Law

A Patent Case That Affects Everyone

When you buy a product, you can do whatever you want with it. Right?

Caveat emptor.

Photographer: Daniel Acker/Bloomberg

This week, the U.S. Supreme Court will hear arguments in a patent dispute, Impression Products Inc. v. Lexmark International Inc. Unlike most patent cases, this one directly affects the daily lives of nearly every American. It requires the court to answer a simple question with profound implications: Does a patent holder have the power to dictate how you use a product after you buy it? 

Although you may not realize it, many of the products you use every day -- from phones and cars to toothbrushes and medications -- are patented. These patents are largely invisible to the average consumer because of a crucial legal limitation known as "exhaustion." Exhaustion provides that when you buy a product, you own it, even if it was patented. As a result, the patent owner's rights to determine what you do with it are limited. You can use, donate, resell or repair the product as you see fit. The patent holder no longer has any say in the matter.

Of course, patentees like Lexmark are reluctant to give up that control. Lexmark sells printers. But more importantly for its bottom line, it sells ink cartridges. As anyone with a home printer can attest, the continuing cost of replacing ink can quickly surpass the once-per-decade expense of a new printer. Frustrated by consumers who buy cheap ink in bulk to refill their own cartridges -- and by companies that do the refilling for them -- Lexmark is attempting to use patent law to construct something resembling customer loyalty.

This strategy isn't unique. We see it when mobile-phone companies lock their customers' devices to stop them from switching to a competing network. We see it when car companies, electronics manufacturers and even the tractor maker Deere & Co. try to clamp down on independent repair shops. Often those efforts rely on software locks that restrict how customers can use, or whether they can fix, the things they buy.

In fact, that was Lexmark's initial approach. The company argued that the use of replacement ink cartridges bypassed its software locks in violation of the Digital Millennium Copyright Act. But the U.S. Court of Appeals for the Sixth Circuit saw that argument for what it was -- a perversion of copyright law intended to thwart competition.

So Lexmark went back to the drawing board. Its next strategy was to use the patents on its ink cartridges to restrict what consumers could do with them. Lexmark began selling cartridges with a notice on the packaging insisting that the product couldn't be reused or transferred to third parties. According to the company, anyone who refilled or resold those cartridges was a patent infringer -- even if they owned them.

So far, the courts have agreed. The Court of Appeals for the Federal Circuit, which hears all appeals in patent cases, embraced the idea that companies like Lexmark can unilaterally set the rules for how you use the devices they sell you. As long as a patent holder gives notice of the restrictions, the court reasoned, you're bound to obey them.

The Supreme Court should reject that power grab. It's inconsistent with a century and a half of precedent, in which the court has consistently held that companies may not use patent law to restrict the use and transfer of a product after an authorized sale. Moreover, allowing patent holders to replace the straightforward rules of ownership with whatever restrictions best suit their bottom lines would impose enormous costs on the public. Rather than rely on the established rules of property, every consumer purchase would demand a diligent and tedious investigation. Can this ink cartridge be refilled? How many times? Can it be transferred? To whom and under what conditions?

More worryingly, many consumers simply won't invest the time to scour every label, click-through agreement or product manual to figure out the terms of each purchase -- and that's a recipe for abuse. Imagine if Toyota Motor Corp. sold you a car, but sued you for patent infringement after you had it repaired by an independent mechanic. Or if Apple Inc. sold you an iPhone, but told you it was illegal to resell it. Or if you bought a coffeemaker but were barred from brewing your favorite local brand.

That's the future Lexmark wants to create. And it's one the Supreme Court needs to prevent.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the authors of this story:
    Aaron Perzanowski at aaron.perzanowski@case.edu
    Jason Schultz at jason.schultz@law.nyu.edu

    To contact the editor responsible for this story:
    Timothy Lavin at tlavin1@bloomberg.net

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