested that the “insubstantial differences” test might be more appropriate for…… Continue reading this entryContinue Reading ...
Judging by the media coverage, the Supreme Court’s decision today in Impression Products, Inc. v. Lexmark Inc. will have dramatic implications for producers and consumers of patented products around the world. The decision places “sharp limits on how much control patent holders have over how their products are used after they are sold,” says the New York Times’s Adam Liptak. The ruling is a “sure-to-be-landmark decision,” reports Ronald Mann at SCOTUSblog. It “takes away an important tool used by companies to control the marketplace,” according to Bloomberg.
Well, maybe. But the Court’s opinion, authored by Chief Justice Roberts, also opens the door for creative contract lawyers to draft licensing agreements that severely restrict resale of patented products. The full impact of the Supreme Court’s decision won’t be known for years, but much will depend on how courts view the newfangled licensing agreements that are almost certain to follow in the wake of Impression Products.
To see why, let’s start with a hypothetical: Suppose your firm, Company A, holds a U.S. patent covering a certain widget. You manufacture one such widget and sell it to B on the condition that B not resell the widget to anyone else. In violation of that condition, B resells the widget to C, who then uses the widget. Can you sue B and/or C for patent infringement?
Prior to today, the answer under Federal Circuit precedent was yes: A could sue both B and C. Today’s decision changes that. The Court holds 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.” This is true even if A’s sale to B occurs outside the United States. Thus, Company A now cannot sue B or C for patent infringement, though it still might be able to sue B for breach of contract.
But now reconsider the above scenario with the following modification: Company A—instead of selling the widget to B—licenses the widget to B with the proviso that B can do whatever she wants with the widget except resell it. If B violates the terms of the license and resells the widget to C, who then uses it, can Company A sue B and/or C for patent infringement?
The answer would seem to be yes. As the Chief Justice writes in today’s decision, the Supreme Court’s 1938 ruling in General Talking Pictures v. Western Electric continues to “stand for the modest principle that, if a patentee has not given authority for a licensee to make a sale, that sale cannot exhaust the patentee’s rights.” That, says the Chief Justice, is a “fundamentally different situation” from the one encountered in Impression.
But just how different is it? The dispute in Impression involved a manufacturer of printer cartridges (Lexmark) that sold cartridges to certain customers in the United States and abroad on the condition that they not resell the cartridges to anyone else. Some of those customers nonetheless resold their cartridges to Impression, which then refurbished them and put them back on the retail market. Today’s decision makes clear that Lexmark cannot sue Impression for patent infringement. But what if, tomorrow, Lexmark amends the terms of its arrangements with customers so that instead of “selling” cartridges subject to a resale restriction, it “licenses” the cartridges to customers for an indefinite term on the condition that they not resell the cartridges to anyone else? Under the “modest principle” of General Talking Pictures, it would seem that Lexmark’s grant of a license has not exhausted its patent rights. If Impression again tries to refurbish and resell those cartridges, Lexmark can again sue for infringement. While Lexmark lost in this case, now it knows what to do next time.
To be sure, General Talking Pictures applied to a license to make patented products, while our hypothetical printer cartridge arrangement involves a license to use a patented product. But nothing in today’s decision suggests that the make/use distinction is a distinction with a difference. And such a distinction would effectively eliminate a patentee’s ability to ever license use of its products by converting all such licenses into outright sales.
Alternatively, courts in future cases might decide that licenses like the one we’ve imagined are really “disguised sales,” and they might decide to honor the substance of such transactions rather than the form. But the distinction between a sale and a license is a formal one, and any effort to draw a clear line will be a struggle. After all, what’s the difference between (1) a sale on the condition that the purchaser cannot resell the product and (2) a license that allows the licensee to do whatever she wants with the product except resell it? One might say that the latter is a disguised sale, but one might just as easily say that the former is a disguised license. Or one might say that neither is a disguised anything, because the only difference between a sale and a license is the contractual clothes that they wear.
Courts have confronted a similar question in the context of copyright’s first sale doctrine, under which the “first sale” of a copy exhausts the copyright owner’s right to restrict the purchaser’s disposition of that copy. Distinguishing between a “first sale” and a license is not always easy. In Vernor v. Autodesk, Inc., a 2010 case involving graphic design software packages, the Ninth Circuit set forth a multifactor test to help it draw that line. The Ninth Circuit’s Autodesk test looks to “whether the agreement was labeled a license,” “whether the copyright owner retained title to the copy,” and whether the contract between the copyright owner and the purchaser/licensee “required [the copy’s] return or destruction, forbade its duplication, or required the transferee to maintain possession of the copy for the agreement’s duration.” The presence of these factors indicates that the transaction is a license rather than a sale, though no single factor is decisive.
Now let’s say that instead of a copyrighted software package, we have a patent-protected smartphone. It should be easy enough for the smartphone manufacturer to write up a contract that will prevent the phone’s user from reselling it. Instead of buying your smartphone, you’ll “license” it from Apple or Samsung, which will retain title to the device. Your license will last indefinitely, but you’ll agree that when you’re done with the phone, you’ll either return it to the manufacturer or destroy it yourself. And bingo: Under the Autodesk test, we have a license rather than a sale, which means that General Talking Pictures rather than Impression Products supplies the applicable legal rule.
Contracting around Impression Products might be harder in the case of pharmaceutical products. Let’s say that a pharmaceutical company wants to sell an oral diabetes medication at a discounted price in India without cannibalizing its U.S. market. To do so, the pharmaceutical company needs to be able to ensure that the drug cannot be reimported and resold here. (We’ve argued elsewhere that price discrimination of this sort can make it easier for patients in less affluent countries to get access to potentially lifesaving medicines.) Instead of selling the drug in India, might the pharmaceutical company “license” the pill to Indian patients on the condition that they either return the pill or ingest it? And if so, would a court—following something like the Autodesk test—treat the transaction as a license rather than a sale?
We can’t say for sure. The notion of a pill license might strike some courts as too clever by half. The idea of licensing (essentially, leasing) a smartphone is not so farfetched; the idea of leasing a pill might be too hard for a court to swallow. The ability of a patent holder to restrict resale of a product may then come to depend largely on the product’s physical characteristics: Does this seem like the sort of things that parties might plausibly transfer by license/lease rather than by sale? And while we see no reason why the physical characteristics of a product ought to determine the patentee’s ability to restrict sale, that might well be the path that today’s decision takes us.
Chief Justice Roberts writes in today’s opinion that “[i]n sum, patent exhaustion is uniform and automatic.” We doubt it. In all likelihood, the ability of a patent holder to restrict resale of a product will be technology-specific—and will depend on the ingenuity of transactional lawyers as well as the inclinations of lower courts. The limits that Impression Products places on patent holders may turn out to be “sharp,” or they may turn out to be “soft.” All we can say for now is that it will be a long time before they are clear.Continue Reading ...
By Kevin E. Noonan — The U.S. Supreme Court handed down its decision today in Impression Products, Inc. v. Lexmark International, Inc., unsurprisingly reversing the Federal Circuit regarding the metes and bounds of the patent exhaustion doctrine. The …Continue Reading ...
AT LEAST ONE OF A AND B
–>either or both
$$ Conveniently, at least one of the first and second materials comprise semiconductor material. / 第１および第２の材料の少なくとも一方は半導体材料を含むことが便宜である。(USP7619265)
$$ The container closure assembly of claim 4, wherein at least one of said first and second elements further comprises a projecting ridge formation between said respective lead-in ramp surface and urging ramp surface. (USP5411157)
$$ The amplifying optical device of claim 21, and further wherein at least one of the first and second reflectors is configured to suppress optical feedback outside the wavelength range. (USP6445494)
$$ An electronic device according to claim 18 wherein at least one of said first and said second functions includes causing said device to perform one action that is not part of the other function. (USP6282436)
$$ An electroluminescent display according to to claim 1, wherein at least one of said first and second conductive layers is patterned. (USP6211613)
$$ …inputting at least one of said first and second beam signals into a receiver… (USP6167286)
$$ A structure according to claim 18, wherein said third substrate is optically transparent and wherein at least one of said first and second substrates are optically transparent. (USP5801796)
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The CAFC affirmed ND Cal in Twin Peaks:
Twin Peaks Software Inc. (“Twin Peaks”) appeals
from a judgment of the United States District Court for
the Northern District of California that claims 1 and 4 of
U.S. Patent 7,418,439 (“the ’439 patent”) are invalid as
indefinite following a claim construction order by the
district court. See Twin Peaks Software Inc. v. IBM Corp.,
No. 3:14-cv-03933-JST, 2016 WL 1409748 (N.D. Cal. Apr.
11, 2016) (“Order”). Because the district court did not err
in its claim construction or in concluding that the challenged
claims are invalid as indefinite, we affirm.
IBM responds that, although Twin Peaks refers to
multiple columns and figures of the ’439 patent, it fails to
identify any algorithm that is clearly linked or associated
with the “means for mounting” function, and that all of
the descriptions identified by Twin Peaks disclose the
outcome of, or what results from, the MFS mounting
function. IBM also contends that Twin Peaks is improperly
relying on the knowledge of one of ordinary skill in
the art to “fill in gaps in disclosure.” Id. at 35–36.
The CAFC noted:
the “means for mounting” limitation is circularly
described by referring to the very term “mount” and the
results of various “mount” operations, rather than by
disclosing the identity of the “means for mounting.”
Twin Peaks appears to argue that the “MFS Mount
Protocol” involves multiple regular mount operations
known in the art, but even assuming arguendo that that
contention is accepted, the specification does not describe
to what extent the MFS mount protocol involves the
regular mount operations or to what extent the “MFS
mount” operation is different from the regular “mount”
operation. See Biomedino, 490 F.3d at 953 (holding that
“a bare statement that known techniques or methods can
be used does not disclose structure”); Med. Instrumentation
& Diagnostics Corp. v. Elekta AB, 344 F.3d 1205,
1211 (Fed. Cir. 2003) (noting “[t]he requirement that a
particular structure be clearly linked with the claimed
function in order to qualify as corresponding structure”).
Of the “ordinary skill” argument:
Lastly, Twin Peaks argues that a person of ordinary
skill in the art reading the specification would understand
what structure corresponds to the “means for mounting”
limitation and could implement it because “some structure
is disclosed” and therefore, omitting certain details is
“of no significance.” Appellant’s Br. 44. Twin Peaks cites
our case law holding that, in some cases, disclosure of
“some structure” can be sufficient, e.g., Atmel Corp. v.
Info. Storage Devices, Inc., 198 F.3d 1374, 1382 (Fed. Cir.
1999), as supporting its proposition. However, the “some
structure” in the specification that would be sufficient still
should be “some structure corresponding to the means”
recited in the claims “so that one can readily ascertain
what the claim means and comply with the particularity
requirement of ¶ 2.” Atmel, 198 F.3d at 1382 (emphasis
added). Indeed, the “interpretation of what is disclosed
must be made in light of the knowledge of one skilled in
the art,” but “the understanding of one skilled in the art
in no way relieves the patentee of adequately disclosing
sufficient structure in the specification.” Id. at 1380; see
also Biomedino, 490 F.3d at 952. Here, as discussed
above, other than the post hoc synthesis of what the
“means for mounting” limitation corresponds to as proposed
by Twin Peaks, the ’439 patent specification itself
does not adequately disclose the corresponding structure
of the “means for mounting” limitation, and that inadequate
disclosure cannot be cured simply by relying on the
knowledge of a person skilled in the art. Biomedino, 490
F.3d at 953 (“The inquiry is whether one of skill in the art
would understand the specification itself to disclose a
structure, not simply whether that person would be
capable of implementing a structure.” (citation omitted)).
We therefore conclude that the “means for mounting”
limitation of claim 1 is indefinite and that the district
court did not err in so concluding.
**Separately, from Blawgsearch on 30 May 2017:Continue Reading ...
Bob Stoll: ”And it is the international exhaustion holding that is particularly troubling. Sales abroad act independently from the US patent system and there is no impact from the US patent system on those sales. Yet in this decision, the Supreme Cour…Continue Reading ...
This morning’s opinion in Impression Products, Inc. v. Lexmark International, Inc. does not, directly, have anything to do with patent remedies, but the issues at stake are such important ones that I would be remiss not to say at least a few words about them on this blog. To reiterate, in an opinion by Chief Justice Roberts, the U.S. Supreme Court today holds as follows:
This case presents two questions about the scope of the patent exhaustion doctrine: First, whether a patentee that sells an item under an express restriction on the purchaser’s right to reuse or resell the product may enforce that restriction through an infringement lawsuit. And second, whether a patentee exhausts its patent rights by selling its product outside the United States, where American patent laws do not apply. We conclude 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 or the location of the sale.(Justice Ginsburg dissented on the second question only, and the newly-appointed Justice Gorsuch didn’t participate; otherwise the opinion was unanimous.) Since I was one of the signatories of an amicus brief urging the Court to affirm the Federal Circuit (that is, to go the opposite way on the two questions described above), I am rather disappointed in the outcome. Jason Rantannen has an excellent overview of the opinion on Patently-O, so I’ll just focus on a few additional observations that so far have occurred to me:1. My principal policy concern going forward is that the United States’ adoption of a regime of international exhaustion could result in drug companies pulling certain drugs from the market, or substantially raising their cost, in developing countries. (For analysis, see this article and this op-ed by Ouellette & Hemel.) As a moral issue, the marginal benefits to U.S. consumers that the opinion may now permit do not, in my opinion, outweigh the substantial risk to the health and well-being of the poor in other parts of the world. Then again, maybe there will be other ways for drug companies to continue to price discriminate (charge a lower price in developing countries) without the risk of having the drugs exported to the U.S. Professor Fred Abbott so argued in an amicus brief he filed, and I hope he’s right.2. I’m also not so eager to condemn price discrimination, for the standard reasons that many economists aren’t–i.e., that it’s better than single-price monopoly pricing which reduces output and excludes those consumers who would be willing to pay a price above marginal cost. That said, I understand that the welfare effects of second and third degree price discrimination can be ambiguous, and there is a recent paper by Elhauge and Nalebuff arguing that metering ties are generally welfare-reducing. So maybe I’ll be proven wrong here. It will be interesting to see, going forward, if the Lexmarks of the world who are now unable effectively to engage in price discrimination (unless they figure some other way around the decision) will raise the prices of their products.
Clarification: What I mean by that last sentence is that it will be interesting to see if the price Lexmark charges for its printers, or the price it charges low-usage consumers for ink, goes up. In effect, henceforth Lexmark customers will buy refillable cartridges at a price I would expect to be lower than the price Lexmark previously charged for refillable cartridges but higher than the price it charged for nonrefillable cartridges. Customers who use a lot of ink will be better off, but those who use only a little will be worse off, if what I understand to be the standard economic predictions come true. Then again, maybe that isn’t how things will work out in this particular market.3. As for the opinion itself, I’m a little disappointed at the formalistic character of much of it–reliance upon Lord Coke’s distaste for restraints on alienation and all that–and I’m not all that persuaded by the policy illustration the Court provides at pp. 7-8, where it writes:Take a shop that restores and sells used cars. The business works because the shop can rest assured that, so long as those bringing in the cars own them, the shop is free to repair and resell those vehicles. That smooth flow of commerce would sputter if companies that make the thousands of parts that go into a vehicle could keep their patent rights after the first sale. Those companies might, for instance, restrict resale rights and sue the shop owner for patent infringement. And even if they refrained from imposing such restrictions, the very threat of patent liability would force the shop to invest in efforts to protect itself from hidden lawsuits. Either way, extending the patent rights beyond the first sale would clog the channels of commerce,with little benefit from the extra control that the patentees retain. And advances in technology, along with increasingly complex supply chains, magnify the problem.See Brief for Costco Wholesale Corp. et al. as Amici Curiae 7–9; Brief for Intel Corp. et al. as Amici Curiae 17, n. 5 (“A generic smartphone assembled from various high-tech components could practice an estimated 250,000 patents”).To be sure, no one wants to see “the smooth flow of commerce . . . sputter,” but is that really a realistic risk under a regime of national exhaustion? The E.U., for example, follows an analogous rule of regional exhaustion, so that sales outside the E.U. don’t exhaust the E.U. IP owner’s rights; but it surely wouldn’t be fair to say that commerce in the E.U. has ground to a halt. To use the Court’s example, car manufacturers would face an outcry from consumers if they tried to “restrict resale rights and sue the shop owner for patent infringement,” thus suggesting to me that the market provides some discipline against this parade of horribles; and when it doesn’t, antitrust law in an appropriate case might prevent a monopolist from using some type of restraint to expand or maintain the scope of its monopoly. The exhaustion doctrine, in other words, as Professor Herb Hovenkamp has argued, often seems to be stricter than necessary to prevent monopolist abuses. Finally, note that in the above illustration if any of the patents wasn’t cleared in advance, the patent owner would still have a cause of action against any maker, user, or seller in the chain of commerce. Just because someone buys or sells the car at retail doesn’t ensure them against being sued (though again, and putting aside occasional demands by patent assertion entities which sometimes might be abusive, one doesn’t see too many suits against retailers or consumers in this space).4. As to whether there will be ways to get around Impression Products by structuring more transactions as licenses, or by trying (somehow) to enforce contracts against purchasers or asserting state-law claims for tortious interference with contract . . . for now, I’m somewhat skeptical that any of these alternatives will be very effective. And the bulk of the case law so far hasn’t favored Lexmark’s efforts to engage in price discrimination via the Digital Millennium Copyright Act. On the other hand, the U.S. FDA still takes the position that the importation of drugs for personal use from abroad is illegal, though to my knowledge it doesn’t enforce this rule very strictly, so I expect we’ll see marginally more drug imports from Canada going forward. (Maybe some day we will enact our own universal health care system and render that workaround superfluous, but prospects don’t look very good at the moment, unfortunately. My apologies for all the editorializing here today, which I trust will be, for different reasons, about equally offensive to both the right and the left.)Continue Reading ...
Update: Maybe I’m just an outlier here, but to have an important rule of law determined in the year 2017 based in part on Lord Coke’s views on restraints on alienation strikes me as just a tad absurd. Cf. O.W. Holmes, The Path of the Law (“It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV.”). Coke flourished some 200 years after the reign of Henry IV, but nonetheless . . .
The “delicious acronym SSFFC” – as described by Marie-Paule Kieny, assistant director-general for Health Systems and Innovation at the World Health Organization – will no longer be used by WHO to describe substandard and fake medical products. And key to this decision is that protection of intellectual property rights is not a competence of the UN health agency.Continue Reading ...
The Supreme Court determined that when a patent owner sells a product the sale exhausted patent rights in the item being sold regardless of any restrictions the patentee attempts to impose on the location of the sale. In other words, a sale of a patented product exhausts all rights — both domestic and international… Notably, the Supreme Court rejected the Government’s international exhaustion compromise, which would have been to recognize that a foreign sale exhausts patent rights unless…
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By Jason Rantanen Impression Products, Inc. v. Lexmark International, Inc. (2017) – Download opinion In a straightforward and almost unanimous opinion authored by Chief Justice Roberts, the Supreme Court reversed the Federal Circuit on both domestic (8-0) and international exhaustion (7-1). The Supreme Court’s opinion is summed up by a single sentence early on. “We […]Continue Reading ...
Just a few minutes ago, the Court reversed the Federal Circuit’s decision in Impression Products v. Lexmark International. From the opinion by Chief Justice Roberts:
This case presents two questions about the scope of the patent exhaustion doctrine: First, whether a patentee that sells an item under an express restriction on the purchaser’s right to reuse or resell the product may enforce that restriction through an infringement lawsuit. And second, whether a patentee exhausts its patent rights by selling its product outside the United States, where American patent laws do not apply. We conclude 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 or the location of the sale.I’ll start reading the full opinion and may have more to say about it later in the day. My initial reaction is one of disappointment, for reasons previously stated here.Continue Reading ...
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