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Importers of Gray Market Goods Get Favorable Supreme Court Ruling

Monday, June 05, 2017
Sandler, Travis & Rosenberg Trade Report

Following similar rulings with respect to copyrighted and trademarked goods, the Supreme Court recently ruled that patented goods may be freely resold after their first authorized sale. The ruling further solidifies the legality of importing used goods for resale in the U.S. (known as the gray market or parallel market), a positive development for discount retailers and consumers.

The case Impression Products Inc. v. Lexmark International Inc. involved Impression’s purchase and refurbishment of printer toner cartridges manufactured by Lexmark. In some cases the initial purchasers of those cartridges contractually agreed to return them to Lexmark when they were empty. When Impression acquired those cartridges anyway, Lexmark sued for patent infringement.

The Supreme Court ruled that patentees lose the right to control patented goods through patent law after their first authorized sale, whether it occurs in the U.S. or overseas. Contractual agreements limiting the initial purchaser’s rights to use or resell the goods may be enforced under contract law, the court said, but not under patent law.

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