Who holds the power?
Does a patent holder have the power to dictate how you use a product after you buy it?
That’s the question that the Supreme Court would now have to settle as it hears arguments on a patent dispute case Impression Products, Inc v Lexmark International, Inc.
Case with big repercussions
Although a decision is months away, businesses like IBM and Costco, public interest groups, and legal scholars are closely following the case, since the verdict is likely to be a “major” decision with wide-ranging implications for our society.
The basics of a patent
Most products are patented. As consumers, we do not have to worry about such patents because of the legal principle of “exhaustion”.
This means that when you buy a product, you own it, and the legal patent that the manufacturer held is ‘exhausted’.
You can use, repair, donate or resell the product without any legal consequences.
Lexmark is about to ruin it for everyone
That independence may soon change, depending on how the Supreme Court’s verdict.
Lexmark sells printers and cartridges. Printers are cheap, and they last long.
Cartridges are expensive and refills are more frequent. Lexmark’s most business consists of selling cartridges.
Because new ink cartridges are expensive, consumers often look for cheaper ways to refill old ones. Many companies provide such a service. Impression Products is one of them. They sells ink by refilling cartridges, including those of Lexmark.
All about the money
Lexmark is reluctant to miss out on business of selling new ink cartridges because of competitors refilling older ones for cheap.
Their solution: use patent law to go after these entities, and restrict customers from refilling cartridges.
Trying to cut competition out is not a new strategy. Cellular providers lock devices, dissuading customers switching to competing networks. Monsanto wants farmers sowing patented seeds only. Equipment Company Deere & Co. clamp down on independent repair shops.
If at first you don’t succeed, sue them differently
Lexmark tried this approach initially and were blocked by the Courts. It argued that refills violated software locks and hence the Digital Millennium Copyright Act. U.S. Court of Appeals for the Sixth Circuit ruled against Lexmark for misapplying the scope of the Copyright Act.
When they failed the Copyright route, they took the patent route.
Lexmark began selling cartridges with a notice on the packaging: no reuse or third party transfer allowed. Voila! Refills would now be patent infringement.
Impression Products is now challenging the legality. But this time, Lexmark has had success with the Court of Appeals for the Federal Circuit, which hears all appeals to patent cases.
The court reasoned that so long a patent holder gives notice of restriction, the customer is bound to obey them, even after they own the product.
Its whole victory hinged on a technical argument about the 1952 Patent Act that revolves around the word “authority”.
Unsurprisingly, if the Supreme Court agrees, this would have serious consequences for third-party businesses that thrive on customer service of products of bigger companies, the resale markets and consumer choice in general.
Patent owners would suddenly have broad new powers, including suing customers who already bought their product.
For instance, if you buy a Toyota, it may be illegal for you to take it to any mechanic other than a Toyota dealer. You may be in violation of patent law if you resell your iPhone!
The Supreme Court will likely be very wary of the implications of its own decisions. Many consumer groups are already claiming Lexmark’s arguments as an unprecedented power-grabbing tactic to corrode consumer rights in favor of bottom lines of private businesses.
The U.S. Justice Department is arguing in favor of Impression, and asking the Supreme Court to reverse part of the Appeals Court’s decision.
Tech giants like Intel and HTC have also showed support for Impression and warned major supply chain disruptions in case of a ruling favoring Lexmark.
Lexmark supporters, meanwhile, include big pharma, patent holding companies, and IBM (only in the extraterritorial aspect)
[clickToTweet tweet=”Expert analysis suggested Justices are learning legal precedence of patent laws; outcome: uncertain.” quote=”Expert analysis of the initial arguments heard by the Supreme Court suggested that Justices are still being acquainted with the legal precedence of patent laws, and the outcome is still very much uncertain.”]
This will be a landmark case, with implications far beyond ink. Let us hope the Justices do not blotch this one for us.