Legal Definitions - patent-exhaustion doctrine

The patent-exhaustion doctrine is a legal principle that limits the rights of a patent holder after they have sold a patented item. Once a patented product is sold without any specific conditions or restrictions, the patent holder's exclusive rights to control that particular item are "exhausted." This means the buyer is generally free to use, resell, or even repair the item without needing further permission from the patent holder.

However, this doctrine does not prevent patent holders from imposing legitimate contractual conditions at the time of sale, as long as those conditions are not anti-competitive or illegal. If a sale is made with specific, legally binding terms (often through a license agreement), those terms may still apply to the buyer's use of the item.

• Example 1: Reselling a Patented Gadget

  Imagine a company invents and patents a unique smart home device, such as an advanced, energy-efficient air purifier. They manufacture and sell these purifiers to consumers through various retail channels. Once a consumer purchases one of these patented air purifiers, the patent-exhaustion doctrine applies. The consumer is then free to resell their used air purifier on an online marketplace, give it away, or even dismantle it for parts, without needing permission from the original patent-holding company. The company's patent rights over that specific unit are exhausted by the initial sale.

• Example 2: Repairing a Patented Appliance

  Consider a company that holds a patent on a specialized, high-performance motor used exclusively in their brand of robotic vacuum cleaners. A customer purchases one of these vacuum cleaners. If, after several years, the vacuum cleaner's patented motor breaks down, the customer can take it to an independent repair shop or even attempt to fix it themselves using third-party replacement parts. The patent-holding company cannot sue the customer or the repair shop for patent infringement simply because they are repairing or using non-original parts to fix the already purchased patented item. The right to control that specific vacuum cleaner was exhausted when it was sold.

• Example 3: Incorporating a Patented Component

  Suppose a company patents a highly efficient, long-lasting battery cell technology. They manufacture and sell these patented battery cells to a laptop manufacturer. Once the battery cells are sold to the laptop manufacturer, the patent-exhaustion doctrine applies to those specific cells. The laptop manufacturer is then free to incorporate these purchased, patented battery cells into their laptops and sell the finished laptops to consumers. The original patent holder for the battery cells cannot then demand additional royalties from the laptop manufacturer for the sale of the laptops containing those cells, nor can they prevent the sale of the finished laptops based on their battery cell patent. Their rights over those specific battery cells were exhausted when they sold them to the laptop manufacturer.