Yesterday, the Supreme Court issued two decisions, described below, of interest to the business community.
- Intellectual Property—Patent Exhaustion
- Federal Employer's Liability Act—Personal Jurisdiction
Intellectual Property—Patent Exhaustion
The doctrine of patent exhaustion holds that, after the first authorized sale of a patented article, the patent rights in that particular article are exhausted and the patentee cannot exert any further control over the article under patent law. Today, the Supreme Court held that this doctrine applies "regardless of any restrictions the patentee purports to impose or the location of the sale," abrogating two Federal Circuit decisions from 1992 and 2001 that had respectively held that (1) patentees could avoid patent exhaustion by imposing express restrictions on the use or resale of an article at the time of the first sale; and (2) a patentee's U.S. patent rights are not exhausted when an article is sold abroad.
First, the Court unanimously (Justice Gorsuch did not participate) held that a patentee cannot use patent law to enforce post-sale restrictions on the use or resale of an article, because any authorized first sale exhausts the patentee's rights, irrespective of a patentee's attempts to impose conditions on its sale of the article. In short, as the Court explained, "patent exhaustion is uniform and automatic."
Second, the Court held 7-1 (Justice Ginsburg dissented) that a patentee's U.S. patent rights are exhausted by the authorized sale of an article abroad. The Court held that the common-law rule against restraints on alienation of chattels, which is the basis for the patent exhaustion doctrine, is "borderless" and that U.S. patent rights are therefore exhausted by foreign sales in the same way as by domestic sales.
Mayer Brown represented the victorious petitioner, Impression Products, in this case.
Federal Employer's Liability Act—Personal Jurisdiction
A defendant may be sued only in jurisdictions that have "personal jurisdiction" over the defendant. The scope of personal jurisdiction is important because it limits a plaintiff's ability to engage in forum shopping. This Term, the Supreme Court is considering two important personal-jurisdiction cases, BNSF R. Co. v. Tyrrell and Bristol-Myers Squibb Co. v. Superior Court of California.
Today the Court issued its decision in BNSF, holding that the Federal Employer's Liability Act's venue provision does not make a railroad subject to personal jurisdiction in every state in which it operates, and that the Due Process Clause makes it unconstitutional for a court in a given state to exercise personal jurisdiction over a railroad in connection with a claim that arose outside that state, unless the railroad is "at home in the forum State," something that it typically will be only in the states in which it is incorporated or has its principal place of business. In so holding, the Court reaffirmed the broad applicability of its recent decisions in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), which rejected the contention that nationally active corporations may be sued on any matter wherever they engage in business.
Although she agreed with the majority's statutory analysis, Justice Sotomayor dissented from its constitutional analysis, as she effectively did in her Daimler concurrence.
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