DOCTRINE OF PATENT

EXHAUSTION
IN INDIA By,
Ke vin Shibu
Roll No:34
 Doctrine of Patent Exhaustion
◦ A patent grants the Patent holder exclusive rights to prevent others from making, using,
selling, offering for sale in the territory of patent grant or importing an invention into the
territory of patent grant.
◦ Once an unrestricted sale of the patented invention is made, the rights of the patent
holder with respect to the product are exhausted and this is called as the Doctrine of
Exhaustion or First Sale Doctrine.
◦ As per the Doctrine of exhaustion the first unrestricted sale of a patented item exhausts
the patentee’s control over that particular item. In other words, if patented product is
sold without any restriction, the Patent holder loses his rights over it.
◦ For example, if A holds a patent over a tea maker and if this tea maker is sold by him
without any restriction, he loses his right over the tea maker. In other words, the buyer of
the tea maker is free to sell, re-sell or distribute the tea maker and his actions would not
amount to infringement.
 Doctrine of Patent Exhaustion
◦ The rationale underlying the Doctrine of exhaustion is that a patent holder, who has
already been rewarded through the first sale must not be allowed to profit repeatedly
on the same good by controlling its use, resale or distribution. Under the doctrine, a
patent holder’s exclusive right as manifested in a patent claim ends at the first sale of
patented goods.
◦ Patent exhaustion may be classified into International, National and Regional based on
the extent of exhaustion.
 Doctrine of Patent Exhaustion
◦ International exhaustion
◦ International exhaustion is a scenario where the patent holder loses his patent rights
over the product, when the product is sold any where in the world. India and Japan
are two examples that follow International exhaustion of patent rights.
◦ Regional exhaustion
◦ Regional exhaustion is a scenario where the patent holder exhausts his rights over the
product when the patented product is sold in a particular region. Countries in the
European Union follow the principle of regional exhaustion.
◦ National exhaustion
◦ In case of National exhaustion, the patent holder exhausts his patent rights in a country
only when the patented product is sold in that country. United States of America
follows national exhaustion.
 Exhaustion provision in India
◦ The 2005 Amendments to the 1970 Act (Indian Patent Act,1970) tried to supply
clarity by broadening the scope, however has created new issues in
conceptualizing whether or not the amendment permits international
exhaustion.
The 2005 amendment to Section 107A (b) states, “importation of patented
products
◦ by any person from a person who is duly licensed underneath the law to
produce and sell or
◦ distribute the product, shall not be thought of as an infringement of patent
rights.
 TRIPS and Exhaustion
◦ Exhaustion is one of the most contentious issues discussed during the Uruguay Round
negotiations involving the TRIPS Agreement . Since there was no consensus on the nature of
exhaustion regime , it was primarily left for WTO members to decide .
◦ One of the primary arguments against the rule of national exhaustion was that it would
reduce trade flows and compartmentalize free - trade , which is the foundational pillar of
the WTO .
◦ Article 6 of TRIPS does not define exhaustion- contentious during negotiations due to its
impact on free - trade . WTO members can adopt any regime of exhaustion , including the
power to define what exhaustion should mean , in some limited way . As per Article 6 WTO
members ' decision to adopt a particular regime of exhaustion cannot be challenged under
the Dispute Settlement Mechanism . However , WTO member must provide National
Treatment and Most - Favoured Nation treatment to nationals of all WTO members . It is
important to note that WTO member in implementing any regime of exhaustion cannot
violate other provisions of the agreement .
◦ There is no WTO dispute settlement jurisprudence on Article 6 .
 TRIPS and Exhaustion
◦ The meaning of Article 6 is made clear by Article 5 ( d ) of the Doha Declaration which
states that " the effect of the provisions within the TRIPS Agreement that are relevant to
the exhaustion of intellectual property rights is to depart each member free to establish
its own regime for such exhaustion without challenge this doesn't mean that an
exhaustion policy can never be challenged in WTO dispute settlement . This is often
because the term " exhaustion " isn't self defining , and a Member may bring a claim
against another Member declarative that it has adopted an unreasonable definition of
the idea of exhaustion .
◦ In Salomon v Commissioner of Customs , where Lord Diplock had held that : ' if the
terms of legislation is not clear , and is fairly capable of more than one meaning , then
the terms of international treaties to which the government is signatory , become
relevant ..... within the context of Section 107A ( b ) therefore , where the terms of the
statute don't seem to be clear , it is probably that the courts can interpret the section
during a manner in line with TRIPS .
 Exhaustion of patent rights in India
◦ Section 107A ( b ) read , " importation of patented products by any person from a person
who is duly authorized by the patentee to sell or distribute the product , shall not be
considered as an infringement of patent rights . "
◦ As per the Statement of Objects and Reasons of the 2002 Amendment , this provision was
introduced to " ensure availability of the patented product in the Indian market at minimum
international market price . " It is evident that unless there is authorization by the patentee to
sell or distribute the product , a subsequent act by the purchaser to import the patented
good into India can be infringing .
◦ This is assuming that the patent holder may refuse to sell or impose post - sale restraints on
her licensee and , hence , such a licensee may not be authorized to sell the product to
anyone importing such patented products into India . Since this restricted the concept of
exhaustion .
◦ However , the above amendment created further problems in interpretation since it now
allows any person who is duly authorized under the law .
 2005 Amendment
◦ This provision was legislated to remove ambiguities surrounding the 2002 amendment Act by adding m
critical clarifications on the idea of non-infringing importation
◦ Section 107A ( b ) was amended in 2005 . It now reads : " importation of patented products by any person
from a person who is duly authorised under the law to produce and sell or distribute the product , shall not
be considered as an infringement of patent rights . "
◦ The earlier demand of consent of the patent holder is currently replaced with “a person who is duly
licensed under the law” and currently includes the word “to produce.”.These two changes have led to
intense confusion in conceptualizing the character of the exhaustion regime that India’s patent law
imagined.
◦ Prior to 2005 amendment, the third party could import only from a person "duly authorized by the
patentee" to manufacture and sell the product. With the 2005 amendment, any person can import from a
person duly authorized under the law without any authorization of the patentee. Since 107 A(b) does not
explicitly define the phrase "duly authorized under the law." It is believed that Section 107 (b) should be
read in conjunction with Section 107 A (a) which clearly indicates that Indian legislature follow International
Exhaustion..
 Doctrine of Patent Exhaustion
◦ Strix Limited v . Maharaja Appliances Limited ( 2009 )
a single bench of the Delhi High Court refused to accept the defense under Section
107A ( b ) pleaded by the defendants .
◦ J Sai Deepak v . Central Board of Excise & Customs & another , ( 2012 ) WP ( C ) No.
3165 of 2012
a division bench of the Delhi High Court refused to entertain a public interest litigation to
interpret the contours of Section 107A ( b ) purely on interpretations of the petitioner.