[The Viewpoint] The Doctrine of Exhaustion of IPRs in India

The Doctrine of Exhaustion of IPR, (an attribution of the Doctrine of First Sale) refers to the consumption of rights in an Intellectual Property subject matter (Patents, Trademark and Copyright) as a consequence of the legitimate transfer or a valid transaction of sale of the title in the tangible article that incorporates or bears the intellectual property asset in question. In other words, the Doctrine of Exhaustion implies that once a valid transaction of sale takes place then the owner of the intellectual property in question cannot control or prevent the further sale of the goods bearing the said intellectual property.

As per Article 6 of the Trade Related Aspects of Intellectual Property Rights (TRIPS), the issue of exhaustion of Intellectual Property Rights is a matter of national discretion and each member country is entitled to prohibit or allow parallel imports within its own legal framework.

The origin of the Doctrine dates back to the 19th Century when the United States Supreme Court for the first time addressed the issue of exhaustion of patent rights was in Bloomer v. McQuewan (1853), wherein the Court drew a distinction between a license of the patent right and the acquisition of a patented machine. Thereafter, in 1870’s, the United States Supreme Court in the decision of Adams v. Burke and the Court in United Kingdom in the case of Betts v. Willmot, recognized the concept of “Implied license”.

As enumerated above, the issue of exhaustion of IPR is a matter of national discretion and accordingly the principle of exhaustion of IPR is divided into the following:

National Exhaustion- Under this, an authorized sale of a good incorporating the protected IP will exhaust the right to use and resale the product in question within the domestic market and hence will prevent the IP owner’s domestic enforcement of the related IPRs against those possessing, using or redistributing the particular good. One of the countries that follows the principle of national exhaustion is the USA.

International Exhaustion- Under this, once a product is put in the market anywhere in the world by the IP owner himself or authorized licensee, it is freely distributed across nations as a single market. Under the statutory provisions of the Indian Patents Act, 1970, India recognizes the principle of international exhaustion and the Indian Judiciary recognized the principle of international exhaustion of trademarks in the case of Kapil Wadhwa and Ors. Vs. Samsung Electronics Co. Ltd.