[00:00:34] Speaker 04:
Before we begin the argument, I just want to be clear on the time division, because we've got an appeal and a cross appeal here, right?

[00:00:39] Speaker 04:
Correct.

[00:00:40] Speaker 04:
And you didn't split up, which is fine if you don't, but you didn't split up your time with 15 minutes.

[00:00:46] Speaker 04:
So you don't want to necessarily reserve any of that time to respond.

[00:00:50] Speaker 04:
Correct.

[00:00:50] Speaker 04:
Excellent.

[00:00:50] Speaker 04:
Thank you.

[00:01:04] Speaker 04:
OK, Mr. O'Connor.

[00:01:05] Speaker 02:
Thank you.

[00:01:06] Speaker 02:
May it please the court.

[00:01:08] Speaker 02:
I'd just like one quick opening statement before I'm sure you're going to have questions.

[00:01:16] Speaker 02:
Don't tell your throat.

[00:01:17] Speaker 02:
Yes, yeah.

[00:01:19] Speaker 02:
That's the legal term.

[00:01:20] Speaker 02:
In a jazz photo, which is the case causing all problems for my clients,

[00:01:29] Speaker 02:
The one statement that's very short that's relevant is, quote, United States patent rights are not exhausted by products of foreign provenance.

[00:01:43] Speaker 02:
To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent.

[00:01:50] Speaker 02:
See Bosch versus Graf.

[00:01:53] Speaker 02:
A lawful foreign purchase does not obviate the need for license from the United States patentee.

[00:01:59] Speaker 02:
Now, I pointed out in my brief that the extinguishment has to be done by the patentee.

[00:02:08] Speaker 02:
Now, I didn't quote Quanta for that proposition, but in a reading case over last night, on page 16 of Quanta, it specifically says, quote, exhaustion is triggered only by a sale authorized by the patent holder.

[00:02:23] Speaker 02:
So even if there was some question as to the state of the law,

[00:02:26] Speaker 02:
regarding whether or not a sale has to be by the patent holder, which I think was a well-established proposition at that time anyway, but it was affirmed in Quanta.

[00:02:39] Speaker 04:
So Bosch really... Do you want to talk to us about curting?

[00:02:42] Speaker 04:
Sure.

[00:02:42] Speaker 04:
That's your main appeal.

[00:02:44] Speaker 02:
Well, that's my main appeal, but it also relates to the fact that I think Quanta was...

[00:02:47] Speaker 02:
Jazz photo was wrongly decided on the first instance.

[00:02:50] Speaker 03:
Yeah, even if Jazz photo relied on a case that's distinguishable or you think was wrongly decided, there's nothing we as a panel could do about that unless you're intervening Supreme Court law to tell us that.

[00:03:02] Speaker 02:
Correct.

[00:03:02] Speaker 02:
I agree with that.

[00:03:03] Speaker 02:
So Kurt Zang is the intervening case.

[00:03:06] Speaker 02:
And what Kurt Zang did was, to make quite simply, he stated the general proposition, going back to Lord Koch, back in whenever it was, long before there were patents and trademarks,

[00:03:17] Speaker 02:
that when you sell a product, your rights in that product are extinguished by the words of the first sale.

[00:03:22] Speaker 02:
That was the general proposition.

[00:03:23] Speaker 02:
the exception to that proposition being... No, we understand that.

[00:03:26] Speaker 04:
But as the district court pointed out here, and we have to be particularly mindful of that to the question that Judge O'Malley asked you, which there are several questions here, and one of them is what we as a panel have the authority to do independent of the UNBOMP court.

[00:03:41] Speaker 04:
So as I understand it, you can tell me if you disagree, we only have that authority if it's kind of crystal clear or pretty certain that the Supreme Court's opinion in Kurtzing

[00:03:52] Speaker 04:
dealt with and decided this issue for purposes of cat law and not just copyright law.

[00:03:57] Speaker 02:
Correct.

[00:03:58] Speaker 04:
So why isn't the fact that the Supreme Court spent so much effort and included its analysis, not exclusively Lord Koch and the common law, but the statutory provisions, the context of libraries and bookstores, et cetera, et cetera, seems to me that a fair reading might be that the Supreme Court was looking at all of those factors together.

[00:04:21] Speaker 04:
And therefore, why wouldn't that at least compel a reconsideration and not that this case decides our case?

[00:04:28] Speaker 02:
could answer that as simple as where it was going to go a second ago.

[00:04:32] Speaker 02:
The general law prevails unless there's an exception in the statute.

[00:04:36] Speaker 02:
And if you look at all the arguments that were being made on that copyright case was that there was an exception in the statute.

[00:04:43] Speaker 02:
And so that all of that discussion of analysis of the context of the copyright statute was all directed to finding out whether or not there was an exception.

[00:04:52] Speaker 02:
The defendant in that case did not challenge

[00:04:56] Speaker 02:
that, I'm sorry, the plaintiff in that case did not challenge whether or not the general proposition applied to first sales overseas.

[00:05:05] Speaker 02:
It was arguing that the statute, the way it was written, had an exception because the sales were legal versus illegal and so on.

[00:05:12] Speaker 02:
That's the general proposition.

[00:05:13] Speaker 02:
So if you read that case carefully, and I have many times, hopefully I got it right, is that that was the analysis.

[00:05:20] Speaker 02:
Is there an exception under the copyright statute to the general rule?

[00:05:23] Speaker 02:
And they concluded there was not.

[00:05:25] Speaker 02:
So that doesn't change the general rule.

[00:05:28] Speaker 02:
So the general rule applies across the board to all sales of property, which all would have to include patent rights as well.

[00:05:36] Speaker 02:
So I think clearly if you accept that general rule, and I don't see any way the court cannot,

[00:05:41] Speaker 02:
then Jazz Photo is clearly at odds with that gentleman.

[00:05:44] Speaker 03:
Even if you say that that's the way it was argued, that's not the way the opinion is written.

[00:05:48] Speaker 03:
The opinion says we have to engage in statutory interpretation.

[00:05:53] Speaker 03:
And it does a whole variety of statutory analyses.

[00:06:00] Speaker 03:
And consistent with the statutory interpretation, we look to the principle of the fact that the common law was the background for this statute.

[00:06:10] Speaker 03:
And then they say the common law supports our conclusion under the statute.

[00:06:14] Speaker 03:
Isn't that really the way?

[00:06:16] Speaker 02:
That's not how I read the case.

[00:06:17] Speaker 02:
The way I read the case is they say, here's the general proposition.

[00:06:21] Speaker 02:
plaintiff is arguing there's an exception to that general proposition because of the copyright statute.

[00:06:25] Speaker 02:
And the entire analysis was looking not at what does the copyright say in general, but I would say with regard to that proposition.

[00:06:33] Speaker 04:
I understand your argument with regard to that factor, but the Supreme Court also relied and spent at least some time talking about the threat to ordinary scholarly, artistic, and commercial and consumer activities, et cetera.

[00:06:46] Speaker 04:
So I understand what you're saying about they had to look at the statute, even if they wanted to wholeheartedly adopt common law to just make sure Congress hadn't changed it.

[00:06:55] Speaker 04:
There were other factors that they looked to and seemingly relied on as well, and no one has yet analyzed those factors in connection with Patnaw in general or with exhaustion as applied to Patnaw, right?

[00:07:08] Speaker 02:
That's correct.

[00:07:09] Speaker 04:
So we might conclude, therefore, even if we thought it was generally applicable, that those factors cut the other way, and wouldn't it therefore be fair to say that keratin doesn't apply to Patnaw?

[00:07:21] Speaker 02:
Okay, there'd have to be some analysis as to why the general proposition doesn't apply in patent law.

[00:07:25] Speaker 02:
The difference is patent law is much simpler.

[00:07:27] Speaker 02:
There is no statute that can be construed as saying that there's an exception to the general rule, there's a first sale overseas, there's nothing in the patent statute of any of that sort.

[00:07:36] Speaker 02:
That was entirely created by this court, which we understand to overturn, there has to be a clear statement by the Supreme Court.

[00:07:44] Speaker 02:
I really don't think those other factors cut against in any way, shape, or form a general law, which was, at the end of the day, that was their decision.

[00:07:52] Speaker 02:
It was quite simple.

[00:07:53] Speaker 02:
Here's the general rule.

[00:07:54] Speaker 02:
We'll look at the copyright statute.

[00:07:55] Speaker 02:
Well, that's not right.

[00:07:56] Speaker 04:
I mean, I think that just as much as I appreciate your saying that given the statute, they would have to look at common law that preceded it.

[00:08:04] Speaker 04:
And that's what necessitated their look at the statute.

[00:08:06] Speaker 04:
They didn't have to.

[00:08:08] Speaker 04:
If common law is the beginning and the end of our analysis with respect to this question, then they didn't have to cite and rely on those other factors in the economy and speak to that, right?

[00:08:19] Speaker 02:
Well, they didn't have to.

[00:08:20] Speaker 02:
And I don't think they did have to.

[00:08:22] Speaker 02:
I think they chose to.

[00:08:23] Speaker 02:
I think they wanted to do a thorough analysis and discussion of the copyright law and all the things that were affected by the copyright law.

[00:08:29] Speaker 02:
But at the end of the day, that's the narrow holding, because I read it.

[00:08:33] Speaker 03:
So the entirety of the principle that we're supposed to rely on is taken from one paragraph?

[00:08:40] Speaker 02:
Well, that's a pretty long paragraph, and yes, it's... A long paragraph.

[00:08:45] Speaker 02:
It wasn't like a throwaway or a footnote.

[00:08:47] Speaker 02:
I mean, it was pretty central to their analysis.

[00:08:50] Speaker 02:
And they quoted extensively from Lord Coulkin.

[00:08:52] Speaker 02:
He said it was a long category.

[00:08:53] Speaker 02:
I forget the exact terms.

[00:08:55] Speaker 03:
Yeah, I mean, that's an interesting statement, a long pedigree, and yet they only cite one thing, one paragraph.

[00:09:01] Speaker 03:
So what else have you found that tells us that this pedigree is long in the patent arena?

[00:09:10] Speaker 02:
Nothing other than that general principle.

[00:09:12] Speaker 02:
In the patent context, there's only one case that relates really other than a couple that have followed it.

[00:09:18] Speaker 02:
in that jazz photo is the only law out there, Supreme Court or otherwise, that deals with this issue that there's an exception for overseas sales.

[00:09:26] Speaker 02:
This is it.

[00:09:28] Speaker 02:
The jazz photo came basically out of nowhere.

[00:09:31] Speaker 02:
With no Supreme Court, even though reports rely on Posh, it's not a proper reliance.

[00:09:37] Speaker 02:
And there's nothing else in jazz photo.

[00:09:39] Speaker 02:
It's that one sentence.

[00:09:41] Speaker 02:
So the question is, is there anything else?

[00:09:42] Speaker 02:
There isn't anything else.

[00:09:44] Speaker 03:
What about the fact that the entire statutory scheme in the patent arena is very focused on avoiding extraterritoriality?

[00:09:54] Speaker 02:
Well, I don't see that it is.

[00:09:55] Speaker 02:
I mean, the start patent scheme, and I've been like the last, but I've been doing this for 46 years.

[00:10:05] Speaker 02:
I've never seen anything indicating in the patent statute any place

[00:10:09] Speaker 02:
that there should be some sort of exception to first sale.

[00:10:12] Speaker 02:
In fact, the only thing for the first sale is even in the statute.

[00:10:16] Speaker 02:
That's common law.

[00:10:17] Speaker 02:
But it's common law going all the way back to Adams.

[00:10:20] Speaker 04:
And do you recognize what you're urging us to do?

[00:10:23] Speaker 04:
pretty dramatic.

[00:10:25] Speaker 02:
I do.

[00:10:25] Speaker 04:
When you understand the change, and we haven't had a lot of cases, and I don't know exactly why that's true in this area of exhaustion, but it would dramatically affect the way companies operate globally and what they do, right?

[00:10:41] Speaker 02:
Well, that's why I'm here.

[00:10:43] Speaker 02:
Because the present law has dramatically affected the way companies do business in a negative way.

[00:10:48] Speaker 02:
And not only that, but I want to get a feel, but right now in Europe we have

[00:10:52] Speaker 02:
protectionism going on over there because all the countries in Europe are now considering and are going to pass, there's no doubt, no question from the people I know, they're going to pass the same basic law as it relates to Europe.

[00:11:04] Speaker 02:
So first sale extinguishment only applies to sales made in Europe.

[00:11:09] Speaker 02:
That's a direct political reaction to the decision by this court in jazz photo.

[00:11:14] Speaker 03:
It's like... I've had decisions in the books for a while.

[00:11:17] Speaker 03:
I'm sorry?

[00:11:18] Speaker 03:
It's not like that decision came down yesterday.

[00:11:20] Speaker 02:
I know, but I'm saying it's taking them a while in Europe to get around to doing that.

[00:11:23] Speaker 02:
You're being counseled fairly slowly, and they all have to get in line.

[00:11:27] Speaker 02:
But I'm saying that process started as soon as Jazz Photo came down.

[00:11:31] Speaker 02:
It's just not culminating.

[00:11:33] Speaker 04:
So the other issue on Quanta and Malacroft, that's an issue for rebuttal.

[00:11:38] Speaker 04:
So why don't we hear from the other side?

[00:11:40] Speaker 02:
If I could just, one quick thing.

[00:11:42] Speaker 02:
The other alternative is en banc, which I asked this court to do.

[00:11:47] Speaker 02:
case where I represented a 9-star ITC case.

[00:11:51] Speaker 02:
And 9-star got hit with an $11 million fine for selling cartridges that had been bought, purchased, used, spent, thrown away.

[00:11:59] Speaker 02:
And I ask this court then to please consider Omban's review.

[00:12:02] Speaker 02:
It didn't, hopefully, if you're not willing to overturn the panel, at least maybe we could suggest this go up for Omban's review, because that is basically just a terrible case.

[00:12:10] Speaker 04:
Thank you.

[00:12:15] Speaker 04:
Mr. Meath?

[00:12:16] Speaker 01:
Yes, Meath.

[00:12:18] Speaker 01:
the district court did not err on the genus photo issue.

[00:12:25] Speaker 01:
However, with respect to Lex Clark's return program, the district court erred by failing to follow binding precedent.

[00:12:31] Speaker 04:
Well, let me ask you about the first issue, right?

[00:12:33] Speaker 01:
Sure.

[00:12:33] Speaker 04:
The one we were talking about with your friend.

[00:12:35] Speaker 04:
Why is it not a fair reading of the Supreme Court's opinion in cursing to say,

[00:12:41] Speaker 04:
As your friend said, they relied really at common law.

[00:12:46] Speaker 04:
The only reason they looked at the statute is because they had to, because the statute obviously could have impacted on common law that preceded it.

[00:12:54] Speaker 04:
We don't have the statutory provisions here.

[00:12:57] Speaker 04:
Why isn't that the end of the story?

[00:12:58] Speaker 04:
In other words, there's no daylight between patent law and copyright law as it applies to exhaustion.

[00:13:04] Speaker 01:
I would start first with Bob's Merrell saying that copyright law is not necessarily applicable to patent law, nor is it vice versa.

[00:13:11] Speaker 04:
and further with respect to... But the Lord Cooke quote would be equally applicable to both patent and copyright law, would it not?

[00:13:21] Speaker 01:
It could, but the applicable language, to the extent we're going to go back to the 1600s and talk about Lord Cooke, is... Well, the Supreme Court is good enough for me.

[00:13:31] Speaker 01:
That's fine.

[00:13:32] Speaker 01:
But the applicable phrase in that

[00:13:35] Speaker 01:
writing was whether the seller has deprived himself or herself of the quote-unquote whole interest in the intellectual property right or the property right.

[00:13:46] Speaker 01:
In this case, we're talking about a U.S.

[00:13:48] Speaker 01:
patent right.

[00:13:49] Speaker 01:
Under Bosch versus Graf,

[00:13:52] Speaker 01:
under a jazz photo, there's been... Well, Bosch is really distinguishable, isn't it?

[00:13:58] Speaker 03:
I mean, you rely heavily on it in your brief and act like the Supreme Court has laid down the law here, but that case really turned on a sale that was authorized by a foreign patent holder under a different patent, not one authorized by this particular patent.

[00:14:18] Speaker 01:
So I disagree, however, with respect... You disagree with my description of the case?

[00:14:22] Speaker 01:
Maybe my understanding of the facts of the case.

[00:14:27] Speaker 01:
There was certainly an authorization under Bosch for the foreign dealer.

[00:14:32] Speaker 01:
The dealer was authorized to sell the patented item.

[00:14:35] Speaker 01:
The item was then imported into the United States.

[00:14:37] Speaker 03:
Right, but he was authorized by a holder of a European patent that was not the same person or entity as the holder of the U.S.

[00:14:45] Speaker 01:
patent.

[00:14:46] Speaker 01:
Correct.

[00:14:47] Speaker 01:
But I guess the distinction I was coming back to, which was I thought the point Mr. O'Connor was making, was

[00:14:52] Speaker 01:
trying to draw a distinction between an authorized dealer or licensee or if the sale is coming directly from a patent owner.

[00:15:03] Speaker 03:
Trying to draw a distinction between the ultimate authorization coming from the U.S.

[00:15:08] Speaker 03:
patent owner and the ultimate authorization coming from the owner of a foreign patent.

[00:15:15] Speaker 03:
Those are very different things.

[00:15:18] Speaker 01:
Okay, I'll stipulate to that.

[00:15:20] Speaker 01:
I would stipulate to that.

[00:15:21] Speaker 01:
With respect to this particular case, though, and Lord Cook, the operative language, though, is the whole interest in whether or not the US patent holder has been deprived of his or her right in that whole interest.

[00:15:37] Speaker 01:
Kirk Sang, nothing in Kirk Sang indicated that the Supreme Court intended to completely overhaul the patent laws regarding exhaustion, setting aside the Bosch versus Graf issue.

[00:15:51] Speaker 01:
there wasn't a reference to patent, there wasn't even an analogy to a patent case in Kirkstein.

[00:15:57] Speaker 03:
Yeah, but Koch's language was actually referring to chattels.

[00:16:00] Speaker 03:
I mean, in some ways, that's more applicable to patents than it is to copyright.

[00:16:04] Speaker 01:
Is it not?

[00:16:07] Speaker 01:
Well, it's still a property, right?

[00:16:08] Speaker 01:
But I still think the applicable language from Cook, Lord Cook, is whether or not you've been deprived of your whole interest.

[00:16:16] Speaker 01:
And in this case, for example, with respect to the return program,

[00:16:20] Speaker 01:
We've only been deprived a proportion of our interest, a single-use portion of the interest, whereas with respect to... Well, what were the facts encouraging?

[00:16:29] Speaker 04:
Was it Wiley & Sons, Wiley & Company, the book publisher?

[00:16:34] Speaker 04:
They weren't deprived of their whole interest.

[00:16:36] Speaker 01:
Correct.

[00:16:36] Speaker 01:
That was different because the First Sale Doctrine was codified in Section 109 of the Copyright Act, and exhaustion turned on the legislative language and history in there.

[00:16:49] Speaker 01:
It was, the question was whether or not.

[00:16:50] Speaker 04:
Well, isn't it a fair statement to say that the Supreme Court's analysis of the legislation in that case, they started with common law and then they looked at the statute and said, is there anything the statute has done or said to disrupt the common law view at the time the statute was enacted?

[00:17:07] Speaker 04:
Wasn't that the reliance on the statute in that case?

[00:17:12] Speaker 01:
That was, yes, that was a fair statement.

[00:17:13] Speaker 01:
That was part of the analysis.

[00:17:14] Speaker 01:
And they also looked to the legislative history where curatorial

[00:17:19] Speaker 01:
aspects of the statute were phased out during legislation.

[00:17:24] Speaker 04:
Yeah, but that has nothing, but they started, they began and end with common law.

[00:17:28] Speaker 04:
So why don't we in the patent context, since we don't have those statutory provisions, begin and end with common law the way they did?

[00:17:35] Speaker 01:
I think in this particular instance because patent exhaustion has not been codified and because we have about 150 years worth of case law from the Supreme Court and

[00:17:46] Speaker 01:
since 1983 from the Federal Circuit dealing with exhaustion in the patent context.

[00:17:52] Speaker 01:
So you're right, it would, Kirk's saying, and J.S.

[00:17:57] Speaker 01:
Foyle are not clearly irreconcilable with one another.

[00:18:00] Speaker 01:
Certainly, it's not crystal clear.

[00:18:02] Speaker 04:
Okay, you want to turn to your next issue?

[00:18:04] Speaker 01:
I will.

[00:18:05] Speaker 01:
Yes, please.

[00:18:05] Speaker 01:
With respect to the second issue, Lexmark's return program, Malacroft is the law of the

[00:18:13] Speaker 01:
and it followed general talking pictures, which held that a license that restricts the right to sell or use a patented item is valid and enforceable unless it exceeds the scope of the patent grant.

[00:18:27] Speaker 01:
Quanta did not overrule Malacroft, and the two cases are not clearly reconcilable with one another.

[00:18:31] Speaker 04:
Well, where's the license here?

[00:18:32] Speaker 04:
What's the agreement?

[00:18:33] Speaker 04:
You call it repeatedly, I think, a conditional sale.

[00:18:36] Speaker 04:
Where's the conditional sale here?

[00:18:39] Speaker 01:
So it's in the stipulation, it's the return program license agreement.

[00:18:43] Speaker 01:
It's a combination, conditional sale, single use based restriction.

[00:18:51] Speaker 03:
But it wasn't a point in General Talking Pictures was that it was the right to sell that had been conditioned, not the right to use?

[00:19:03] Speaker 01:
No, I think that at Printco, for example,

[00:19:06] Speaker 01:
In discussing general talking pictures, and Malancroft made clear that it was a, I don't have the exact case site, but the inquiry is, exhaustion is going to turn on the exact language of the license agreement.

[00:19:28] Speaker 01:
So the first inquiry is whether or not the restriction is inside or outside the scope of the patent grant.

[00:19:34] Speaker 01:
If it's outside the scope of the patent grant, it's going to be unenforceable.

[00:19:38] Speaker 01:
If it's inside the scope of the patent grant, then we have to look at whether or not it's a conditional or unconditional sale.

[00:19:44] Speaker 01:
With respect to an unconditional sale, such as in Adams, Blumer, Keeler, and Juana, that's obviously going to trigger exhaustion, where it was a conditional sale, such as Mitchell v. Hawley,

[00:20:03] Speaker 01:
General Talking Pictures, Valencroft, and in this particular case, exhaustion is not going to apply because we're acting within the scope of the patent grant and... Well, tell me what the conditional sale was here.

[00:20:17] Speaker 01:
In this case, the conditional sale is it sold to the customer subject to

[00:20:23] Speaker 01:
uh... a single-use-based restriction the customers given a choice between two part of it but i don't like to agree with the customer yes contractual serious yes it's difficult it's stipulated that uh... the term program is a valid enforceable conditional sale and single-use license there's an experience there's two channels that wasn't my question okay is there some sort of license agreement between the seller and the purchaser and there's an actual document and the document says

[00:20:50] Speaker 04:
And it says you were only licensed, you were only allowed to use this for this purpose and not for any other?

[00:20:58] Speaker 01:
Yes, so for example, at paragraph 16 in the stipulation at appendix 2562, this is an example of the express and enforceable contract with each of the authorized supplies dealers and distributors.

[00:21:18] Speaker 01:
Oh, are we allowed to talk about this stuff?

[00:21:25] Speaker 01:
The return program license is public.

[00:21:29] Speaker 01:
That's public.

[00:21:29] Speaker 04:
So why did you mark it confidential?

[00:21:31] Speaker 01:
Because the other financial terms of these contracts with the individual suppliers and distributors

[00:21:40] Speaker 01:
the channels of distribution, the number of... Where are those financial numbers?

[00:21:45] Speaker 01:
The financial numbers are not in the document.

[00:21:47] Speaker 01:
The exact parties with whom we have these agreements, those are not public.

[00:21:53] Speaker 04:
I don't understand.

[00:21:55] Speaker 04:
Is there anything marked confidential in the appendix with regard to the license?

[00:22:00] Speaker 04:
Is it confidential or non-confidential?

[00:22:04] Speaker 04:
There are parts that are confidential.

[00:22:07] Speaker 04:
me an example just because I mean we're in a position of having to arguably write an opinion and know what we can say and what we can't say and we're severely constrained when everything is marked confidential but only portions of it really are.

[00:22:20] Speaker 01:
I understand.

[00:22:22] Speaker 04:
I don't see any numbers.

[00:22:23] Speaker 04:
You mentioned certain numbers and so forth, and at least in this agreement I'm just looking at it quickly now looking for numbers, but I don't really see any.

[00:22:32] Speaker 01:
There are no numbers in this agreement.

[00:22:34] Speaker 01:
The stipulation itself had exhibits to it.

[00:22:37] Speaker 01:
The exhibits were replete with financial documentation and numbers, terms for the

[00:22:45] Speaker 01:
contracts with the authorized supplies dealers and authorized distributors.

[00:22:49] Speaker 04:
But in the appendix from 2553 through 2566, nothing is confidential.

[00:23:00] Speaker 01:
Sorry, it's a question.

[00:23:01] Speaker 01:
Yes, the portions here that would be confidential would be, for example, in paragraph 17 where there's references to various types of programs.

[00:23:09] Speaker 01:
Those are not, as I understand it, publicly available.

[00:23:14] Speaker 01:
There's a series of these from 16 through 23.

[00:23:21] Speaker 04:
Paragraph 16 through 23.

[00:23:22] Speaker 01:
Right.

[00:23:23] Speaker 04:
The rest of it is OK.

[00:23:25] Speaker 01:
But the applicable, going back to your question about the license language itself, the license language itself can be found in Exhibit E.

[00:23:37] Speaker 01:
which is referenced in paragraph 16, return program cartridges are sold at a discount versus the price.

[00:23:43] Speaker 04:
I'm sorry, I'm lost.

[00:23:44] Speaker 04:
Are we on 2562?

[00:23:45] Speaker 01:
2562 references exhibit E at the bottom of the paragraph.

[00:23:52] Speaker 01:
Yes.

[00:23:53] Speaker 01:
And I'm going to read you the expressed language from that contract.

[00:23:58] Speaker 04:
Is that in the appendix?

[00:24:01] Speaker 01:
It wasn't cited by anybody.

[00:24:03] Speaker 01:
It's in the record.

[00:24:04] Speaker 01:
It's not in the appendix.

[00:24:06] Speaker 01:
It's numbered.

[00:24:08] Speaker 01:
The contracts were not in, the contracts themselves are not in the appendix.

[00:24:14] Speaker 01:
It's in the District Court record.

[00:24:17] Speaker 03:
You don't have a contract claim here, right?

[00:24:20] Speaker 01:
There's no contract claim, correct.

[00:24:21] Speaker 03:
It's for...

[00:24:26] Speaker 03:
describes General Talking Pictures as a license that limited the buyer to selling ample amount of hires for private and home use and it says that they then try to sell it outside the bounds of that license.

[00:24:42] Speaker 03:
Do you not see a distinction between a license to sell this conditional and a license to use this conditional?

[00:24:55] Speaker 01:
There can be a distinction.

[00:24:57] Speaker 01:
In this case, they're tied together.

[00:25:01] Speaker 01:
It's a conditional sale with a single use restriction.

[00:25:05] Speaker 01:
You cannot buy the cartridge unless you agree to the single use condition.

[00:25:09] Speaker 01:
So it's different than Malacroft, where there was just simply a notice attached, and arguably, as some people want to refer to it, as a post-sale use restriction.

[00:25:20] Speaker 01:
This is different.

[00:25:21] Speaker 01:
This is upfront.

[00:25:22] Speaker 01:
It's part of the contract.

[00:25:24] Speaker 01:
The return program cartridge is sold subject to a discounted price that the consumer is going to use the cartridge one time and then return it only to Lexmark.

[00:25:34] Speaker 04:
I thought you told Judge O'Malley there wasn't a contract claim.

[00:25:37] Speaker 01:
There's no contract claim.

[00:25:38] Speaker 01:
The license is part of the contract.

[00:25:40] Speaker 01:
We're not suing our end users or our customers for breach of contract.

[00:25:45] Speaker 01:
But any use of the cartridge beyond the term of the license is going to constitute patent infringement, which is what this case is about.

[00:25:53] Speaker 04:
And the license is contained within the contract?

[00:25:56] Speaker 01:
So it's contained in multiple parts.

[00:25:58] Speaker 01:
It's contained with the resellers.

[00:26:00] Speaker 01:
It's undisputed.

[00:26:01] Speaker 01:
It's contained in Lexmark's agreement with the resellers.

[00:26:05] Speaker 04:
Is that in the exhibits, in the appendix?

[00:26:08] Speaker 01:
Yes, in paragraph 23 of the stipulation at A2564.

[00:26:16] Speaker 01:
Lexmark sells the return program cartridges to the resellers at a discounted price, which reflects the value of the property rights conveyed to Lexmark.

[00:26:25] Speaker 01:
The resellers are only authorized to resell the return program cartridges subject to the contractual return program condition.

[00:26:33] Speaker 01:
And they also sell regular cartridges in which they've received full compensation and their rights have been exhausted.

[00:26:48] Speaker 04:
Let me jump.

[00:26:52] Speaker 04:
Will you say they're the underlying document for this?

[00:26:56] Speaker 04:
I mean, it's just hard to deal with this when we don't have the underlying document.

[00:27:04] Speaker 04:
The resellers are only authorized to resell the return program.

[00:27:08] Speaker 04:
What is that based on?

[00:27:11] Speaker 01:
It's based on the stipulation, undisputed facts, that's exactly what the contract said.

[00:27:16] Speaker 01:
That's what the court agreed to.

[00:27:20] Speaker 01:
When we submitted the stipulation to the court, it agreed to vacate the portion of its opinion that was at odds with this language.

[00:27:33] Speaker 04:
I'm sorry to give you a hard time, I'm just having a hard time.

[00:27:37] Speaker 04:
Even if you look at quanta and you look at the distinction that the Supreme Court drew between it and the general talking pictures case.

[00:27:48] Speaker 04:
It's a little hard to think about and really appreciate unless you're looking at the portions of the license that they cited and so forth.

[00:27:55] Speaker 04:
So I'm having a hard time doing that in this case in the absence of the actual document.

[00:28:00] Speaker 01:
I apologize.

[00:28:00] Speaker 04:
And characterization of documents is one thing.

[00:28:03] Speaker 04:
I mean, when you look at all these cases, who the heck knows what these different characterizations means?

[00:28:07] Speaker 04:
It seems a little difficult for me at least.

[00:28:10] Speaker 01:
Fair point.

[00:28:10] Speaker 01:
I understand that.

[00:28:12] Speaker 01:
In accordance with the Federal Circuit rules, no one cited that page in the appendix, therefore it wasn't included as part of the joint submission.

[00:28:19] Speaker 01:
But if I could briefly sum up, then in our opinion, to rule in impression's favor on this appeal would require the court to adopt three untenable positions.

[00:28:31] Speaker 01:
First, it would have to ignore

[00:28:33] Speaker 01:
the stipulated fact that this is a valid, enforceable conditional sale and single use restriction too.

[00:28:41] Speaker 01:
It would have to conclude that the Supreme Court not only intended to overrule Mallencroft and Jazz Photo, but also its decisions in Bosch and General Otaki pictures, in my opinion.

[00:28:54] Speaker 01:
And lastly, it would decide that the, you have to decide that the Supreme Court dramatically changed the well-sold parameters of patent exhaustion.

[00:29:02] Speaker 01:
that has existed for approximately a century.

[00:29:06] Speaker 01:
Based on that, based on the stipulated facts and the binding precedent, we think that ruling in Lex Mark's favor on both issues is appropriate.

[00:29:14] Speaker 01:
Thank you.

[00:29:24] Speaker 03:
Can you respond to General Talking Pictures argument?

[00:29:26] Speaker 02:
Sure.

[00:29:27] Speaker 04:
Basically, I'd be with everything the questions you asked, which was... Why don't we add two more minutes just to keep the time even between you and your friend.

[00:29:35] Speaker 02:
Thank you.

[00:29:35] Speaker 02:
Appreciate that.

[00:29:36] Speaker 02:
General Talking Pictures was a license to a manufacturer with restrictions on how that manufacturer could sell the product.

[00:29:45] Speaker 02:
And they were only allowed to sell it for personal use, not for commercial use.

[00:29:50] Speaker 02:
And they went ahead and violated the term of that license agreement.

[00:29:54] Speaker 02:
First place, it was a negotiated license signed, which is different from what we have here, between the licensee and the licensor.

[00:30:03] Speaker 02:
So there were restrictions on the ability of the licensor to sell the product.

[00:30:09] Speaker 03:
Well, don't we have you stipulating that there are restrictions on the ability of the reseller to sell the product?

[00:30:16] Speaker 02:
No.

[00:30:17] Speaker 02:
The stipulation, again, we don't have the contract, but as it's characterized, is that they have to agree to sell the cartridges pursuant to the program.

[00:30:28] Speaker 02:
And the program is with the license on them.

[00:30:31] Speaker 02:
So they have to sell the products as they get them from the manufacturer to the consumer.

[00:30:35] Speaker 02:
And that's it.

[00:30:36] Speaker 04:
So what you're saying, paragraph 23, the middle of that paragraph where it says the resellers are only authorized to resell the return program cartridges subject to the contractual return program condition.

[00:30:49] Speaker 02:
Yes.

[00:30:50] Speaker 02:
And to me, that's very similar to Intel.

[00:30:52] Speaker 02:
There were restrictions placed on Intel that they could sell, but they had to inform the purchasers that there were conditions on the purchasers.

[00:31:01] Speaker 02:
And that's what we have here.

[00:31:02] Speaker 02:
They agree to sell them, substitute conditions,

[00:31:05] Speaker 02:
put on the purchasers.

[00:31:07] Speaker 02:
But they themselves were unrestricted in their ability to sell, just as Intel was.

[00:31:11] Speaker 02:
So there's nobody telling retailers, you can't sell this product to certain people.

[00:31:17] Speaker 02:
The retailers, like Staples, they have them on their shelves.

[00:31:20] Speaker 02:
People come in and buy them.

[00:31:22] Speaker 02:
They buy them.

[00:31:22] Speaker 02:
This is on this license, in quotes, is on the package.

[00:31:28] Speaker 02:
And that's the extent of the retailer's obligations.

[00:31:31] Speaker 02:
There's no restrictions on to whom the retailer can sell the products.

[00:31:34] Speaker 02:
They just have to sell them what the conditions contained on the product itself.

[00:31:41] Speaker 02:
In other words, they couldn't take the packaging and cross that out or remove the attempted restrictions.

[00:31:47] Speaker 04:
Do we need to overturn Mellencroft to decide in your favor on this issue?

[00:31:54] Speaker 02:
I think so.

[00:31:56] Speaker 02:
I think so.

[00:31:56] Speaker 02:
And again, here I am asking you to do the impossible.

[00:31:59] Speaker 02:
But I think, first of all, I think Malin's law was bad law.

[00:32:02] Speaker 02:
I mean, I remember when it came down.

[00:32:03] Speaker 04:
Well, this has been a little trickier than perhaps the first discussion we had earlier.

[00:32:07] Speaker 04:
Yes.

[00:32:09] Speaker 04:
Because we arguably, a panel has the authority to overturn precedent if it's unknively clear that the Supreme Court has changed it.

[00:32:19] Speaker 04:
I know you're making that argument in cursing.

[00:32:21] Speaker 04:
You're not making the same argument for quanta right, or are you?

[00:32:25] Speaker 02:
Well, yeah, I think we are.

[00:32:27] Speaker 02:
And it's hard to distinguish, in my mind, between Quanta and Mellondrake.

[00:32:33] Speaker 02:
It's really hard to draw it.

[00:32:35] Speaker 02:
And there may be one there.

[00:32:36] Speaker 02:
But at least as far as this particular case is concerned, I really have a hard time.

[00:32:41] Speaker 02:
And that's why both of the district judges that have looked at this thing have said, to the extent that Mellondrake is inconsistent with Quanta, we call that the Mellondrake has been subsalentia overturned, which is there

[00:32:53] Speaker 02:
district court just correct the right to do as it is your right to do if you agree with that.

[00:32:59] Speaker 02:
Malandrot really was kind of the same thing.

[00:33:02] Speaker 02:
It was a seller put a label, I'm going to call them a label license on the products and then they were sold.

[00:33:08] Speaker 02:
The key distinction is sale of a product as opposed to license to manufacture of a product.

[00:33:16] Speaker 02:
Under exhaustion, when you sell a product and you're authorized to sell that product,

[00:33:21] Speaker 02:
That's the end of it as far as your patent rights are concerned.

[00:33:23] Speaker 02:
Contract rights?

[00:33:24] Speaker 02:
Sure.

[00:33:24] Speaker 02:
You may or may not have an enforceable contract, depending upon the state law.

[00:33:29] Speaker 02:
But as far as patent rights are concerned, it's pretty clear.

[00:33:32] Speaker 02:
I think I talked about, poetically referred to the gossamer threads of holding onto patent rights.

[00:33:38] Speaker 02:
Patentees have notoriously tried to find ways to hold onto their patent rights after they've sold the product.

[00:33:44] Speaker 02:
But I think that Quanta was pretty much affirming the general principle that if you sell something,

[00:33:50] Speaker 02:
then that's it.

[00:33:51] Speaker 02:
You don't have any more patent rights.

[00:33:52] Speaker 02:
You may have a contract right, but you don't have any more patent rights.

[00:33:55] Speaker 04:
And how was that limited by General Talking Pictures?

[00:33:58] Speaker 02:
General Talking Pictures was at nothing.

[00:34:00] Speaker 02:
The right to sell was limited.

[00:34:04] Speaker 02:
So General Talking Pictures had a license, again, to manufacture and a limited right to sell to a limited customer base.

[00:34:12] Speaker 04:
And your friend would say that you were limited here because you were required to put the, there was a condition put on it.

[00:34:19] Speaker 02:
As was Intel.

[00:34:21] Speaker 02:
until I had the same obligation.

[00:34:22] Speaker 02:
As I'm saying, it's hard to distinguish quanta from what happened in this case and the facts in melancholy.

[00:34:29] Speaker 03:
I think they're all of the same.

[00:34:31] Speaker 03:
I'm sorry?

[00:34:33] Speaker 02:
I don't think so because pre-quanta essentially, as I read it, was pre-quanta and basically just followed melancholy.

[00:34:42] Speaker 02:
So I think melancholy is bad law and I think quanta essentially, just like the two judges, but I think it's been overturned.

[00:34:47] Speaker 02:
by Quanta.

[00:34:51] Speaker 03:
Thank you.