Client Alert - Supreme Court Limits Post-Sale Patent Rights

On May 30, 2017, the Supreme Court struck another in a series of blows to patent owners this term and significantly broadened the doctrine of patent “exhaustion,” which bars a patentee from asserting patent rights over an article after an authorized sale of the article. The decision reversed longstanding Federal Circuit precedent permitting patent infringement actions if (1) a sale was subject to clearly communicated, lawful restrictions on post-sale use or resale; or (2) a sale was made overseas. The Supreme Court voided these safe harbors, finding them to be sales that exhausted patent rights, reasoning “patent exhaustion is uniform and automatic.” Slip Op. at 13. The Supreme Court’s decision not only has immediate ramifications for patent licensing and enforcement actions, but also is likely to have a cascading effect on worldwide supply chains, pricing and product availability in some countries.