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The U.S. Supreme Court in a recent ruling has opined on the rights of a purchaser to use and resell patented products.

The patent system give the patent owner the right to exclude others from making, using, and selling the patented invention, for the life of the patent. The right to exclude, however, is subject to the rule of patent exhaustion – upon the sale of a patented product, the patent owner’s patent rights are exhausted and the buyer is free to use or resell the product. Similar to the first sale doctrine.

In this case, Lexmark was the owner of a number of patents for printer cartridges. Through a program, Lexmark provided purchasers the option of buying the cartridge at full price OR to buy the cartridge at a 20% discount, but with the stipulation that the cartridge would only be used once so that it could not be re-filled and be thrown away.

Defendant, Impression Products, was obtaining these cartridges from buyers and then re-manufacturing them. Thereafter, Lexmark filed a lawsuit for infringement for patent infringement.

Defendant argued that Lexmark’s patent rights were exhausted in the US and abroad when Lexmark sold the cartridges. In other words, they were free to refurbish and resell the cartridges, as they wished.

The US Supreme Court ruled that when Lexmark sold its cartridges under discount, its patent rights were exhausted. However, the Court surmised that its contract rights may still be enforceable.

Therefore, the Supreme Court left the door open for patent owners to sue under contract theory, so that that patent owners may still restrict downstream sales of their patented products–but not under patent infringement.