The more registered intellectual property rights ("IP rights") a country has, the more the country benefits, since IP rights lead to increased international trade by attracting direct investment and thus lead to increases in GDP growth and the labor market. In addition, protecting IP rights creates incentives for researchers to spend more time and money developing technology.
A protected IP right gives its owner absolute rights over the IP right and allows him to use it however he chooses, which is why IP rights should be regulated in a sensitive manner that satisfies both the IP rights' owner and consumers. If not, the owner's absolute rights could cause them to abuse the rights through monopolistic market techniques. Therefore, a doctrine called Exhaustion of a Right is commonly accepted and implemented in legal systems that place certain restrictions on the use of such rights.
Exhaustion of a right is defined as, the consummation of the rights arising from goods once the goods are circulated into the market with the owner's consent. Once the goods are circulated into the market by or with the owner's consent, the owner can no longer control the distribution of those goods. The owner, in other words, has exhausted his distribution rights once he places the goods into the market.
Although the institution is called the exhaustion of a right, the owner of the right still benefits from the outcomes arising from the right. The owner of the IP right can no longer prevent a third party from distributing goods carrying the same trademark for the same goods. That being said, the owner retains the absolute right to produce, transfer, pledge, and use the IP rights as well as to grant a license to a third party. Although the owner of the IP rights can no longer prevent a third party from distributing goods carrying the same trademark for the same goods, the owner could still intervene in the distribution process if he detects that the goods are subject to a negative impact by a third party.
In Turkey, exhaustion of a right is conditioned upon three requirements; the goods pertaining to the IP rights must be: (i) protected by legislation; (ii) circulated in a specific geographic area1; and (iii) circulated with the consent of the IP right's owner/holder2.
- The Goods Must be Protected by Legislation:
The goods must be protected by legislation through specific regulations in order to use the rights and benefits deriving from them.
- Specific Geographic Area3:
Turkey adheres to the national exhaustion system; it does this through the Law on Intellectual Property, the Decree Law on the Protection of Trademarks and the Decree Law on the Protection of Patent Rights.
The Law on Intellectual Property Article 23/2 provides that the exhaustion of the right will be effective once the work's owner consents to the sale of the work or its duplicated copies.
Article 13 of the Decree Law on the Protection of Trademarks provides that, once the goods are put on the market by the owner and/or with his consent, the acts related with a product carrying the registered trademark will not constitute a breach of the rights of a registered trademark.
Article 76 of the Decree Law on the Protection of Patent Rights provides that, after the product has been put on the market in Turkey by the right holder of the patent or with his consent, the rights conferred by a patent will not extend to acts committed with regard to a product under patent protection.
- The consent of the IP right's owner:
The owner must consent for the goods to be circulated into the market. Therefore, to fulfill this consent requirement, either the IP rights' owner or a third party to whom the owner has given explicit permission must place the goods into the market.
The importance of establishing the exhaustion of the right arises when potential and/or current importers want to circulate the same goods into that specific market. This has caused heated debate on a topic called Parallel Import.
Parallel Import emerges when goods produced under the protection of a trademark, patent or copyright are first placed legitimately (with the consent of the IP right's owner) into the market in a country abroad, but are then subsequently imported to another country and circulated in the market without authorization from the IP right's local holder/owner. The trademarked goods must be original and must have been circulated into the imported country's market to establish a parallel import4.
An IP right's holder/owner can only prevent the sale of the original imported goods before he has exhausted this right by putting the goods for sale on the market for the first time. However, once the first sale of the goods occurs, the IP right's owner no longer has the right to stop the importer from selling the goods in the same market.
It is crucial to mention that the importer of the parallel imported goods must establish service stations to comply with the current obligations on after-sale services of the industrial devices. This is due to legislation that requires after-sale service stations to be implemented and the importer of the products to render the services.
1. Yasaman/Ayoglu, Marka Hukuku, pg. 542
2. Yasaman/Ayoglu, Marka Hukuku, pg. 569
3. Different legal systems employ different protection methods for the exhaustion of the rights. There are three different systems that are employed by countries and/or regions.
National Exhaustion: The first sale within a country exhausts national distribution rights. The right is exhausted only in the country where the goods are circulated.
International Exhaustion: IP rights are exhausted when the owners circulate the goods in any market in the world. In this system, the owners of the IP rights in the jurisdiction cannot stop parallel imports into the jurisdiction by relying only on the IP rights.
Regional Exhaustion: The exhaustion of the rights is limited only to a specific number of countries. The EU is the primary region adhering to the regional exhaustion system.
4.Although some doctrines also accept the grey market as parallel imports, the requirement of the difference in quality and other necessary qualifications is sought to establish a grey market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.