CURRENT INNOVATION CONCERNS
Elpidio V. Peria
26 March 2017
A US Supreme Court case, Impression Products, Inc. v. Lexmark International, Inc, may soon either extinguish or sustain the practice of using computer printer toner cartridge refill and considering the popularity of these types of refills here in the Philippines, this will surely have an impact on businesses that rely on the secondary market on refilled toner cartridges.
Last 21 March 2017, Impression Products, Inc., a US company engaged in the remanufacture of toner cartridges by acquiring used Lexmark toner cartridges, refurbishes them and sells these cartridges again in competition with new and refurbished cartridges sold by Lexmark, filed a petition for certiorari before the US Supreme Court as the federal appeals court ruled against Impression for its acts of reselling Lexmark toner cartridges.
The original cartridge manufacturing company, Lexmark International, Inc, would prefer that its customers return their empty cartridges to it for refurbishment and resale, rather than sell the cartridges to a remanufacturer. It offers its customers the option to purchase a “Return Program Cartridge” at a discount of roughly 20%, subject to a single use/no-resale restriction. These cartridges contain a restriction that “the buyer may not reuse the cartridge after the toner runs out and may not transfer it to anyone but Lexmark once it is used.”
The key question in this case is : is the patent over the toner cartridges exhausted once the cartridges are sold with a condition that constitutes a post-sale restriction, or to put it in other words, when does the rights of a patent holder over the patented product stop, at the point when it is sold, or can the patent holder still claim monopoly rights over the patented product provided the patent holder communicated to the buyer that such monopoly rights still remain because the patent holder said so?
` A key principle of patent law is the “first sale” doctrine or the doctrine of “exhaustion”, where the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. This is because the initial authorized sale of a patented item terminates all patent rights to that item. The unresolved item here is whether the principle of exhaustion will apply when the patent holder expressly communicated to the buyer that it is trying to restrict the further sale of the patented article.
This is a big issue since many Filipinos, or even in the US, depend on these refillers so that they may be able to keep up with the very high prices of these computer printer toner. If the patent owner wins this case, then the monopoly of the toner cartridge manufacturer becomes absolute it will often lead to abuse by way of lousy after-service or even atrociously high prices of toner cartridges.
How will the US Supreme Court decide? We will soon find out and will report on this here in this blog.