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SCOTUS: Patent Rights Over a Printer Cartridge Are Exhausted When It Is Sold (cornell.edu)
884 points by beefman 230 days ago | hide | past | web | favorite | 303 comments

If you want to learn about a really interesting aspect of the "first sale doctrine" and how it applies to software, you should have a look at "Vernor vs Autodesk" in the USA and compare it to "Oracle vs UsedSoft" in the EU. Basically, in the USA the courts determined that if a company sells you software, but in their terms & conditions claim that they are merely granting you a license, then you can't resell the software b/c you aren't considered to own it. In the EU however, if a company sells you a permanent life-time license in exchange for a one-time fee, the courts determined that you aren't merely licensing that software, you own it and you are allowed to resell it.

I think these different rulings haven't been fully appreciated yet. For example, if you buy Apple's Final Cut X for $299, you should be allowed to resell that software if you live in the EU, but there is currently no way to transfer licenses between users, preventing users from reselling it. It seems to me that by preventing users from reselling their software, Apple (and the Google Play Store) are probably violating EU law on this matter.

I do hope EU gets on top of Apple/Google/Netflix/HBO/etc soon. It's supposed to be One Market, yet these all impose territory restrictions where content in Spain is not necessarily available in France and vice versa.

They're working on it: https://en.wikipedia.org/wiki/Digital_Single_Market

Note that the issue is rulemaking, not enforcement. The Single Market is a statement of principle, not a legally-applicable regulation, and needs specific rules to be made to put it into effect in different markets.

I would also add that the original intent was to remove government-imposed barriers to trade between the members (elimination of duties, regulation, etc). Whereas the unavailability of certain content based on location is almost certainly the result of a contractual arrangement between content makers and distributors rather than a government-imposed limit.

The scope of the Single Market is broader than that - it includes standardization of weights and measures, standardization of product names, etc. - rules that apply to private companies, and are meant to break down extra-legal obstacles to trade.

> The scope of the Single Market is broader than that - it includes standardization of weights and measures, standardization of product names, etc

Well historically individual states had their own regulations regarding weights/measures and product names, and that authority was transferred to the new market when it was created. These types of regulations ensure a level playing field between buyers and sellers, and are an important function of any regulated market. You know what you're getting when you buy a 750 mL bottle of Chateauneuf.

It doesn't necessarily follow that the maker of the Chateauneuf ought to be required to distribute it in a particular geographic territory.

It doesn't necessarily follow that the maker of the Chateauneuf ought to be required to distribute it in a particular geographic territory.

True, but the maker of Chateauneuf cannot prohibit a reseller from exporting its products to that territory either. That content-providers have been able to prohibit this, is only because of copyright. And since copyright is a government-granted monopoly, it does follow that the EU can use its monopoly grant to enforce that same single-market principle for digital content.

> It doesn't necessarily follow that the maker of the Chateauneuf ought to be required to distribute it in a particular geographic territory.

Exactly. There are some awesome products that I can't buy in the UK, because no-one imports and sells them, that are available in France etc., and vice versa. Of course I'm free to go and buy them myself and bring them back without duty (for the next couple of years at least, after that, on vera).

But this isnt about requiring Chateauneuf to do anything, its about restrictions on what people who buy Chateauneuf can do with their bottles, where they can take them and who they can sell them on to.

In some countries it is government-imposed, in the sense that national authorities exist in law, which will hoover up royalties before distributing them to creators and performers. This requires that any performance or distribution is recorded by (and paid to) such authority. At the moment, if an entity in the Italian market shows a French movie to Italian audiences, the Italian authority collects royalties before sending them to the registered owners of such rights; but what happens when a German entity shows the same film to Italian audiences? Does it pay Italian authorities or follow German rules?

That's the sticky point from a legal point of view, which needs European legislation and cooperation from all involved parties (investors, producers, distributors, streamers etc) to be resolved. Since the industry benefits from market segmentation though, they are dragging their feet. For example, it's usually better to sell the same film to a different distributor in each country, rather than a single one serving all markets - 28 smaller paydays will often tally up to levels that one single Euro-wide agreement is unlikely to reach; and some films will do well only in certain countries, so might be penalized at EU level.

I don't quite see how this is different from, for example, sales tax.

Or, actually the status quo: if you're a Polish company organising a music festival in Italy you follow Italian law.

That principle won't change just because it's a streaming service, for the obvious reason that anything else would lead to content distributers shopping around for the cheapest jurisdiction.

Regarding the distributers' wish for market segmentation: That's a perfectly understandable reason, and it will become illegal rather soonish. Sure, you can chose you customers. But you won't be able to make their nationality part of the equation much longer.

The public will profit rather obviously. Personally, I don't even care about any changes in pricing. Most annoying are companies segmenting the market along borders, and then never actually signing a local distributor. Or somehow only selling the translated movie etc.

One caveat for practical reasons will be sports rights. It's just not possible to set a single price for, say, the British Premier League games that works everywhere: either it's but a fraction of today's prices, or nobody outside the UK would consider buying a subscription*

* UK example for demonstration purposes only. Will not be implemented. Search for better examples underway.

> I don't quite see how this is different from, for example, sales tax.

That's a good example, and that too is a complete mess in the EU at the moment (google vatmess)... Copyright legislation has even more burdensome vagaries to deal with, like identifying authors, owners and distributors (in some countries rights can be alienated, in others they can't, etc etc) and get approval from all parties. This is why streaming services are so slow to expand in the European market.

> market segmentation: [...] will become illegal rather soonish.

That's a very optimistic view. Creators have very powerful lobbies, even the most heart-hardened bureaucrat will melt at the prospect of spending a few hours with Charlize Theron or Mick Jagger.

that's an optimistic way to frame the situation; there's heavy opposition from the content industry to limits to geoblocking, and unsurprisingly the industry seems to have support within the commission (Oettinger at least - perhaps the fact he now left the Digital Economy and Society position helps).

I'm not confident at all they'll be able to completely ban geoblocking in one go. Hopeful they will at least poke some holes in it this round. Most parts of the single market needed a couple of revisions of a directive (quite a few years removed) before liberalizing a particular market fully..

> Oettinger at least - perhaps the fact he now left the Digital Economy and Society position helps).

It certainly has lowered my blood pressure–he's now in a much more important position. But that means that people will actually stop him if he continues to embarrass himself in the way he previously did.

There'll be exceptions for sports broadcasts, and maybe other content where there is a reason legitimising a difference in prices. For example: a french 24h news channel may be worth 20 Euro in France, but is more of an "yeah, all right, why not" buy for someone in Austria trying to freshen up his language skills.

Funny how "let the market decide the price" is suddenly a much less attractive option when it means making way less money.

Are French newspapers also suddenly a lot cheaper when sold in Austria? Of course not. They're more expensive in fact, because of transport and the cost of stocking a relatively unpopular item.

Now, these two costs don't matter for digital/streaming media. So imagine that they are negligible for French newspapers, too. Would they be sold in Austria for super-cheap, with just a slim margin on the price of paper they're printed on? I kind of expect the price to be roughly the same, actually.

The only reason that digital/streaming media get to pretend to be "different" is because they started out with the technological means to enforce market segmentation before regulation got wind of it. And that ability is incredibly profitable, to the detriment of the consumer. Which is why we regulate it. And now they don't want to give back something they really didn't have any right to in the first place.

Note that I'm not claiming either side of whether these streaming media should be the expensive local price everywhere, or the cheap everywhere-else price. Just that the fact that the market value of something differs extremely between regions, is an argument for regulation of market segmentation, not against.

Former Netflix employee here.

I do hope the EU gets on top of Content Owners soon. In my time at Netflix, we often worked hard to negotiate global content deals; however, it's far more lucrative for the content owners to sell for each market individually. I suspect that the other players in this space feel the same way; all of them are held hostage by the content owners.

Don't you think the most likely outcome of this is the far majority of older media titles will just no longer be available in the EU indefinitely?

It will be unreasonably difficult and just not worth it to track down and negotiate with all the various the owners for each territory for most older titles.

Why would that happen? I'm pretty sure that whoever the owner of those rights are, they want to make money out of them.

You'd think so, but the BBC found similar problems when launching their streaming services.

Annoyingly I can't find the link, but IIRC the BBC originally looked into making everything it had ever made in its giant archives available to stream. Even for the content the BBC produced and owned internally, which is a huge amount, they determined it simply wasn't possible to offer the full BBC back catalog all the time on their service - tracking down the various rights holders, actors, and other parties to the content to renegotiate for streaming was an impossible undertaking. A real shame - a readily accessible public database of all of the BBC's content would have been incredible, especially when so much of it was paid for by UK tax payers.

The last Labour government in 2010 was looking at options to legislate to absolve the BBC of these responsiblities, but sadly it didn't go anywhere. This is absolutely a problem that will need legal changes to fix for old content, realistically.

The simplest fix might be a mandated license for streaming old content where the royalties go to a collection agency and can be claimed by the rightsholders when they finally show up.

Maybe limit the collection time as well, so e.g. Any funds that have been sitting without a valid claim for more than a year go back to the BBC.

Except there might be a lot of rightsholders in the different territories. Figuring out how to disperse the revenue could be very difficult.

It is a weird idea to steal art from people and force them to sell it to others.

Compulsory licenses have precedent in the music industry.

Rights aren't "sold", they are only licensed, and almost always for a limited time.

idk I haven't had a very hard time buying distribution rights for an unlimited time period for video games.

No government should force that. It should be up to the company on where it's goods are sold etc.

If the government is going to act as hired muscle for the copyright industry, then it should have at least some room to dictate the terms.

Sure, if your only goal is to maximize profit extraction and wealth consolidation.

The great thing about the law is that it can be whatever we collectively decide it to be.

And considering that companies don't have any moral rights, you need to proof that affording them such power positively affects actual people.

Corporations have rights, true. But consumers also have rights.

For example of a small thing that's discussed by the EU with regards to this, if I get a netflix subscription here then go over the border I can no longer watch what I have even already downloaded. Netflix should not have to stop someone watching a show just because they went a bit further down the road.

That sounds a little better than the ridiculous Autodesk decision, however it sounds trivial to circumvent by simply putting a 'term of license' clause in the EULA.

I'd go so far as to say I don't think EULAs should be considered a valid legal instrument.

>> I'd go so far as to say I don't think EULAs should be considered a valid legal instrument.

Agreed. The EULA is not even mentioned at the point of sale. Most notably, the company that sold the software often has no idea who has entered into such an (alleged) agreement with them. I thought acknowledgement was a critical part of contract law, but somehow clicking a virtual button in private is claimed to qualify.

contract-wise it seems from case law they're on pretty steady ground. Of consideration + capacity + intent, capacity is probably the trickiest when you're not in person with the counterparty.

I think the more interesting angle of attack is by calling this a contract of adhesion, i.e. saying that the vendor is using their superior market position to force a long and disadvantageous contract on customers.

At the point where EULA was being invoked for many or most buyers, you could probably file a class action claiming the product was falsely advertised (i.e. it costs not $9.99 but $9.99 plus 100 hours of legal fees).

The uniform code of commerce is very concerned about terms hidden in long contracts, which is the reason some parts of long EULAs are in caps.

What if I say aloud "No, I do not agree to the terms of this EULA, but I'm going to click this button in order to install the software anyway." How about that? You may say "but clicking the button indicates agreement" to which I say it does not unless I actually agree to the terms of the EULA. The EULA is the only thing defining the meaning of clicking the button...

Lets suppose a techo-archeologist in 2100 finds an old PC and some MS windows install disks. Wow! he says, I've found a major artifact from a hundred years ago in the heyday of the internet! He gets it to power up and loads the disks in. He finds the EULA and takes pictures and uses OCR software to document his findings and then says "Huh, I wonder how anyone would ever read all that or agree to it, I sure don't agree with it, but I've got my research to do." And he clicks "I agree". Did he just enter into a contract? With whom? Suppose Microsoft went under completely in 2075. How does this clicking a button equate to him entering a contract? It seems incredibly absurd to me.

Or yeah, what if I speak a language similar to english except the word 'EULA' means 'none of the following applies'.

Or what if I dance around in a circle reciting green eggs & ham whenever I sign anything?

Let me know when you find the court that is willing to hear these questions.

Unfortunately the 'had my fingers crossed' test from SCOTUS US v every 5 year-old was recently struck down.

Pretty sure that last one would go the other way, actually.

trey gowdy did say that james clapper only committed perjury after lying about the same thing 3 times. Fortunately congressmen's statements don't carry the weight of law.

He'd enter into a contract with whoever bought Microsoft's IP, presumably OracleApple or Teslabet. Old corporations never die, they just fade away.

Well, if you sign the contract and the contract is legally "fair" (i.e., you weren't coerced, nothing fraudulent took place, etc.), then it doesn't matter what you say. The EULA isn't the only thing defining what agreeing to the contract means. The general framework of contract law in your country defines it as well.

We can quibble over whether EULAs are enforceable contracts due to one reason or another, but you can't just say, "Well I don't agree with the meaning of the EULA, therefore I'm not bound by the agreement".

The contract should be signed before buying the software, not when a consumer has already paid for it or wasted his time and Internet traffic to download it.

Imagine if you bought something and then learned that you have to pay again to be able to use the item.

A contract should be beneficial for both parties. But EULA only limits consumer's rights without giving everything in exchange.

It gives the consumer access to the software.

I agree that the fact that you only see them after the sale is a problem, though one that would be "solved" to some degree if every vendor could be reliably relied on to honor the terms that say "if you don't agree, return it to the vendor for a refund".

There are bunches of problems around EULAs, but the general concept of an agreement you must adhere to in order to legally use the product doesn't seem especially legally shady to me. Or at least not in the ways referred to by the commenter I was replying to.

Most contracts limit a party's rights without giving everything in exchange.

If you don't agree to the terms of the agreement then you don't have an agreement.

Half the software I use has EULAs that were "agreed to" by some other third party.

And if you don't have an agreement, you have no right to use the software.

The execution of the EULA as a thing you don't get to see up front introduces problems, for sure. But I don't see anything blatantly illegal about an agreement that says, "you must adhere to these terms to use this software".

Define "use." What is it that I do not have a right to do? Look at other peoples' phone screens? I didn't agree to the iOS EULA. Can I listen to the music coming out of my partner's laptop? I didn't agree to any music app EULA.

>But I don't see anything blatantly illegal about an agreement that says, "you must adhere to these terms to use this software".

That is not an agreement. I often cannot agree to those terms, because I do not know what they are. And I will use the software regardless, because "use" means nothing specific unless we have an agreement on what that means as well.

EULAs are "agreements" that do not require agreement, that often bind someone to do something they cannot reasonably do.

It depends.

Law is generally meant to be "reasonable" and much depends on the particular facts.

You have cited class action and the uniform code of commerce.

If EULA contains mandatory binding arbitration and a no class action clause, both your ideas are dead in the water.

Per the SCOTUS contract law supersedes class action. Your idea for a class action is dead. Mandatory binding arbitration is not required to follow any law but the AAA. The arbiter may ignore the UCC. The UCC concerns are now dead as well.

Even the _legality_ of a contract itself probably does not stop mandatory binding arbitration: http://www.law.com/sites/davidmgersten/2014/08/01/arbitratio...

I'm not a lawyer nor a consumer law expert.

My theory of the case is that if the goods delivered were known to be unfit by the vendor, consideration was not met and the contract wasn't formed.

Some of these contracts waive the implied warrant of merchantibility. Not sure which jurisdictions allow that. Not sure if the warrant of merchantibility is still 'implied' if a specific use is advertised and the product isn't fit for that use.

I suspect the unconscionability test in contract law is stronger in contracts of adhesion.

actually ignore the above. I just read your law.com/davidmgersten source and I clearly have no idea what I'm talking about.

To quote my law professor on EULAs in the EU: "I never read them. They are either fair, or unenforceable".

In the EU it is impossible for normal consumers to sign away most rights intended to protect the consumer.

Misleading the consumer in any way about that can even end in fines.

EULAs in EU are a joke. A "normal" consumer cannot even sign away most of the consumer protection rights even if he wants to.

A funny joke, like, do they make EUlaugh?

In the EU, that doesn't work. Specifically because none of the conditions of the EULA apply to the sale unless you were presented it before you paid for the product. If it's possible to purchase the product in such a manner where you are not presented the EULA before you bought it, you can ignore a lot of it's conditions.

If a seller wants to impose some conditions of course he should do so before selling his product rather than try to deceive a customer after purchase. Only a dishonest seller would do such a thing.

IMO any company that is using words like buy, sell, sale, purchase, get, of a product and not specifying they are selling only a _license agreement_ are committing a heinous fraud and should be fined no less than a years median profit (or, let's say, 5% of revenue as an underpin).

Sure, advertise "get license to use Wandows for a limited period, further restrictions on use apply" but if you say "get Wandows for $100" then you sold it and no EULA or other additional restrictions can apply; and no, small-print doesn't count.

U.S. statute is supposedly the same. A valid contract involves consideration from both parties. After you've bought something the contract is set. One party can't subsequently say, "oh in addition you have to agree to this."

Unfortunately law isn't what got written into statute or precedent yesterday. Law is what happens to you in court today.

Please stop talking about "valid contract" or "consideration" here. The EULA almost certainly contains a provision on mandatory binding arbitration.

The validity of the contract may be ignored.

Under "BUCKEYE CHECK CASHING, INC. v. JOHN CARDEGNA, ET AL." and "Rent-A-Center West v. Jackson" mandatory binding arbitration overrides a challenge to the validity of the contract. The arbiter will decide if the contract is valid.

Under "Hall Street Associates, L.L.C. v. Mattel, Inc." the arbiters "manifest disregard of the law" is not enough to overturn an arbitration award against you.

So, no, a valid contract is not required, so long as an otherwise invalid contract contains an mandatory arbitration provision, the "contract" will be decoded by mandatory binding arbitration. If you are a human vs a corporation, your win rate is 0.2% in the national arbitration forum.

A purchase is not required to be locked into a mandatory binding arbitration agreement, because a whether you'd made a purchase would be part of the validity of the contract.

How does one avoid being locked into a mandatory binding arbitration agreement? For example, suppose I run a website that contains a TOS such that it requires visitors to deposit into my bitcoin account scaled by marketcap and a MBAA. When the Google crawler comes by, do I hit the jackpot?

Well, I found this article which seems to present a case where the decision went against the idea of "drive by" mandatory binding arbitration agreements, so I don't think my get rich quick scheme will work.

Knutson v. Sirius XM Radio Inc. http://www.blankrome.com/mobile/index.cfm?page=resource&&vie...

  The EULA almost certainly contains a provision [..]
That's begging the question. The question is whether any provision in the EULA is relevant at all.

Per Rent-A-Center:

> There are two types of validity challenges under § 2: "One type challenges specifically the validity of the agreement to arbitrate," and "[t]he other challenges the contract as a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was fraudulently induced), or on the ground that the illegality of one of the contract's provisions renders the whole contract invalid." Buckeye, 546 U.S., at 444, 126 S.Ct. 1204. In a line of cases neither party has asked us to overrule, we held that only the first type of challenge is relevant to a court's determination whether the arbitration agreement at issue is enforceable. [...] But that agreements to arbitrate are severable does not mean that they are unassailable. If a party challenges the validity under § 2 of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that agreement under § 4.

Could one not attack the agreement to arbitrate on the grounds that no binding agreement could ever have been reached in the circumstances? Even severing the arbitration clause from the remaining of the contract, it seems it could be argued that there was no agreement to arbitration, as there was never any intention to enter into an agreement of any kind (I'm assuming the claimant would argue that they knew the EULA was not valid as a contract and thus ignored the terms). This seems especially so as the FAA specifies "[a] written provision in [...] a contract" - there was never any intention to create a contract by at least one of the parties.

Even if the argument does not hold, framing in such a way would require the courts to consider it (the validity of the agreement to arbitrate) rather than it just passing it directly to the arbitrator.

Perhaps that's just a hopeful reading of the case; it just seems absurd to me as an English lawyer (degree, non-practising) that the arbitration clause can be plucked out and enforced when the contract itself is a farce.

its conditions

My uneducated opinion is that it wouldn't matter, in the same way that you cannot sign away your right to warranty in the EU.

A surprise contract that most don't pay attention to and severely limits the rights of the target human is an American standard.

Also in most business contexts employees have no right to sign contracts on behalf of their employer.

Shouldn't be, but most definitely are as a matter of settled law in the US. :(

This is a good test of democracy surely. What proportion of the population want EULAs, want not to own stuff they bought? Yet the USA as a supposed democracy has laws that contradicts that position with arguably no benefit to society.

What does the European ruling imply for services like Steam, that will sell you a game license-key, but in a way where that key is bound to your particular Steam account? Does it force such keys to be transferrable in Europe? Or force the licensing server to have a "transfer of ownership" API such that it will revoke one key and generate another for the new owner?

I think that this is the big question! I actually started an auction site based on allowing EU users to resell their Steam games (and ios/google play apps) b/c I think due to the Oracle v UsedSoft ruling Steam users should be able to resell their Steam game keys. However, b/c there is no mechanism to transfer keys (or ios apps) between users, there wasn't much my startup could do.

There was an attempt in Germany to sue Steam to allow users to resell their entire Steam account(1). However, that effort failed. I think they should have pursued a case that focused on allowing Steam users to resell individual games. There may still be a court case that could be won that focuses on reselling the individual games keys between users.

I think in the EU though there could be some debate about whether games are considered "software". Only software is covered by Oracle v UsedSoft as I recall.

(1) https://theundisciplined.com/2014/03/20/losing-steam-is-used...

I think you may be reading too much into all of this.

Oracle sued alleging copyright violation. The ECJ ruled that what UsedSoft was doing was not a copyright violation.

Applying that to Steam, it would imply that if I sold someone my Steam key for a game I had purchased I would not be violating copyright. It does not necessarily imply that Steam has to make or allow the key to work for the buyer. That's out of scope for copyright law.

The UsedSoft v Oracle case is specifically about and whether or not a licensee can resell the software they have purchased.

"On 3 July 2012, the ECJ handed down its landmark decision in UsedSoft GmbH v Oracle International Corp (C-128/11), ruling that the owner of copyright in software cannot prevent a perpetual licensee who has downloaded the software from the internet from selling his ‘used’ licence. This decision has significant implications for the software and other digital industries." [1]

[1] http://www.linklaters.com/Insights/Publication1403Newsletter...

Yes, the copyright owner cannot prevent the licensee from selling the license, but the copyright owner also does not have any obligation to continue hosting a cloud service, to authenticate the existing license on a different account using their cloud service, or to otherwise assist the licensee in transferring the license.

But they might be under an obligation to not build licensing infrastructure into their software that bound licenses to accounts in the first place, in a way that technically prevented users from transferring them. That could be seen as a form of DRM restricting users from reselling something they're legally able to re-sell, and the courts would Not Like That, for the same reason they don't like things like warranties not transferring on resale.

In principle it could. It depends on how much of this is followed by governments or interested third parties (through courts).

For example many countries started to require that mobile phone numbers should be transferable between carriers and mandated the carriers to build an infrastructure for this.

Most mobile apps have moved to a model with in-app purchases. I wonder if this rule applies there. If a game is free, but I spend $1.99 on 500 gold coins (in-game currency), does the law require that I be able to sell the gold coins?

What about if I use them to buy virtual non-consumable items (like permanent character upgrades)?

I assume the law wouldn't apply to consumable items (like spending 50 gold coins to speed up the construction of a building) because it doesn't result in any in-game item I own.

I'm also curious about reselling in-app purchases. The Oracle vs UsedSoft ruling only applied to "software" as I recall. I think if you had paid for in-app purchases to unlock premium features of a product there could be a case to made that you should be able to resell that free app with the features you paid to unlock.

As far as reselling unused in-game currency like gold coins that speed up construction of a building, I personally think it would be cool to see a secondary market pop up. However, I don't know if that would be covered by UsedSoft v Oracle.

The big question is whether individual Steam games should be able to be resold in the EU due to Oracle vs UsedSoft. If so, that's a potential multi-billion dollar secondary market that doesn't exist yet.

Edit: Sidenote, I actually started an auction site based on the idea of reselling Steam games (and ios games) several years ago based on the UsedSoft v Oracle ruling but due to these companies not allowing users to transfer licenses between each other, my startup was not workable.

Generally speaking, this would be a very poor result (from the perspective of said game owners). Pretty much all of us would have our credit card processing contracts revoked, because in all "regular" contracts (e.g. Stripe, Braintree, etc. etc.) you may not use their service to sell goods which can be "readily resold for cash". If that was the legal result, these applications would probably need to stop accepting EU credit cards.

Italy here. Many owners of small shops and small restaurants go to supermarkets to buy stuff they resell because sometimes their dealers don't deliver all they need or not often enough: being small put those shops to the end of the list.

I wonder if the contracts are the same here or if processors just don't want to know because they still make money twice from any of those sales.

That, Or they change their terms to suit EU laws..

I think that this distinction is largely becoming irrelevant in the cloud era. Most software is sold / licensed on a term basis these days, and honestly the industry is healthier as a result. App stores are really the only remaining vestige of "buy once, use forever" -- and I'd guess that the EU isn't interested in going after it thanks to the small dollar amount and huge number of companies who benefit.

Software was never truly a "product" in the same way that physical goods are -- it was always a service thanks to the maintenance and continued investment required. It may have been better for the consumer in the short term to "buy" software, but a subscription model allows for more predictable cash flows to the developer of the software (which keeps software vendors in business -- and their software supported).

The industry is healthier as a result? I question that rather strong claim.

Consider as a counter point, I can still pull up cartridge based games on my old consoles and they work. Rather well, actually.

Now, that does speak only to the "health" of the software I run. It also ignores the implications of this world we are in where everything is fully connected to the internet.

To your point of healthier for the developers. Do you have numbers to back that up? Certainly gave companies a more reliable cash flow that are licensing software. But... conversely, this gave consumers a burden in the form of constant cash flow out.

To add to your counter-point, the consumer also gets rent-seeking companies locking the consumer into a proprietary system to extort you to pay more, more often(eg:Intuit). That is, if the provider doesn't shut down the platform b/c it isn't profitable enough(eg:Cubby), new investors ruin the product or they go out of business for myriad reasons.

As a consumer, I will never purchase subscription software. If a new version has a feature I need or because of OS upgrade, I'll purchase the new version or an upgrade if offered.

The physical goods model for software is much more consumer friendly. You don't need every single upgrade, you can choose how much to spend on an ongoing basis. If an "upgrade" is less suitable for you than the original, you can skip it or look for a substitute.

It's scary to contemplate a world where the software you rely on every day can change out from under you without your control or even knowledge. See the animosity aimed at Windows 10 updates.

We're in that world, to a large degree. By default, phone apps auto-update. OSes auto-update. Websites arbitrarily change behavior, as suits their owners. All but the last can be disabled (mostly), but it's still a pain.

Healthy for whom?

Not for people who don't want software to change out from under them. This includes a large number of people and cuts across just about all industries.

Not for people who want portability. "Cloud" services have a horrid habit of holding your data hostage. There's usually lip-service to portability, but for any moderately complex application, there's nothing available to load the data in to.

Not for people who are not connected 24/7. Sure, this number shrinks all the time, but there will always be times when we're offline.

Not for people who consider their data sensitive. Windows 10 should probably be considered malware by anyone who has a nondisclosure agreement with teeth and works on sensitive documents.

It is absolutely better for businesses creating commercial software. Revenue is so much easier to handle.

It would be interesting if food was sold this way. Instead of an upfront purchase of atoms and molecules, you license their use and pay a monthly fee. It would be a bit hard to tell which exact atoms came from each food consumed with current tech, but one could do estimates of the expected half-lives of various atoms and molecules in the human body and have people agree to pay according those rates. This would definitely allow for more predictable cash flows to the farmer and the rest of the food processing and delivery system.

Bechtel had a neat scheme where they bought all of the water rights for 40 years in Bolivia for $2.5B -- with a contract that guaranteed them a minimum of 15% return each year.

Citizens revolted when it was learned they may need to obtain a license from the government to collect rainwater from their roofs.


The James Bond writers are really getting lazy.

Until you reach a point where most of your atoms come from them, and you are their property now. Great! Why do people here propose the most obtuse and shitty dystopian scenarios for everything?

Sorry, forgot about Poe's Law[1] for a moment there.

[1] https://en.wikipedia.org/wiki/Poe's_law

Because they didn't propose anything, they outlined an interesting satirical scenario.

Physical goods need maintenance and continued investment sometimes too, not seeing a differentiation here between software and other goods. Could you perhaps expand on hire you perceive then to be different enough to warrant additional protections?

s/industry/some software vendors/

The loss of perpetual right to use is a devastating and nasty impact on the industry to customers. I've been involved in big hairy nasty disputes from massive vendors of cloud services -- they have you over a barrel in the way the IBM did in the bad old days.

It does not work like this in the EU. Most EU countries don't have a case law based ("common law") system, for starters.

It's true that the EU is not ruled by common law. It does not follow that rulings by the Court of Justice have no effect. The ECJ interprets the laws as written, and in this particular case it decided that software can be resold. That is the status quo in the EU until (a) EU institutions change the law, or (b) the ECJ decides to revisit this and comes to a different decision.

Here's the ruling: http://curia.europa.eu/juris/document/document.jsf?docid=124...

Are european secondhand copies resellable in the US?

Probably. In general, the first sale doctrine applies to copyrighted works that exist on a physical medium. https://en.wikipedia.org/wiki/First-sale_doctrine

And if they are, once I've bought the EU copy in the us, can i resell it again?

> if you buy Apple's Final Cut X for $299, you should be allowed to resell that software

If you do resell your "copy" of the software, does the EU law make the company accept new-user registrations/activations? Does it require them to also send out new updates to the non-original owner?

I think for software companies to comply with the EU ruling they would need to have a mechanism for transferring registration keys from one user to another. After the original buyer transfers their key to a buyer on the secondary market, the original buyer would no longer have access to the software.

It's been awhile since I read that Oracle v UsedSoft ruling, but I think that the new owner is entitled to whatever updates are offered. If they were paid updates, (like upgrading from v7 to v8 for $20) the new owner would still have to pay the upgrade fee, of course. But if they were free updates, then they would be free to new owner just as they would be to the original owner.

From a software seller's perspective, I don't see the issue with this. If you sell one license of your software to a user, you have accepted that one user will consume one license of your software. If that license gets transferred to a different user then the original user has relinquished their license, which has resulted, still, in only one license getting consumed by one user. When you sold the software you committed to updating that one license of software that you sold, what does it matter who is using and getting the update for that single license? (Of course you don't have to give free updates to any users whether they bought your software on the secondary market or directly from the software developer.)

If you look at ProTools, they actually let user transfer licenses between each other. The licenses are stored on an iLok and users can transfer keys between one another. It's great because users can sell used audio plugins for protools or the actual protools software itself to each other. https://www.ilok.com/#!home

I would think you can sell a copy of the software but if it somehow doesn't work on the buyer's computer, that's too bad. Surely the law won't require software vendors to provide ongoing support to all future owners. Maybe you'd have to sell your whole computer and software together for it to keep working.

Like if you buy an iPad with your name engraved on it, then when you sell it, the buyer will be stuck with your name still on it - Apple isn't obliged to re-engrave it with the new owner's name.

FCPX doesn't work that way. If you purchased it on its release date 5 years ago, you essentially bought a subscription of free updates that continue through today. Many of these have been major releases with major new functionality, not just minor bug fix updates.

This is very different from the old system of buying something like Word (or FCP 7) in a box, getting a few minor updates to fix bugs, and when the new major version came out, you had to pay at least an upgrade fee, if not full price.

It's not a question of whether FCPX is a good value. If an EU citizen pays a one-time fee for a lifetime license of FCPX they are supposed to be able to resell that software according to the Oracle vs UsedSoft ruling. Apple has not built a mechanism into their App Store to allow users to transfer licenses to one another, which means they are not complying with the EU ruling.

This applies to every software product in their store (and Google's Play Store) that is bought for a one-time fee in exchange for a lifetime license in the EU.

It doesn't appear to me that EU citizens are paying a one-time fee for a lifetime license. It appears to me (though I'm no lawyer) that they are paying a one-time fee for a subscription. I don't know whether it's time-limited or lifetime, but it is a distinction with an actual difference, and may affect how EU law regards it.

The whole "lifetime license in exchange for a one-time fee" idea in the Oracle vs UsedSoft case comes from that case trying to determine what "ownership" means in regards to digital products. In Autodesk vs Vernor, Autodesk was claiming that if you paid $3,000 for license of Autocad, you don't actually own that software you are just "licensing" it and thus the first sale doctrine doesn't apply, so the customer can't resell the Autocad product they bought, even though the customer paid a one-time fee for a product they "own" for life (this was before Autodesk moved to a subscription model). Autodesk claimed this b/c they included in their EULA that the customer was merely licensing their product and didn't "own" it. The US supreme court eventually agreed with Autodesk.

In the Oracle vs UsedSoft case, the EU court was taking on this question of what does it mean to "own" a digital product vs "licensing" a digital product. That court came to the conclusion that if you paid a one-time fee for a lifetime license of a digital product then you own that product (no matter what the EULA says) and the first sale doctrine applies, which gives you the right to resell it. On the other hand, if you were paying a fee that only gives you access for a set amount of time (a subscription), then you would just be renting (or "licensing") that product for a certain amount of time and thus wouldn't own it, which means you can't resell that product because it isn't covered by the first sale doctrine.

A subscription expires and would need to be renewed. Your license for FCPX never expires. Since you paid a one-time fee for a license of FCPX that never expires (a lifetime license) your copy of FCPX would be covered Oracle vs UsedSoft in the EU and you could resell it. Paying a one-time fee for something is not a subscription.

If you buy a car with cash, you own that car. You can own/use that car for the rest of your life or you can resell that car. If you lease a car you have a subscription that you must renew to keep using that car and you do not have the right to resell that car. That is basically how the Oracle vs UsedSoft sees software products in the EU.

If a product is rented for a long term then maybe a consumer should be able to pass a right to use it to someone else. Otherwise this can be used to circumvent the law.

> It seems to me that by preventing users from reselling their software, Apple (and the Google Play Store) are probably violating EU law on this matter.

No actually; the law says it's _allowed_ to resell software, but it doesn't say companies are _required_ to make software transferable. If they did make it mandatory, it'd be the end for digital-only software like the app stores, Steam, etc.


> On 3 July 2012, the ECJ handed down its landmark decision in UsedSoft GmbH v Oracle International Corp (C-128/11), ruling that the owner of copyright in software cannot prevent a perpetual licensee who has downloaded the software from the internet from selling his ‘used’ licence. This decision has significant implications for the software and other digital industries.

Software vendors often prevent you from transfering the license from an old PC to a new PC. I don't know what's the legal ground for that (outside of OEM product). For instance Microsoft will not let you activate an Office 2010 license anymore.

I came here to ask about things like this...

In short, the sale of a product does not allow you to control what is done with the product afterwards through patent law.

I'm assuming this is almost similar to attempts to use copyright law to stop the sale of products on the grey market. http://www.bipc.com/court-rebuffs-attempt-to-use-copyright-l...

I do wonder though, if they changed the underlying software on the cartridges they would get into trouble. I do not see this stopping John Deere's practice of locking up their hardware through copyright laws. https://www.wired.com/2015/02/new-high-tech-farm-equipment-n...

John Deere's stuff can be seen as a legal quirk that actually SHOULD be unconstitutional and the [EFF's Apollo 1201](https://www.eff.org/press/releases/cory-doctorow-rejoins-eff...) project is specifically aiming to find just the right case(s) to take all the way to SCOTUS to declare this.

I was under the impression that John Deere's restrictions were licensing-based. But maybe they rely on copyright as well?

They did, untill it they lost the ability to do so under the DMCA back in 2015. All though they could be re-allowed in 2018. The library of Congress gets to reinterpret it every three years.

It will be renewed: there is zero evidence of John Deere being harmed by others performing warranty-voiding repairs.

That and it effectively divides up lobbying power against the DMCA. It doesn't matter if the analog loophole effectively dooms all forms of DRM on music, video, and books or that video game DRM is always hacked within a few months. What matters is that snake-oil salesmen have convinced Hollywood that it's a good idea and they have a very effective lobbying group.

Software licenses are copyright licenses.

No, as in the machines are licensed from JD, and therefore they can't modify the software.

Interesting that even with importation fees, it was cheaper for Costco to import watches.

That's especially likely to happen when manufacturers are deliberately trying to charge very different prices in different markets (like you see in a lot of parallel importation cases).




On the right day, you can get a high end watch for a lot less than going into a boutique.

I bought a Omage Aquaterra, with the big white dial for $1400 years ago. This watch was going for $3500 in the authorized retail stores.

Swatch took Costco to court, and lost.

There's no factory warranty, but most of these new high end watches will keep perfect time for 10 plus years. Oh yea, Costco does have some watchmaker that supposedly repairs watches. I can repair, so I don't trust anyone anymore.

It's too bad companies continually screw Americans on price, on so many products--the medication cost difference really bothers me.

Besides the obvious battery life and water-resistant depth, what is the functional difference between that $1400 watch and the $20 Casio I just bought for my girlfriend?

people who like expensive watches (ie other rich people) can tell that his is expensive, so he's part of the ingroup. it's an impractical amount of money to spend, even at his steep discount, on something that is also functionally outmoded for most people by smartphones, and thus acts as a high-cost (honest) social signal.

some people also like sophisticated physical mechanics (likely including GP, since he can repair watches), but i believe that's typically secondary.

It's kind of interesting that we've come full circle. We started with pocket watches and moved to wristwatches when it was too inconvenient to take something out of your pocket to check the time in the trenches of WWI. Now we've transitioned back to pocket watches in the form of a phone because it's "more convenient."

High end watches serve the same function as jewelry. They're also magnificent pieces of art and engineering in many cases.

If you just want something that keeps time, the $20 Casio is fine. In fact, most people I know just look at their phones. However, there's elegance and sophistication present in a luxury watch that you don't get with a simple digital watch.

When you can cite Lord Coke in your opinion, I guess it's practically mandatory to do so.

> As Lord Coke put it in the 17th century, if an owner restricts the resale or use of an item after selling it, that restriction “is voide, because . . . it is against Trade and Traffique, and bargaining and contracting betweene man and man.” 1 E. Coke, Institutes of the Laws of England §360, p. 223 (1628)

Semi-off-topic: I've noticed that Coke's writings are a bit more similar to "modern English" than other things I've read written in the 1600s. This surprised me, because he was a judge and probably wrote in formal language for the time. Formal language, to me, seems perpetually set back to the way people talked about 60-100 years previously. Thus you'd expect Coke to sound like he's writing in the 1500s, but instead he sounds like an 1800s writer.

Perhaps I've caught a time-traveler? If so, to Coke: I'm having some friends over for dinner tonight, and you're welcome... email's in my profile if you need directions ;)

I don't know anything about Coke, but my impression of SCOTUS opinions is that they often use language I wouldn't consider formal. Consider the first sentence of section II-A of this decision:

> First up are the Return Program cartridges that Lexmark sold in the United States.

I often find the decision to be more readable (if much longer) than the syllabus.

I don't know a lot about this topic, but my understanding is that (unlike many languages), English evolved where more formal language became popular, and casual/familiar language died away. For example, "you" is the formal version of "thee" (similar to "vous" vs "tu" in French).

Formal writing probably was influenced by the move to standardization of grammar and spelling (which was, after all, elite-driven) sooner than informal writing, so that may be part of the reason for the results you describe in that particular time frame.

The Planet Money podcast recently did an episode about this case: http://www.npr.org/sections/money/2017/03/31/522226226/episo...

I listened to this podcast yesterday. Planet Money is well produced and entertaining as heck!

Can someone clarify one part:

>The other option is to buy a cartridge at a discount through Lexmark’s “Return Program.” In exchange for the lower price, customers who buy through the Return Program must sign a contract agreeing to use the cartridge only once and to refrain from transferring the cartridge to anyone but Lexmark.

>As a result, even if the restrictions in Lexmark’s contracts with its customers were clear and enforceable under contract law, they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.

There are two issues at play here, right? One is Lexmark's patent rights, and the other is the contract between Lexmark and the consumer. The Supreme Court held that Lexmark can't use patent rights to prevent refilling the cartridges, but what of the contract? Is that enforceable?

Yes, assuming the contract was valid. Lexmark could in that case sue their customers that sent cartridges to a re-manufacturer. The only one with a relationship with Lexmark is their customer, so that's the only entity they could sue. (However, given that this isn't a case involving Lexmark and a customer, the court didn't rule on that contract, just acknowledges the possibility.)

"If the patentee negotiates a contract restricting the purchaser’s right to use or resell the item, it may be able to enforce that restriction as a matter of contract law, but may not do so through a patent infringement lawsuit."

Although, this brings up an interesting idea, which may be the logical conclusion to all of this. The patentable parts at play here are in the cartridge, and it was the sale of that that exhausted their patent rights. Now if Lexmark decided that it was only going to sell you the toner, but maintained ownership of the cartridge, then they'd be able to sue any re-manufacturer, regardless of their source (domestic vs abroad end users). Because (a) it would be patent infringement and (b) it would be selling stolen goods.

Instead of selling it, why not just lease it? They would then retain ownership and could very well claim theft if another company attempted to refill it and sell it.

Shouldn't they be able to structure their lease agreement as a 1 time payment and 100 year term or something?

If I lease a car, someone else can't repaint it and sell it legally.

Or they could set up their own cartridge recycling plant, retain ownership of the cartridges themselves, and charge a reasonable fee to refill the cartridges.

If a customer chooses not to have a cartridge refilled but would rather buy a new one, the customer just returns the cartridge to a recycling point.

Sort of like beer bottles in the UK half a century ago. The bottles and crate remained the property of the brewery and you returned them to claim your deposit back.

Lexmark could sue the re-manufacturer for tortious interference claiming they are encouraging Lexmark's customers to violate their contracts with them thus financially harming Lexmark.

Maybe, but the remanufacturer would argue back that they didn't take ownership of the cartridge, they just added toner which never transferred ownership.

A sibling post about beer is also interesting. Beer kegs are owned by the brewery -- you buy the beer inside the kegs and you must return the keg. However, it is common for (very) small breweries to refill kegs that aren't theirs. If you buy a keg of beer from brewery A, drink the beer, take the keg to brewery B and ask them to fill it, they often will (if they have time).

Usually, there is a clause in the agreement with the brewery that owns the keg that you will not refill it. However, that's a contract with the customer, not the competing brewery and as far as I know, it is not illegal for the second brewery to refill them (but the customer can be sued).

Let's say the original brewery has a patent on the keg in question. Normally you would not be able to use the keg because you do not have a license to the patent. I think the interesting point here is that if the original brewery retains ownership of the keg, then the second brewery can not refill the keg without infringing on the patent. However, if the brewery sells the keg to the customer, then the customer sells the keg to the second brewery -- the patent is exhausted (in the opinion of given in the link). So the brewery can fill the keg because they own it.

To be honest, while I think a sane law would work this way, I'll bet this is trickier than it seems. Let's say you have a special filling mechanism on the keg that is patented. You can sell the keg to the user. The user can use the keg for it's intended purpose (to dispense beer). The user can then sell the keg (either full or empty) for its intended purpose (to dispense beer). However, they can explicitly say, "We do not transfer the patent rights for filling this keg using our patented filling system". The user signs an agreement stating that they understand that the keg can not be refilled and that they have not bought the rights to the filling system.

In that case, when they resell the keg, how can the patent rights be exhausted? The customer never bought them in the first place.

So I expect SCOTUS will rule against this (unfortunately).

When I take my car in for an oil change, the shop doesn't take ownership for an hour...

They also don't sell your car to another person...

Its not quite analogous

True. A "refill while you wait" service would be analogous, however.

And one could make an argument that, since printer cartridges are more fungible, the difference matters for cars but not for printer cartridges. IANAL, so I don't know if it makes any legal difference.

The court doesn't rule on that contract issue. It is not in play in this case at all, as it would require that Lexmark sue its own customers for contractual infringement. The ruling mentions:

> even if the restrictions in Lexmark’s contracts with its customers were clear and enforceable under contract law

> and whatever rights Lexmark retained are a matter of the contracts with its purchasers, not the patent law

I only skimmed the Opinion of the Court, but AFAICT:

The contract was between Lexmark and the consumer. If the consumer violates that contract and sells to a re-manufacturer, then the re-manufacturer may refill the cartridges, as the re-manufacturer never entered in to a contract with Lexmark.

To the degree that the contract is enforceable, then it is with individual consumers. No individual consumers were parties to the case, so the validity of the contract wasn't ruled upon.

Yes, the contract is (presumably) enforceable.

The reason it matters is that Lexmark has to sue its customers --the ones who signed the contract--in order to enforce a contract right. In the case that the Supreme Court just decided, Lexmark sued its competitors, the cartridge remanufacturers.

For Lexmark to sue its customers would be administratively difficult and is also generally not very good PR. So my guess would be Lexmark will never file that lawsuit.

I don't see any reason why that would be unenforceable, but resellers are not a party to that contract, and there is no contract if you just buy new cartridges and refill those ones.

The court didn't directly address that point. The Lexmark contract likely has a choice of law provision, e.g., "this contract will be interpreted and enforced in accordance with the laws of the State of California." It would be inappropriate for the U.S. Supreme Court to rule on an issue of state law unless it also posed a question under federal law.

The case is limited to the question of whether Lexmark has the right under patent law to prevent resale, refurbishment, and refilling of its cartridges. The Court ruled that it does not.

IANAL, likely not, it sounds very similar to Morton Salt Co. v. G.S. Suppiger Co. [0] which found that since Suppiger "is making use of its patent monopoly to restrain competition in the marketing of unpatented articles, salt tablets, for use with the patented machines, and is aiding in the creation of a limited monopoly in the tablets not within that granted by the patent." it was barred from enforcing the patent and contract.

The risk of being barred from enforcing their patents probably encourages Lexmark to not even attempt to bring such a suit.

[0] https://en.wikipedia.org/wiki/Morton_Salt_Co._v._G.S._Suppig....

Edit: HN seems to strip the trailing "." from the URL

1942...A golden oldie!

No. That's what SCOTUS is saying. Lexmark is trying to enforce a contract over an item that they do not control. Is like if you signed a contract with me that every time you handed someone a glass of water, you would require them to say "thank you" in a non-native language. I have no control (legal or otherwise) over your actions or the glass or the water, therefore the contract is not enforceable.

In the case, Lexmark relinquished its rights to the physical product in question when they sold it. Then on the basis of patent law (the idea that they own the rights to the "idea" of the toner), they tried to say that you may not sell it to anyone else. What SCOTUS is pointing out is that Lexmark's patent does not grant them control of a product they made and sold.

To be clear here, the patent prohibit others from making (and subsequently selling) these toners, but if Lexmark made the toner, all bets are off.

No. Lexmark can negotiate a contract with its customers (this is unrelated to patent rights). But, if the customer sells the item to a 2nd customer (possibly in violation of the contract), then that 2nd customer is not subject to the contract, as the contract was between Lexmark and the initial customer.

SCOTUS is saying that they can't use patents to say you may not sell to anyone else. You can instead use contracts to say these things, but those contracts are with the initial customers only, and don't "flow through the market" with the item.

It is quite likely that Lexmark sold the cartridge to a reseller (think walmart) who sold it to the consumer. Thus Lexmark may not be able to sue the end users successfully because there was no contract - though they could sue the reseller (walmart in this example).

Of course suing your customers is a PR disaster even if you would win. Suing resellers is a bad idea as they will never carry anything you make again which means you might win one round but you can declare bankruptcy. Even if sue OfficeMax with a promise to not sue Walmart, expect that walmart drop you anyway as they cannot afford that risk.

What they could do is make the cartridge inoperable without online activation, in which the customer has to agree to terms of use. Damn, that's evil...

they do already with the printer it'd be interesting if that could cover usage of purchased accessory

False. The opinion specifically says Lexmark may have a good breach-of-contract case, but this specific case was a patent case.

I think this is a bad read. See the other two sibling comments.

If I sign that contract with you and don't deliver on my promise of having people tell me "thank-you" in a non-native language every time I give them a glass of water, I'd be in breach of contract with you.

I'm not opposed to the deal, I just better get really incredible terms.

The text is the same, but I find the official PDF better typeset and much more readable: https://www.supremecourt.gov/opinions/16pdf/15-1189_ebfj.pdf

What an amazing waste of space on the paper... I mean, yes margins are good, but when you lose 60% of the page to them they might be overbearing.

My guess is that it is typeset for a particular journal of law - whatever is used to officially document SCOTUS decisions, with an appropriate column size for that. The additional electronic publishing is just using the same format but slapping it in the middle of A4/Letter.

It's possible that the margins are meant to be cropped by the printer. Though more likely it's just an optimization of line-length, font size, and ink usage. (since ink costs more than paper)

That's a fascinating judgement and the hypothetical case that they use to illustrate things seems interestingly chosen:

>But an illustration never hurts. 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. Those companies might, for instance, restrict resale rights and sue the shop owner for patent infringement. And even if they refrained from imposing such restrictions, the very threat of patent liability would force the shop to invest in efforts to protect itself from hidden lawsuits. Either way, extending the patent rights beyond the first sale would clog the channels of commerce, with little benefit from the extra control that the patentees retain. And advances in technology, along with increasingly complex supply chains, magnify the problem. See Brief for Costco Wholesale Corp. et al. as Amici Curiae 7–9; Brief for Intel Corp. et al. as Amici Curiae 17, n. 5 (“A generic smartphone assembled from various high-tech components could practice an estimated 250,000 patents”).

Good, but the tip of the issue is licensing. Autodesk[1] has set precedence that all an organization must do to limit the resale of anything is institute a EULA. Simply by asserting that an offer is for a license not the thing being licensed the seller can bypass common law, Lord Coke, and the first sale doctrine.

P.S. This also means that expensive professional software like Autodesk's, or anything with such an EULA, cannot be considered an asset since it has no dollar value after purchase.

1: https://www.wired.com/2010/09/first-sale-doctrine/

There seems to be a logic gap here if I'm understanding the possibilities correctly.

What stops me from founding a company through which I get paid, leveraging that company to purchase 100% of my "assets", then instituting a EULA and selling (at no cost) a lifetime license to use anything I want to myself? As per your logic (as I understand it), I could then declare myself utterly destitute and owning $0 worth of assets. My company could also claim $0 worth of assets.

At that point, could I not play any number of games to increase eligibility for government assistance programs or reduce tax burden?

(This is a quick thought, so if there's any glaring flaws in this idea please do point them out.)

> My company could also claim $0 worth of assets.

You need a place to live. You have the company purchase it, "license" it to you under a EULA. The company now owns property worth some amount of money (it can sell this property and turn it into cash.) Thus, the company has at least a single asset. And you own the company. You have an asset.

Oh, you want the company to rent a place to license to you? Fine, now no one has assets, but the leasing company might not actually be willing to sign the lease with a company who's going to effectively sublease.

The definition of "property" is an extraordinarily complex topic.

Just a few of the absolute most basic questions:

What does it mean to possess something?

Is physical possession all that matters?

Is it the right to use something?

If you possess something, but someone prevents you from using it, have you lost property?

And then if you start mixing in taxes... whoa boy. Take a look at http://digitalcommons.law.utulsa.edu/cgi/viewcontent.cgi?art...

The net of all of it that the law, both formal and common, has evolved to deal with this topic. But there are constant new frontiers, like this SCOTUS decision.

> My company could also claim $0 worth of assets.


If the company buys assets and sells or transfer's them to you, the fact they are not assets to you doesn't really change the facts for the company do they?

However, if your company buys stuff with a EULA that prohibits resale then those purchases are an immediate 100% loss. If the company must liquidate the following day those purchases will not contribute to recovering any investment value.

Look at visual effects and post production companies in M&E, a large part of Autodesk's addressable market. These companies are constantly going out of business, and the unrecoverable costs of very expensive software contributes to this volatility.

If I'm licensing from my company, what legal mechanisms force that asset to still be owned by my company? Can I not license it to myself under some vague EULA terms in which the company gets it back upon my passing, but I'm forbidden from reselling (and thus it's not an asset for me either)? If the key to this is the "licensing" of a product forbidding resale, I'm not seeing how that isn't a financial black hole into which assets disappear.

well I am curious how it will play out in the long run because unlike printer cartridges you have no physical object with software since almost all is done via digital distribution.

I do know our commercial software at work on about every platform is by license only. we don't own any of it. didn't microsoft do this with Office, give you a "low" monthly rate instead of selling out right?

Perhaps the plan is, buy it for 299 or license it for 9.99 a month or 99 a year? so this would skirt the issues presented with physical items?

I do not believe that mechanism of delivery is a relevant feature of any of these laws. The copyright of a book is not contingent on its delivery via a binding of paper.

One could argue a subscription is different than a purchase (of anything license or otherwise), but if you subscribe to a magazine you can legally resell any issues you receive. I see no reason you shouldn't be able to re-sell your Office 360 subscription.

The law as decided in the Autodesk case seems to indicate that you can restrict the sale even of physical items if you assert that the items contains 'licensed' software, and state the terms of the license do not allow resale. The owner of the product could sell the physical item, but only if they could remove the 'licensed' software.

This is really similar to the concept of 'first sale' in copyright law, which similarly prevents the copyright holder from using copyright to restrict what a buyer does with the object.

Glad to see it extended to patent law as well.

The first sale doctrine was already reflected in both areas of law. What this decision is about is whether patents are still exhausted if you sell the product with an EULA-style list of restrictions. Lexmark argued that because they specified that the cartridges were only to be used once, they retained their rights and ability to sue. The court determined that the restrictive sale contract did not prevent patent exhaustion.

Not quite. The court determined that sale exhausts their ability to sue under patent law. They explicitly left open the possibility that they could sue (and prevail) under contract law. (The problem with suing under contract law is that they would have to sue the original purchaser, which presents significant logistical challenges.)

Yes they both stem from common law disfavouring restraints on alienation.

Something I've searched for but not found a layperson introduction to: any idea why that doesn't apply to real estate? Deed restrictions that purport to put conditions on how property can be resold have repeatedly been upheld, except for a really narrow, somewhat recent carve-out for no-selling-to-black-people deed restrictions, which were held unenforceable, but specifically because they were racially discriminatory [1], not because of any general principle that covenants can't restrict alienation of property.

[1] https://en.wikipedia.org/wiki/Shelley_v._Kraemer

Many restrictions may be implicitly time limited by the common law rule against perpetuities; but different rules apply to real estate and retail sale because of the process to buy either one. If I buy a book, I'm not bringing my lawyer to review the contract and objecting to terms in the purchase agreement; if I buy real estate, it's a major investment and I'm expected to examine the title for encumbrances and carefully consider the consequences of them; and there's a customary process (escrow) which provides for time to ensure any defects in title or other condition are remediated or compensated for to the agreement of both parties.

Restrictions and covenants and so on are very common, but actual restraints on alienation or sale itself aren't so much, at least not enforceable ones; they're heavily disfavored in the realm of real estate as well.

IANAL but I was trained at one time as a real estate agent. This is not legal advice and especially does not constitute personalized advice about anyone's particular situation.

Real property is not chattel. There's an exacting legal distinction between real property and chattel.

In the US, real property deeds carry what in the real estate field is sometimes called a "bundle of rights" which are by default included together but can be separable. One is the occupation and use of the land. One is the right to dispose of it to another buyer. One is the mineral rights to what's below the surface. One is inheritability. One is the freedom to put the land to particular uses. It's possible for example to negotiate a contract in which a person, party A, has nearly full ownership of land for a lifetime but it then goes to another party, and party A is not free to sell to someone else in the meantime. It's possible that you own a home under which you own no oil or gold rights. It's possible even (at least in some places) to grant a deed with lease-like restrictions such as giving your ne'er-do-well child a house and land that he actually owns, but only so long as he completes rehab and no drugs are ever found there.

Deed restrictions are agreed to by a number of nearby landholders and depending on jurisdiction may count as a contract or may actually be more fundamental to the ownership of the property, which further may depend on how the property was conveyed to the buyer. In many states or counites / parishes in those states, deed restrictions are on file with a government office and apply only for a certain number of years. A certain number of landholders must agree to new restrictions. A certain lower percentage of them must agree to keep enforcing existing restrictions. Depending on the type of restriction, the nature of the organization enforcing, how equally they've been enforced in the past, the jurisdiction, and potentially other factors they may carry no weight at all or may result in civil actions up to fines, liens, and specific performance rulings to correct deviations.

In Houston, or maybe it was Harris County (most of Houston is in Harris County and much of the county's land is in the city, so it's easy to forget when not using the information that often) HOAs were told that the bylaws must be on record, must be provided to property holders, must be enforced 100% the same across all restricted plots, must be mentioned at regularly held meetings, and a few other conditions must be met or they were completely null and void. I live in a community with a reasonable HOA, and I'm glad it's neither a free-for-all (there's little to no zoning at the city level) nor one of those HOAs that charges hundreds of dollars a month to come and measure the grass and use a spectrometer on the exterior paint.

Interestingly, this all started in real estate, but it's changed over the years.

Real estate is almost exclusively state law, so it moves faster and is different among states :)

Federal law moves slower.

This case sounds similar to the ruling back in the 1980's (I think) that came from a suit by the makers of Warn winches against a North Texas trailer maker/seller.

From flawed memory, the trailer sales business offered the Warn product line at prices well below those of other Warn dealers and below the suggested retail prices from Warn. He was sued by the manufacturer in an attempt to get him to raise the prices and he prevailed I think based on first sale doctrine since the court ruled that Warn had already been paid for the product and that ownership and control of the winches passed to the trailer manufacturer who was thus free to advertise and sell them at any price he desired even if it meant he took a loss on each one sold. They belonged to him and he could do as he pleased with them. He had been using them as a kind of loss leader where one of the incentives of buying a trailer allowed you to purchase a winch at a large discount.

EDIT: The case was not Warn winches, it was Ramsey winches and the ruling was:


Briefly - I have a bad memory. The case was a lot more involved since Ramsey tried to terminate the distributor agreement and was thus sued by Pierce Sales. Pierce was a high-volume winch dealer and due to the high volume of sales he was able to buy the winches from Ramsey at the lowest price available to dealers. He then used that buying power to advertise the lowest prices for the winches and even offered other dealers the opportunity to buy hard-to-find winches directly from his stock at prices lower than they could buy directly from Ramsey if that particular winch was even available from Ramsey stock. Pierce alleged price-fixing by Ramsey and ultimately won the case.

I remembered the court case but almost none of the pertinent details.


Yay, hopefully this will translate into a non-crazy ink refill situation which will translate into a much reduced price in ink cartridges. My hope is that the following will occur;

1) People who sell re-filled cartridges, and offer to refill your existing cartridges will no longer suffer malicious lawsuits from HP & Lexmark.

2) That will increase the supply and create a price competition between re-fillers. Making it possible to easily find ink cartridges at 1/2 to 1/3 the price that the printer manufacturer sells it for.

3) The manufacturers will reduce prices on their ink cartridges in order to support their revenue stream.

I also expect more counter measures like ink cartridge chips that 'self destruct' when the cartridge is exhausted to prevent refilling. And aggressive prosecuting under the DMCA people who reverse engineer cartridge chips to create work alike versions.

If what you are hoping for is a situation where manufacturers will sell printers at a loss and then also sell ink at cost, I don't think that's a long-run equilibrium.

If you are looking for printers where you can get ink at cost in exchange for paying a bit more up front, that's available now: https://epson.com/ecotank-super-tank-printers

Kodak also did this ~10 years ago [1] but I cannot figure out if they still use this business model.

[1] https://outline.com/7ZNnYV

Thanks for the link to the Eco-Tank/Super Tank printers from Epson. I have ordered one of the wide-format ones to see how well it works. Sad that the 'print only' wide format is only available outside the US. Seems like 'print only' is the 'manual transmission' of the printer market :-)

What I always hope for, and never expect, is people competing and using engineering quality as a competitive discriminator. I want the ink jet printer that German engineers designed to show they could do a better job than the Swiss engineers. The one that prints repeatably color and registration accurate prints as the building it is in burns down around it. I had a Mannesmann-Tally printer that I swear would stop bullets while it continued to chug away on your printouts. I remember those days fondly :-).

I'll settle for paying a 50% gross margin on a printer that is supported by all my systems, doesn't use a proprietary paper, ink, or other part that insures I can continue to use and service it for 10 years.

I've heard this point expressed by lots of people with regards to different products in the markets, i.e. "I would pay a lot more for the product if it did x."

The fact that such a product doesn't exist tells me that either there aren't enough consumers like you out there to make a market at an acceptable price, or that consumers like you are willing to defect and buy a cheaper product, if it's cheaper by a large enough margin.

Again, not doubting your desires, but the market is giving you its answer to your offer ...

You are correct. I (and as I found out, many others!) have created a label for this effect, crapitalism. It arises from the bulk of the market preferring price over quality. When that happens, vendors that make a product for a lower price at the expense of quality take market share from vendors who maintain quality. The reduced volume at the quality vendor reduces their scale economics which puts still more pressure on margins, and they end up exiting the market. When quality has been completely driven out of the market (as it nearly has been in USB chargers) you get companies that can command better margins by having better quality.

I have always hoped that we might some day get a market maker for quality, imagine something like EBay but instead of matching up yard sale customers with swap meet vendors you matched up customers with the means and willingness to both recognize and pay for quality. Still waiting on that :-)

Information asymmetry is the problem.

We might want quality and be willing to pay for it, but still buy the cheap junk because we can't reliably identify quality in the marketplace. Paying more for a product could get more quality, but it might just be paying more.

It's a variation of the cherries and lemons in the used-car market.

This is the basis for "The Innovator's Solution", and another word for it is "disruption". In the book, Christensen argues that existing suppliers target ever-higher quality (because they have the technology to do so), leaving room for "good-enough" vendors to undercut them and take away their volume product-by-product, meanwhile funding them to develop ever-better products.

Suffice it to say I disagree with Christensen and have some truly remarkable proof of that, which this comment is too small to contain. :-)

Well then the companies that are selling the printers at a loss will have to change their business model or go out of business.

Don't forget:

4) if HP & Lexmark are unable to use the DMCA to stop cartridge refillers, then the price of printers will go up, as the printer manufacturers won't be able to make any profit on cartridge sales. They'll instead have to make all their profit on the initial sale of the printer.

That would cut the legs out from the Ink Jet market, which IMHO is a good thing. They are the most wasteful and craptastic printers. Making them no longer almost free[1] would make people reconsider getting them and maybe even consider not printing or buying a decent printer.

[1] Before you count the Ink costs of course.

I would be ok with that. Too many quality issues are currently swept under the 'well it isn't like you paid very much for the printer is it?' mat.

Isn't this a good thing? I'd rather not companies obfuscate the true cost of the things I buy.

You make a good point that it is good for consumers to be informed. But it is also a good thing for sellers to be able to price discriminate between high-volume and low-volume users, which is made possible by making more profit on the ink than on the printer. If they could not do this then printers would be more expensive than most people would want to pay, even though the cost of production is actually less. So there would be a lost opportunity from gains from trade, which results in decreased total social welfare.

But to reiterate, yes it would be good if we all knew how much cartridges would cost up-front. I've even heard of some printer companies (Samsung, if memory serves) selling printers with half-full toner cartridges, to make the up-front cost even lower. This gives consumers the (false) impression that toner will be cheaper than it is, on the thinking that "I just bought printer + toner for $80, therefore toner obviously costs much less than this". Unfortunately, this isn't true when it's a half-full toner cartridge.

As I recall, one of the endless antitrust-related suits that IBM was once involved with was a similar sort of price discrimination case involving printer supplies. "Overcharging" for supplies that you alone can supply is a very straightforward way to do usage-based pricing on products that can't easily be sold that way.

This is often called "metering" and I agree it can be a good thing if, for example, you are selling an experience good where people cannot accurately predict how much they will want to pay for it until they try it--it allows you to charge less up-front.

But I think in practice when you see this used in consumer goods sales, it's likely because the manufacturer is exploiting psychology in which unsophisticated consumers do not accurately predict their costs. For example: https://academic.oup.com/qje/article/121/2/505/1884013/Shrou...

IIRC most Ink Jet printers are sold with half filled "starter" cartridges. They have to, or people would just buy new printers each time because they're cheaper than a replacement cartridge.

In practice it means people will still be able to stop you from doing things with stuff you own. Just not using patent rights. Lexmark's real problem here is that its enforceable contracts are usually with the resellers, and so enforcing against a third party purchaser is trickier, so it tried to use patent law instead. (It has plenty of contracts, including on the wrapping of the printer cartridges, I'm just sticking with the ones that are easy to enforce)

They'll always be looking for new ways, but fortunately for the moment SCOTUS has been productive about shooting them down as they come up. Kirtsaeng v. John Wiley prevented bizarre applications of copyright exhaustion, and now they've done the same to patent law. This is an encouraging sign that, whatever its other faults, SCOTUS seems to take the first-sale doctrine pretty seriously.

All they really need to do is make cartridges rentals instead of sales, no?

There's no particular reason to make it a rental. They can still put whatever contractual restraints they want on a sale, they just have to enforce those under contract law, not via patent law.

The entire reasoning for bringing a patent lawsuit is that it allows them to sue the refillers/resellers, instead of having to sue millions of individual customers who might have violated a shrink-wrap contract with Lexmark. Going into a cartridge rental business, besides adding a ton of overhead, wouldn't really change that -- they'd still need to go after the renters one at a time.

With a rental wouldn't purchasers of used cartridges essentially be knowingly buying stolen property? (Which seems very straightforward in terms its legal ramifications compared to other options.)

IANAL, but I think you'd have to prove that, ie identify the chain of custody for the device and prove that the lease was broken.

Perhaps also by a clever rebate scheme.

Product price is $180. Rebate is $40. Applying for and getting the rebate necessitates signing of a 'contract' which prohibits certain action. [1]

[1] May not hold up in advanced legal cases but enough of a leg to stand on to get the ball rolling.


"The other is to buy a cartridge at roughly 20-percent off through Lexmark’s “Return Program.” A customer who buys through the Return Program still owns the cartridge but, in exchange for the lower price, signs a contract agreeing to use it only once and to refrain from transferring the empty cartridge to anyone but Lexmark."

Note that because the contract is with the purchaser, and not with the refiller/reseller, Lexmark can only use the original purchaser. Which is why they turned to patent law in order to try to and stop the refiller/reseller.

Same model as before where you are contractually required to return it, except you get a rebate after the cartridge is returned within a certain timeframe.

You better be glad it went this way, or you would have no reasonable property rights. All objects may have contained an unknowable restriction on their use or ownership. Everything could have what is tantamount to an easement and you wouldn't know what it was unless you found out how it was first sold.

Fortunately sanity on basic notion of property rights remains within the SCOTUS.

Some context for this consequential decision:


Thanks! The usage being litigated (and confirmed lawful) was this:

> A Lexmark refill toner cartridge costs about $130. It's not cheap. So there are businesses that have sprung up that take empty Lexmark printer cartridges, refill them and then resell them for a lot cheaper.

I wonder if this will affect the various Qualcomm suits. Qualcomm tries to collect patent royalties from (say) Foxconn based on the sale price between (say) Apple and the carrier/consumer.

Edit: moved long commentary from FOSS blog to separate thread:


If Apple purchased Qualcomm chips and then resold them as part of the iPhone, then it might affect those suits, but this is not the case.

Apple licenses proprietary Qualcomm technology from Qualcomm. Apple uses the technology, but builds its own chips.

No Qualcomm's licenses are with Foxconn et al. Apple has been negotiating for a direct license but they haven't reached any agreement:


Qualcomm apparently filed an amicus brief in support of Lexmark in this case:


Couldn't find the vote without teasing it out of the text -

It was an 8-0 decision, with a minor dissent from Ginsburg on what happens when a product is sold in a foreign territory.

Where did they land on the foreign territory scenario? I only saw that the lower courts thought foreign territories did not cause patent rights to expire.

They said those rights were exhausted as well. That was the point on which Ginsburg dissented; in my non-lawyerly paraphrasing it sounded as though she saw foreign patent law as something that could not be exhausted on the same grounds as domestic patent law (being foreign and all). I saw some citations of trade-treaties and such (Bern Convention) in her dissent, but didn't go farther. She joined on the the domestic point.

I'm a little surprised that Ginsburg dissented here, and also dissented from Kirtsaeng v. John Wiley: naively, she's "liberal", and (at least in my bubble) being "liberal" is associated with wanting less strong IP protection.

But I see also that she wrote the majority opinion in Eldred v. Ashcroft, saying that the 28-year extension to copyright terms was constitutional.

What's the right way to understand her legal thinking here? Is she known as an IP maximalist? Or are there other principles she's using to reach these conclusions? (I don't completely follow her logic that, because US patent law doesn't provide any protection in other countries, US patent rights are preserved across a sale in some other country.)

Justice Ginsburg is definitely known as an IP maximalist.

Some people have wondered if she's been influenced by her daughter's views on IP, since Jane Ginsburg (a colleague of Eben Moglen's at Columbia!) is one of the most influential copyright law professors and has taken a maximalist view in many copyright controversies.


> (at least in my bubble) being "liberal" is associated with wanting less strong IP protection

And that's also much less true in regions with major media industries, like New York and Los Angeles.

I wish I could go back in time to ensure that Americans never started using "liberal" to mean anything other than "one who advocates for liberalization of trade and economics".

This is what it means in Europe. It took me a good long time after moving to start hearing it with its international meaning, but now I find the Americanized form absurd in its conflation.

In other words, liberals--in the international sense of the word--absolutely 100% endorse IP maximalization and indeed all forms of corporate ownership, rent, and public infrastructure transfer.

Sibling responses here are good overviews of her views in this decision, but more generally, the liberal-vs-conservative view of the court is at least to some extent a media invention. 5-4 decisions tend to be big, juicy, mainstream-accessible politically oriented cases, so they get the most press, which leads to the perception that most cases are decided 5-4 along "political" lines. This is not true, though: unanimous decisions are the single most common outcome, and decisions that are not 5-4, or are 5-4 along some other axis, happen all the time, with justices predictably agreeing or disagreeing on certain issues in a way that's not aligned with the popular conception (e.g., Thomas and Scalia typically disagreed on fourth amendment jurisprudence despite being on the same "side").

I think she's trying to say specifically that patent rights are preserved in the U.S., because that's where U.S. patent law applies.

Her dissent is brief and only partial; and so I think she's only calling attention to a minor point that nonetheless has legal ramifications. Remember that the court's can also be to clarify the laws, and in this case, it seems to me that she took the opportunity to point out a gray area that might come up in the future. I see this "dissent" (if it can really be called that) as a footnote of sorts. "Watch out for these situations here", she's saying. It's not a political stance, but rather pointing out a technicality.

Actually it is a genuine dissent because the majority decision did specifically address that scenario as well:

> Applying patent exhaustion to foreign sales is just as straightforward. Patent exhaustion, too, has its roots in the antipathy toward restraints on alienation, and nothing in the Patent Act shows that Congress intended to confine that principle to domestic sales.

Ah, missed that bit. Thanks for clarifying.

"she's "liberal", and (at least in my bubble) being "liberal" is associated with wanting less strong IP protection."

I may not agree with her opinion but I am happy about anybody who goes against the expected behavior because they are "liberal/conservative". It's time that the people in power think for themselves instead of going by party/ideology line.

I don't know much about IPO law but this seems to be a good thing for consumers and also the "market". I honestly thought that this court would just decide in whatever way corporations want them to deice.

I don't think that liberals would want less IP laws.

IP laws are a government restriction on citizens. Conservatives generally want strict limits on government regulations and liberals want more government regulations.

> she's "liberal", and (at least in my bubble) being "liberal" is associated with wanting less strong IP protection

Hollywood is pretty well known for being liberal.

while I agree with @ckozlowski that Gingsburg's dissent is based on technicality than politics, yes, who can forget the likes of the weasel Christopher Dodd and his long dealing with the wall street and now Hollywood.

Could Lexmark argue that they're not really selling the cartridges to you, but are instead leasing them for an indeterminate period of time?

I don't think consumers will bother with anything that hassle-some:

Lexmark: "For $20 you can lease one of our fine cartridges for an indeterminate period of time. Just need your signature on page 2, 5, and 6 of this contract."

Canon, Panasonic, HP, Xerox: "You give me $20; I give you cartridge."

The problem is the cartridge is a significant cost. If Lexmark gets the cartridge back and refills it their costs are lower than their competition. There is a reason HP sends a free shipping return label with all their cartridges: it isn't about being green (though that is a nice bonus), it is about recycling.

Maybe Lexmark could say, give us $140 per month and we will ship you a new cartridge every month with a return label. For every cartridge you ship back, you get a $20 credit on your monthly bill. Then adjust the amount of ink or timing until it is just right for each company.

I think you'd then have to enter some kind of a lease agreement, which would be a big turn-off for customers that would like to just buy a replacement cartridge without signing a contract.

1) As with many of the tricks that printer companies use to dissuade people from buying off-brand inks, if enough printer manufacturers did it, consumers might find that they have few other options -- especially if they've had poor luck with third-party inks.

2) I pay $3 a month for HP's Instant Ink program. It allows me to print up to 50 full-color pages a month with my inkjet printer, and when one of the cartridges is running low, it automatically sends a replacement. It's not significantly more expensive, in my case (low-volume usage), than buying the ink cartridges directly, but it's a lot more convenient. I'm not quite sure if it technically counts as a leasing program, but it follows a similar ethos. So I wouldn't so easily dismiss the idea that a leasing program would lead to a consumer backlash.

And then what happens if the consumer just ignores the lease and sells it anyway?

They tell the company "I threw it away".

People throwing used printer cartridges away would probably happen a lot, anyway, right?

Technically it would break the contract but the issue is that it would be very difficult to enforce.

1. This seems like collusion would be necessary

2. I have to think it's pretty hard to establish that a consumable is subject to a lease. What is returned at the end of the lease?

Potentially, but if challenged the courts would see right past a company taking away customer rights by shifting words around and rule that such an indefinite lease was ownership.

As opined here the justification for the exhaustion of the patent after sale is that the patent holder has in the sale been granted the price desired, fair compensation, for the patented item, and thus cannot demand further use of the patent with respect to the item. However, this desired price can only be set by the patent holder in the monopoly granted through the patent in the US. Therefore, this price cannot be set outside of the US where the patent holder has no patent monopoly, and thus competition. Consequently, the patent holder will not receive the desired price and remain uncompensated by the patent, and thus may still require further use of it.

Surely the Supreme Court shouldn't disqualify the patent holder's right to fair compensation for the invention in sales outside of the US?

I can't believe that the printer market has not been disrupted by someone offering a decent printer without ridiculous ongoing printer cartridge costs.

I just bought a £99 printer that will cost more than £99 in printer cartridge costs after just a few months of casual use and I did not spot any alternatives.

The alternative for most people is to buy a cheap laser printer. You don't need color for most things and the operational costs are far lower.

To answer your question, though, the profits for fairly low margin printing hardware business need to come from somewhere. Sure, you can cut the margins on ink. Now you're paying $500 for the printer whether you use it heavily or just now and then.

I got this color laser printer [1] at $179.99 in 2013 and it's still going strong. I got it specifically as a long term investment because I don't print very often and was tired of having dried-out ink every few months when I did go to print.

I'm curious how close to that price point inkjets will get if they have to turn a profit without proceeds from ink cartridge sales. We might be moving toward a point where it makes less and less sense to buy an inkjet at all.

[1] http://a.co/2kJojV2

Now you're paying $500 for the printer whether you use it heavily or just now and then.

That's how it ought to be, if a printer is USD 500 perhaps quality will rise. I hate replacing equipment every other year because product quality for home use is that abysmal.

Why can't they just accept lower margins

Why should they? After all, margins is the only reason why they're producing printers at all; if the margins are bad then it would be better for them to stop producing these products as they can get more profit manufacturing something else.

Assuming you're referring to inkjet style printers - Epson did exactly that with their Ecotank printers. Big (by ink cartridge standards) tanks in the printer you fill up with relatively cheap bottled ink. Got my wife one for the homeschool classroom and it lasts a long time for very little $$.

Where can one buy these printers?

The reason there has been no such disruption is that the current pricing model (with the bulk of the costs in the toner/ink) effectively price discriminates between low volume users and high volume users.

If toner/ink were sold at cost, then all of the profit would have to be made in the printer sale. This would cause printer manufacturers to choose the profit-maximizing price, which would be much higher than the current price. At this high price, many light-usage customers would choose not to purchase the printer, and very heavy-usage customers would enjoy a greater consumer surplus (because they would have been willing to pay much more for their high-volume printing).

So it's not that there's anything broken about the current business model — it's just the way that manufacturers can reach as many potential customers as possible. The reason that lawsuits like this one crop up is that third-party cartridge refillers are trying to undercut the printer manufacture on the cost of refills. This makes sense, and eventually we'll find an equilibrium price where third party refills cost somewhat less than "official" refills (which will instead carry more of a guarantee of effectiveness/warranty).

There's a certain obviousness to this decision. Indeed it's hard to read the rest of the opinion after it explains what it is to exhaust patent rights in the first paragraph. There's plenty of precedent, indeed when you're quoting Coke, you're going back to the 17th century and his decision doesn't seem different from the opinion.

This all begs the question how did this ham handed attempt to abuse patent rights even end up in court and then how did it get appealed to the Supreme Court and moreover why did the Supremes bother to hear it? Because it seems obvious at least to this NL and obvious stuff usually isn't on their docket.

Outside of the narrow case involving printer cartridges, what other implications and precedents can we expect this to set?

Can it stop smartphone makers from being able to blacklist devices that are resold, for instance?

No. In practice it just stops people for suing for patent infringement over devices that are resold.

> smartphone makers from being able to blacklist devices that are resold

What is that blacklist?

I am guessing this is a reference to some Google Pixel phones that were resold when they first hit the market[1].

1: http://wccftech.com/google-blacklist-pixel-project-fi/

Verizon denied my activation of used phones a couple of times due to a blacklisted IMEI, so apparently they (at least used to) keep an internal blacklist also.

Verizon owns their network, so I'd imagine they have pretty broad discretion (FCC-willing) on restricting the specific devices they'd allow on it. Blacklisting IMEI's seems like a pretty reasonable theft deterrent.

Are you sure it was specifically blacklisted? It wasn't "not whitelisted"?

When I gave my developer edition Galaxy S3 to a friend, having bought it unlocked and used it on Sprint, I had a dickens of a time trying to help them use it on Verizon. Eventually, the answer I got was not that it was different from the version they were selling, nor was it incompatible at the radio level or otherwise wouldn't work on their network, nor did they think it was stolen or otherwise blacklisted, but that the IMEI wasn't prefilled in Verizon's database and they wouldn't add it because we didn't buy it there.

Verizon lost a customer that day. Since then, between myself and my friend and our families, we've probably paid in $6,000 to other carriers in the last 36 months.

that the IMEI wasn't prefilled in Verizon's database and they wouldn't add it because we didn't buy it there.

FWIW, This filter applies at the point of activating a SIM card, not moving a SIM from a phone they would activate to one that "doesn't work" on their network.

I thought the blacklist was for only stolen or lost devices reported by the first owner.

Wasn't apple using patents to stop modding of their magsafe cables?

Not modding, but production of alternatives. Most (all?) products that were magsafe compatible that actually made ti to market were hacked up magsafe adapters.

How does this case compare to Monsanto vs Bowman? If you recall, this case pertained to a farmer that bought seeds from a local farmers association, then applied Roundup guessing that some/all of the seeds were GMO. Monsanto argued he violated their patent. Bowman argued that the GMO patent was exhausted after the first sale. He lost.

This Lexmark case seems to undermine the Monsanto case. I don't understand this inconsistency between the two cases.

Anybody able to clarify why these are different?

Because using the resulting soybeans as seeds constituted creating unauthorized copies of a patented object.

Thank you... I guess that makes some sort of sense. Now if Lexmark can modify their printer cartridges to print and replicate themselves, Lexmark might might find cover under the Bowman case!

I wish I could hand the SC justices 10 seeds each, with each 10 seed packet comprised by 5 GMO seeds and 5 non-GMO seeds. If the justices could visually sort the GMO and non-GMO seeds correctly, their ruling is actually "followable". If the product in question appears on the surface to be a natural object without patentability, extending patent protections to something that is indistinguishable from a non-patented object and self replicates seems incredibly academic.

When you go to the store and buy anything, do you know what is patented and what is not? Do you know every patent that covers every part of your phone? Do you know what parts of any of these things you can copy? Patent Law is just like that- 'academic' as you describe it, I suppose.

(I realize none of those things self-replicate like your seeds... but I think my point still holds.)

This article came up today and highlights quite nicely my unease about GM plants a. [0][1] If I stretch a bit, also kind of explains my unease about extending patent protections to plant life. The petunia flower with GM color change could be under patent protection. [2] Here we have a case of GM petunias growing outside a lab and quite likely breeding. What are the patent implications of patented plants going to seed? Does the landowner where the plant grows owe somebody money? If I'm a landowner, how do I identify and prevent patented plant life from growing on my property?

[0] https://news.ycombinator.com/item?id=14511660

[1] http://www.sciencemag.org/news/2017/05/how-transgenic-petuni...

[2] https://www.google.com/patents/CA2930494A1?cl=en

So a company signs a contract for cheaper ink that requires them to return the cartridges to Lexmark and only Lexmark.

Then companies willfully break the contract and send their cartridges to a 3rd party. Lexmark sues the third party and courts throw out the suit.

Lexmark can either tighten enforcement and restrictions on their own customers as well as sue them, or stop the program all together. I assume they will just stop the program and only sell the more expensive new cartridges going forward.

An excellently subtle line of English text to say "yeah your friend can refill your printer cartridges for you, without facing penalties of patent infringement"

Will companies now save more money on toner?

Is there anyone selling a reverse-engineered, refillable pod for the coffee machines that only accept pre-filled proprietary ones?

Do these coffee machine vendors seek to use patents to protect their sales of coffee?

Edit: I know Keurig and Nespresso are the well-publicised examples, but I was thinking of the others. I assume with reasonable confidence there are others still using non-refillable proprietary pods.

> Do these coffee machine vendors seek to use patents to protect their sales of coffee?

A couple years ago this was a debate in France, Nespresso lost but it was because of anti-competitive behavior[1]. There's apparently[2] plenty of 3rd party nespresso pods : around 50 brands worldwide.

[1] https://arstechnica.com/business/2014/04/nespresso-open-sour...

[2] http://www.beveragedaily.com/Processing-Packaging/Coffee-cap...

You can get a refillable pod for kuerigs. I think it's even kuerig branded. Is there another vendor you're thinking of?

Lidl sell Nespresso compatible capsules.

Apple really pissed me off about this. Magsafe is not licensed. Buy Magsafe bricks, cut the end off, and make a battery that can charge MacBooks? See you in court.


Apple hasn't made a similar product in the seven years since this case. That's ridiculous that they would discourage accessories for their product. That's free R&D for them.

This is a pretty big deal. It is great to finally start to see what patents where supposed to be, which was to protect the inventor until they could become established in the market. Not as a tool to stifle innovation. Very interesting outcome.

> Gorsuch, J., took no part in the consideration or decision of the case.

Does anyone know why this is?

Justices typically recuse themselves from cases that pre-date their nomination.

But they could decide to jump in?

Possibly, but why? He has to learn everything there is to know about being on the supreme court (including things like where to park in DC), and all the other work he is expected to do. All this to weigh in on a case that was 7-1 (and the 1 was a minor dissident), so his voice would mean nothing to the result, and it would inflame the Democrats (in this case - if a Democrat did the nomination the Republicans would be inflamed) who would look extra hard for a reason to impeach him. If congress is close such a thing along might be enough to impeach.

If this ever happens it will probably be a 4-4 decision where the other justices - knowing they are tied - ask for a tie breaker. Expect there to be a lot of publicity: they will want to make it clear to everything that everything is being done right. This probably includes redoing the oral hearings for the benefit of the new member.

The "could" in your question implies that anyone would be able to stop them. More likely it's a convention they've chosen to follow.

The Justices pretty much set their own rules, so sure, probably.

He has only been the court since April 2017. I would assume this was in review long before his arrival.

He wasn't sworn in before oral arguments.

Because the case got before the court before he was confirmed, likely.

Does this mean that printer prices are about to go up since HP/Brother/Lexmark will no longer be able to make as much money on the ink?

The writing's on the wall for the whole business anyway.

Lexmark did attempt to move to new markets some years ago due to this. They sold off their consumer/inkjet business and have been buying a bunch of software companies. This attempt to "softpivot" failed miserably. Lexmark was sold to a Chinese business some time ago. Now the software business is being split up and sold.

Perhaps, but how often do you really need to buy a printer? And they're so cheap a mild price increase wouldn't harm much.

The Canon MG2520 (I think there's a newer version now) is a printer/scanner/copier combo that often retails for $20. (And comes with ink.)

Price of ink would fall in exchange, since they have to compete with the off-brand folks.

Hmm, cheapest I found the MG2520 was $30 shipped including ink. Not bad, and still pretty low. I'd expect the minimum for a wireless printer-scanner with ink, shipped, to be $40 or so. $9 shipping, $3 wireless chip, $5 ink, $9 plastic/frame, $5 motors/print heads, that's already $31. (I could be off, of course.) I wonder how much, if anything, Canon loses on the printer, and how many people buy replacement ink.

The $20 price comes and goes. Micro Center was where you could easily pick it up for that regularly. And it's not wireless, FYI.

The new version is the MG2522, which is currently $25 at Micro Center, and a wireless model, the MG3620, is $40.

The ink doesn't cost them $5. It's almost entirely markup.

Can somebody explain, what does the word ‘exhaust’ mean? It doesn't seem like it's being used in the plain-English sense here.

One meaning of exhausting is "using up" (like exhausting a resource). In copyright and patent law, there is an idea that the rights of the copyright holder or patent holder only extend so far, and can be in effect "used up" in certain contexts so that they don't have further rights to restrict other people's activities. This case related to such a situation.

Edit: Wikipedia describes this at https://en.wikipedia.org/wiki/Exhaustion_of_intellectual_pro... and in a lot more detail at https://en.wikipedia.org/wiki/Exhaustion_doctrine_under_U.S....

The decision has this definition in the first paragraph, which I think is reasonably clear: "When a patentee sells one of its products, however, the patentee can no longer control that item through the patent laws—its patent rights are said to 'exhaust.'" (It sounds to me like the plain-English sense of "run out": there are no more patent rights left after the sale, they have been used up in the process of getting the product on the shelves and sold in preference to a competitor's product.)

Wikipedia has some articles about it:



If I'm reading the decision right, the question is not whether patent rights "exhaust" in the common case when you sell things (everyone agrees that they do). The question is whether Lexmark, by putting conditions on the sale, can prevent their rights from exhausting. The federal circuit's interpretation was, yes, the rights would exhaust, except that when Lexmark put conditions on the sale that the toner-cartridge purchaser agreed to, Lexmark retained its rights because that's a legal and valid contract between the buyer and seller. SCOTUS said, no, it doesn't work that way, the rights were definitely exhausted:

"Lexmark exhausted its patent rights in the Return Program cartridges that it sold in the United States. A patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose. As a result, even if the restrictions in Lexmark’s contracts with its customers were clear and enforceable under contract law, they do not entitle Lexmark to retain patent rights in an item that it has elected to sell."

It's the verb/adjective sense, as in "I ran a marathon and am exhausted." rather than the noun sense, as in "The car's exhaust was unpleasant to breathe." In the sense used, "exhaust" means "to use up" or "to reach the limit" (in that you can go no further). The patent holder's patent rights are exhausted at sale, or the patent holder exhausts their patent rights at sale.

(Note that "exhaust" in the noun sense is really the same meaning: it is fuel that has been used up by combustion.)

What's new precedent has been set by this decision? It seems it upholds an existing doctrine.

So now the companies will start selling "leases" to printer cartridges ?

This is another in a series of necessary smackdowns of the Federal Circuit.

Florian Mueller (yes, [1]) says this is very bad news for Qualcomm. He quotes Roberts' decision:

"The problem with the Federal Circuit's logic is that the exhaustion doctrine is not a presumption about the authority that comes along with a sale; it is a limit on the scope of the patentee's rights. The Patent Act gives patentees a limited exclusionary power, and exhaustion extinguishes that power. A purchaser has the right to use, sell or import an item because those are the rights that come along with ownership, not because it purchased authority to engage in those practices from the patentee."

Then recaps FTC v Qualcomm:

Presumably, some people in another Washington DC building are now reading the Supreme Court decision: the lawyers working on the FTC's case against Qualcomm. The FTC argued in its January complaint, under a headline that describes Qualcomm's "no license-no chips" policy as "anomalous among component suppliers," that "when one of Qualcomm's competitors sells a baseband processor to an OEM, the OEM can use or resell the processor without obtaining a separate patent license from the competitor—just as a consumer buying a smartphone does not have to obtain a separate patent license from the seller of the smartphone." The FTC went on to explain that "Qualcomm is unique in requiring an OEM, as a condition of sale, to secure a separate patent license requiring royalty payments for handsets that use a competitor's components." For example, this would apply to a situation in which a device maker is a customer of Qualcomm and, say, Intel or Samsung's component business.

And Apple v Qualcomm including relevance of overseas sales portion of today's decision:

Count XXIII of Apple's antitrust complaint against Qualcomm is a request for judicial "declaration of unenforceability [of Qualcomm's patents in certain contexts] due to exhaustion." Apple alleged in its January complaint that "Qualcomm has sought, and continues to seek, separate patent license fees from Apple's [contract manufacturers] for patents embodied in the chipsets Qualcomm sells to Apple's CMs, a practice that is prohibited under the patent exhaustion doctrine." ... Apple's complaint already anticipated that Qualcomm would point to its corporate structure: "Qualcomm has attempted to evade the patent exhaustion doctrine by selling baseband processor chipsets to Apple's [contract manufacturers] through QTC, which is operated by QTI, which is in turn a wholly owned subsidiary of Qualcomm." Apple then points to Qualcomm's 2012 restructuring, which I already blogged about back then with a focus on open-source licensing issues. The Supreme Court's broad and inclusive approach to exhaustion simply doesn't allow any kind of end-run around the exhaustion doctrine through a first sale outside the United States as in one of the two issues relevant in the Lexmark case.


[1] Yes it's FM but his analysis here seems better than it did 6+ years ago. I don't remember him saying things like this in the oracle case: "The good news is that the Supreme Court has once again overruled the Federal Circuit in a way that strengthens those defending themselves against attempts to gain excessive leverage and extract overcompensation from patents."

Once FM lost my trust (during the Oracle-Google suit reporting) it's just hard to take him at face value again.

Perhaps, maybe his tune changes according to which side is paying him. Most of the quotes above are not reliant on his analysis though and the relevance of today's decision to Qualcomm's practices seems pretty clear.

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