Exhaustion doctrine

An insight into the exhaustion doctrine or the first sale doctrine

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Exhaustion doctrine, doctrine of exhaustion, or first sale doctrine, are three different names referring to the first unrestricted sale of a patented item exhausts the patentee's control over that specific item. Generally speaking, it is asserted as an affirmative defense to charges of patent infringement, but is less usually asserted affirmatively in a declaratory judgment action.

In other words, it is a concept in intellectual property law whereby an intellectual property owner will give up or "exhaust" certain rights after the first use of the subject matter which is the subject of intellectual property rights. For example, the ability of a trademark owner to control further sales of a product having its mark are typically "exhausted" following the sale of that product.

The doctrine of "patent exhaustion." also refers to that same doctrine as It is closely related to (and sometimes conflated with) the doctrine of implicit license, and is often asserted in conjunction with claims of equitable estoppels or legal estoppels.

The concept typically arises in the parallel imports context, and may therefore be related nationally, regionally or internationally, such that if a right becomes "exhausted" in one area or jurisdiction, an intellectual property owner may not be able to enforce its rights in another area or jurisdiction.

Different countries confine the applicability of the doctrine of exhaustion in relation to different products in different ways.

United States: cases involving the first-sale doctrine

In Jazz Photo Corp. v. United States International Trade Commission, 59 USPQ 2d 1907 (Fed Cir August 21 2001), Fuji Photo Film claimed that the user of a single-use camera was not allowed to remove the film, process it, replace the battery, or package it in a new cardboard container, by labeling the camera with a warning that the purchaser should not open camera. The ITC held that these steps amounted to reconstructing the camera and infringement of the patents. The decision was reversed by the Federal Circuit based on the fact that the labeling was not an enforceable restriction on the use of the camera, that "no license limitations may be implied from the circumstances of sale" (59 USPQ 2d at 1917), and that the challenged activities merely repaired the camera and extended its useful life. However, in the same decision, the Federal Circuit confirmed that the U.S. follows what is called the "territorial exhaustion doctrine," which provides that a U.S. patent is only given up by a sale made in the United States. As the disposable cameras in question were sold and repackaged abroad, there was no exhaustion of the U.S. patent, and resale of the refurbished device in the United States amounted to infringement. The defendant was only permitted to obtain cameras originally sold in the U.S. to refurbish and resell in the U.S., because those original sales (having been made in the U.S.) effectively exhausted the patentee's rights under the U.S. patent.

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