Exhaustion Doctrine

The exhaustion doctrine, also referred to as the first sale doctrine, is a common law patent doctrine that limits the extent to which patent holders can control a patented product after an authorized sale. Under the doctrine, once an unrestricted, authorized sale of a patented article occurs, the patent holder’s exclusive rights to control the use and sale of that article are exhausted, and the purchaser is free to use or resell that article without further restraint from patent law. Note, however, that under current law, the patent owner retains the right to exclude purchasers of the articles from making the patented invention anew, unless it is specifically authorized by the patentee.

Procedurally, the patent exhaustion doctrine operates as an affirmative defense, shielding authorized purchasers from infringement claims concerning the use or sale of a patented good after the patent owner authorized its sale.

Because the doctrine is only triggered by a sale authorized by the patentee, it is often difficult to figure out if the exhaustion doctrine applies in a particular case, for example, when the patentee restricts or conditions the sale itself, or restricts the use or sale of the patented article once purchased and in the hands of an end user (post-sale restrictions). The 2008 Supreme Court decision in Quanta Computer, Inc. v. LG Electronics, Inc., leaves unclear the extent to which patentees can avoid the exhaustion doctrine through limited licenses. 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.