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BIO Chimes In: Impression Products v. Lexmark International (Supreme Court)

March 3, 2017
This is a three part series on BIO's recently submitted amicus briefs in cases before the Supreme Court as well as the U.S. Court of Appeals for the Federal Circuit.

Included in our cases to watch post were some upcoming IP cases on the agenda this term for the Supreme Court.  BIO, with Croplife International, has subsequently submitted an amicus brief in one of those cases. Let's take a look:

BIO and Croplife's brief addressed two questions facing the Supreme Court directed at patent exhaustion: the territoriality principle of U.S. patent law and the question of conditional sales.

International sales, they argued, should not exhaust patent rights. The Supreme Court has held since the 1857 decision in Brown v. Duchesne that "no infringement occurs when a patented product is made and sold in another country." The Federal Circuit's en banc opinion rested on this precedent, supported for over 150 years in other cases including Boesch v. Graff (1890) in which the Court held that a sale authorized by another international law did not permit "defiance of the rights of patentees under a United States patent."

The Federal Circuit's decision had affirmed prior holding in previous cases including Jazz Photo Corp. v. International Trade Commission and supported the Supreme Court's existing precedent "confirming the territoriality of the U.S. patent system and furthering important public policy."

For BIO and Croplife, who support holders of U.S. patents, "the territorial limitation on patent exhaustion advances public policy and economic efficiency...[and] permits innovators to sell patented products internationally at locally-driven market prices."

Addressing the question of conditional sales, the brief supports the Federal Circuit's decision affirming prior holding in Mallinckrodt, Inc. v. Medipart, Inc., which held that conditional sales of patented products do not exhaust patent rights:

"Mallinckrodt rests on longstanding precedent recognizing the right of a patent owner to convey only a portion of the patent right without giving away the rest. The Court should reaffirm this precedent, on which industry members have relied for decades to structure their businesses and to establish the value of rights and products they convey through licenses and sales contracts."

The Supreme Court has reaffirmed this foundational principle of patent law and consistently recognized that "a patent owner may grant a license for restricted use."

"The Federal Circuit’s decision in Mallinckrodt built on fundamental principles spanning over a hundred years of Supreme Court precedent and held that unless a conditional sale 'violate[d] some other law or policy ... private parties retain the freedom to contract concerning conditions of sale.'976 F.2d 700, 708 (Fed. Cir. 1992)."

In the closing paragraph of their brief, BIO and Croplife affirmed the following:

"The current legal regime has long ensured certainty and efficiency in the market. Petitioner’s request to overrule Mallinckrodt and disrupt the way patented products have been and continue to be sold should be rejected. To do otherwise would fundamentally alter the market for many patented products: disrupting pricing strategies, restricting access to innovative products, 37 and creating obstacles to further innovation as well as the country’s economic growth."

Oral arguments will be held March 21, 2017.