48 Pages Posted: 28 Feb 2017 Last revised: 10 Mar 2017
Date Written: March 6, 2017
Patent transactions are a key component of technology markets, enabling patent owners and other firms to efficiently commercialize new technologies on the costly and risky path from “lab” to “market.” Mandatory patent exhaustion without the possibility of contractual waiver or modification substantially limits the range of possible transactions by precluding the enforcement via patent infringement actions of downstream restrictions relating to sales of patented products. Although mandatory patent exhaustion can mitigate problems of notice and related transaction costs, its categorical approach substantially reduces the static and dynamic benefits — including to consumers — of customized patent transactions.
Instead, we support a presumptive approach to patent exhaustion, which allows contractual opt-out when clear notice is provided of a downstream limitation that is otherwise lawful. Such a rule best promotes the invention and commercialization goals of patent law and also is more consistent with the body of prior Supreme Court opinions. Thus, presumptive exhaustion should apply to domestic sales of patented products. Additionally, we argue that while there is little legal basis for exhaustion in the context of foreign sales, should the Supreme Court adopt an international exhaustion doctrine, it should be presumptive for similar reasons.
Keywords: Intellectual Property, Patent Exhaustion, International Exhaustion, Patent Licensing, Downstream Restrictions, Lexmark, Impression Products
JEL Classification: L24, O34
Suggested Citation: Suggested Citation
Barnett, Jonathan and Sichelman, Ted M., Brief of 44 Law, Economics and Business Professors as Amici Curiae in Support of Respondent in Impression Products, Inc. v. Lexmark International, Inc. (March 6, 2017). USC Law Legal Studies Paper No. 17-10; San Diego Legal Studies Paper No. 17-266. Available at SSRN: https://ssrn.com/abstract=2923826