Sociology Index

Patent Case Law

Arizona Cartridge Remanufacturers Association Inc. v. Lexmark International Inc., 421 F.3d 981 (9th Cir. 2005), the Ninth Circuit Court of Appeals upheld a District Court decision that found that the contract terms on the packaging of a printer cartridge are sufficiently clear to act as a "box-wrap" license, such that when the user opens the box he or she is accepting the terms and forming a contract.

Because the printer cartridge is patented, Lexmark can impose post-sale conditions on purchasers such as prohibitions preventing refilling of the cartridge. The Ninth Circuit ruled that an End User License Agreement on a physical box can be binding on consumers who signal their acceptance of the license agreement by opening the box.

Consumers generally refill their own cartridges either themselves or through third-parties. Lexmark produced "Prebate" ink cartridges with a purchase contract that states that in exchange for purchasing the ink cartridge at a lower price, the consumer agrees to not tamper with the cartridge and return it to Lexmark for refurbishing and repackaging.

Arizona Cartridge Remanufacturers Association Inc. (ACRA) brought a suit that Lexmark's claims that its restrction was enforceable was deceptive.

Lexmark later renamed the Prebate cartridges to Lexmark Return Program Cartridges. But, does the ruling applies only to Lexmark's "Prebate" ink cartridges, or does it prohibit refilling of all cartridges, or purchasing of refilled cartridges.

The court agreed with the district court that ACRA has not offered evidence that Lexmark's advertisements constitute deceptive or unfair business practices.

The ruling explicitly addresses patent licensing: "It found that the company could legally enforce the post-sale restriction under a Federal Circuit decision allowing patent holders to limit the use of their products after sale...citing Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 708 (Fed. Cir. 1992))."

The ruling does generally accept the theory that EULAs are binding on consumers who "indicate their agreement" by performing a physical action, as long as that contract was available to consumers before purchase: "Lexmark has presented sufficient unrebutted evidence to show that it has a facially valid contract with the consumers who buy and open its cartridges.

The district court found that the ultimate purchasers of the cartridge, the consumers, had notice of the restrictions on use and had a chance to reject the condition before opening the clearly marked cartridge container."

Bauer & Cie. v. O'Donnell, 229 U.S. 1 (1913) - licensing terms on patented works - the United States Supreme Court ruled that patents could not be used to control resale prices.

Jazz Photo Corp v International Trade Commission, 59 USPQ 2d 1907 (Fed Cir August 21 2001), Fuji Photo Film asserted that the user of a single-use camera was not allowed to remove the film, process it, replace the battery, or package it in a new cardboard container, based on labelling on the camera warning the purchaser that the camera should not be opened. The ITC held that these steps amounted to reconstructing the camera and infringement of the patents. The decision was reversed by the Federal Circuit on the grounds that the labelling was not an enforceable restriction on the use of the camera, that "no licence limitations may be implied from the circumstances of sale" (59 USPQ 2d at 1917), and that the challenged activities merely repaired the camera and extended its useful life.

Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992), the federal court found that the doctrine of exhaustion was only a unilaterally disclaimable "implied license", despite more than a century of precedent to the contrary.

Quanta v. LG Electronics. LG Electronics licensed patents to Intel for use in microprocessors, with the condition that Intel notify buyers of those microprocessors that such buyers did not receive a patent license for the use of the Intel microprocessors together with non-Intel components. LG Electronics sued Quanta for violation of the patents, while Quanta
argues that the first sale doctrine applies. The Electronic Frontier Foundation filed an amicus brief in the case, arguing that Mallinckrodt and later cases based on it have inappropriately expanded the scope of patents by judicial fiat, and that sellers should use contract law if they want to impose conditions on a sale: EFF Supports Consumer Right To Repair, Resell Patented Goods (2007-11-13).