Supreme Court first-sale copyright ruling could lead to parallel policy for patents

KWIKA partner Jonathan Steinsapir was quoted in Ryan Davis’s piece at Law360.com about the effect that the U.S. Supreme Court’s recent decision regarding the “first-sale” doctrine in copyright law might have on patent law.

As we mentioned in our previous KWIKA News item (“High court throws wrench into copyright holder worldwide pricing differentials”), the Court handed down a historic ruling that will make it difficult for copyright holders to vary their pricing structure between domestic and foreign markets since a “first sale” anywhere in the world exhausts a copyright holder’s control over any subsequent resale.  Legal observers are understandably surmising that a similar policy may soon follow for patents.

Although the concept of rights exhaustion applies to both copyrights and patents, its legal basis comes from a different place for each.  In copyright law, the first-sale doctrine is found directly in the Copyright Act; in patent law, exhaustion is a common-law doctrine built on judicial rulings.

Jonathan notes that since the Supreme Court decision on copyrights appears to be based on “a value judgment about what the first-sale rule should look like” rather than the traditional view of the doctrine as a statutory-based guideline, chances are good that the patent exhaustion principle, already a less formal notion, could follow suit.  “If you look at it in a patent context, there’s an expectation that the Supreme Court would probably come out the same way.  Logic seems to suggest they would.”

On the other hand, if the Supreme Court were to remand a major patent case, Ninestar Technology Co. v. International Trade Commission, to the Federal Circuit (which has already ruled against Ninestar), Jonathan expects that the lower court, known for supporting strong patent rights, may dig in its heels and buck the high court’s latest weakening of copyright-holder rights.

“I expect the Federal Circuit will find a patent-law-specific way to say that [the Supreme Court’s recent rights-exhaustion ruling on copyrights] doesn’t apply to patent cases.”