Sociology Index

Exhaustion of rights

An intellectual property rights owner will run through or exhaust certain rights after the first use of that which is the subject of intellectual property rights just as a trademark owner cannot control further sales of a product. The doctrine of exhaustion as explained by the European Commission: "performers, producers of films and phonograms and broadcasters have the exclusive right to allow the objects protected by their rights to be made available to the public, or to forbid their being made available. This "distribution right" is not exhausted except where the first sale in the community of that object is made by the rightholder or with his consent." 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.

Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992), the federal court found that the doctrine of exhaustion was only a unilaterally disclaimable "implied license", despite more than a century of precedent to the contrary.

Bauer & Cie. v. O'Donnell, 229 U.S. 1 (1913), the United States Supreme Court ruled that patents could not be used to control resale prices.

Arizona Cartridge Remanufacturers Association Inc. v. Lexmark International Inc., 421 F.3d 981 (9th Cir. 2005), the Ninth Circuit Court of Appeals upheld a District Court decision that found that the contract terms on the packaging of a printer cartridge are sufficiently clear to act as a "box-wrap" license, such that when the user opens the box he or she is accepting the terms and forming a contract. Because the printer cartridge is patented, Lexmark can impose post-sale conditions on purchasers such as prohibitions preventing refilling of the cartridge.

Quanta v. LG Electronics. LG Electronics licensed patents to Intel for use in microprocessors, with the condition that Intel notify buyers of those microprocessors that such buyers did not receive a patent license for the use of the Intel microprocessors together with non-Intel components. LG Electronics sued Quanta for violation of the patents, while Quanta argues that the first sale doctrine applies. The Electronic Frontier Foundation filed an amicus brief in the case, arguing that Mallinckrodt and later cases based on it have inappropriately expanded the scope of patents by judicial fiat, and that sellers should use contract law if they want to impose conditions on a sale: EFF Supports Consumer Right To Repair, Resell Patented
Goods (2007-11-13).