Table of Contents

Research Handbook on Intellectual Property Exhaustion and Parallel Imports

Research Handbook on Intellectual Property Exhaustion and Parallel Imports

Research Handbooks in Intellectual Property series

Edited by Irene Calboli and Edward Lee

From the Americas to the European Union, Asia-Pacific and Africa, countries around the world are facing increased pressure to clarify the application of intellectual property exhaustion. This wide-ranging Research Handbook explores the questions that pose themselves as a result. Should exhaustion apply at the national, regional, or international level? Should parallel imports be considered lawful imports? Should copyright, patent, and trademark laws follow the same regime? Should countries attempt to harmonize their approaches? To what extent should living matters and self-replicating technologies be subject to the principle of exhaustion? To what extent have the rise of digital goods and the “Internet of things” redefined the concept of exhaustion in cyberspace? The Handbook offers insights to the challenges surrounding these questions and highlights how one answer does not fit all.

Chapter 14: Regulatory responses to international patent exhaustion

Sarah R. Wasserman Rajec

Subjects: law - academic, intellectual property law, international economic law, trade law

Extract

Modern international trade law seeks to increase global welfare by lowering barriers to trade and encouraging competition. Multilateral treaties such as the 1947 General Agreement on Tariffs and Trade (GATT)1 have significantly lowered tariffs and led to increased trade. Additionally, the theories underlying modern trade law have been applied to non-tariff barriers to trade, so that the World Trade Organization (WTO) includes agreements addressing subjects as diverse as telecommunication, industrial and product safety standards, and intellectual property. While the overriding purpose of the WTO is to encourage free trade, this principle has not been fully applied to patent law, placing the two fields in tension. Currently, patent law grants rights that are fortified by national borders while trade law aims to diminish the relevance of borders. In one very important respect patent law remains at odds with modern trade theory in most countries. Under current United States (U.S.) law, for example, a U.S. patent holder may block the importation, use, or sale of patented goods purchased abroad, even if purchased from a seller licensed under a foreign patent. In contrast, an unconditional purchase of a patented good within the U.S. exhausts the patent holder’s rights with respect to that good. The doctrine of exhaustion (also called the first sale doctrine) advances consumer interests by limiting restraints on alienation and fosters efficient use of goods by lowering transaction costs in resale markets while limiting the patent holder to a single reward for each sale. However, because most countries do not adhere to a doctrine of international exhaustion for patents, there is no free trade in patented goods. Moreover, the current rule undermines the purposes of exhaustion in the domestic context, because the information costs associated with determining the origin and history of goods in the resale market will apply to goods first sold domestically when they are identical to imported goods first sold abroad. The current rule also adds transaction costs to the manufacture of goods, such as consumer electronic goods, that contain multiple, patented components and are sourced from multiple countries.

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