SCOTUS declines to hear case of international patent exhaustion

(Reuters) – The U.S. Supreme Court on Monday declined to hear a case involving whether patented goods purchased abroad and resold in the United States are subject to the so-called first-sale doctrine which generally allows the owner of a lawfully purchased item to resell it.

The case involved Chinese company Ninestar Technology Co Ltd, which had been making printer cartridges in China that Epson American Inc claimed violated Epson patents and had been selling them though subsidiaries in the United States.

Epson asked the U.S. International Trade Commission to stop Ninestar from importing the cartridges on grounds that the sales violated Epson’s patent rights. The ITC issued an order prohibiting Ninestar from importing the cartridges.

Ninestar carried on importing, leading to an ITC finding that the company was in violation of its original order. The ITC also imposed a fine against the company.

Ninestar appealed to the U.S Federal Circuit Court of Appeals. It admitted not complying with the order, but said it was justified in doing so because the correct law is that the manufacture and sale of a product in any country, not just in the United States, extinguishes a party’s patent rights.

In its February 2012 ruling, the appeals court ruled against Ninestar, saying that printer cartridges that violated Epson’s patents still did so, no matter if they’d been manufactured and sold abroad first and then in the United States.

Ninestar filed a petition asking the Supreme Court to review the decision.

Intellecutal property practitioners were curious how the Supreme Court would handle the case in light of last week’s high court holding that a student was within his rights to resell in the United States textbooks that were purchased abroad. In Kirtsaeng v. John Wiley & Sons, the publisher had claimed that the first-sale doctrine should apply only to goods manufactured in the United States.

Harold Wegner, an intellectual property partner at Foley & Lardner, said the Supreme Court often waits to find the right case to take up an issue, but that he was still surprised the court did not grant certiorari in Ninestar and remand the case to the Federal Circuit in light of Kirtsaeng.

Other intellectual property lawyers said the patent landscape is simply different from copyright and that the laws do not necessarily need to coincide.


The Ninestar ruling is consistent with prior Federal Circuit rulings on international patent exhaustion, said Eric Schweibenz, a partner with Oblon, Spivak, McClelland, Maier & Neustadt.

Because the International Trade Commission had found that Ninestar had repeatedly violated its exclusion order, the issues presented by the case were fairly narrow, Schweibenz said. Even if the high court had wanted to address this issue, it might not have seen it as the proper vehicle, he said.

Daryl Joseffer, a partner at King & Spalding who has argued intellectual property issues at the Supreme Court, said that the Kirtsaeng decision was focused on interpreting the copyright statute, whereas the same statutory scheme does not exist in patent law.

The Supreme Court also faces different situations when deciding whether to take copyright and patent cases. Once you have a circuit split in a copyright case, Jossefer said, the Supreme Court needs to step in and decide which is correct.

Because the Federal Circuit has exclusive jurisdiction over patent appeals, the Supreme Court is not likely to step in unless there’s good reason to believe the Federal Circuit got it wrong, he said.

Harold Barza of Quinn Emanuel Urquhart & Sullivan, who represented Epson, said the company was pleased with the Supreme Court’s choice not to hear the case. “We believe the factors governing international patent exhaustion are different from those that govern copyright law,” he said.

Charles Rothfeld of Mayer Brown who represented Ninestar did not immediately respond to a request for comment.


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