Lexmark International is a U.S.-based global provider of printing and imaging products, software and services. Impression Products is a Charleston, West Virginia company with about two-dozen employees who refill toner cartridges for re-sale.
The multi-national company and the family-owned small business went head to head in the country’s highest court and the West Virginia company won.
Lexmark argued that Impression Products infringed on its patent when it bought used Lexmark toner cartridges, refilled them and sold them at a lower price than Lexmark. However, the U.S. Supreme Court determined Lexmark’s patent rights were limited.
“We conclude that Lexmark exhausted its patent rights in these cartridges the moment it sold them,” wrote Chief Justice John Roberts for the majority. “The single-use/no-resale restrictions in Lexmark’s contracts with customers may have been clear and enforceable under contract law, but they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.”
The decision ended a seven-year-long legal fight for Impression and their President, Eric Smith, who maintains he never doubted the validity of their argument. “I knew from the beginning that we were going to fight,” he told me on Talkline Monday.
Most of the companies sued by Lexmark ended up settling, but not Smith and Impression. “It was very intimidating. It was a very scary time for us in 2010 when we started receiving those cease-and-desist letters.”
But he always believed it was a fight worth having. “If you believe in what you are doing and you have a product that you really believe in, that you have worked your tail off to get it right (then) you are going to fight,” he said.
The decision has ramifications beyond printer cartridges. “A win for Lexmark could have made life difficult for a vast number of businesses—big and small; manufacturers, wholesalers, and retailers; merchants of new goods and used—that trade in patented goods,” wrote Robb Mandelbaum in Forbes.
Justice Roberts cited the hypothetical of a car dealership that buys patented parts to repair and resell vehicles. “That smooth flow of commerce would sputter if companies that make the thousands of parts that go into a vehicle could keep their patent rights after the first sale. Those companies might, for instance, restrict resale rights and sue the shop owner for patent infringement.”
Smith said the ruling in their favor just makes sense. “If you buy a product, you would think it’s yours. I just kept coming back to that, thinking surely common sense will prevail here.”
And it did. That’s a victory for a small West Virginia company and a big win for free market competition.