Lexmark added Impression products to the list of over two dozen defendants in a patent infringement lawsuit filed in U.S. Court for the Southern District of Ohio, a suit that began by the company in 2010. Although all of the other defendants buckled to Lexmark’s clout, either choosing to settle, or with the court granting Lexmark default judgments against absentee defendants, Smith and his attorney stood their ground electing to fight the lawsuit.
Over 25 years ago, teenager Eric Smith began his own business delivering typewriter ribbons to customers in Charleston, West Virginia. As the demand for typewriter products declined and the world of computer printing evolved in the 1990s, Smith found a market niche by buying empty toner cartridges, refilling them, and selling them back to customers at a lower price. The niche led to Smith growing and developing the office supply business that his father founded, Impression Products, turning it into a successful small-scale venture with 25 employees and Smith serving as the company’s president. The company became even more successful as internet commerce matured, with Impression selling the refilled cartridges around the globe.
Things were going well until 2013, when lawyers for industry giant Lexmark began sending Smith threatening letters, claiming that Impression Products was violating patent law by selling the recycled cartridges overseas. Citing case law from the precedent-setting 2001 Federal Appeals ruling of Jazz Photo Corp. v. ITC, which adopted standards between repair, which is permitted under patent law, and reconstruction of camera equipment, which was prohibited, Lexmark sued Impression Products, along with several other toner recycling companies across the country. In the 2001 ruling, the judicial panel decided that “United States patent rights are not exhausted by products of foreign provenance.” Lexmark added Impression products to the list of over two dozen defendants in a patent infringement lawsuit filed in U.S. Court for the Southern District of Ohio, a suit that began by the company in 2010. Although all of the other defendants buckled to Lexmark’s clout, either choosing to settle, or with the court granting Lexmark default judgments against absentee defendants, Smith and his attorney stood their ground electing to fight the lawsuit.
During this time, a similar patent case had been floating through the federal court system, Kirtsaeng v. John Wiley & Sons, Inc, reaching the Supreme Court by 2013. John Wiley & Sons, a college textbook vendor, practiced market segmentation, selling textbooks for cheaper to overseas clients while selling them at higher price in the more lucrative U.S. market. Supap Kirtsaeng, a Taiwanese student studying in the U.S. had his parents purchase the books from their home in Taiwan, instructing the company to ship the books to Kirtsaeng’s campus residence. The Supreme Court ruled 6-3 in favor of Kirtsaeng, with Justice Stephen Breyer writing the majority opinion stating that “the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets.”
The “first sale” doctrine stems from a 1908 case Bobbs-Merrill v. Straus, involving the novel The Castaway, after the Straus brothers, the owners of the department store Macy’s, purchased a large quantity of the novels at wholesale. Although the book’s publisher set a minimum retail price of one dollar, Macy’s sold the books for 89 cents. Bobbs-Merril sued the brothers for copyright infringement. The Supreme Court ruled in favor of the Straus brothers, ruling that once the product had been sold, its rights in that copy were exhausted. This became known as the first sale doctrine. Meanwhile, in the 1917 Motion Picture Patents Co. v. Universal Film Manufacturing Co fundamental patent law ruling, patent holders for motion picture projectors sued the owner of one of the projectors who tried to use third-party film reels in the projector. Like Straus, the Supreme Court ruled in favor of the defendants, writing that once the projector was sold it, it was “carried outside the monopoly of the patent law and rendered free of every restriction that the vendor may attempt to put upon it.”
Noted patent attorney, Ed O’Connor, who had been frustrated by the Jazz Photo ruling for years, has represented Impression Products throughout the litigation. O’Connor argued that the Kirstaeng ruling means that if an authorized first sale anywhere in the world exhausts copyright laws, than it should apply to patent law as well. Although Federal Judge Michael R. Barrett in Ohio cited some disagreement with Lexmark’s interpretation of the law, he ruled that patent law and copyright law were not equivocal in the Lexmark case. Despite the adverse ruling, O’Connor was successful in petitioning the D.C. Appeals Court, which handles patent cases, to hear the case. While most appeals are decided by a three-judge panel, the D.C. court ruled in April that O’Connor and Lexmark will be able to make their arguments to an en banc, or full panel of judges.
The court also invited amicus briefs, which the court has been flooded with, from Lexmark supporters such as computer and mobile technology patent-holders and trade groups, as well as from remanufacturers, retailers, and public interest groups who have filed on behalf of Impression Products. Oral arguments are set to begin in the D.C. Court on October 2nd. The decision to hear the case en banc highlights the gravity of this particular case. Given the mixed rulings of Jazz Photo and Kirstaeng, plus the fundamental question of whether patent law and copyright law should be administered congruently, the case seems like prime fodder for the Supreme Court’s docket regardless of the appeals ruling.
ARS Technica – Doug Kari
Electronic Frontier Foundation – Vera Ranieri
PatentlyO – Dennis Crouch and John Duffy