Introduction
Intellectual property refers to the creation of mind which is fresh and original. Such as invention, artistic and literary work, symbols, and names used in commerce and design. Intellectual property rights are the rights given to a person for his/her creation of the mind. It gives the creator the exclusive rights over his work for a period of time. These rights are protected under the trademark, patent, and copyrights law. Like any other property, ownership of intellectual property can be transferred that can be done by selling the product which is protected by IPR. But once it is sold the IPR is exhaust.
Principle of Exhaustion of Intellectual Property Rights
It is a concept in intellectual property rights wherein once the product is put in the market with the consent of the owner. And the product is purchase legitimately the product owner will lose or exhaust certain rights over the product. In other words, after the first legitimate sale of the product; the exclusive rights to sell will be exhauste by the owner.
For instance if a creator obtains patent for inventing a new kind of pen. The creator can legally prohibit other creators from making and selling the same kind pen. But cannot prohibit the customer who bought the pen from the patent owner from reselling the same pen to the third party.
Exhaustion of Rights under ‘Patent’
Section 107A of the Indian patent act 1970 talks about exhaustion rights under patented products. Its sub-clause (b) clearly states that importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product, shall not be considered as an infringement of patent rights. This signifies once the patent product is sold (anywhere in the world including India) by a person duly authorizedby law, further can sell, distribute and produce the good.
Exhaustion of Rights under Trademarks
Section 30(3) of trademark act acknowledges the concept of international and national exhaustion. It states that where the goods bearing a register trademark are lawfully acquire by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under or through him is not an infringement of a trade by reason only of-
(a) The registered trademark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or
(b) The goods having been put on the market under the registered trademark by the proprietor or with his consent.
Further in section 30 (4) clarifies that; if in any case the owner of the product feels that the product will be impaire or change after the buyer acquires the rights. The trademark owner can cancel the sale. In the case of a trademark unlike any other intellectual property rights consent can be changed at any given time.
Exhaustion of Rights under ‘Copyrights’
The exhaustion of intellectual property rights with respect to the literary work is primarily derive from section 14 of the copyrights act 1957. Section 14(a)(ii) authorizes the copyright owner to issue copies of the work to the public in copies that are not already in circulation. A copy that is sold once is already deemed to be a copy that is already in circulation. So, the first sale of copies exhausts the right of the owner to further sell or distribute the same copies. Thus, the recognition accorded to the Doctrine of First Sale under the Indian Copyright Act is limited
The Copyright (Amendment) Bill, 2010 has propose to recognize the principle of international exhaustion. It is in respect of all classes of works through amendments to Section 2(m). It defines infringing copies, and to Sections 14(d)(ii) and 14(e)(ii) which affect films and sound recordings. However, these propose amendments, even if they were to become law would not affect the Rental Right. And would only affect the right of resale of copies that had already been legally sold.
Different modes of Exhaustion
1. Universal or International exhaustion theory: Doctrine of International exhaustion works on the assumption that; the whole world is one market or one country. Thus goods once sold in any part of such market or country operates as exhaustion of rights of the trademark owner over such goods.
2. Regional exhaustion theory: Doctrine of Regional exhaustion applies when goods bearing a trademark are first sold by. Or with the consent of the owner in any country, which is a part of any specific region. Then the owner cannot prevent the subsequent sale in his own country. Or in any other country which is also a part of that specific region. The European Union has adopted regional exhaustion.
3. National exhaustion theory: Doctrine of National exhaustion stipulates that once a product has been sold in the domestic market for the first time by or with the consent of the owner, for which he has received a consideration, he then ceases to have control over any subsequent sale of the same in the domestic market, in the sense that he can neither prevent the subsequent sale of the said product nor can he claim any profit arising from a subsequent sale nor can he sue for infringement of his trademark. The rationale behind this principle is that the owner has already derived a profit arising out of the first sale; hence, he cannot keep deriving profit out of a sale that was not made by him.
Parallel Importation
Parallel importation refers to the goods sold and produced legally but they are sold at a very low price by an unauthorized trade channel at the same time in different markets. In every country, there is a huge difference in the taxes, import cost, labor, and material cost, so the parallel importers buy the products at low cost and sell it for the higher cost, the cost which might be higher than what the importer bought it for but for the consumers, it is much lesser to what they were buying in the showrooms.
For example the cost of I- phone in the United States is much lesser than the cost of I – phone in India. So what these parallel importers do is they buy the legitimate product from a legitimate market in the United States in bulk and they somehow bring that in India and sell it for a much lesser price than it is in the I – phone showrooms in India.
Conclusion
The principle of exhaustion of the intellectual property rights denies the owner the right over his patented, trademarked and copyrighted product and that can be harsh at times on the creator because he had spent a lot of years of his life creating that product and once it is for sale his rights are exhausted just like that he no longer say that the product is his and the product could be up for resale without the consent of the owner. National exhaustion tends to favor the producer but the international exhaustion tends to favor the consumer because in different countries the applicability of the principle of exhaustion functions in a different way.
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