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The Supreme Court Just Handed Consumers and Small Companies a Big Win

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Now that the Supreme Court is finally back to operating with all 9 justices, decisions are once again being made. Even so, an overwhelming victory is uncommon. Yet the Court, in a 7-1 ruling, has just decided a case that has exceptionally far reaching implications for small companies and for consumers.

 

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The decision in  Impression Products, Inc. v. Lexmark International, Inc. decides consumer rights. The case breaks down like this. Lexmark makes printers. The printer itself is inexpensive. The ink, though. Ink is precious and Lexmark charges accordingly. Or maybe the ink isn’t so precious. Impressions products can make it easily enough, and they can refill Lexmark ink cartridges inexpensively.

Lexmark claimed this was a patent infringement. They even made customers sign a contract saying they wouldn’t use third party ink suppliers. But consumers are going to go for the lowest cost option, and the ink supplied by Impression Products worked fine and was less than half the cost of the Lexmark refills.

Lexmark sued. As Slate reports,  Lexmark argued “1) that it should be able to stop Impression and other consumers from reselling the cartridges by enforcing its patent rights; and 2) that international sales don’t exhaust a company’s patent rights over a particular product.”

Impression, in what seems like an obvious angle of defense, said manufacturers can not restrict or dictate what consumers do once they sell a product.

The Supreme Court agreed. “The purchaser and all subsequent owners are free to use or resell the product just like any other item of personal property, without fear of an infringement lawsuit,” Chief Justice John Roberts wrote for the majority opinion.

This is huge. It will devastate the printer industry. Manufacturers will now be accountable for the relative cost of their products and they will be unable to fix prices on ink.

It has long reaching implications for many companies, though, including those in the drug industry. Price fixing seems to be the key focus. Many US drug makers sell their drugs in the United States for heavily inflated prices, knowing insurance companies will cover the cost. They sell them for much less in other countries. That first sale is the equivalent of the sale of the printer.

It is conceivable that buyers overseas could buy drugs at reduced rates and resell it in the United States for much less.

“An authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act,” the Court decided.

The lone dissenting voice, Justice Ruth Bader Ginsburg , wasn’t even completely against the ruling. She only objected to the international patent protection element. Justice Neil Gorsuch abstained from the vote as the arguments had begun before his swearing in.