Patent laws grant the patent holder with an absolute right to
exploit the patent in any manner as it may deem fit, subject to
certain limitations. The principle of exhaustion comes into play
once the patent holder sells the patented product; after such first
sale, the patent holder cannot restrain the purchaser from further
selling such product. In the case of Lexmark International Inc
v Impression Products, Inc, Lexmark (Plaintiff) had patent for
the ink cartridges for its printers. The Plaintiff was selling two
cartridges (1) Discounted cartridges, sold in the U.S., which
restricted the resale rights of the purchasers; and (2) Cartridges
sold abroad without any discount and no restriction on resale. The
Defendant purchased the used cartridges of the Plaintiff Company
and resold them in the U.S. The Plaintiff filed a suit for patent
infringement against the Defendant. The Defendant argued that the
Plaintiff was estopped from claiming infringement because it had
exhausted its right to regulate the sale of the product after
making a 'legitimate' first sale in the U.S. Furthermore,
the Defendant claimed that by selling its product abroad, the
Plaintiff had also exhausted its rights in the U.S.; the Defendant
cited few copyright related cases to support its claims. The
District Court, agreed with Defendant's contention of
exhaustion of rights by sale in the U.S. however, the second
argument pertaining to exhaustion of rights in the U.S. by sale
abroad was rejected. The matter was appealed before the Federal
The Appellate Court upon hearing the two parties, the Government
representatives and amicus curiae for the matter, concluded that
the Plaintiff was correct in claiming patent infringement. It was
ruled that the patent holder had the right to impose limitations on
resale and reuse. It was further held that patent rights are
territorial in nature and if an article patented in the U.S. is
sold abroad without any restrictions imposed on resale and/or
reuse, it would not result in exhaustion of patent rights in the
U.S. The Court observed that cases of copyright exhaustion were not
applicable to patents because of differences in the statutory
provisions. This ruling broadens the rights of patent owners in the
sense that they can regulate the resale and reuse of their patented
article, also this decision does not discriminate between
practicing and non-practicing entities (NPE's). While this
decision benefits patent holders, it also gives the patent trolls
more opportunity to bring frivolous suits. It will be interesting
to see the impact of this decision on the U.S. patent system.
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This article enunciates the recent, much awaited, and landmark judgment delivered on September 16, 2016 by Hon'ble Delhi High Court throwing light on the important provisions of the Copyright Act, 1962.
The Patents Act 1970, along with the Patents Rules 1972, came into force on 20th April 1972, replacing the Indian Patents and Designs Act 1911. The Patents Act was largely based on the recommendations of the Ayyangar Committee Report headed by Justice N. Rajagopala Ayyangar. One of the recommendations was the allowance of only process patents with regard to inventions relating to drugs, medicines, food and chemicals.
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