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A Supreme Court Hearing On Printer Cartridges May Decide The Future Of Retail And Resale

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A Supreme Court Hearing On Printer Cartridges May Decide The Future Of Retail And Resale

A landmark case that could have ramifications for more than one industry is before the U.S. Supreme Court, and the case has polarized people as varied as companies, scholars, consumer advocacy groups, government and the legal fraternity as well.

The Printer Cartridge Patent Case

The U.S. Supreme Court recently heard oral arguments in the case of Impression Products Inc. v. Lexmark International Inc (NYSE: LXK). The case, according to the SCOTUS blog, involves the doctrine of "exhaustion," which deems that a patent holder's right to enforce its patent is exhausted once the patent holder sells the object.

Lexmark is contending that Impression Products thrives on refilling Lexmark cartridges — in violation of the cartridge manufacturer's agreement with buyers that forbids them from refilling them. Impression Products claims that Lexmark's rights to control the use of its patented refillable print cartridges would be exhausted once it sells those to retail buyers.

Earlier, Lexmark had the backing of the U.S. Court of Appeals, which upheld both of its main arguments in a Feb. 12, 2016, verdict. The court ruled that the conditions Lexmark placed on the sale of its cartridges could be enforced as a matter of patent law. The appeals court also ruled that patent holders can still have control over products after they're sold abroad and re-imported by buyers.

The Obama administration had referred the case to the Supreme Court, siding with Impression Products.

Precedents

The ruling of the appeals court was in violation of a Supreme Court verdict in 2013 in a copyright case, namely Kirtsaeng v. John Wiley & Sons. The verdict in the case legitimized importing and re-selling of books. This was a copyright case, as opposed to Lexmark's patent case.

Companies Throw Their Weight Behind Impression

Impression Products has the backing of some companies in the technology and manufacturing sectors.

Costco Wholesale Corporation (NASDAQ: COST) has argued that goods ranging from computers, smartphones, automobiles and even medicines have many components sourced from different parts of the world and are protected by several patents, meaning the manufacturer would have to negotiate an appropriate licensing agreement.

What Could Be The Likely Outcome?

It is believed the outcome of the case could set a major precedent. A decision in favor of Lexmark could lead to manufacturers making several aftermarket restrictions on their products, according to Gizmodo. If the High Court's decision cuts in favor of Impression Product, then used products can effectively compete with new products to drive prices lower, which is good for consumers and competition.

Weighing in on the likely outcome, a Fortune article indicated that the Supreme Court has more often overruled the patent appeals court ruling, often by a 9–0 margin. Given that the Justice Department is also favorably inclined toward Impression Products, Lexmark could be at a disadvantage. The article also saw the possibility of a 4–4 tie, given that the Senate has yet to confirm President Trump's nominee to the Supreme Court, implying that Lexmark will have its way, given the lower court backing.

This landmark case, which remains in progress, could change the way products are sold by retailers and resellers.

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