First sale doctrine is that the first unrestricted sale of a patented item exhausts the patentee's control over that particular item. First sale doctrine generally is asserted as an affirmative defense to charges of patent infringement. First sale doctrine is less commonly asserted affirmatively in a declaratory judgment action. First sale doctrine also may be referred to as the doctrine of "patent exhaustion." First sale doctrine is closely related to the doctrine of implied license. First sale doctrine is often asserted in conjunction with claims of equitable estoppel or legal estoppel.
The European Commission in a February 2002 press release states as follows: 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.
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.
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.
Jazz Photo Corp v International Trade Commission, 59 USPQ 2d 1907 (Fed Cir August 21 2001), Fuji Photo Film asserted 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, based on labelling on the camera warning the purchaser that the camera should not be opened. The ITC held that these steps amounted to reconstructing the camera and infringement of the patents.
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.
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.