The US Government Weighs In on Printer Cartridges1 Sep, 2015 By: Ed O'Connor, Avyno Law
As the patent attorney leading the charge in defense of remanufacturer Impression Products, here is my response to the amicus curiae brief filed on June 29, 2015 by the US government over the future for restrictive patent rights on printer cartridges.
A Shrink Wrap License
The Mallinckrodt decision was the legal basis upon which the Lexmark Prebate program rested. According to that ruling, a patentee who sells a product may put a label on that product which restricts the use by a purchaser. Called a “shrink wrap” contract, Mallinckrodt has been much criticized, but it is the law of the land. In our brief, we took the position that Mallinckrodt was effectively overruled by a recent decision of the United States Supreme Court. The United States government agrees and, in its brief, argues that Mallincrodt was effectively overturned.
The government also agreed with us that the Jazz Photo decision should be overturned. Jazz Photo held that while the first sale of a product extinguishes all of the patent rights in that product, extinguishment is limited to first sales made in the United States.
Jazz Photo has wreaked havoc in the remanufactured cartridge business, and has the potential of wreaking havoc on many other products in many diverse industries. It is of particular concern to companies in the electronics field, such as, Intel, Samsung, and a host of others. Those companies are among the many enterprises, scholars, and trade associations that support the position I advocate for overturning Jazz Photo.
While the government agrees that Jazz Photo should be overturned, it also argued that the court should allow patentees to require contracts to maintain their US patent rights as a condition of overseas sales. Such a contract would create untold problems.
A Potential Nightmare
In my opinion, if the court were to adopt the government's recommendation, it could cause tremendous practical problems. For example, most imported electronics products, have many components that are patented in the United States. These products are often sold in one country, then transferred to another company in another country where those components are included in other products, which are in turn sold to companies in other countries where they are then included in a final product, which is then imported into the United States.
The government's proposal would mean that any purchaser along the supply chain would have to determine whether or not there were any contracts wherein a seller of components has United States patent rights. Those purchasers would also have to determine which contract rights control. If the initial products were sold in China, then the question would be, “What is the effect of a contract in China on the rights of a US purchaser?” Based on conversations we have had with representatives of various companies that sell electronics products into the United States, it appears that the government's proposal is an absolute nightmare. I agree.
Whose Laws Apply?
In the recharger industry one can imagine a scenario where a US OEM sells a product in Singapore with a label saying that the patent rights, in that product, are preserved in the United States. Those products would be purchased by consumers in Singapore who would pay zero attention to the label restrictions. If the products are thereafter remanufactured by, say, a company in Australia and then sold into the United States, the obvious questions are "Is that label contract effective in preserving US patent rights?” and “Which country’s law applies?”
The proposition I have presented to the court is that Jazz Photo simply be overturned and that the law of patent exhaustion, as it exists for United States sales, should be the same as it exists for sales outside of the United States as well.
I believe our position is solid and that we will prevail.
Ed O’Connor is Litigation Chairman of Avyno Law. For more information on this topic and Mr. O’Connor, contact www.irecyclingtimes.com