“Patent cases create strange bedfellows,” says patent attorney Case Collard of Dorsey & Whitney in Denver concerning the Federal Circuit’s Feb. 12 Lexmark v. Impressions ruling. “A victory for a printer company, Lexmark, has made pharmaceutical companies very happy.”
True enough. The businesses, with vastly dissimilar interests, both stand to benefit from the 10-2 ruling that helps patent owners. The full 12-member appeals court upheld its standards on patent exhaustion in ruling for Lexmark and against Impression Products, a seller of refurbished cartridges.
Under the decision, buyers can’t ignore patent owners’ restrictions on the resale of their products and, when products are first sold overseas, U.S. importation counts as infringement if an importer doesn’t have a license from the patent holder.
Lexmark cared about the blade-and-razor business model: Selling printers at low prices and having patent-exclusivity-pricing on the ink-filled cartridges.
But life science industry patent holders also rejoiced. Drug makers want to be able to market drugs at different prices in different countries, with U.S. pricing the highest so as to subsidize availability where the drug would otherwise be unaffordable. A bar against importing a drug, bought overseas, that would infringe a U.S. patent is just what the doctor ordered.
The “bedfellowship” of these businesses, then, is not strange at all, considering the patent incentive – exclusivity – brings with it flexibility in deciding what business model works best for a patentee. Lexmark’s business model would fail without the U.S. patent, as would brand-name drug makers’ variable pricing approach.
Without its patents on inkjet cartridges, Lexmark would have to charge more for the printer, presumably putting better quality devices in fewer hands.
Without U.S. drug patents, major drug manufacturers would have to charge roughly the same price worldwide, with an open question of whether they could make a sufficient profit to justify research and development costs.
Critics contend that flexibility in devising business models based on exclusivity creates tension with antitrust laws. Proponents contend that the intellectual property clause of the Constitution (Article I, Section 8, Clause 8) had precisely that tension in mind.
The point? It’s not about the dissimilarities between industries. It’s about the patent incentive. It’s no surprise that, as patent holders, Lexmark and branded drug makers can share a bed.
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