April 21, 2015

“Fed. Circ. Could Weaken Patent Rights In Exhaustion Case,” Law360, April 21, 2015

Longtime Federal Circuit precedent allowing patent owners to control the use of their products after they are sold is in question since the full court has decided to review the issue of patent exhaustion, and attorneys say overturning those rules would create significant new hurdles to patent enforcement.

The Federal Circuit decided last week on its own motion to conduct an en banc review in Lexmark International Inc.’s infringement suit against a printer cartridge reseller to address whether two of the court’s precedents on patent exhaustion remain good law in light of recent U.S. Supreme Court rulings.

The case involves two separate questions. In the first one, the Federal Circuit will decide whether the sale of a patented item outside the U.S. exhausts the patent owner’s rights to later sue for infringement.

The Federal Circuit’s ruling on both questions have wide-ranging implications for patent enforcement, said Matthew Cutler of Harness IP & Pierce PLC.

“This really is about the scope of patent rights and how far you can extend the patent monopoly,” he said.

Still, any Federal Circuit ruling on the issue would be influential, Cutler said.

“There are a significant number of companies and industries that make use of restricted-use type sales as a way to extend patent coverage beyond the first sale,” he said, so a ruling that patent rights are exhausted despite such restrictions would be “a huge seismic shift in many industries.”

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