Exhaustion of patent rights: how it can be used in defense against patent infringement
Receiving a letter from a patent holder alleging patent infringement may be very daunting. However, before jumping to submit to the requests of the patent holder it is important to confirm whether you are in fact infringing the patent. One such a manner to confirm, is to check whether the patent rights of the patent holder are exhausted.
Should the patent rights of the patent holder be exhausted, the patent holder has no further rights in terms of the patent. Accordingly, you can also not be sued for patent infringement or, alternatively, to pay a license fee to the patent holder. In this blog, we will explore what exhaustion of patent rights is, what it means for you, and the impact of a license on it.
What is exhaustion of patent rights?
This doctrine entails that once a patented article was first put in the market in an authorized manner, the rights of the patent holder are exhausted. Due to the exhaustion, the patent holder no longer has any right in terms of the article. The patent holder thus have no further control over the article. This doctrine is regulated in terms of Article 53 lid 5 of the Rijksoctrooiwet.
Being put in the market in an authorized manner constitutes that the patent holder himself, or a licensee of the patent holder, has put the article in the market. This needs to have occurred within the Netherlands, Curaçao, Sint Maarten or the European Union to exhaust the patent rights. Since the United Kingdom left the European Union, patent rights are not exhausted if the article was, for example, bought in the United Kingdom and then resold in the Netherlands. In such a case the rights are not exhausted and the patent holder may still sue for patent infringement.
What does exhaustion mean for third-parties?
The concept of exhaustion of rights is based on the principle that a patent holder has one opportunity to receive a reward for the patented article. Once that reward has been obtained, the patent holder cannot pursue third parties because he is, for example, of the opinion that his reward was not sufficient. Accordingly, should a third party purchase the article after being put in the market in an authorized manner, the third party is free to use or sell the article.
Can a license agreement prevent exhaustion of rights?
A license agreement cannot prevent exhaustion of rights of the patent holder. However, the license agreement may impose certain restrictions on the purchaser. These restrictions will need to be uphold in terms of contract law and not in terms of patent law.
For example, the license agreement may stipulate that the licensed article may not be re-sold by the purchaser. Should the article be re-sold, the patent holder may instigate proceedings based on breach of contract. However, the rights of the patent holder would still have been exhausted due to the purchase. Accordingly, the patent holder has no right to sue the purchaser for, for example, patent infringement.
Conclusion
Understanding the doctrine of exhaustion of patent rights is crucial for both patent holders and potential infringing parties. When patent rights are exhausted through the authorized sale of a patented article, the patent holder loses control over further legal claims related to that specific article. By comprehending the doctrine of exhaustion of rights, both patent holders and third parties can better assess their rights and obligations, enabling them to pursue a well-informed legal course.
If you have any questions regarding exhaustion of patent rights or any other inquiry related to patent law, please contact us!
