Finding a Place for Mallinckrodt and Conditional Sales in the Patent Exhaustion Doctrine: Will “Lex” Mark the Spot?

This article originally appeared in Vol. 40, No. 3 of New Matter, the publication of the IP Section of The State Bar of California. Any opinions in this article are not those of Winston & Strawn or its clients. The opinions in this article are the author’s opinions only.

The Federal Circuit is facing a rare opportunity to clarify and correct a muddled area of the law: contracting around patent exhaustion. After a panel hearing, the Federal Circuit ordered on April 16, 2015, sua sponte an en banc hearing of the patent exhaustion issues in Lexmark Int’l, Inc. v. Impression Prods., Inc. The Lexmark case involves a patent owner’s sales of patented printer cartridges to end users under the condition that they use the articles once and then return them, as well as Lexmark’s sales of the same patented articles to its resellers requiring the resales to take place under the same restriction. The Federal Circuit will consider whether any of those sales gives rise to patent exhaustion in the U.S. In light of deep-rooted Supreme Court precedent, the Federal Circuit should overrule en banc its previous decision in Mallinckrodt, Inc. v. Medipart, Inc., to the extent it had ruled that a sale of a patented article—when the sale is made under a restriction that is otherwise lawful and within the scope of the patent grant—does not give rise to patent exhaustion.