On February 12 the U.S. Court of Appeals for the Federal Circuit issued its decision in the Lexmark v. Impression Products case, affirming earlier decisions made in Jazz Photo and Mallinckrodt and giving Lexmark a victory against Impression Products and the aftermarket.
In 2014 Impression Products had challenged the Jazz Photo decision, which allowed Lexmark to retain its patent rights on cartridges first sold abroad. The company argued that Jazz Photo had been implicitly overruled by the Supreme Court’s decision in Kirtsaeng. They also argued that the decision in Quanta regarding restricted single use had overruled Mallinckrodt, undermining Lexmark’s core argument that it retained certain patent protections on cartridges sold under the Return Program.
Judge Michael R. Barrett of the District Court of Southern Ohio ruled in favor of Lexmark in regards to overseas patent exhaustion, but agreed that Quanta was more applicable than Mallinckrodt, giving a victory to Impression Products.
There were questions regarding the District’s Court’s understanding of some of the finer points of resell and both parties appealed. This time, however, the U.S. Court of Appeals for the Federal Circuit, which has authority on patent matters, ruled in favor of Lexmark. The court empaneled a group of 12 judges to hear the case en banc. The judges overwhelming opted to uphold both Jazz Photo and Mallinckrodt, with 10 in the majority and 2 dissenting.
Charlie Brewer, industry analyst and online publisher of Actionable Intelligence (www.Action-Intell.co) broke the news and says that the appellate court’s decision was not surprising.
“If you read Jazz Photo or Mallinckrodt and see how they treat patent right exhaustion, then compare the rulings to other global statutes, they’re pretty consistent — especially Jazz Photo,” says Brewer. “The reselling of a product in a foreign market, almost never exhausts the patent in question. It’s the same in most countries that enforce patent law.”
Brewer cautions that for certain firms in the aftermarket, the ruling from the appeals court could have far-reaching effects.
“For companies illegally sourcing empties overseas or for empties brokers hoping they could bring more empties in from overseas, it is a big loss,” he says.
However, Brewer doesn’t think it will have any significant effect on the legitimate aftermarket.
“Nothing has really changed for them,” he commented. “Most U.S. remanufacturers have been aware of the issues of patent exhaustion on cartridges first sold overseas for years and they only source empties originating in the States. For these guys, and I think it’s the vast majority of the U.S. remanufacturing industry, the decision simply means that it’s business as usual. Beyond that, most third-party supplies vendors in the U.S. only market Lexmark compliant cartridges anyway.”
With the decision in, Brewer thinks the OEMs are bound to continue their aggressive pursuit of those that infringe their patents.
“OEMs are simply protecting their share of a downward trending market,” he says. “It’s their responsibility to their stakeholder. We can expect more legal actions.”
Impression Products lawyer, Ed O’Connor, says he plans to appeal the ruling to the U.S. Supreme Court. He continues to insist that Jazz Photo and Mallinckrodt are bad law in light of more recent rulings from the high court.
In another IP case, Xerox announced on February 2 that it had come to an agreement with South Korea-based Hana Corp. regarding what they considered to be infringement on the patents of their solid ink consumables.
Xerox released a statement, stating: “To amicably resolve such dispute, the parties have come to a mutual agreement and Hana and its supplier will stop the manufacture, distribution and sale of solid ink for Xerox color printers.”
Kevin Weaver, Vice President, Brand Protection, Xerox Supplies Business Group, says that Xerox invests a lot of money to develop its products and it invested a lot to fight this case.
“It’s about protecting our resellers,” he says. “We need to demonstrate to our resellers that we will actively and aggressively pursue [these cases]. We are not going to sit around and let [companies] abuse our IP.”
