Keywords: IPR exhaustion, trademark exhaustion, the TRIPS Agreement, US law ontrademark exhaustion, EU law on trademark exhaustion, Vietnamese law on trademarkexhaustion, conditions trig
The exhaustion doctrine in relation to the first sale doctrine and the implied
The first sale doctrine stipulates that intellectual property rights (IPR) owners lose their ability to control the distribution of a product once it has been sold or consented to for sale In conjunction with this, the implied license doctrine allows IPR-protected products to circulate freely without territorial restrictions in the license agreement, meaning the IPR owner cannot interfere with subsequent sales However, if the license agreement includes territorial restrictions, it may require the licensee to label the product with notices such as “Not for sale in the licensor’s country” or “For use.”
If a license agreement specifies that goods can only be sold in the licensee's country, the intellectual property rights (IPR) owner has the authority to prevent resale in the licensor's country Conversely, if the license contract lacks a territorial restriction clause, the goods may be exported and resold in both the licensor's country and other international markets.
The exhaustion doctrine, first sale doctrine, and implied license doctrine aim to limit the exclusivity of intellectual property rights (IPRs), focusing on the exhaustion of these rights However, each doctrine has distinct differences that set them apart.
The exhaustion doctrine, originating from Germany and linked to jurist Joseph Kohler, contrasts with the first sale doctrine, which emerged in the US from common law related to the alienation of personal property, first referenced in the 1873 case of Adams v Burke Additionally, the implied license doctrine, developed by English courts, is rooted in contract law principles.
The exhaustion doctrine applies when a product is placed on the market by the intellectual property rights (IPR) owner or with their consent, while the first sale doctrine pertains to the initial sale of the product by the IPR owner or with their consent Although distinguishing between these doctrines may seem theoretically significant, their practical application yields the same outcomes Under English law, the implied license doctrine emphasizes the importance of notifying subsequent users about distribution limits of the patented product In contrast, the classical exhaustion doctrine asserts that limitations on patent rights are inherent and not reliant on the patentee's explicit intentions Ultimately, the exhaustion of IPR occurs automatically and is not at the discretion of the title-holder.
The geographical scope of the exhaustion doctrine and the first sale doctrine varies based on the exhaustion regime adopted by each country Exhaustion can occur within a single nation's territory under a national regime or extend across multiple countries under regional and international frameworks In contrast, the implied license doctrine dictates that the scope of exhaustion is determined solely by the terms agreed upon between the licensor and licensee, as outlined in the license contract.
Despite historical differences among the three doctrines, recent practices have seen a blending of them Currently, U.S courts refer to "the exhaustion doctrine" rather than "the first sale doctrine," applying it in their rulings The terms "exhaustion doctrine" and "first sale doctrine" are often used interchangeably, with the implied license doctrine functioning as a component of the exhaustion doctrine, particularly in jurisdictions that recognize these principles.
'4 Opri, Debra A., Video Rentals and The First Sale Doctrine: The Deficiency of Proposed Legislation, Whittier Law Review, Vol 8, 1986, p 332.
'25 See Ganea, Peter, supra note 1; Keeling, David T., supra note 56, p 77.
'26 Heath, Christopher, Parallel Imports and International Trade, supra note 89, p 7.
'27 Yusuf, Abdulqawi A and Andrés M von Hase, /ntellectual Property Protection and International
Trade: Exhaustion of Rights Revisited, World Competition and Economics Review.16(1): 115-31, 1992, pp. 117-119.
In the case of 28 Jazz Photo Corp v International Trade Commission, the court highlighted that an international exhaustion regime may permit intellectual property rights (IPR) owners to incorporate specific restrictive clauses within licensing agreements This flexibility allows for tailored conditions that can impact the enforcement and scope of IPR across borders.
The implied license doctrine has notable weaknesses that render it less reliable than the exhaustion and first sale doctrines Firstly, the effectiveness of the exhaustion doctrine can be undermined when intellectual property rights (IPR) owners impose restrictive conditions on licensees, making the doctrine ineffective Secondly, third parties can easily circumvent these restrictions by exporting and reselling goods without being bound by the contract, as they were not privy to the agreed terms Consequently, the limitations intended by the licensor may become meaningless, diminishing their ability to control the use of their licensed products Therefore, due to these significant shortcomings, the exhaustion and first sale doctrines are generally more favorable than the implied license doctrine.
This section delves into the theoretical foundations of Intellectual Property Rights (IPR) exhaustion, providing insights into the concept and its implications, including the exhaustion of trademarks Understanding IPR exhaustion from its fundamental principles is essential for grasping its broader impact.
The concept of exhaustion is inherently linked to Intellectual Property Rights (IPRs) and has been embraced in various languages, including "erschöpfung" in German, "épuisement" in French, "agotamiento" in Spanish, "exaustdo" in Portuguese, and "shomô riron" or "shojinro" in Japanese.
The concept of Intellectual Property Rights (IPR) exhaustion has been defined by international organizations and legal scholars from various perspectives It is viewed as a limitation on IPRs, marking a point at which these rights are considered exhausted, and is often illustrated through specific examples.
Intellectual Property Rights (IPR) exhaustion occurs when the distribution rights of an IPR owner are depleted after the owner has placed a product on the market.
'29 Regarding the shortcomings of the implied license doctrine, see Keeling, David T., supra note 56, p 77;
'39 Carvalho, Nuno Pires de, supra note 57, p 149.
'3! Heath, Christopher, Parallel Imports in Asia, supra note 89, p 13.
' This concept was defined by WIPO, WTO and WHO See WIPO, International and Parallel Importation
; WHO, Globalization and Access to Drugs- Health Economics and Drugs Series, No 007, WHO/DAP/98.9, p 24,
; WTO, Glossary Term,
.
In their analysis of parallel imports in Asia, Christopher Heath and Mark Halle discuss the implications of intellectual property rights (IPRs) exhaustion, questioning whether countries should prioritize consumer interests or private rights Their commentary highlights the ongoing debate surrounding IPRs and the balance between protecting innovation and ensuring consumer access.
134 See WIPO, supra note 132; Heath, Christopher, ibid.
5 WHO, supra note 132; WTO, supra note 132.
Intellectual Property Rights (IPR) exhaustion occurs under two key conditions: the product must be placed on the market by the IPR owner or with their consent Once exhaustion takes place, it solely affects distribution rights, leaving production rights intact Additionally, exhaustion pertains only to the distribution rights of a specific product, meaning unsold items remain unaffected.
Trademark exhaustion significantly affects certain products
A product can be simultaneously protected by various forms of intellectual property rights (IPRs), such as copyright, trademark, industrial design, and patent rights For instance, a computer may have protections under copyright and trademark laws, while a pharmaceutical product is typically safeguarded by patent and trademark rights The significance of each intellectual property type varies depending on the product, making it essential to identify which products are most relevant to specific IPRs, especially when applying the exhaustion principle.
The NERA Study highlights the significant relevance of trademarks to various products, including footwear, leather goods, musical recordings, motorcars, consumer electronics, domestic appliances, cosmetics, perfumes, clothing, soft drinks, confectionery, and alcoholic drinks The findings suggest that any changes in trademark exhaustion laws could have a substantial impact on these industries.
Trademark exhaustion in some commercial activities ô+ <<ô 49 1 Parallel import of trademarked goods - - che 49 2 Repair of trademarked ỉử05 s 4544485 n2 66: 385 01555 0Hš GE 380556 380006/014004388 52 3 Contractual restrictions and trademark exhaustion -. - >ằ- 53
The principle of intellectual property rights (IPR) exhaustion determines when an IPR owner's distribution rights for a specific product are depleted Beyond this, IPR exhaustion plays a significant role in trade-related issues, offering solutions to various challenges This section examines the theoretical aspects of trademark exhaustion in relation to three commercial activities: parallel importation of trademarked goods, repair of trademarked goods, and contractual restrictions involving trademarks Each activity is analyzed to clarify its connection to the concept of trademark exhaustion.
2.2.3.1 Parallel import of trademarked goods
Parallel trade refers to the legitimate exchange of authentic products that have been introduced into the market in a different country, either by the intellectual property rights (IPR) holders or with their approval, alongside the officially sanctioned distribution channels.
712 Abbott, Frederick M., Cottier, Thomas and Gurry, Francis, /nternational Intellectual Property in An
Integrated World Economy, Wolters Kluwer, 2007, p 60.
Parallel trade involves the sale of goods across borders without the trademark owner's permission, yet these goods are not considered counterfeit if they bear the trademark owner's consent This includes both parallel imports and exports, which are essential components of the parallel trade market.
Case | - Parallel import: An unauthorized distributor of country B imports the product from country A to country B without permission of the IPR owner or the licensors in countries A and
B In this case, A is an exporting country; B is an importing country; the unauthorized distributor is a parallel importer The condition of parallel import is PI + T < P2 In particular, PI is the price in country A; P2 is the price in country B; T is the necessary import cost including transport and administrative costs In other words, the price in the importing country is higher than in the exporting country.?°
Case 2 — Parallel export: An unauthorized distributor of country B exports the product from country B to country A without permission of the IPR owner or the licensors in countries A and
B In this case, A is an importing country; B is an exporting country; the unauthorized distributor is a parallel exporter The condition of parallel export is P2 + T < PI In particular, P! is the price in country A; P2 is the price in country B; T is the necessary export cost including transport and administrative cost In other words, the price in the exporting country is lower than in the importing country.”"°
Import (authorized) Export (authorized) Import (unauthorized) Export (unauthorized)
7141 alonde, Anne Gilson, Anti-counterfeiting in the twenty-first century, LexisNexis, 2006, p.31.
Parallel imports in Asia have been a topic of discussion among various scholars, including Heath, Stothers, Matthews, Munoz-Tellez, and Maller-Langer Research indicates that the implications of parallel trade can vary significantly, particularly in small countries, where it may impact consumer welfare The debate continues on whether such trade practices ultimately benefit or harm consumers, highlighting the complexity of international trade dynamics.
, p 19.
See Mayer, Jorg, Technology Diffusion, Human Capital and Economic Growth, United Nations Conference onTrade and Development, No 154, Jun 2001, ; FactorContributions to East Asian Economic Growth, . longer true anymore Nowadays, the new powerhouse of prosperity is knowledge-based property.” Thus, IPR protection becomes indispensable Intellectual property protection aims at encouraging creation, allocating and using these properties effectively, and harmonizing creators’ interests and these of other individuals and organizations There are different theses that have been used to argue for the need to protect IPRs.’ These arguments share a common point: exclusive rights must be granted to IPR owners for at least a certain period.
Trademark exhaustion in cases of repair of trademarked goods
Under Article 7.1 of Directive 2008/95/EC and Article 13.1 of Regulation (EC) No 207/2009, subsequent owners in the EU have the right to use trademarked goods due to the legal principle of trademark exhaustion Unlike US law, EU law does not explicitly address the rights of subsequent owners to reuse, repair, recycle, or reconstruct these goods However, it is my belief that such rights are implicitly recognized within EU trademark law.
Article 7.1 of Directive 2008/95/EC and Article 13.1 of Regulation (EC) No 207/2009 establish that trademark exhaustion allows subsequent owners to use a trademark in relation to goods under two conditions: when the goods remain unaltered and are re-commercialized, or when they are altered and still re-commercialized In the first scenario, owners can utilize the trademark for advertising and relabeling, while the second scenario includes the use of trademarks on repaired or recycled goods EU legislation recognizes the lawful use of trademarks on repaired goods, although their commercialization may be restricted if "legitimate reasons" are identified Thus, the repair of trademarked goods is officially acknowledged within the EU framework.
Trademark exhaustion in the context of repairing trademarked goods has not yet been addressed by the ECJ, but it can be compared to repackaging trademarked products While repackaging is not always equivalent to repairing, altering the pack size—either increasing or decreasing it—could be considered a form of repair, as it directly impacts the goods themselves This aspect of pack size modification has been previously analyzed.
Bristol-Myers Squibb v Paranova A/S*''and held permissible in particular cases if required by the rules or practices of importing countries of trademarked goods."'°
Trademark exhaustion raises important questions in the context of repairing trademarked goods, particularly regarding the differences between repair and recycling, as well as between repair and reconstruction It is crucial to understand the fine line that separates lawful repairs from trademark infringement.
616 Bristol-Myers Squibb and Others v Paranova A/S, supra note 139.
$18 Ibid., paras 53-55. still not been treated in either EU legislation of case law In this case, EU law seems less developed than US law.
National laws regarding the repair of trademarked goods vary significantly among Member States, with many countries, including Sweden, Greece, Hungary, Bulgaria, Poland, and Portugal, lacking specific regulations In contrast, countries like the United Kingdom, Italy, and Germany have established guidelines Italian law permits repairs as long as there is no alteration or detriment to the trademark, while German law is clearer, stating that exhaustion of rights is not applicable if the product is modified or worsened post-sale In Germany, whether a repair modifies the product is assessed on a case-by-case basis, and replacing expendable parts does not negate exhaustion; however, substantial changes to the product's substance do prevent exhaustion.
In cases where repairs are not visibly apparent and do not affect the functionality of the product, such repairs do not constitute a modification The National Group of Sweden addressed AIPPI's inquiries regarding the distinction between modification and non-modification of trademarked goods, particularly in relation to the exhaustion of rights.
IPRs in cases of recycling and repair of goods, p 6, .
620 Greece, Q205, The Report of the Group of Greece answered the questions of AIPPI on Exhaustion of IPRs in cases of recycling and repair of goods, p 2
*" Hungary, Q205, The Report of the Group of Hungary answered the questions of AIPPI on Exhaustion of
IPRs in cases of recycling and repair of goods, p 5,
.
5? Bulgaria, Q205, The Report of the Group of Bulgaria answered the questions of AIPPI on Exhaustion of
IPRs in cases of recycling and repair ofgoods, p 2,
5? Poland, Q205, The Report of the Group of Poland answered the questions of AIPPI on Exhaustion of
IPRs in cases of recycling and repair of goods, p 3,
.
64 Portugal, Q205, The Report of the Group of Portugal answered the questions of AIPPI on Exhaustion of
IPRs in cases of recycling and repair of goods, p 3,
.
5# Derclaye, Estelle, supra note 227, pp 22-23.
55 Italy, Q205, The Report of the Group of Italy answered the questions of AIPPI on Exhaustion of IPRs in cases of recycling and repair of goods, p 2,
.
5” Germany, Q205, The Report of the Group of Germany answered the questions of AIPPI on Exhaustion of
IPRs in cases of recycling and repair of goods, p 8,
.
%8 Ibid, p 8, °° OLG Karlsruhe GRUR 1995, 417, 419-Rolex-Uhren; OLG Stuttgart WRP 1995, 248, 254-Rolex, OLG
Miichen WRP 1993, 47-aufgearbeitete Kupplungen, ibid. °° BGH GRUR 1990, 678, 679 — Herstellerkennzeichen auf Unfallwagen, ibid.
53! BGH GRUR 2004, 758-Flugelradzahler, ibid. las
German court’s decisions is, to some extent, similar to the ruling of the US courts on the difference between the reconstruction and the repair of trademarked (and patented) goods.
The lack of EU regulations governing the repair of trademarked goods could hinder cross-border trade within the EU To address this issue effectively, it is essential for the EU to establish comprehensive legislation in the near future, potentially drawing on the established laws of its Member States and the United States as valuable references.
Legal consequences of trademark exhaustion .ccccccssesceessssssseessereseeeees 144 5.4 Exhaustion regime and parallel imports .cccccccccsssessesceesseereesscesccsseseeueasensenses 145 Sul, Decree Nee GSA ss aces sansnmamnan eisansmasmananinsannes inisnsicnneomawiennanisitinnnnnnnanreninasiniise 145 5.4.2 Circular No 825/2000/TT-BKHCNMT 0 c:cccsccscscesseseeesseeeseeeeseeseeneee 146 ce trungigu0TDG02/G9000G00000001E0000H9YIISHHSIBISGEINNGHHMHNGGHLS0G.300000T0T9500E5007000ĐHSDGBDNSGIAN80000)5800E/09⁄0SP5/GIG5E 147 5.4.3.1 International exhaustion for trademark :.ccccccsssssscessecsssseeessesseseeeenes 148 AI) 79 an ố ố ố
This chapter will delve into fundamental theoretical questions surrounding intellectual property rights (IPR) exhaustion, with a specific focus on trademark exhaustion Understanding the theoretical foundations of exhaustion is crucial for interpreting the laws and practices of various countries and regions regarding both IPR and trademark exhaustion Additionally, this exploration aims to provide recommendations for enhancing Vietnamese trademark law Key terminology related to IPR and trademark exhaustion will also be defined in this chapter.
This section addresses fundamental theoretical inquiries regarding Intellectual Property Rights (IPR) exhaustion, including its definition, the evolution of the exhaustion doctrine, and its relationship with the first sale and implied license doctrines It also explores the conditions that activate IPR exhaustion, the legal ramifications it entails, the various types of exhaustion regimes, and the social and economic impacts associated with each regime.
The exhaustion doctrine is a key principle in intellectual property law that defines the boundaries of exclusive rights held by intellectual property rights (IPRs) holders Its primary goal is to strike a balance between the interests of creators and the public, ensuring that once a product is sold, the rights of the owner to control its further distribution are limited.
7 Theory plays a very important role in determining the relevant practice and their relation is correlative.
The relationship between theory and practice is cyclical; theory informs practice, and through its application, theory is refined and enhanced For a deeper exploration of this concept, refer to Ngo, Doan Vinh's work, "A Discussion of Theory," published by the National Political Publishing House in 2009, pages 141-142.
'' This Chapter is based on the following main sources: Ganslandt, Mattias and Maskus, Keith E., /Pẹ,
The article "Parallel Imports and Strategic Behavior," published as IFN Working Paper No 704 by the Research Institute of Industrial Economics in Sweden, explores the implications of parallel imports on international trade dynamics It references key contributions from scholars such as David T Keeling, Steven D Anderman, Peter Ganea, and Christopher Heath, emphasizing the strategic behaviors that influence market interactions in the context of parallel imports.
The article discusses the implications of parallel imports in Asia, referencing key works such as Nuno Pires de Carvalho's contributions and Christopher Heath's edited volume on the subject, published by Kluwer Law International in 2004 Additionally, it highlights the significance of legal perspectives and definitions provided by experts like Bryan Garner.
A (ed.), Black’s Law Dictionary, 8" edn., Thomson West, 2004; Wehmeier, Sally (ed.), Oxford Advanced Learner's Dictionary of Current English, 6" edn., Oxford University Press, 2000; Fink, Carsten and Maskus,
Keith E., supra note 6; Abbott, Frederik M., Parallel Importation: Economic and social welfare dimensions, the International Institute of Sustainable Development, June 2007,
; Valetti, Tomasso and Szymanski, Stefan, Parallel Trade, International Exhaustion and IPRs: A welfare Analysis, Journal of Industrial Economics, 2006, 54: 499-526; Maskus, Keith E and Chen, Yongmin, Vertical Price Control and Parallel Imports: Theory and Evidence, Review of International Economics, 2004, !2:551-70>; Goldstein, Paul and Reese, R Anthony, Copyright, Patent, Trademark and Related State Doctrines: Cases and Materials on the Law of Intellectual
Property, Foundation Press, 6" edn., 2008; AIPPI, Working Guidelines, supra note 66; AIPPI, Resolution, supra note 66; Nimmer, Raymond T., Breaking Barriers: The Relation Between Contract and Intellectual Property Law, Berkeley Technology Journal ; Vol 13: 827,
; The NERA Study. ằ Doctrine, from Latin doctrina, means “a code of belief”, “a body of teaching”, or “instruction”, taught principles or positions, as in the body of teaching in a branch of knowledge or belief For the details of legal
Intellectual Property Rights (IPR) protection plays a crucial role in maintaining fair competition and market circulation The exhaustion doctrine states that once IPR owners place a product on the market or consent to its sale, they relinquish control over its further distribution This principle balances the interests of IPR holders with those of consumers, ensuring that once a product is sold, it can be freely traded without additional restrictions.
The exhaustion doctrine, developed by legal scholars and established through precedents, is crucial for interpreting laws and understanding the underlying policies of legislation It guides courts in decision-making, particularly within common law systems, where it supports intellectual property and competition law In common law countries, the exhaustion doctrine is considered a source of law, while in civil law countries, it significantly influences legal development despite not being formally recognized as a source of law For practical application, the doctrine must be enacted in statutes.
2.1.1.1 The formation and development of the exhaustion doctrine
The exhaustion doctrine was established to mitigate the legal monopoly of intellectual property rights (IPRs) by balancing the interests of IPR holders with those of consumers and ensuring effective competition in the market While IPR holders are granted a "bundle of rights," including exclusive rights, the exercise of these rights can create obstacles to the free movement of goods and services, distort competition, and restrict consumer access to products that embody IPRs Thus, the exhaustion doctrine serves as a crucial mechanism to alleviate conflicts between IPR protection and market dynamics, promoting a healthier marketplace.
Intellectual Property Rights (IPR) protection is essential for fostering economic development and enhancing social welfare, as creative products play a crucial role in these processes Economists, both classical and modern, acknowledge that economic growth is driven by two key sources: capital and labor, alongside technology, which encompasses intellectual property The relationship between these sources has evolved over time, highlighting the increasing importance of IPR in promoting innovation and economic progress.
Idris, the former General Director of WIPO, emphasized that tangible assets like land, labor, and capital were once the benchmarks for assessing economic conditions This perspective is not merely a doctrine; it is supported by discussions at the Northwestern University School of Law's conference on Legal Doctrine and Political Control A Vietnamese Dictionary defines doctrine as a structured system of ideas and interpretations within a specific field Doctor Ngo Doan Vinh further clarifies that a doctrine should encapsulate a coherent set of ideas and viewpoints related to a particular research subject, ensuring its verification and truthfulness.
5! Dainow, Joseph, The Civil Law and The Common Law: Some Ponits of Comparison, 15 Am J Comp. Law 419, 228 (1966-1967), cited by James G Apple and Robert P.Deyling, A Primer on the Civil-Law System, < http://www fjc.gov/public/pdf.nsf/lookup/CivilLaw.pdf/$file/CivilLaw.pdf>, p 19.
See Mayer, Jorg, Technology Diffusion, Human Capital and Economic Growth, United Nations Conference onTrade and Development, No 154, Jun 2001, ; FactorContributions to East Asian Economic Growth, . longer true anymore Nowadays, the new powerhouse of prosperity is knowledge-based property.” Thus, IPR protection becomes indispensable Intellectual property protection aims at encouraging creation, allocating and using these properties effectively, and harmonizing creators’ interests and these of other individuals and organizations There are different theses that have been used to argue for the need to protect IPRs.’ These arguments share a common point: exclusive rights must be granted to IPR owners for at least a certain period.
PHACHCS chuannnbnnuonrrinnidittiiitittiaitiTi0lBSGHHAEAEISESRSSASI455/8500501378/013000552048.0880101178390/080005E 157 5.6 Trademark exhaustion in cases of contractual restrICtIOnS . S.ccccscằ: 158 5.6.1 Contractual restrictions in trademark licensing contractS
This chapter will examine fundamental theoretical questions surrounding intellectual property rights (IPR) exhaustion, with a specific focus on trademark exhaustion Understanding the theoretical foundations of exhaustion is essential for interpreting the laws and practices of various countries and regions regarding IPR and trademark issues Additionally, this analysis aims to propose enhancements to Vietnamese trademark law The chapter will also define key terminology related to IPR and trademark exhaustion.
This section explores fundamental theoretical issues surrounding Intellectual Property Rights (IPR) exhaustion, including the definition of IPR exhaustion, its historical development, and its relationship with the first sale and implied license doctrines It also examines the conditions that activate IPR exhaustion, its legal implications, various exhaustion regimes, and the social and economic impacts associated with each regime.
The exhaustion doctrine is a legal principle in intellectual property law that defines the boundaries of intellectual property rights (IPRs) Its primary goal is to achieve a balance between the rights of IP holders and the interests of the public, ensuring that once a product is sold, the rights of the owner are limited in terms of further control over that product.
7 Theory plays a very important role in determining the relevant practice and their relation is correlative.
The relationship between theory and practice is reciprocal; theory informs practice, and through practical application, theory is refined and enhanced For a deeper exploration of this concept, refer to Ngo, Doan Vinh's work, "A Discussion of Theory," published by the National Political Publishing House in 2009, pages 141-142.
'' This Chapter is based on the following main sources: Ganslandt, Mattias and Maskus, Keith E., /Pẹ,
The 2007 IFN Working Paper No 704 from the Research Institute of Industrial Economics in Sweden explores the implications of parallel imports and strategic behavior in international trade Key contributions from authors such as David T Keeling, Steven D Anderman, Peter Ganea, and Christopher Heath provide insights into the complexities of parallel imports and their impact on market dynamics This research highlights the significance of understanding these factors in the context of global trade practices.
The article discusses the complexities of parallel imports in Asia, highlighting various legal perspectives and implications It references key works, including Nuno Pires de Carvalho's analysis and Christopher Heath's edited volume on the subject, which provide valuable insights into the regulatory landscape Additionally, it acknowledges Bryan Garner's contributions to the discourse, emphasizing the importance of understanding intellectual property rights in the context of international trade.
A (ed.), Black’s Law Dictionary, 8" edn., Thomson West, 2004; Wehmeier, Sally (ed.), Oxford Advanced Learner's Dictionary of Current English, 6" edn., Oxford University Press, 2000; Fink, Carsten and Maskus,
Keith E., supra note 6; Abbott, Frederik M., Parallel Importation: Economic and social welfare dimensions, the International Institute of Sustainable Development, June 2007,
; Valetti, Tomasso and Szymanski, Stefan, Parallel Trade, International Exhaustion and IPRs: A welfare Analysis, Journal of Industrial Economics, 2006, 54: 499-526; Maskus, Keith E and Chen, Yongmin, Vertical Price Control and Parallel Imports: Theory and Evidence, Review of International Economics, 2004, !2:551-70>; Goldstein, Paul and Reese, R Anthony, Copyright, Patent, Trademark and Related State Doctrines: Cases and Materials on the Law of Intellectual
Property, Foundation Press, 6" edn., 2008; AIPPI, Working Guidelines, supra note 66; AIPPI, Resolution, supra note 66; Nimmer, Raymond T., Breaking Barriers: The Relation Between Contract and Intellectual Property Law, Berkeley Technology Journal ; Vol 13: 827,
; The NERA Study. ằ Doctrine, from Latin doctrina, means “a code of belief”, “a body of teaching”, or “instruction”, taught principles or positions, as in the body of teaching in a branch of knowledge or belief For the details of legal
Intellectual Property Rights (IPR) protection plays a crucial role in ensuring fair competition and safeguarding market circulation The exhaustion doctrine asserts that once an IPR owner places a product on the market or consents to its distribution, they relinquish the right to control its further distribution This balance aims to protect the interests of IPR holders while also considering consumer rights.
The exhaustion doctrine, developed by legal scholars and established through precedents, is crucial in interpreting laws and guiding court decisions, particularly in common law systems where it supports intellectual property and competition policies While it serves as a source of law in common law countries, in civil law jurisdictions, it is not formally recognized as a source but has significantly influenced legal development For practical application, the exhaustion doctrine must be enacted into statutes.
2.1.1.1 The formation and development of the exhaustion doctrine
The exhaustion doctrine was established to mitigate the legal monopoly of intellectual property rights (IPRs) by balancing the protection of IPR holders with the need for market circulation and effective competition While IPR holders are granted a "bundle of rights," including exclusive rights, the exercise of these rights can create obstacles to the free movement of goods and services, distort competition, and limit consumer access to products embodying IPRs This highlights a potential conflict between IPR protection and the principles of free trade and competition Thus, the application of the exhaustion doctrine serves as a key solution to reduce these barriers and conflicts.
Intellectual Property Rights (IPR) protection is essential for fostering economic development and enhancing social welfare, as creative products play a crucial role in this process Economists, both classical and modern, acknowledge that economic growth is driven by two primary sources: capital and labor, alongside technology, which encompasses intellectual property The relationship between these sources has evolved over time, highlighting the increasing significance of IPR in promoting innovation and economic progress.
Idris, the former General Director of WIPO, highlighted that tangible assets like land, labor, and capital were once the benchmarks for assessing economic conditions This perspective is not merely a doctrine, as discussed in various academic settings, including the Northwestern University School of Law's conference on Legal Doctrine and Political Control in April 2005 A Vietnamese Dictionary defines doctrine as a systematic framework of ideas and theoretical interpretations within a specific field Doctor Ngo Doan Vinh emphasizes that a doctrine should encapsulate a coherent system of ideas and viewpoints regarding a particular research subject, ensuring it is validated and truthful.
5! Dainow, Joseph, The Civil Law and The Common Law: Some Ponits of Comparison, 15 Am J Comp. Law 419, 228 (1966-1967), cited by James G Apple and Robert P.Deyling, A Primer on the Civil-Law System, < http://www fjc.gov/public/pdf.nsf/lookup/CivilLaw.pdf/$file/CivilLaw.pdf>, p 19.
See Mayer, Jorg, Technology Diffusion, Human Capital and Economic Growth, United Nations Conference onTrade and Development, No 154, Jun 2001, ; FactorContributions to East Asian Economic Growth, . longer true anymore Nowadays, the new powerhouse of prosperity is knowledge-based property.” Thus, IPR protection becomes indispensable Intellectual property protection aims at encouraging creation, allocating and using these properties effectively, and harmonizing creators’ interests and these of other individuals and organizations There are different theses that have been used to argue for the need to protect IPRs.’ These arguments share a common point: exclusive rights must be granted to IPR owners for at least a certain period.
TRADEMARK EXHAUSTION IN LAW AND IN PRACTICE — A COMPARISON
Trademark exhaustion in cases of repair of trademarked goods 181 1 Compatibility with the TRIPS Agreemeit - nen seeiereire 181 2 Disparities by comparison with US and EU laws - cà 181] 6.6 Trademark exhaustion in cases of contractual restrICtIO'S c2 182 6.6.1 Compatibility with the TRIPS Agreement cà che 182
The repair of trademarked goods is a novel aspect of Vietnamese law, as discussed in Part 5.5 This section evaluates the compatibility of Vietnamese regulations on the repair of trademarked items with the TRIPS Agreement, while also identifying shortcomings in Vietnamese law when compared to the legal frameworks of the United States and the European Union.
6.5.1 Compatibility with the TRIPS Agreement
The TRIPS Agreement allows WTO members to establish their own laws regarding the repair of trademarked goods, requiring formal recognition of the legality of such repairs and the use of trademarks in this context (as noted in footnote 6 to Article 28 and Article 16.1) Vietnam's legal framework aligns with these TRIPS standards by permitting repairs of trademarked goods under the principle of trademark exhaustion, as outlined in Article 125.2(b) of the LIP This means that subsequent owners can repair trademarked items without interference from trademark owners, since the latter's rights to exploit the goods are relinquished once the goods are placed on the market with their consent However, current Vietnamese law does not explicitly address the legality of trademark use concerning repaired goods, despite its practical acceptance.
6.5.2 Disparities by comparison with US and EU laws
The recognition of the legality of repairing trademarked goods, stemming from trademark exhaustion, is a shared principle in Vietnamese law as well as in US and EU legislation In the US, this was established in the landmark Supreme Court case Champion Spark Plug, while the EU addresses it in Article 7 of Directive 2008/95/EC and Article 13 of Regulation (EC) No 207/2009 However, Vietnamese law lacks clarity on several aspects related to the repair of trademarked goods, including the definition of repair, the differentiation between repair and reconstruction, and the permissible extent of repairs.
US courts have clearly defined key questions regarding intellectual property law, highlighting a significant disparity between Vietnamese and US legal frameworks In particular, the distinctions between repair and reconstruction within this context are well articulated in US law.
865 Adler, Matthew D and Posner, Eric A (eds.), supra note 48, p 17.
18] courts Accordingly, repair is considered as a minor repair or refurbishment, whereas
The concept of "reconstruction" refers to creating a "new" or "different product," which has been clarified in various cases regarding the distinction between lawful repair and trademark infringement Specifically, altering trademarked goods to create a new product constitutes trademark infringement, while lawful repair, reconditioning, or refurbishment is permissible as long as it does not cause consumer confusion with the original product US courts recognize that providing sufficient notice of repairs serves as a valid defense against trademark infringement claims Additionally, in cases of parallel imports, the relevance of material differences and product quality diminishes if the goods are clearly labeled as repaired instead of new.
EU law regarding the repair of trademarked goods is less developed compared to US law and is similarly underdeveloped in Vietnam Both EU legislation and Vietnamese law lack specific provisions addressing the legality of repairs for trademarked items Additionally, there is a notable absence of European Court of Justice (ECJ) judgments on this issue, resulting in significant disparities among Member States' laws concerning the repair of trademarked goods To date, the ECJ has primarily focused on cases related to trademark usage in advertising and the repackaging of trademarked products, without addressing the implications of using goods after trademark exhaustion.
In Vietnam, the frequent repairs of trademarked goods highlight the need for clear regulations regarding such practices To address this gap, US law can serve as a valuable reference for developing new guidelines that govern the repair of trademarked items.
6.6 Trademark exhaustion in cases of contractual restrictions
Contractual restrictions are employed by trademark and intellectual property rights (IPR) owners to mitigate the effects of trademark exhaustion This complex issue intersects with intellectual property, contract, and competition law In Vietnam, the legal framework regarding trademark exhaustion under contractual restrictions is in place but lacks depth While Vietnamese regulations align with the TRIPS Agreement's open provisions, they are not as comprehensive as those found in the United States and the European Union.
6.6.1 Compatibility with the TRIPS Agreement
Vietnamese regulations on intellectual property rights (IPR) exhaustion, as outlined in Part 5.6, focus on territorial restrictions in license agreements for industrial property These restrictions may be either permitted or prohibited under the Law on Intellectual Property (Article 144.2(b)), and are also subject to limitations imposed by competition law (Articles 11.3 and 13.3 of the Law on Competition, alongside Article 28.2 of Decree No 116/2005/ND-CP) and contract law (Articles 122.1(b) and 128 of the Civil Code 2005).
8°” Karl Storz, supra note 79, paras 30 and 33.
Champion Spark Plug, Bulova Watch, and Karl Storz exemplify how specific stipulations align with the TRIPS Agreement This Agreement grants WTO Members the authority to create and define their own antitrust and competition laws, enabling them to manage and prevent anti-competitive practices related to intellectual property rights (IPR).
6.6.2 Disparities by comparison with US and EU laws
Vietnamese law on trademark exhaustion exhibits both similarities and significant differences when compared to US and EU laws, particularly concerning contractual restrictions While there are no explicit provisions in Vietnamese law, it aligns with US and EU interpretations on two key points: first, contractual restrictions lack legal effect against third parties, and second, such restrictions in industrial property license contracts are subject to intellectual property, competition, and contract law The following section outlines four main disparities between these legal frameworks.
Vietnamese law does not address whether territorial restrictions in trademark licensing contracts can prevent trademark exhaustion, a question that is clearly resolved in US and EU law Both jurisdictions assert that contractual limitations cannot prevent trademark exhaustion if the goods were sold by the trademark owner or with their consent For instance, the US Supreme Court in Quanta ruled that agreements imposing post-sale restrictions on goods do not avoid exhaustion Likewise, the ECJ in Peak Holding stated that "territorial restrictions [ ] cannot preclude the exhaustion."
Vietnamese law lacks clarity on whether breaches of contractual restrictions in trademark licensing agreements can be classified as trademark infringements, a distinction that is addressed in both US and EU law Under EU regulations, such breaches may qualify as trademark infringements if they align with Article 8.2 of Directive 2008/95/EC, which includes territorial limits; otherwise, they fall under contract law Similarly, US court rulings indicate that a breach of contractual restrictions can either lead to trademark infringement or be treated as a contract violation For example, a distributor's failure to comply with restrictions on customer types may be seen as trademark infringement, while violations regarding the resale terms of trademarked goods are typically remedied through breach of contract claims.
Vietnam's legal framework lacks clarity on the crucial issue of whether the trademark exhaustion principle or the freedom of contract principle takes precedence in cases of contractual breaches In contrast, both the United States and the European Union provide clear guidelines on this matter.
In both, the principle of trademark exhaustion prevails over the principle of freedom of contract (as indicated in Parts 4.1.5 and Part 4.2.5.) Intellectual property law should be
869 See analyses in supra Parts 4.1.5 for US, 4.2.5 for EU, and 5.6.2 for Vietnam.
?”! Peak Holding, supra note 83, paras 53-55.
8”? Polymer Technology Corp v Mimran, supra note 504.
83 The Report of the US Group, supra note 374, p 08.
183 the first choice in dealing with contractual restraints involving IPRs.°”4 “{F]reedom of contract prevails [over] inter-partes, and exhaustion prevails in extra-contractual situations.”®”°
Vietnamese law lacks specific provisions addressing the interplay between intellectual property, contract, and competition law regarding trademark exhaustion in the context of contractual restrictions In contrast, this relationship is comprehensively addressed in the legal frameworks of the US and EU, with US law offering particularly detailed guidance, as highlighted by the US Supreme Court's rulings.
Legal basis of trademark Gx HAUS 00 cenncmresmennnennnansnincsnaammmaseansncenins 190 7.4.2 Conditions, legal consequences and the trademark exhaustion regime
To ensure clarity and transparency, the conditions that trigger Intellectual Property Rights (IPR) exhaustion, the consequences of IPR exhaustion, and the exhaustion regime as a whole, should be explicitly outlined in the Law on Intellectual Property (LIP) and subsequent implementing and guidance decrees.
7.4.2.1 Amendments and supplements to LIP
An article on IPR exhaustion could be added to Part One of LIP providing that:
The rights associated with Intellectual Property Rights (IPR) become exhausted once the IPR-protected products are marketed by the owners or with their approval, limiting the ability to restrict circulation, importation, or exploitation of these products thereafter.
The proposed article emphasizes the importance of "consent" to clearly define when intellectual property rights (IPR) exhaustion occurs Specifically, it highlights that the current Article 125.2(b) of LIP focuses on the individual authorized by the trademark owner, rather than solely the owner's authorization Relevant EU law, including Article 7.1 of Directive 2008/95/EC and Article 13.1 of Regulation (EC) No 207/2009, serves as valuable references for this issue.
When different categories of intellectual property rights (IPRs) have varying exhaustion regimes, a clarification of the term "market" is unnecessary However, if an international exhaustion regime is applied uniformly across all IPR categories, the phrase "including overseas markets" may be included for clarity.
The rights of intellectual property rights (IPR) holders to restrict the circulation, importation, and use of their protected products are considered exhausted once these products have been placed on the market, including international markets, either by the IPR owners themselves or with their consent.
To enhance the clarity and applicability of intellectual property rights (IPR) exhaustion, specific stipulations for various IPR categories are essential Currently, Article 125.2(b) of the LIP addresses the exhaustion regime, including trademark exhaustion, but requires amendments due to its ambiguous interpretations There are two prevailing views: one suggests that international exhaustion encompasses all industrial property rights—patents, industrial designs, layout designs of semiconductor integrated circuits, geographical indications, and trademarks—while the other excludes trademarks To resolve this ambiguity, it is proposed that the regime of international exhaustion be explicitly applied to all categories of industrial property rights, thereby improving the legal framework surrounding IPR exhaustion.
2 Owners of industrial property objects as well as organizations and individuals granted the right to use or the right to manage geographical indications shall not have the right to prevent other from performing acts:
8° Similarly, in case a national exhaustion regime applies to all categories of IPRs, the article should be written:
The rights of intellectual property rights (IPR) owners to restrict the circulation, importation, and exploitation of IPR-protected products are considered exhausted once these products are placed on the domestic market by the owners themselves or with their consent.
However, in the case of Vietnam, the author favors an international exhaustion regime applying to all categories of IPRs.
193 a) b) Circulating, importing, exploiting utilities of products which have been put on the market, including oversea markets by the owners of industrial property objects or with their consent.
Vietnam could benefit from EU legislation, particularly Article 7 of Directive 2008/95/EC and Article 13 of Regulation (EC) No 207/2009, which state that trademark owners cannot prevent the use of their trademarks for goods once trademark exhaustion has occurred This principle establishes a crucial legal framework for the use of trademarks on repaired, recycled, or repackaged goods and related advertising after the original products have been marketed by the trademark owners or with their consent However, subsequent owners are prohibited from affixing the trademark to their own products unless they have an agreement with the trademark owners.
For comprehensiveness and consistency, LIP’s stipulations on industrial property right exhaustion (including trademark exhaustion) should include a provision connecting
The relationship between Article 124 and Article 125.2 clarifies that the rights of industrial property object owners under Article 124 are constrained by Article 125.2 Currently, this connection is not reflected in the law, prompting a proposal to revise Article 123.1(a) to state that "Rights to use industrial property objects are limited by the cases provided in Article 125.2 of this Law." This stipulation should be incorporated into Article 123 instead of Article 124 for two reasons: Article 123 serves as a general provision regarding the rights of industrial property owners, encompassing both Articles 124 and 125, and Article 124 specifically addresses the use of industrial property objects rather than the rights to their use.
7.4.2.2 Amendments and supplements to Decrees
To further refine Vietnam's trademark exhaustion law, Decree No 103/2006/ND-CP must provide clear guidelines on the two crucial conditions of the Law on Intellectual Property (LIP): "consent" and "put on the market" By detailing these conditions, the decree can effectively implement certain articles of LIP concerning industrial property, ultimately enhancing the country's trademark laws.
The Decree recognizes both express and implied consent regarding trademark use, specifying that consent is not valid if trademarked goods are produced or sold beyond the quantity authorized by the trademark owner, thereby constituting trademark infringement Additionally, it clarifies that the burden of proof lies with infringers, who must demonstrate that the industrial property rights-protected products were marketed with the express or implied consent of the respective owners.
Article 21.2 of Decree No 03/2006/ND-CP recently introduced the "put on the market" condition, yet it remains inadequately addressed in Chapters 5 and 6.
8” Article 124 clarifies the use of industrial property objects that are already recognized in Article 123.
Article 125.2 outlines the circumstances under which owners of industrial property rights cannot prohibit others from utilizing their property This provision is part of the ongoing amendments and updates to Decree No 103/2006/ND-CP.
The "put on the market" condition requires clarification regarding who is responsible for placing goods on the market and the criteria for when a product is considered as such Typically, trademark owners or their licensees are the ones who put goods on the market A product is deemed to have been placed on the market when a sale occurs that allows the trademark owner to benefit economically from the trademark, aligning with the theory of Intellectual Property Rights (IPR) exhaustion This concept asserts that IPR owners should be compensated for their creative efforts and expenses, a principle reflected in the rulings of both US and EU courts concerning market placement, as discussed in Chapter 4.