Post-sale restraint

A post-sale restraint, also termed a post-sale restriction, as those terms are used in United States patent law and antitrust law, is a limitation that operates after a sale of goods to a purchaser has occurred and purports to restrain, restrict, or limit the scope of the buyer's freedom to utilize, resell, or otherwise dispose of or take action regarding the sold goods.^[1] Such restraints have also been termed "equitable servitudes on chattels".^[2]

Support for the rule against enforcement of post-sale restraints has at times been rested on the common law's hostility to restraints on the alienation of chattels. "The right of alienation is one of the essential incidents of a right of general property in movables, and restraints upon alienation have been generally regarded as obnoxious to public policy, which is best subserved by great freedom of traffic in such things as pass from hand to hand. General restraint in the alienation of articles, things, chattels, except when a very special kind of property is involved, ... have been generally held void."^[3]

^ See, e.g., Peter Carstensen Archived 2007-07-06 at the Wayback Machine, Post-Sale Restraints via Patent Licensing: A "Seedcentric" Perspective, 16 Ford. Intell. Prop. Media & Ent. L.J. 1053 (2006) ("The use of post-sale restraints on buyers of patented goods is an increasingly common strategy of patent holders. The seller attaches a notice to the patented good or a good containing a patented component purporting to limit scope of what the buyer has bought and imposing explicit restraints on buyers' freedom to resell the product or take other actions. The patent community has sought to justify and explain these post-sale restraints based on an analogy to the right of real property owners to encumber such property with covenants that restrict future owners. The key claim is that the patent owner has the right to divide the interests in the goods being sold and declare that only some rights were transferred. This conception provides a basis to bind not only the party in privity but all others who come, or might come, into possession of this property."); Jeffery B. Fromm and Robert A. Skitol, Harmonization of the IP Misuse Doctrine and Antitrust Law, The Antitrust Source (Jan. 2003), p. 4 ("The Federal Circuit has addressed the application of the patent misuse doctrine to certain kinds of post-sale restrictions, such as 'single-use only' provisions. According to the Federal Circuit, such restrictions cannot be deemed misuse unless they are both (1) found outside the scope of the patent grant and then also (2) found anticompetitive under full application of the antitrust rule of reason."); Anne K. Bingaman, Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Antitrust and Innovation in a High Technology Society, Address at the celebration of the 60th anniversary of the founding of the Antitrust Division (Jan. 10, 1994) ("Whether the holder of a patent may, for instance, tie unpatented supplies to the patented product; engage in compulsory assignment grant backs; or place post-sale restraints on resale by purchasers are just a few of the host of issues that have been debated and litigated in the patent/antitrust field for several decades."). See also B. Braun Medical, Inc. v. Abbott Laboratories, 124 F.3d 1419, 1429 (Fed. Cir. 1997) ("Moreover, the district court erred by instructing the jury that it must find patent misuse if Braun placed any post-sale restrictions on use of the SafSite valves it sold to Abbott."); United States v. Ciba-Geigy Corp., 508 F.Supp. 1118, 1147 n.14 (D.N.J., 1976) ("As noted, infra, CIBA's attempt to insulate itself from horizontal competition by use of illegal post-sale restraints did not appreciably enhance its market position.").
^ See Clairol, Inc. v. Cody's Cosmetics, Inc., 353 Mass. 385, 231 N.E.2d 912 (1967) (refusing to enforce servitude). See also Z. Chafee, Equitable Servitudes on Chattels, 41 Harv. L. Rev. 945 (1928); Z. Chafee,Comment: The Music Goes Round and Round: Equitable Servitudes and Chattels, 69 Harv. L. Rev. 1250 (1956).
^ Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 404 (1911). See also id. at 404-05 (quoting Coke on Littleton sec. 360: "If a man be possessed . . . of a horse or of any other chattel, real or personal, and give or sell his whole interest or property therein, upon condition that the donee or vendee shall not alien the same, the same is void, because the whole interest and property is out of him, so as he hath no possibility of a reverter, and it is against trade and traffic and bargaining and contracting between man and man."). See also, to the same effect, Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2012).

[1] See, e.g., Peter Carstensen Archived 2007-07-06 at the Wayback Machine, Post-Sale Restraints via Patent Licensing: A "Seedcentric" Perspective, 16 Ford. Intell. Prop. Media & Ent. L.J. 1053 (2006) ("The use of post-sale restraints on buyers of patented goods is an increasingly common strategy of patent holders. The seller attaches a notice to the patented good or a good containing a patented component purporting to limit scope of what the buyer has bought and imposing explicit restraints on buyers' freedom to resell the product or take other actions. The patent community has sought to justify and explain these post-sale restraints based on an analogy to the right of real property owners to encumber such property with covenants that restrict future owners. The key claim is that the patent owner has the right to divide the interests in the goods being sold and declare that only some rights were transferred. This conception provides a basis to bind not only the party in privity but all others who come, or might come, into possession of this property."); Jeffery B. Fromm and Robert A. Skitol, Harmonization of the IP Misuse Doctrine and Antitrust Law, The Antitrust Source (Jan. 2003), p. 4 ("The Federal Circuit has addressed the application of the patent misuse doctrine to certain kinds of post-sale restrictions, such as 'single-use only' provisions. According to the Federal Circuit, such restrictions cannot be deemed misuse unless they are both (1) found outside the scope of the patent grant and then also (2) found anticompetitive under full application of the antitrust rule of reason."); Anne K. Bingaman, Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Antitrust and Innovation in a High Technology Society, Address at the celebration of the 60th anniversary of the founding of the Antitrust Division (Jan. 10, 1994) ("Whether the holder of a patent may, for instance, tie unpatented supplies to the patented product; engage in compulsory assignment grant backs; or place post-sale restraints on resale by purchasers are just a few of the host of issues that have been debated and litigated in the patent/antitrust field for several decades."). See also B. Braun Medical, Inc. v. Abbott Laboratories, 124 F.3d 1419, 1429 (Fed. Cir. 1997) ("Moreover, the district court erred by instructing the jury that it must find patent misuse if Braun placed any post-sale restrictions on use of the SafSite valves it sold to Abbott."); United States v. Ciba-Geigy Corp., 508 F.Supp. 1118, 1147 n.14 (D.N.J., 1976) ("As noted, infra, CIBA's attempt to insulate itself from horizontal competition by use of illegal post-sale restraints did not appreciably enhance its market position.").

[2] See Clairol, Inc. v. Cody's Cosmetics, Inc., 353 Mass. 385, 231 N.E.2d 912 (1967) (refusing to enforce servitude). See also Z. Chafee, Equitable Servitudes on Chattels, 41 Harv. L. Rev. 945 (1928); Z. Chafee,Comment: The Music Goes Round and Round: Equitable Servitudes and Chattels, 69 Harv. L. Rev. 1250 (1956).

[3] Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 404 (1911). See also id. at 404-05 (quoting Coke on Littleton sec. 360: "If a man be possessed . . . of a horse or of any other chattel, real or personal, and give or sell his whole interest or property therein, upon condition that the donee or vendee shall not alien the same, the same is void, because the whole interest and property is out of him, so as he hath no possibility of a reverter, and it is against trade and traffic and bargaining and contracting between man and man."). See also, to the same effect, Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2012).

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