Document Type

Article

Publication Date

2016

Abstract

A bedrock principle of patent law — patent exhaustion — proclaims that an authorized sale of a patented article exhausts the patentee’s rights with respect to the article sold. Over one hundred and fifty years of case law, however, has produced two conflicting notions of patent exhaustion, one considering exhaustion to be mandatory regardless of whether the patentee subjects the sale to express patent restrictions, and another treating exhaustion as a default rule that applies only in unconditional sales. The uncertainty surrounding the patent exhaustion doctrine casts a significant legal cloud over patent licensing practices in the modern economy and has emerged as a central subject in scholarly debate on the nature and scope of intellectual property rights.

This Article takes a normative approach to patent exhaustion and argues that the correct exhaustion rule should be a “default-plus” rule that combines a default-rule component with a patent misuse test that is independent of the exhaustion analysis. The default-rule component would allow patentees to avoid exhaustion through express patent restrictions, while the patent misuse test would ensure that such restrictions do not violate public policy. This Article contends that this default-plus rule is superior to the mandatory rule in terms of theoretical foundation, malleability, and circumvention. Adopting this default-plus rule would minimize legal impediments to socially beneficial patent restrictions while preserving maximum flexibility in accommodating new technologies and licensing practices.

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