Item (1) of Article 69 of China's Patent Law in 2008 stipulates that a patented product or a product directly obtained by a patented method, after being sold by the patentee or its licensed unit or individual, is used, promised to be sold, sold or imported, and is not regarded as infringement of the patent right.
As can be seen from this regulation, exhaustion of patent right is a restriction on patent right in China. In order to balance the interests of the patentee and the public, the scope of application of patent exhaustion must be strictly stipulated.
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The exhaustion of patent rights is the product of American judicial precedent in the19th century, which has a history of more than 60 years. The system began in brummer case of 1852, and its basic principle was established in Adams case of 1873. At present, it has become the basic defense of patent infringement.
In the case of Bloomer v. McQuewan, the Supreme Court of the United States expounded the reasonable compensation theory of the principle of exhaustion of patent rights, and held that the application of the principle of exhaustion of patent rights was mainly due to two basic motives: the expectation of preventing the patentee from obtaining unfounded compensation and the extreme distrust of imposing permanent restrictions on personal property. If the patentee gets reasonable compensation, he can't continue to control the patented product under the pretext of patent right.
The principle of patent exhaustion was formally established in the case of 1873 Adams v. Burke, which put forward the first sale theory to explain the application of the principle of patent exhaustion. In this case, the patentee of the sealed cover product prohibited the first batch of buyers from using the sealed cover in some fields.
The court held that the patentee or the patentee obtained the reward for the invention when selling the patented equipment or machine whose only value lies in its use, and should give up the right to restrict the use of the relevant equipment or machine, which is commonly called the first sale theory.
Both the theory of reasonable compensation and the theory of first sale are aimed at limiting the interference of the patentee in the patented products that have been sold, so that the product buyers have full freedom to dispose of and use their legal property.
Subsequently, the court also wrote in the judgment of the case of 1895 Keeler v. Standard Folding Bed Company: Under the principle of exhaustion of patent rights confirmed in Adams v. Burke, the buyer can not only freely use the patented products, but also freely resell the patented products.
In the judgment of 1942 in the case of American government v Masonite company, the US Supreme Court gave a new explanation to the principle of exhaustion of patent rights: whether the patent rights of a product are exhausted depends on whether the patentee gets a return from the use of these products.
If the patentee has received reasonable remuneration from the first sale, he should not benefit from the second, third and more sales.
1942, the case of U.S. government v. UnivisLens Company, is a typical case involving the exhaustion of unfinished patented products.
The court held that "although this case involves an unfinished patented product, the product contains the substantive features of the invention patent and belongs to the scope of patent protection. The product is destined to be completed by the buyer according to the patent requirements, which means that the patentee has sold his invention".
Therefore, it is judged that Univis has no right to determine the resale price of finished lenses on the grounds of exhaustion of patent rights.
The case shows that as long as the patentee sells the patented product, whether the patented product is sold in a "completed state" or in an "unfinished state" but the buyer completes the production and resells it, the principle of exhaustion of patent rights should be applied.
The exhaustion of patent rights is also the main controversy in the case of Quanta Computer Company v. LG Electronics Company in 2008, which is considered to explain the related issues about the principle of exhaustion of patent rights again since the case of 1942 Univis.
In this case, LG owns the patent of the calculator processing method and authorizes it to Intel. Intel loads LG's processing method program into microprocessors and chips, and then sells it to computer product manufacturers. One of LG's licensing conditions is that Intel users cannot combine Intel products with non-Intel components with LG method patents.
The court rejected LG's claim that the principle of patent exhaustion does not apply to method patents, and ruled that there was no patent infringement in this case, because the method must be embodied in the product, and the patent right was exhausted when the product was first sold.
In this case, the judge confirmed that the principle of exhaustion of patent rights also applies to method patents. Although the method patent itself cannot be sold in the form of products or equipment, it can be embodied in products and can be exhausted through the sale of products embodying this method.
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