## Facts

- Lexmark manufactured printer toner cartridges and owned U.S. patents covering cartridge components and use.
- Lexmark sold two cartridge lines:
  - “Regular” cartridges at full price without post-sale restrictions.
  - “Return Program” cartridges at a discount conditioned on single-use and no-resale/no-transfer terms except back to Lexmark.
- Lexmark used a microchip to impede reuse unless the chip was circumvented or replaced.
- Impression Products acquired used Lexmark cartridges (including Return Program cartridges) through intermediaries, arranged for refurbishment/refilling and chip circumvention or replacement, and resold the cartridges in the United States at lower prices.
- Impression’s supply included (1) cartridges first sold in the United States under the Return Program and (2) cartridges first sold abroad and later imported into the United States.
- Lexmark sued for patent infringement based on (1) violation of Return Program restrictions and (2) importation/resale of foreign-sold cartridges.

## Issues

1. Whether an authorized U.S. sale of a patented item subject to clearly communicated, lawful post-sale restrictions exhausts the patentee’s U.S. patent rights, barring infringement suits to enforce those restrictions.
2. Whether an authorized sale of a patented item outside the United States exhausts the patentee’s U.S. patent rights as to later importation and resale in the United States.

## Decision

- The en banc Federal Circuit reversed the district court’s dismissal of infringement claims involving domestically sold Return Program cartridges.
- The court held that Lexmark’s domestic Return Program sales did not exhaust Lexmark’s patent rights because the sales were conditional and expressly withheld authority to reuse or resell.
- The court affirmed the district court’s ruling that Lexmark’s authorized foreign sales did not exhaust Lexmark’s U.S. patent rights.
- The court concluded that, absent express or implied authorization to import, importation and resale of foreign-sold cartridges could infringe U.S. patents.

## Legal Principles

- Patent exhaustion is tied to the “authority” conveyed by the patentee; exhaustion arises only from a sale that grants authority to use or resell the item free of lawful conditions.
- A patentee may make a domestic sale subject to clearly communicated, otherwise-lawful post-sale restrictions (e.g., single-use/no-resale); violating those restrictions can support patent infringement liability under 35 U.S.C. § 271(a).
- Post-sale limitations are not necessarily confined to contract remedies; when conduct exceeds the scope of the patent-based authority granted, it can be treated as infringement rather than only breach of contract.
- Authorized foreign sales do not, by themselves, exhaust U.S. patent rights; U.S. exhaustion from foreign transactions requires express or implied authorization to import and resell in the United States.
- The Federal Circuit reaffirmed its prior doctrines permitting enforcement of lawful post-sale restrictions through patent law and rejecting automatic international patent exhaustion.

## Conclusion

The en banc Federal Circuit held that Lexmark’s patent rights were not exhausted by (1) discounted domestic sales conditioned on single-use and no-resale terms, or (2) authorized foreign sales lacking authorization for U.S. importation, allowing Lexmark to pursue infringement claims in both settings.


Lexmark Int'l, Inc. v. Impression Prods., Inc., 816 F.3d 721 (Fed. Cir. 2016)