Exhaustion Doctrine - Overview

Overview

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 during the term of the patent. The conventional rationale behind providing these exclusive rights is to “promote the Progress of Science and useful Arts” by providing inventors the incentive to invest in researching and developing innovative technology. Providing these protections, however, comes with social costs 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 good, the purpose of patent law is fulfilled with respect to that good. 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 good into commerce without restriction prevents the patent owner from exercising his or her right to exclude others from using or reselling that good.

The patent exhaustion doctrine has not been codified, and is thus still a common law doctrine. (Contrast first-sale doctrine in copyright). It was first recognized by the Supreme Court in 1873 in Adams v. Burke. In that case, the patentee authorized a licensee to make, use, and sell patented coffin lids only within a ten-mile radius in Boston. A customer of the licensee bought the coffin lids within the ten-mile radius, but later resold the lids outside of the ten-mile radius. The patentee sued the customer, but the Supreme Court found no infringement: Once the coffin lids were lawfully made and sold, “there is no restriction on their use to be implied for the benefit of the patentee or his assignees or licensees.” Because the sale was authorized (bought within the ten-mile radius), the defendant acquired the right to use the coffin lids free from any claim of the patentee, even though he used it outside the ten-mile radius.