Exhaustion doctrine under U.S. law

The exhaustion doctrine, also referred to as the first sale doctrine, is a U.S. common law patent doctrine that limits the extent to which patent holders can control an individual article of a patented product after a so-called authorized sale. Under the doctrine, once an authorized sale of a patented article occurs, the patent holder’s exclusive rights to control the use and sale of that article are said to be "exhausted," and the purchaser is free to use or resell that article without further restraint from patent law. However, under the repair and reconstruction doctrine, the patent owner retains the right to exclude purchasers of the articles from making the patented invention anew (i.e., making another article), unless it is specifically authorized by the patentee to do so.

Procedurally, the patent exhaustion doctrine operates as an affirmative defense, shielding authorized purchasers from infringement claims concerning the sale or use (including repair and modification) of a patented product after the patent owner authorized its sale.

Because only an "authorized" sale triggers the doctrine, it may be difficult or at least controversial to determine whether the exhaustion doctrine applies in a particular case: for example, when the patentee purports to restrict or condition the use or resale of the patented article once purchased and in the hands of an end user (post-sale restrictions); or when the patentee licenses another to manufacture and use or sell the patented product only in a particular field. The 2008 Supreme Court decision in Quanta Computer, Inc. v. LG Electronics, Inc., arguably leaves unclear the extent to which patentees can avoid the exhaustion doctrine by means of so-called limited licenses (licenses limited to a specified field of use). Since its development by the courts in the late 19th century, the patent exhaustion doctrine has raised questions regarding the scope of exclusive rights granted by patents and the extent to which a patent owner may extend those rights to control downstream use and sales of patented articles.

A patent gives the patent owner the right to exclude others from making, using, selling, offering for sale, or importing into the U.S. the patented invention (i.e., a product embodying the invention) during the term of the patent. The constitutional rationale behind providing these exclusive rights is to “promote the Progress of Science and useful Arts” by providing inventors the incentive to invest their time, labor, and funds in researching and developing innovative technology. Providing these protections, however, comes with social costs (monopoly rents) and limits the public’s ability to freely alienate patented goods. Thus, public policy dictates that the patent owner’s exclusive rights be limited in scope. Generally, when a patent owner receives compensation for the use of his or her invention through sale of a patented product, the purpose of patent law is fulfilled with respect to that product. Upon receiving compensation, the patent owner's rights to exclude others are exhausted and “the patent law affords no basis for restraining the use and enjoyment of the thing sold.” Accordingly, a patent owner's voluntary introduction of a patented product into commerce without restriction prevents the patent owner from exercising any claimed right to exclude others from using or reselling the sold product.

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Wikipedia