and i think that in a case which discusses this best is a motion picture patents were talked about what is this the scope of the bad grant which of course is the four corners of the claims and every attempt to restrict or control or give an a patent product to give you a license to sell their product that product alone is described in the four corners of the claims the elf like every claim element is there if you go beyond that and then we're talking patent on a contract what if you go beyond that and say and  when you use their patent product only i can repair it only i can provide the ink only i can and you can only use my films in conjunction with your with your project or what i've done is go outside of my four corners of my claims and claim for myself under the patent on some additional value or benefit in restrictions on what you can do with the product restrictions or outside the patent gran but that's not the same result because the issue is always in these cases comes down not to the purchaser or the seller it comes down to somebody who buys from the purchaser and that would not be covered by the patent by the contract because there's no precedent happens when you sell a just hold the licensee guilty of infringement but also held the end user who used it in a way that was outside the scope of the license also guilty for infringement and both of those are under patent law now under contract doctrine so how do you reconcile your view with that supreme court decision which was bound by that was not an authorized sale because the simple answer was another i said like you i thought you just said you can't limit the end user in terms of their unauthorized licensee was only a license to sell the ace and he sells to be b s buying as a product which is not and also in that debate just quickly that the purchaser in that case knew about the license restrictions the court didn't say  c s so if a patent he can convey to or might see a limited use you may only use this for private not commercial purposes and if you sell it to anyone else you can only allow them to use it for private not commercial purposes and yes if you're selling a patent yes pattern not a product right then you're saying that if i sell a product and i tell you i'm selling you the product and i'm giving it to you for a cheaper price in return for your promise to only use it in that pretty much the same things we don't look down much of value the patent he gets what he does when he departs with his ownership of the property putting in this go back to your question on putting a restriction on the use of a proper properties that was and of course specifically address that they said put putting selling something something in and saying on incidentally it's i'm just giving you a license and there's a restricted use there's a that's just playing games with words if you sell it you sell it and saying  defining what rights are those laws and in that text it's has zero room for giving any consideration to say the location which is why there was no meaningful discussion in cour exhaustion on a foreign sales or there is never exhaustion even on the u s sales so that the copyright owner retains rights i think the courts are neighbors perpetually we don't have any of that here we don't have a text well to do it can preserve anything internationally question all the time and the government's position is more moderated so i'd like to know what your view is about their position it is more moderated and we're glad they go part way but we disagree with them for not going the entire way because i i think that kind of reservation is similar to the problem in the second issue of the case in the case which is sort of statutory reservations reservations are brights in connection with the fail transfer of title and the extent to which those reservations can apply to the downstream users that's that's the problem and what the government is suggesting here is really nice for another variant can i characterize your your statement as suggesting you see some hypocrisy in the way that they presented the argument you just made i well let me answer in two ways i think today i think the argument starts and then you can say whatever they want i think the arguments are inconsistent i do think it's in their basic assumptions i think it wouldn't be impossible to draw a distinction between territory and the other issues and i guess what i've said i don't want to get diverted into the discussion of the other issues but but it seems to me if you look at the supreme court's decisions in that situation we think is the clearest case where a reservation of rights is most a quibble and to mallinckrodt at the other end of the spectrum there's a situation where the sale of the foreign sale power a license or is by the foreign patent see who is totally unrelated to the u s patent the and that situation obviously would make no sense to have exhausted you have a sort of a middle situation where the foreign sale i different from the other situations where at least the u s patent is on the scene because it for sale in the u s so i think the most logical thing would be to put the ball in the last two buckets but i i don't want to leave the court with the impression that there would be no basis to always is was the sale either by the patentee himself or if by a licensee was the sale within the terms of the license once you have the sale authorized i think that's the end and the patent rights are exhausted there is no ability to preserve them to impose them on the downstream user support suppose you have a situation which there is no one patent or no form happened protection for the goods and is nonetheless sold by the analogous to the situation where there's a so there's still a sale by the u s patent t it seems to me in most of these situations just to step back and look at the practicalities for a minute it still is there still well on the legal side there still is a a here we are saying has not allowed such restraint is not allowed so we have to allow our evolution of the law to recognize the complexities of craft and the but even if there had been i think that is why the sale exhausted all of the rights because the first question is is there an authorized sale just like it occurred as the question was was the british government authorized to sell the planes once they were authorized to sell the plane even though the only path that the patents he had were canadian patents it didn't matter that all of the patent fees patent rights were tossed thank you thank you it's a court melissa patterson for the united states the government's view that the inquiry and both questions the court pose should be the same and that's whether has there been a sale authorized under the u s patent and if he knew were going to use for commercial purposes and of course an unauthorized sale no one thinks an unauthorized sale it's off any patent rights so i think that if that had been and general mucking pictures you licensee have a license to sell the people to tell you they're only going to use for commercial purposes or not going to for commercial purposes if someone lies to you i think it's still an offer i sale as long as you facility whatever license terms there were about ensuring you were selling within the scope of your life then i think the rights would have been exhausted now as a patentee if i can require my licensees to extract contractual promises from purchasers and if the purchaser then turn around and do something with it they say they're not going they afforded was an infringement because it was an unauthorized sale that licensee with it was just as if a stranger had come along and sold to the purchaser something for which it did not have the patent rights to because he was acting outside the scope of his license again we don't think anyone licensing patente can impose a post sale condition but you can make licensees limit themselves limit their sales in any way the patentee himself would be active he standing in the pa so when you have a licensee standing in your shoes you can restrict them in the same way that would be lawful for you to restrict yourself and if they go outside of it then yes they've infringed if sold outside the scope of their license they've made an separate from any foreign rights you might have and we think that this rule is pretty well lashed out in the common law cases that deal with this exact problem now there aren't that many cases but all of the cases that exist point to the rule that we've articulated in our brief if you want to give your someone who holds both the u s and foreign have rights and you're selling an article abroad if you're silent the purchaser gets to assume what happens if you don't have foreign rights because you country i don't know your honor but i don't think it's relevant to the legally point here how can it not be relevant i want to know if you don't have a patent in germany because it was too expensive because it's really really expensive to pursue patent rights especially and there's no more than having a doll you don't have a patent no one has a patent you're authorized to sell a broad again if you are silent on the sale we do think that by default you're purchaser gets to assume that it is inquiry all of the rights that you may have now we do think because your u s rights are not triggered when you're acting abroad you're not exercising your exclusive rights because those acts with the right only in here within the united states we think if you make it very clear that whatever you're selling whether under foreign observation for panic or not when you ask abroad if you make clear i'm not intending to part to give to you any u s i'm having right to have in this article that that sort of express reservation outside the united states will we automatically assume that you've given everything up but will let you reserve and yet i'm not sure see where how you can differentiate between those two positions if because of that the separate nature of the u s in any foreign rights you may have  possible way and the reason we don't think that's the right default is because of the way american cases have dealt with the common law presumption that the seller parting with all that right so i'd refer the quarterback's the first came the holiday case o fairly lengthy tradition before just so is what this court should return to returning to judge to question if you want to know there can be value from forcing sellers to be clear they of course are the went to know what rights they may have or not have and requiring pleased the court mellotron and jazz photo have been the law of this circuit for roughly twenty five and fifteen years respectively they were correct when this court decided them and they are correct today both cases follow from  have a sale and authorize sale and then there was a restriction on use that you that restriction was violated and there was infringement liability there was a line from that if there was a sale in that case the well yes that was a sale by a licensee correct off now that what that overlooks i think is an authorized sale of what and that's really what mellon fraud is about the question is if you've got an authorized sale do you necessarily have to sell everything patentee basically divide up the rights to the case was pretty clear adams for example and even general electric make clear that patent rights are separable and they can be subdivided so what is the difference between that and post a restrictions think first of all i think there's there's a part of it may be semantics it's a motion picture patents is an example where the there's something that i would call the true post sale restrictions or the terms of the license in that case besides imposing a tie a requirement was per se on lawful at the time they also said oh and by the way of the patentee can impose a subsequent royalty obligation from things that you don't know about yet but we can do that down the road that's a true post sale restriction i think the kinds of restrictions that you've got in in mel in prague for example and in this case there are there were restrictions on post sale use but there were strictures that were imposed as a term of sale so they're not that that kind of a post sale restriction  price the gate the purchasers had a choice what bundle of rights do i want to buy do i want to buy the cards with the right to use it forever and ever and resell it however i like or do i want to block most people doing it as a matter of fact do i want to buy this thing use it and then buy another one and if that's what i want i don't want to pay for the right to reuse it why is this particular restriction on like the time directions that were deemed inappropriate in other words you're saying you can only use it once because a replacement and you know maybe i'm not saying you have to buy the replacement for me but i'm assuming that that's going to be the logical result rather than fix the one that set or repair them i'm we haven't gotten to that issue   a long time restrictions have changed a lot as you know and in particular in the past an area to seventy one the five knowledge the provides in fact that in the absence of you know market power any trust type issues that in fact time is not patent misuse but but beyond that i think the answer in this case goes back to what i was saying a moment ago that any any user who wants the right to reuse a car created can get that right they buy a regular cartridge they have all the rights that flow with that repair reuse refill do whatever you want with it but for buyers who don't want that right and don't want to pay for it they buy but they basically say you know what do you keep that right and i'm going to i'm going to buy a paper what i want so there is no time here in the sense that anybody is is forced or the patent it is being used as leverage to force somebody to buy an patented product that they don't want that's not this case so even putting aside two seventy one  which which i think makes a big difference in the time situation there is no time here because of the fact that there's this option on the part of the buy so if there were no option there would be in this illegal hi i'm sorry ron if there were no option that would be in the leno it would not be an illegal to be concerned at all about time because there is no time here because there is an option what if there is no price differential might exist that i am going in and you can't use it other than for one time  i think that would be legitimate that's not what we do obviously about this case but i think that would be allowed i think that's that's malaprop in fact so it's really not the price differential that that matters it obviously makes the fact better for your side but it's funny it's not like issue i think it's not legally dispositive but i think what it does is it highlights the fact and you've seen it throughout the breach this notion of the bundle of rights and the ability to separate the bundle and let people buy the rights  for the rights they want and don't pay for rights they don't want and that's what we've got in this case but you're right as a strict legal matter i think that's right but i think the fact that there is the option here and the lower price i think highlights why this these sorts of arrangements are not a problem  again there is undisputed here that you actually sell these things as a practical matter when you get ones in the give you money in the condition is that when i'm done using it once i give it back to you why is that i think you do not get it in a lot of ways as some as as a practical matter be put inside details of the u c c and that sort of thing it has obviously has a lot of similarities to at least out one difference is that  we we don't we don't consider it a violation of the contract if a customer tosses it in the garbage so i think that's one respect in which it's not truly like a leadership can answer the question of a general topic of choice and i wasn't quite clear about one thing that the government said so there western electric for months and has who is the manufacturer the transformation company or some automated transformer or something like that and they say you make these these whatever the devices were and you may sell them only to people who are going to do them for noncommercial use suppose the customer comes to transform a company and says i'm going to use in fact this device is outside the authorization of the sale by virtue of the post sale use do you understand general talking pictures to say western electric retains it patent rights against general talking jurors for the improper use notwithstanding that it may have told transformer the correct thing yes that is the way i understand it the  what the court said there are of course that a number of things but it says it's that licenses that restrict use are unquestionably valid and any use beyond the scope of a license is an infringement right there that and the reason i guess that seem to me important was something a number of my colleagues were saying is by that neck and isn't the patent holder retains patent to right control over downstream uses after the first sale the core question is why should there be a dramatic difference why should there be a dramatic difference depending on whether he was a non patent the manufacturer licensee who made the sale versus the p tribally there is any reason or really practical way to draw a distinction between mad kind of thing or being general to the general talking picture a situation where you've been using it at home but you can't use it in a movie theater  restrictions that would otherwise constrain what the buyer could do with the product that he just off now in the us the patents would normally preclude any use of the product but so the law presumes in the us that an initial authorized the end of it for a bunch of reasons your honor to start with kurtz and i and state the obvious the elephant in the room is totally put into copyright case but but more than that it was a statutory construction case curtseying turned on the meeting the legislative history and i want to disagree with mr pinkus the starting point person was not the common law of the starting point was the statute the court looked at the common law as a tool in its section for a construction exercise and look after it went through everything else it looked at the common law to say well ok we haven't found anything so far that has a geographic limitation is there anything in the common law that we should assume congress intended to import that was if it's all of really the common law was judgment to not be territorial and i think that one of the clearest examples of that is the court looked at the predecessor of section one zero nine a which was plainly not territorial just in its language and it said is there any indication at all that when congress changed this language in one nine hundred seventy six or whenever it was that it intended to change from what was plainly i'm not i'm geographically adoption rule to one that was territory limited and the court couldn't find any evidence of that so i i don't think that are you can get broadband coverage on inventions in this country you might not be able to get a patent at all in another country even even in the united states territory right exactly and and i judge where you raise a good point and that is that you know the government's position as you said is that patents are territorial and in fact that's the position the political branches have taken in trade agreements and other treating negotiations but the logic of that position seems to lea to a default rule that ought to be that there is no exhaustion from a foreign sale because really there is the u s patent has nothing to do with the foreign transaction at all and b and going back to what i started to say a moment ago the underlying premise of the exhaustion doctrine is that it's intended to lift restrictions that would otherwise restrain what a buyer can do well that's that's explains why the default rule in the us is well if you sell in the u you have exhaustion because otherwise you've sold something to somebody they can't use it which and that doesn't make any sense but even in a foreign country the u s patent doesn't impose any restrictions out at all on what the buyer can do with the with what he just bought and there may be restrictions in the foreign country and depending on foreign law perhaps those restrictions are exhausted but the u s patent is not in any way constraining what the buyer can do and so there's no reason to presume but a transaction in a foreign country would would be pad i don't think there's a it's fair to say that when the u s patent he sells overseas he somehow being compensated for u s patent rights but clearly when there's no u s patent or when the foreign patent the coverage of the for impact is very different than the coverage of the u s patent which often happens it doesn't make any sense to say well you sold it in france or the philippines and therefore you've given up your rights in the united states which your rights of under a very different legal system very different laws and possibly very it doesn't matter your honor because again even if you have a foreign patent the rights that you're being compensated for giving up are those foreign rights because your us rights are not having any impact on that transaction they're not constraining what the buyer can do in that country  or anywhere else so that's why our transfer of those us patent rights is not a necessary part of the foreign transaction the way that it would be in a transaction in the us depending on the terms of the transaction well you don't really think i think so but again your honor even in that case i don't think there was any any attempt to transfer us rights so we don't read any of those cases as presenting an obstacle if you know if  were kind of policy practical concerns about him with a congress that covers thousand patents and that sort of thing those arguments are at least as great that those those issues are at least as punctuated in the past an area as they are copyright not well you could certainly have those kinds of issues in theory in the pack in there your honor and i would make a couple of comments around that about that one is jest photo has been the laws i said for about fifteen years in the circuit it's it's very clear putting aside whether it says you can never exhaust and it has not caused any problems that's one the other thing is your honor and this is clear from the him eagerly it's not clear that the copyright act was circuit and as the supreme court held just this last term an example you need of the court said i think justice kagan was being a little tongue in cheek but super special justification to turn that aside so in the absence of any evidence of any real problem the other thing i would say your honor is that the amicus briefs make clear and in fact most of the m e c on the impression side you know they talk about you know what we have global supply chains and this can create all sorts of problems but almost to appeal to a party they make clear well yeah but we have global licenses and that's why you know that in fact isn't a problem because we get global licenses and so a products are going to come into the u s or or other foreign printed in the book but there was no suggestion in any of the briefing or obviously in the opinions that the that there was a meeting of the minds or any sort of a valid contractual limitation and here of course we have a stipulation that there isn't a valid and forc conditional on it nobody had to agree to that condition before the sale before the sale which is a difference in this case and i think that's what the court was getting at in quantity whenever it actually went through the agreements and said you know these  intel's right to sell was unconditional and unrestricted and then the fact that it had to give notice that there was no license to the to the ultimate purchaser that didn't make it conditional i think the same thing is true in curtseying so that i'm almost out of time patented product and in fact you'll notice footnote six that the court says if there were a sale abroad then you know l g argues that that would be a substantial non infringing use and therefore there's no substantial there is no substantial embodying the issue the end in fact and then the court rejected that argument but for reasons having nothing to do with exhaustion because there was a foreign sales and in fact both parties in their briefs and quanta l g s footnote nineteen in quantize reply a footnote to beyond the question of printer cartridges or even software or cell phones so i want to address international exhaustion first because important doctrine important if you for our members many biotech products are sold at lower prices keep enveloping countries out of question that if we thought that the question of international exhaustion was not either never or always but  makes in their brief that shouldn't you shouldn't be able to convey a multinational license through silence that there ought to be this is a bundle of rights it's a territorial us bundle of rights what's the problem with one what's the problem with deciding not notice i'm not what's the problem with providing notice if you want to reserve presumably thinks when they're buying something they have the right to use it wherever and whenever doesn't it seem like as the government pointed out that the onus should be on the pounding the seller if they want to preserve our right g supply chain as they describe it where there are sophisticated parties that are all working together in a supply chain that can address the issues the need they're doing their diligence we're just in a very different situation ability to alter the contract for the next batch of units sold i realize it's a highly general maybe even spectrum of the question but if we're trying to assess  the magnitude of any retrospectively how do we figure out whether there may be a little but pretty much new notices can take care of of giving the patent owner retention and us rights pretty easily either by changing the license agreements or right now giving notice within the current license agreements how do we figure it out i think i mean the problem that that that we have is that  we need to address downstream spread to certain with whom we get to the issue that we're raising in downstream practice or within we had no contact with in which there is no notice right the the reason that we feel that foreign sales shouldn't exhaust us patent rights is that we need a way to enforce regional pricing and prevent arbitrage so the the concern that we have is that there are these  aggregate importers out there who could look for opportunities to purchase products i think raising understanding the the problem of not being able to to gauge an international price discrimination of a quite socially beneficial sort i guess that i'm just focusing on on the question but let me just pose a hypothetical most of the products you have you have out there are relatively short shelf life products so yeah you may have a problem with respect to those but they're not going to be sold for very long anyway so most of the new products will be under new sales agreements and you can control the terms of the new sale is that likely true with the implausible just on this retrospective retrofitting to the question i think it would be a very complicated thing for the selling in one hundred fifty countries just up there selling under the laws of those countries which may require various kinds of drugs or approvals and you may not be able to  reservation of rights they may not much for do that is not possible yes or that's entirely possible your honor thank you thank you identifies that the basis for the course decision curtseying was the determination made by a lower court which was adopted not specifically to any particular type of property but as a general common  apropos of this this notion that the decision was increasing was made on going on copyright it just wasn't that was in the nature of an affirmative defense so they said here's the general rule with when something writes well i guess part of it appears and we look at fifteen years ago when that case came down and it seemed like it was yesterday to me fifteen years in the kindest the context of this law was yesterday prior to that we had like over one hundred years of well reservation and your us happened right as we came those rights after a authorize foreign sale the thing that's correct they did not so if i may address what the government did in that case and with a recall  says we think the default rule law to be the opposite of what the government says but if it's what the government says we think there's enough here to indicate that we actually did reserve our right did you take issue with that in your great grief i did not but because that would be an issue on reconsideration we disagree with that and i think it's clear from the context in which he's talking there is you're saying that that based on their advertising based on what's on their packaging and that because the they did make those arguments that that somehow constituted a i'd like to address your concerns by mayor on about the issue of the safety health and safety welfare system and i understand or any other reason i think this is really what concerns me  was the first like you say when in terms of practical context you're in a quarrel and the other side has raised the issue that well we need this for health and safety reasons is now going to be is going to be the determination by the injurious of whether those really were restrictions necessary for health and safety purposes how do we reach that determination in melbourne they said that but as far as i can say they never proved it but so that would lead us into of a mini trial in the in each and every one of these issues and the other aspect of it a near opposite results is that we would never give any consideration to that or with respect to that the biotech industry would say they can't sell to universities for limited purposes for research and for other purposes research purposes and that that hospital takes that or start selling it on the side for commercial purposes they are but they are infringing your contract contracts are a borg or he will animals we know what happened with the contract dramatically different then absolutely and that's the point you can put any remedy you want to with a contract you can put all of your clothes all of your families in a contract as well there's a limitation as to what you can do a far greater flexibility in the contract situation than you do in the pan situation the issue is really in a been the real world is not between the seller and the purchaser we're talking about corporate entities or businesses the issue is what happens when someone downstream buys a product and that's why there's so much concern with the people step you take you don't have to write another fifty page contract that's correct it's also true that we don't want to get into side issues as to whether these really are valid extra considerations in terms of enforcing patent rights but that decision was in the small car based on policy considerations if they analyze and they were thinking about the library broke or the book someone buys at the airport in the denmark and they happen to play into the us and how could they possibly be guilty of copyright infringement when they bought the book in denmark and brought it to us to harvest the software mean doesn't the different circumstances and in particular the impact this will have on pharmaceutical products create a very different set of policy considerations that maybe take us outside the umbrella of kurt namely the importance the extreme importance of low cost aids drugs in africa for example the need for differential pricing  exists in that circumstance that maybe is not so compelling with the korean textbooks versus the u s textbooks but perhaps the supreme court would see these policy considerations differently and i don't believe so and i think the supreme court addressed all us policy never talk about the fact as a legal matter of the knowledge why the purchaser said he knew but they never said when in fact that i think that's still an open question but if you if you say you do know and you buy something from somebody who has a restricted limitation on what and you use it