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06.25.17

After Latest Supreme Court Rulings on Patents, Including Impression v Lexmark, the Federal Circuit is Left Disgraced

Posted in America, Patents at 9:55 am by Dr. Roy Schestowitz

Court of Appeals for the Federal Circuit
The Court of Appeals for the Federal Circuit (CAFC) in 2016

Summary: Hostility towards the patent microcosm’s patent maximalism, as witnessed at the US Supreme Court (SCOTUS), culminated in another decision and will soon result in yet more decisions, as SCOTUS has since then picked more patent cases to look at

THE Court of Appeals for the Federal Circuit (CAFC) has a sore eye. The most powerful court (perhaps in the whole world, not just the US), whose panel of Justices has a profound effect on international law (by extension), keeps refuting it. In other words, CAFC is found to have given an erroneous judgment. Every time SCOTUS looks into it…

Remember Alice? Why does everyone keep mentioning it (millions of citations) 3 years down the line? That’s SCOTUS power.

Well, CAFC has been a disgrace over the years. It used to have among its ranks some truly corrupt people. As for its technical record? As this recent post put it, “Supreme Court: 5; Federal Circuit: 0. What’s Behind the Score?”

Here is the outline: “In the past six months, the Supreme Court has reversed the Federal Circuit in five patent cases. Most recently, it held that a patent owner’s domestic restricted and foreign sales of a product exhausted patent rights. Make sure you have a firm command of these important decisions, as well as ongoing developments in other areas such as inter partes review, obviousness and case law on “abstract ideas.” Attend the August 2017 Chisum Patent Academy seminars in Seattle! (Details at the end of this comment.)”

This is quite revealing, is it not? As noted above, there more patent cases. They are coming to SCOTUS soon (we shall cover these separately another day, having accumulated many notes and references on the subject).

Today (or this weekend) we would like to focus on the latest judgment. We wrote about it very quickly after we had already published many posts about the case. It’s the Impression v Lexmark case, which in almost no way relates to software patents (unlike TC Heartland, which we will revisit separately).

We have, over the past month or so, taken stock of various news and views. We cannot deal with all of them because there are so many (as is typical after SCOTUS decisions). Here is one by Jason Rantanen, a Professor at the University of Iowa College of Law. Here is Professor Sarah R. Wasserman Rajec. Related to this is also a report from The Economist titled “New technology is eroding your right to tinker with things you own”. Those interpretations should be decent enough to be worth reading. A month later (after the decision) the patent microcosm is still up in arms over this ruling because the ruling is viewed as continuation of SCOTUS hostility towards patent maximalism. See Watchtroll’s take or others in the patent microcosm, unlike for example IP Watch [1, 2]. One’s understanding of the decision depends on the views of the writers or the financial interests of the writers. Managing IP wrote about this news and then let Mayer Brown’s Andrew Pincus spout out ‘damage control’ or marketing in “interview” form (classic PR methodology). Speaking to patent law firms (maximalists) about a SCOTUS ruling is bound to lead to bias.

As a printing magazine put it (the case is about printers), the outcome of the case is good for the printing industry, not for the printers industry. The summary says: “The largest of the most recent patent troll cases against the printing industry and its OEMs was dismissed.”

British media covered this by stating:

The US Supreme Court ruled by 10 votes to two that the current model shared by a number of companies of selling low-priced hardware and profiting through the exorbitant price of supplies was unlawful.

10 votes to two is a big gap, almost as big as the gap in TC Heartland.

Joe Mullin, one of our favourite writers about that subject, said this:

In Impression Products v. Lexmark International, the justices’ opinion (PDF) made crystal clear that once a patented item has been sold once, the patent is “exhausted” and can no longer be enforced. That’s true even if the sale happened abroad and the item was later imported. Lexmark had two different strategies for trying to control how its cartridges get re-used; the high court struck down both of them and paid scant regard to various industry briefs pleading to maintain the pricing structures used by Lexmark and others to maintain profits.

Another good source is TechDirt, whose headline said this:

Strike Three: Lexmark Can’t Use Patents, Trademarks Or Copyright To Block Third Party Ink Cartridges

[...]

But CAFC twisted itself in knots to argue that this case was different, saying that Quanta was only about blocking sales, and this case — titled Lexmark v. Impression Products at CAFC and now Impression Products v. Lexmark at SCOTUS — was different because it involved a “limited license” rather than a direct sale. That is, Lexmark basically sold its products with a license agreement, saying “hey, don’t use third party cartridges, and if you do, we effectively are pulling our patent license and will sue you for infringement.”

They rightly point out CAFC’s utter failure.

Florian Müller has meanwhile explained the relevance of this case to a case he has watched closely. To quote the relevant parts: “Lexmark tried to leverage its patents on toner cartridges against various so-called remanufacturers (companies that buy up empty toner cartridges, refill them, and then sell the refilled cartridges). Impression Products was the last man standing at some point and took this to the Supreme Court after the Federal Circuit had decided completely in–surprise, surprise–the patent holder’s favor. Of the three different levels of the federal court system, the Supreme Court took the strongest and clearest position against overleveraging/overcompensation of patents; the Federal Circuit took the very opposite position; and the district court (Southern District of Ohio) had agreed with Lexmark that exhaustion didn’t apply to cartridges sold in other countries, but had sided with Impression at least with respect to cartridges Lexmark sold in the U.S. and on which it sought to impose certain restrictions.”

Further down Müller says that “[p]atent exhaustion as a concept has been strengthened today, and its profile in certain other cases will likely be even higher now. While Apple takes certain positions when it enforces its own patents (and would rather avoid Supreme Court review of a highly controversial Federal Circuit decision in its favor), exhaustion is not an issue in Apple v. Samsung but it does play a role in Apple v. Qualcomm: Count XXIII of Apple’s antitrust complaint against Qualcomm is a request for judicial “declaration of unenforceability [of Qualcomm's patents in certain contexts] due to exhaustion.” Apple alleged in its January complaint that “Qualcomm has sought, and continues to seek, separate patent license fees from Apple’s [contract manufacturers] for patents embodied in the chipsets Qualcomm sells to Apple’s CMs, a practice that is prohibited under the patent exhaustion doctrine.” In the past, Apple had to pay those license fees indirectly (via its contract manufacturers), which it is no longer prepared to do, and that’s why Qualcomm is now suing four Apple contract manufacturers and seeking a preliminary injunction against them.”

Müller later mentioned this in relation to another case he is familiar with. He wrote that “Apple would like to avoid Supreme Court review and just get the most favorable outcome. In some cases, what’s good for Apple is also good for the industry at large. Not so here. If the Supreme Court granted Samsung’s petition from writ of certiorari, the outcome could have similarly positive effects as the recent Lexmark decision. (In the long run, that would also benefit Apple, which is a defendant in the vast majority of patent cases that it’s a party to.)”

In light of this ruling the EFF not only wrote a detailed post (which we cited last month) but also chose a “Stupid Patent of the Month” accordingly:

The Supreme Court’s recent decision in Impression Products v. Lexmark International was a big win for individuals’ right to repair and modify the products they own. While we’re delighted by this decision, we expect manufacturers to attempt other methods of controlling the market for resale and repair. That’s one reason we’re giving this month’s Stupid Patent of the Month award to Ford’s patent on a vehicle windshield design.

We are very gratified to see all these recent rulings from SCOTUS and we remain committed to guarding them from various ongoing ‘attacks’ from the patent microcosm. Some of these attacks we shall shed light on later today or in the coming days/weeks (we prioritise articles about the EPO).

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