Exhaustion of intellectual property rights
The exhaustion of intellectual property rights constitutes one of the limits of intellectual property (IP) rights. Once a given product has been sold under the authorization of the IP owner, the reselling, rental, lending and other third party commercial uses of IP-protected goods in domestic and international markets is governed by the principle.
After a product covered by an IP right, such as by a patent right, has been sold by the IP right owner or by others with the consent of the owner, the IP right is said to be exhausted. It can no longer be exercised by the owner. This limitation is also referred to as the "exhaustion doctrine" or "first sale doctrine". For example, if an inventor obtains a patent on a new kind of umbrella, the inventor (or anyone else to whom he sells his patent) can legally prohibit other companies from making and selling this kind of umbrella, but can not prohibit customers who have bought this umbrella from the patent owner from reselling the umbrella to third parties. There is a "fairly broad consensus" throughout the world "that this applies at least within the context of the domestic market". This is the uncontroversial concept of "national exhaustion". However, "[t]here is less consensus as to what extent the sale of an IP protected product abroad can exhaust the IP rights over this product in the context of domestic law." This is the concept of "regional exhaustion" or "international exhaustion". The rules and legal implications of the exhaustion largely differ depending on the country of importation, i.e. the national jurisdiction.
The rationale behind the uncontroversial concept of national exhaustion is that, once the IP right owner has received the full benefit of the IP right from the first sale, there should not be any encumbrance on the purchaser's rights regarding the particular product in the domestic market where the product was first sold.
The legal concept of international exhaustion is much more controversial, and is recognized in some countries but not in others. The importation, in a country that recognizes the concept of international exhaustion, of a product sold in a foreign country with the authorization of the IP right owner cannot be prevented by the IP right owner. In contrast, in a country that does not recognize the concept of international exhaustion, the foreign sale does not deprive the IP right owner from the right to prevent the parallel importation. "Thus, an IPR owners ability to control its products in international trade depends on if, and to what extent, the importing country recognizes international exhaustion." The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), an international agreement administered by the World Trade Organization (WTO), does not address the issue of exhaustion of intellectual property rights.
- "International Exhaustion and Parallel Importation". WIPO. Retrieved 23 May 2015.
- Clugston, Christopher J. (2013). "International Exhaustion, Parallel Imports, and the Conflict between the Patent and Copyright Laws of the United States". Beijing Law Review 4 (3): 95–99. doi:10.4236/blr.2013.43012.
- The United States Supreme Court adopted the doctrine of international exhaustion in Kirtsaeng v. John Wiley & Sons, Inc. for US copyright law, and in that decision explained the general rationale for the doctrine under common law principles of property rights.
- Article 6 TRIPS: "For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights."