No. 15-1189 IN THE Supreme Court of the United States ———— IMPRESSION PRODUCTS, INC., Petitioner, v. LEXMARK INTERNATIONAL, INC., Respondent. ———— On Writ of Certiorari to the United States Court of Appeals for the Federal Circuit ———— BRIEF OF AMICUS CURIAE QUALCOMM INCORPORATED IN SUPPORT OF RESPONDENT ———— DAVID J. KAPPOS JEFFREY A. LAMKEN RICHARD J. STARK Counsel of Record CRAVATH, SWAINE & LAUREN M. WEINSTEIN MOORE LLP EMILY K. DAMRAU Worldwide Plaza Admitted Only in Illinois 825 Eighth Ave. MOLOLAMKEN LLP New York, NY 10019 The Watergate, Suite 660 (212) 474-1000 600 New Hampshire Ave., N.W. [email protected] Washington, D.C. 20037 (202) 556-2000 [email protected] ROGER G. BROOKS 3804 W. Cornwallis Rd. Durham, NC 27705 (212) 474-1072 [email protected] Counsel for AmicusCuriae WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D.C. 20002 QUESTIONS PRESENTED Section 271(a) of the Patent Act provides that “who- ever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” 35 U.S.C. §271(a) (emphasis added). The ques- tions presented are: 1. Whether the sale of a patented article subject to an express contractual agreement conveying only limited authority to use that article nonetheless automatically confers unlimited authority to sell, offer to sell, use, and import that article. 2. Whether every sale of a patented article outside the United States automatically confers unlimited au- thority to import, sell, offer to sell, and use that article in the United States. (i) TABLE OF CONTENTS Page Interest of Amicus Curiae ......................................... 1 Summary of Argument ............................................... 3 Argument ...................................................................... 5 I. This Case Does Not Call for any Change to the Law of Patent Exhaustion .................. 5 A. Due to the Pragmatic Nature of Patent Law, It Should Be Changed Only When Necessary, and Then Only Incrementally and Cautiously ........ 5 B. No Crisis in Commerce Requires a Change in the Exhaustion Doctrine ....... 7 C. The Current Rule Facilitates Efficient Allocation of Intellectual Property Rights by Flexible Free- Market Negotiation ................................... 9 1. The Mallinckrodt Rule Enables Competition Between Different Business and Pricing Models ............. 9 2. The Mallinckrodt Rule Facilitates Competition in Quality and Reputation ............................................ 12 3. The Mallinckrodt Rule Encourages Private Contractual Ordering That Avoids Unnecessary Litigation ...................... 14 D. Overruling Mallinckrodt Would Reward Dishonest Behavior Without Helping Consumers ................... 15 (iii) iv TABLE OF CONTENTS—Continued Page E. The Unsteady Policy Foundations of the Exhaustion Doctrine Cannot Justify the Doctrine’s Further Expansion ................................................... 17 1. Modern Economic Theory Has Rejected the “Double-Charging” Rationale ............................................... 18 2. The Univis Lens Antitrust Rationale Is Equally Undermined by the Economic Implausibility of “Double Charging” .............................. 20 3. The Goal of “Avoiding Consumer Annoyance” Has No Real-World Foundation ........................................... 21 II. Petitioner Seeks a Sweeping Change to Existing Law .................................................... 23 A. Patent Exhaustion Always Has Been Limited to Unrestricted Sales .................. 23 B. Quanta Did Not Upend Longstanding Principles ........................... 29 III. Foreign Sales of Patented Articles Should Not Exhaust U.S. Patent Rights ................................................................ 30 A. Foreign Sales Do Not Implicate U.S. Patent Rights ..................................... 30 B. Petitioner’s Approach Would Transfer Control Over U.S. Patents to Foreign Governments ............. 31 Conclusion ..................................................................... 33 v TABLE OF AUTHORITIES Page(s) CASES Adams v. Burke, 84 U.S. (17 Wall.) 453 (1873) .................... 6, 25, 26 Aiken v. Manchester Printer Works, 1 F. Cas. 245 (C.C.D.N.H. 1865) ...................... 25 Bloomer v. Millinger, 68 U.S. (1 Wall.) 340 (1864) ............................... 18 Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908) ............................................. 8 Boesch v. Graff, 133 U.S. 697 (1890) ..................... 31 Bowen v. Massachusetts, 487 U.S. 879 (1988) ............................................. 28 Bowman v. Monsanto Co., 133 S. Ct. 1761 (2013) ................................... 16, 19 Brown v. Duchesne, 60 U.S. (19 How.) 183 (1857) .................................................................... 30 Chambers v. Smith, 5 F. Cas. 426 (C.C.E.D. Pa. 1870) ............................................ 24 Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972) ........................................... 5, 30 Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002) ................. 6 Gen. Talking Pictures Corp. v. W. Elec. Co., 304 U.S. 546 (1938) ............... passim Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) ..................................... 20 Keeler v. Standard Folding-Bed Co., 157 U.S. 659 (1895) ....................................... passim Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974) ............................................. 6 vi Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) ................. 19, 20 Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992) ..................... 7, 14 Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) ............................................. 30 Mitchell v. Hawley, 83 U.S. (16 Wall.) 544 (1873) ....................... passim Mozart Co. v. Mercedes-Benz of N. Am., Inc., 833 F.2d 1342 (9th Cir. 1987) ................... 13 NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998) ............................................. 9 Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117 (2d Cir. 2007) ...................... 19 Princo Corp. v. ITC, 616 F.3d 1318 (Fed. Cir. 2010) .............................................. 12, 16 Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008) ............................................. 29 Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997) ...................... 13 Standard Oil Co. of N.J. v. United States, 221 U.S. 1 (1911) ................................................. 9 Town of Concord, Mass. v. Bos. Edison Co., 915 F.2d 17 (1st Cir. 1990) ......................... 20 United States v. Univis Lens Co., 316 U.S. 241 (1942) ................................... 19, 20, 21 Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) ..................................................... 8 vii STATUTES 35 U.S.C. § 154 ......................................................... 30 35 U.S.C. §154(a)(1) ................................................ 18 35 U.S.C. § 271(a) ................................................ 17, 18 TREATY PROVISIONS Paris Convention for the Protection of Industrial Property, Mar. 20, 1883, art. 4, cl. 1, opened for signature July 14, 1967, 21 U.S.T. 1538 ............................. 30 OTHER AUTHORITIES The Boston Consulting Group, The Mobile Revolution: How Mobile Technologies Drive a Trillion Dollar Impact (Jan. 15, 2015), available at https://www.bcgperspectives.com/ content/articles/telecommunications_te chnology_business_transformation_ mobile_revolution ............................................ 7 Ward S. Bowman, Jr., Tying Arrangements and the Leverage Problem, 67 Yale L.J. 19 (1957) .................... 10 Canon MG6821 Wireless All-In-One Printer, Amazon, https://www.amazon .com/Canon-MG6821-Wireless-Printer- Scanner/dp/B013C0ZBG2 (last visited Feb. 22, 2017) ............................ 10 Zechariah Chafee, Jr., Equitable Servitudes on Chattels, 41 Harv. L. Rev. 945 (1928) ........................... 13 Graeme B. Dinwoodie, et al., International and Comparative Patent Law (2002) ........................................... 30 viii David Evans, The Antitrust Economics of Free, 7 Competition Pol’y Int’l 71 (2011) ................................................................. 11 James R. Farrand, Territoriality and Incentives Under the Patent Laws: Overreaching Harms U.S. Economic and Technological Interests, 88 J. Pat. & Trademark Off. Soc’y 761 (2006) .............. 30 Thomas L. Friedman, Thank You for Being Late (2016) ............................................ 2 Warren S. Grimes, When Do Franchisors Have Market Power?, 65 Antitrust L.J. 105 (1996) .......................................................... 14 Christopher M. Holman, Unpredictability in Patent Law and Its Effect on Pharmaceutical Innovation, 76 Mo. L. Rev. 645 (2011) ............................... 15 Herbert Hovenkamp, Post-Sale Restraints and Competitive Harm: The First Sale Doctrine in Perspective, 66 N.Y.U. Ann. Surv. Am. L. 487 (2011) ................................................................. 19 HP Laserjet Pro M452nw Wireless Color Printer, Amazon, https://www.amazon. com/HP-Laserjet-Wireless-Printer- CF388A/dp/B01AUHADDG (last visited Feb. 22, 2017) ............................ 10 Benjamin Klein & Lester F. Saft, The Law and Economics of Franchise Tying Contracts, 28 J.L.