Lexmark and Impression stipulated, for purposes of litigation, that the reduced price of Return Program Cartridges “reflects the value of the property interest and use rights conveyed to the purchaser under the express terms of the conditional sale contract and conditional single-use license.” Impression Products purchases, refurbishes, and resells depleted Lexmark cartridges, including Return Program Cartridges.  See Brief of 44 Law, Economics and Business Professors as Amici Curiae in Support of Respondent at 3, Impression Prods., Inc. Because the restrictions imposed on those cartridges expressly prohibit resale, Lexmark sued Impression on the theory, supported by the Federal Circuit’s precedent , that Impression’s resales are unauthorized and thus infringe Lexmark’s exclusive patent rights to control sales of its patented invention.
Unfortunately, as explained below, the Federal Circuit identified the wrong statutory basis for the doctrine and thus reached the wrong conclusions about its application.  As an example, our article cited Qualcomm’s contracting structures, which undoubtedly restrict the free movement of goods even if patent rights are exhausted after a first sale. 339, 346–50 (1908) (discussing authors’ rights at common law but concluding that those “common-law rights are lost” upon publication).
In Part I of this short essay, we explain the issues in and what’s at stake in the case. Our article remained agnostic about whether such contracts would be enforceable under state contract law, legal under federal antitrust law, or sensible from a standpoint of economic efficiency.
In response, Impression argued that Lexmark’s original sales—even if conditioned— exhausted Lexmark’s patent rights and thus bar any patent infringement actions concerning subsequent uses or sales of the goods.
Impression expressly concedes that “[l]ike all other market participants, patentees may use non-patent mechanisms to restrict resale or reuse of goods,” so the issue in the case is only whether Lexmark can use patent infringement actions to enforce the restrictions placed on the original sales. Lexmark sells its patented ink cartridges (both Return Program and Regular Cartridges) in foreign countries and has never authorized those foreign cartridges to be imported into, or sold in, the United States.
For example, if the doctrine is based on an “affirmative policy” of federal patent law favoring “the free movement of all patented goods” (as some of Petitioner’s amici allege), then the doctrine should not only be mandatory but might also render post-sale restrictions on use and resale unenforceable more generally, not merely unenforceable through infringement actions.
On the other hand, the opposite result—a merely optional or “presumptive” doctrine (escapable through clear contractual language)—could be supported if the Justices agree with some of Respondent’s amici that the exhaustion doctrine serves “multiple policy objectives” including the policy of permitting patentees to “craft customized usage terms for downstream partners in the commercialization process” and to enforce those terms through infringement actions. Or policy factors might point to the Solicitor General’s position, with a mandatory doctrine applied to U. sales but an optional or presumptive approach applied to foreign sales.
In other words, the doctrine (or at least those parts of doctrine based on § 154(a)(1)) should be mandatory, but it should not affect non-patent causes of action.
Interestingly, the Respondent’s brief accepts that the based on the limited scope of § 154 and that, with respect to that portion of the doctrine (the portion of the doctrine grounded in a statutory “delimit[ing]” of the patent rights granted “in § 154”), a patentee cannot opt out by withholding “authority” under § 271(a) because “the patentee cannot withhold ‘authority’ that it never had, like authority to set resale prices.” Finally, if the doctrine is pure federal common law, a variety of different results are possible depending on the Justices’ assessments of good public policy.
Modern scholarly discussions of the doctrine have tended to provide substantive policy reasons as the basis for the doctrine, with the assumption that federal judges can fabricate legal doctrine from substantive policies as a supplement to statutory law. As the Federal Circuit recognized, that assumption seems wrong because, once Congress has legislated in an area, the task of the federal courts is generally “to interpret and apply statutory law, not to create common law.” That general reluctance to fabricate judge-made common law in an area controlled by statute is based ultimately on separation-of-powers considerations. Such a fundamental jurisprudential commitment should not be cavalierly disregarded, and patent law—an area comprehensively controlled by an entire title of the U. Code (Title 35)—seems like an exceptionally poor place for federal courts to begin asserting a new-found power to supplement (or even supplant) federal statutory law with judge-made common law. Thus, in the highly important case of , the Court clearly identified the statutory basis for its decision by quoting, in the first sentence of the opinion, Revised Statutes § 4884—the predecessor statute of modern § 154. attached to it, or impressed upon it, by , the Court began its legal analysis by stating that the case: requires that we shall determine the meaning of Congress when in Rev. a grant to the patentee, his heirs or assigns, for the term of seventeen years, Court repeatedly referred to its task as identifying the proper “meaning” of the statute granting exclusive patent rights. Despite this criticism of the Federal Circuit’s opinion, we have to commend the court for attempting to ground the exhaustion doctrine in statutory law, for the court’s effort will hopefully spur the Supreme Court into clarifying the exact statutory basis of the doctrine.  Brief of Respondent at 14, Impression Prods., Inc.
That’s our compliment to the Federal Circuit—now some criticism. The Court’s holding was also directly based on the limited scope of the rights granted by § 4884, with the Court embracing the view that a patented product, once sold by the patentee, is “discharged of all the rights . Stats., § 4884, it provided that “Every patent shall contain . As demonstrated by the briefing in the case, there is currently massive uncertainty on this point. at 661 (emphasis added) (internal quotation marks omitted).