Last week, the Supreme Court dealt a major blow to corporations that try to use patent law as a weapon against other firms, saying that companies can be sued for patent infringement only in the places they actually do business.
This week, the court ruled again along those same lines, handing a victory to consumer groups in a case about printer cartridges — or, more specifically, toner cartridges, the kind used by laserjet printers. The case has huge implications for the way we think about technology ownership in America and your rights as a user. Here’s what you need to know.
What’s this case all about?
The case is called Impression Products vs. Lexmark. Lexmark does a lot of business with corporate customers, so if you work in an office, you might know the name from seeing it on your printers there. Those machines rely on toner cartridges, which must be changed when they run out, just like ink cartridges in other printers. And just like ink-cartridge printing, laserjet printing hinges on a “razor and blades” business model, where much of the manufacturer’s income depends on the reliable sale of new toner cartridges.
To protect its business model, Lexmark basically did some things that made it harder for people to get cheap, used cartridges on the secondhand market. Those tactics were designed to make it more likely for customers to choose Lexmark’s own cartridges, according to the court. Although there’s nothing specifically illegal about this, the court said, a company such as Lexmark can’t try to use patent law to stop other companies, such as Impression, from reselling its old cartridges.
What did Impression do, exactly?
Companies like Impression make money by buying up old toner cartridges, filling them with more toner and then selling them at a lower price than what Lexmark charges.
Lexmark argued that by refurbishing and reselling its cartridges without permission and outside the terms of Lexmark’s service agreement with end users, Impression was violating the patent that Lexmark held on the cartridges. Essentially, Lexmark was saying that its patent rights extended beyond the initial sale of the cartridge to cover future resales as well.
So what’s the big deal?
The practical question is how much Lexmark or any other company can control what you do with the things you buy. This debate isn’t limited to printer cartridges. If you buy a car, how do you know you really own it? What does ownership actually entitle you to do with your property, anyway?
These issues fit into a broader fight over what some experts call the “right to tinker.” The thinking goes: If you buy something, you should be free to do whatever you want with it — modify it, sell it, even destroy it. But some companies, even car manufacturers, have sought to put limits on that freedom. They make arguments such as Lexmark’s, asserting that handling a product in a way that potentially undermines the company’s business leads to a violation of patent or copyright protections. In this view, customers may think they own the physical property outright, but they are still constrained by an invisible cage made of corporate intellectual property.
The Supreme Court disagreed with this view. To help make its case, Chief Justice John G. Roberts Jr. used an analogy:
“Take a shop that restores and sells used cars. The business works because the shop can rest assured that, so long as those bringing in the cars own them, the shop is free to repair and resell those vehicles. That smooth flow of commerce would sputter if companies that make the thousands of parts that go into a vehicle could keep their patent rights after the first sale.”
What Roberts is saying has enormous implications for the economy, which depends not only on consumers buying things from companies, but also on companies buying from consumers, and individual consumers trading with each other. It also affects people building new innovations in their garage out of off-the-shelf products. In short, what you can do with the stuff you buy has real ramifications for Americans’ way of life.
What happens next?
This debate over ownership is only getting more complicated as the world moves increasingly to digital goods, including subscription-based streaming. With apps such as Spotify, for example, consumers are choosing to rent, not buy. The sprawling digital economy raises new questions for legal experts about access and ownership.
“The next logical step will be for courts to recognize that people who buy digital goods are owners of those goods, not mere licensees, and can resell and tinker with their digital goods to the same extent as purchasers of tangible property,” the Electronic Frontier Foundation, a consumer group that supported Impression in the case, said Tuesday in a blog post.
Other analysts predict companies will get more creative in the courts.
“I expect that technology owners will diversify their legal strategies used to protect their products,” said Seth Heller, an intellectual property lawyer at Axinn, Veltrop & Harkrider.
In fact, although the Supreme Court specifically said Lexmark can’t use patent law to go after cartridge resales, it didn’t rule out other methods of getting what the company wanted.
Lexmark runs a program offering customers a discount on toner cartridges if they agree to use the cartridge just once, and return the spent cartridge back to the company. This deal is subject to a contract that customers have to sign if they want to participate in the program. So, the court said, assuming these contracts are lawful, there’s nothing preventing Lexmark from going after those customers if they violate the agreement by reselling the cartridges.
Still, this reflects only part of Lexmark’s issue with Impression. And it doesn’t help Lexmark’s patent argument at all.
“The single-use/no-resale restrictions in Lexmark’s contracts with customers may have been clear and enforceable under contract law,” Roberts wrote, “but they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.”
