Luận án tiến sĩ luật học: Trademark exhaustion and proposals for an improvement of Vietnamese trademark law

Keywords: IPR exhaustion, trademark exhaustion, the TRIPS Agreement, US law ontrademark exhaustion, EU law on trademark exhaustion, Vietnamese law on trademarkexhaustion, conditions trig

LUND UNIVERSITY HANOI LAW UNIVERSITY

NGUYEN NHU QUYNH

TRADEMARK EXHAUSTION AND

PROPOSALS FOR AN IMPROVEMENT OF

VIETNAMESE TRADEMARK LAW

i

SUPERVISORS: PROF DR KATARINA OLSSON

ASSOCIATE PROF DR BUI DANG HIEU

ABSTRACTIPR exhaustion not only signals the end of an IPR owners’ distribution rights regarding aparticular product but also serves as the basis for solving many trade-related matters,particularly parallel imports, repairs (and recycling or reconstruction) of IPR-protectedgoods, and anti-competitive practices involving IPRs The settlement of IPR exhaustion-related issues requires the intervention of policies, international conventions and nationallaws, and many areas of law, including at least intellectual property, competition andcontract law Still, the utility of the exhaustion doctrine and measures for the exploitation

of that utility are not always fully recognized, particularly by developing and leastdeveloped countries This thesis focuses on trademark exhaustion and provides acomparison between Vietnam’s trademark exhaustion rules both in law and in practice andthose of the TRIPS Agreement, the US and EU Notwithstanding this delimitation, itssolutions should be useful for developing countries other than Vietnam Its goals are tohelp those countries to design their trademark laws (and to some extent, their relevantpolicies) with a view to complying with the TRIPS Agreement, fitting their socio-economic contexts, and fostering economic growth and social welfare

Keywords: IPR exhaustion, trademark exhaustion, the TRIPS Agreement, US law ontrademark exhaustion, EU law on trademark exhaustion, Vietnamese law on trademarkexhaustion, conditions triggering trademark exhaustion, legal consequences of trademarkexhaustion, parallel imports of trademarked goods, repairs of trademarked goods, andtrademark-related contractual restrictions

PREFACEThe exhaustion of IPRs has not so far been the subject of significant legislation at the

international level It is still “one of the most heatedly debated IP-related topics” ' and

“[p]erhaps one of the most trade-related issues in the field of intellectual property."” The

issue has attracted the attention of researchers in both law and economics

Trademark exhaustion, like IPR exhaustion in general, is an exception to the scope of IPRs.Recognition of IPR exhaustion serves to balance the conflict between the interests of IPRholders and those of consumers and maintains reasonable equality between IPR protectionand the circulation of goods and service as well as healthy competition The applicability ofthe trademark exhaustion principle has undeniably been valuable Nonetheless, bothdeveloped and developing countries have faced difficulties in designing laws dealing withtrademark exhaustion-related matters Many issues relating to the exhaustion doctrine and totrademark exhaustion in particular are still controversial, especially where the economicaspects are concerned Those are my reasons to embark upon this research I hope it willserve a reference point for readers who are interested in the trade-related aspects of IPRs,particularly in the exhaustion doctrine and trademark exhaustion, the conditions triggeringtrademark exhaustion, the legal consequences of trademark exhaustion, the exhaustionregime for trademark and parallel imports of trademarked goods, trademark exhaustion incases of repair of trademarked goods, and trademark exhaustion in cases of contractualrestrictions In addition, it contains advice for law and policy makers, especially those ofVietnam, in tailoring policy and law on the issues

Looking back after almost five hard years of research, I would like to record theinvaluable help of the kind people enveloping me and my passions and endeavors Thisdissertation would not have been possible without their support and I would like to

express my deepest gratitude to all who have ever helped me

First and foremost, I would like to offer my wholehearted thanks to my wonderfulsupervisors, Professor Katarina Olsson and Associate Professor Bui Dang Hieu, for theirinsightful conversations during the development of the ideas in this thesis and for helpfulcomments on the text My supervisors have shared their immense knowledge, experiences,

and precious time with me whilst allowed me room to work in my own way I learned

from their academic, stern but friendly attitude to students as this encouraged me to putmore effort into the research My supervisors were happy with my preliminary results andwere willing to give me their help at any time in dealing with difficulties which arose |

am very fortunate to have them to go with me on the rough road during the past years

It is a pleasure to express my special gratitude to the project Strengthen Legal Education

in Vietnam (funded by the Swedish International Development Cooperation Agency) andthe Faculty of Law, Lund University These organizations have given me the opportunity

' Ganea, Peter, Exhaustion of IP Rights: Reflections from Economic Theory, Institute of InnovationResearch-Hitotsubashi University, Japan, 2006 See also Gallego Beatriz Conde, The principle ofexhaustion of rights and its implications for competition law, International Review of Intellectual andCompetition Law, IIC 2003, 34 (5), pp 473-502.

? This is Thomas Cottier’s observation, cited by Sheckhtman, Ekaterina and Sesitsky, Evgeniy, Exhaustionand Parallel Importation in the Field of Trademarks, 2008, <http://www.turin-ip.com/research-papers/papers-2008/Shekhtman-Sesitsky.FINAL.pdf>.

ii

to be im the Joint Doctoral Training Program and realize my dreams of engaging in suchstudy I have benefited from the magnificent library and advanced computer system of theFaculty of Law which greatly enrich my dissertation My most fruitful and intensiveresearch time has been in this cordial refuge I would like to thank the professors,librariams, and other staff of the Faculty.

In the course of my years of research, I also have had the privilege and pleasure ofreceivimg precious support from and spending fruitful time at a number of excellenteducational and research centers, national and international organizations, andgovemmental offices These are: Suffolk University Law School (Boston, US), WIPO,WTO, Max Planck Institute (Munich, Germany), the European Patent Office and, inVietnam, the Inspectorate of the Ministry of Science and Technology (MOST) theNational Office of Intellectual Property (NOIP) of MOST, the CompetitionAdministration Department (VCAD) of the Ministry of Industry and Trade (MOIT), theExports and Imports Administration Department of MOIT, the Drug AdministrationDepartment of the Ministry of Health, the General Department of Customs of the Ministry

of Finance, and the People’s Supreme Court I greatly benefited when the Japanese PatentOffice published my first English article on the Vietnamese law on IPR exhaustion in themagazine of the IP Community (in 2007) After its publication, I received many valuablecomments which have been useful in the subsequent development of my dissertation |would like to thank WIPO for inviting me to return to Geneva in 2010 to carry out aresearch on the use by WIPO Member States of exhaustion-related intellectual propertyprovisions to address anti-competitive practices within the Project on Intellectual Propertyand Competition Policy The arguments below, particularly those on competition-relatedtrademark exhaustion have been strengthened by my work with the WIPO project Also, Iexpress my sincere gratitude to the Vietnamese Ministry of Science and Technology forpermitting me to write some parts of the Circular guiding the Decree No 97/2010/ND-CP

of the Government on sanctioning administrative violations in the domain of industrial

property, also in 2010 Such parts (they are on parallel imports; reuse, recycling, andrepair of industrial property right-protected goods; and production and marketing ofindustrial property right-protected products in excess of the rights granted to industrialproperty right owners) closely link to my dissertation Through discussions with thedrafting group, my ideas on these issues were improved More importantly, my ideas forimproving Vietnamese law on them have been used in a legal normative document

I would like to gratefully acknowledge the invaluable support of Hanoi Law University

My university granted me the best conditions for completing this dissertation My specialthanks go to the Board of Rectors, the Department of foreign relations, the PersonnelOffice, and the Faculty of Civil Law I am aware and fully appreciate that my colleagues

in the Center of Intellectual Property Law and the Division of Civil Law have beenburdened with additional teaching hours due to my frequent, lengthy absences

On an individual level, many have given their time, knowledge, and experience inassisting my research I have received Professor Christina Méell’s warm guidance andeffective help in both study-related and practical matters, especially in the first three years

of the project when I was a very immature PhD candidate I have also been supported inmany ways throughout the process of writing up my research by Assistant Professor BengtLundell who is one of the people most involved in the whole program His seasoned

experience and knowledge of international issues mixed with his understanding ofVietnamese have helped me out in many puzzles I convey a special acknowledgement tohis significant contribution in smoothing my research schedules both at home and abroad.

I would love to emphasize my thanks to Professor Hans Henrik Lidgard When I firstasked him about parallel imports, I knew nothing more than the terms “parallelimports” and “IPR exhaustion.” I was interested in them but worried by their novelty,and I was very hesitant to select the subjects for the proposal for PhD research.Professor Lidgard erased my hesitancy and triggered my passion for doing research ontrademark exhaustion Furthermore, he has given me continuous encouragement andbeen a constructive voice during seminars even when he was not a member of theExamination Panels The encouragement of Professor Lars-Géran Malmberg and hissincere regards have fostered my study since the time I was a master student at LundUniversity I fully appreciate the opinions on comparative method of ProfessorMichael Bogdan Those opinions made me more confident in using such a method anddevoting a whole chapter of my dissertation to comparison

It is a pleasure to pay tribute also to Professor Birgitta Nystrém, Professor Hans-HeinrichVogel, Assistant Professor Eva Lindell-Frant, and Dr Tran Le Hong for their constructivecriticism and useful feedback during and after the seminar I gratefully acknowledge theirimportant contribution to improving my dissertation

I thank Dr Nuno Pires de Carvalho for his tireless help in the whole process of my doingresearch I gratefully thank Dr Christopher Heath, Dr Carsten Fink, Dr Peter Ganea.Professor Margaret Chon, Associate Professor Jessica Silbey, Associate Professor Stephen

M MacJohn, Assistant Professor Ulf Maunbach, Associate Professor Pham Duy Nghia,

Dr Pham Dinh Chuong, Dr Pham Hong Quat, and Mrs Tu Viet Lan for acting as patientinterviewees in many discussions carried out over long-distance via e-mails In particular,

many thanks go to Dr Pham Hong Quat, Mrs Le Hong Van, and Mr Nguyen Thanh

Hong for helping me overcome the difficulties in selecting and accessing the officialdocuments of the trademark exhaustion-related cases in Vietnam Thank to these cases,

my writing on trademark exhaustion in law and practice of Vietnam becomes moreconvincing I record here the help of Professor Stephen Hicks in arranging and following

up my discussions with scholars of intellectual property law when I was in Boston in the

US and afterward Also, many thanks go to Philip Horowitz for his care and patience inreviewing my English

This dissertation would not have been existed without my long-suffering family From thebottom of my heart, I thank my parents, Niet Nguyen and Hue Tran, for teaching me and

my younger sister about the importance of study, giving us the privilege of being able tostudy, and raising us with their gentle love and care This dissertation is one of my efforts

to keep them happy with the achievements of their two daughters I owe much to myparents-in-law and my parents for their support of my extensive study and theirconsiderate care for my daughter when I was abroad

Words fail me in expressing my indebtedness to the sacrifice of my small family Luu

Dinh, I fully understand how much difficulty he has experienced when I have been far

away from our home His love and other contributions given without complaint have

IV

supported me through all the stress of every step of the journey Devotion to Titti QuynhTrang, my little daughter, has been a motivation for me to complete this dissertation.

In addition, many thanks are due to my friendly and cheerful group of fellow students Wehave wholeheartedly shared challenges and pleasures during the years of our research |hope to keep up our collaboration in the future

Finally, I would like to apologize to all who contributed to the realization of thisdissertation but were not mentioned personally

The law is stated in this dissertation as in force on 15 April 2011

Nguyen Nhu Quynh

Association of South East Asian NationsCourt of First Instance (European Court of Justice)Consumer Unity and Trust Society (India)

European CommunityEuropean Court of JusticeEuropean Economic AreaEuropean Economic CommunityEuropean Federation of Pharmaceutical Industries andAssociation (US)

European Free Trade AssociationEuropean Union

Food and Drug Administration (the US)General Agreement on Trade in ServicesGeneral Agreement on Tariffs and TradeInternational Centre for Trade and Sustainable Development(UNCTAD)

Intellectual Property Rights)Law on Intellectual Property 2005 (Vietnam)The Study “Zhe economic consequences of the choice of aregime of exhaustion in the area of trademarks”, undertaken

by National Economic Research Associates-NERA (EU),1999

National Intellectual Property Office (Vietnam)Ministry of Industry and Trade (Vietnam)Ministry of Science and Technology (Vietnam)Organization for Economic Cooperation and DevelopmentResearch and Development

The Treaty establishing the European Community

VI

Council for Trade-Related Aspects of Intellectual Property(WTO)

United NationsUnited Nations Conference on Trade and DevelopmentUnited State of America

Vietnam’s Competition Administration DepartmentThe United States Patent and Trademark OfficeThe Office of the United State on Trade

World Health OrganizationWorld Intellectual Property OrganizationWorld Trade Organization

TABLE OF CONTENTS

ABSTRACT c- co GB ni a 5202208 en aiine 201g s6 tie 28 nga in ie vss gui in ii V8 yas nny s14 60088 V4180i6.4 1 3277.1012 a ll ABBREVIATIONS 1n ẻ vi TABLE OF CONTENTS : : - 0200002002020 01 0016011010104 tá cá xà cá cde sesenensscecerseensensenesacensavenss VINH CHAPTER 0100)06).40))000 909107 lID: v2.2 |

Lo PETERS cine ea elms a i ec cence bats eta aes È1.3 Delimitation 0 41.4 Methods 0 91.0 Prewiges research and Materials) seseensessesnusnniinnoittintnsianegidtdiUSN000000193850205008000540040100000098000038% 14_O EEE 17IyAeuada 0 19

¡ CHAPTER 2: THEORY ON IPR EXHAUSTION AND PARTICULARLY TRADEMARK

"EXHAUSTION ccssccsssssssssssscssscssscssscsssscsssecssscsssccssscssscsssessuecssecasecssecssssanecssscesessneeesseenseees 21

2.1 Theory on IPR exhausfIOIn - 0 SH HH ng 21PRI be OG SU 212.1.1.1 The formation and development of the exhaustion doctrine 222.1.1.2 The exhaustion doctrine in relation to the first sale doctrine and the impliedlicense COCtrINE d6 SH HH 000300710 272A 2s IPR EXHIAHSUDIH eoeesboanoinnsnnniroitesntosipigbiEIDNS08G010NS00I08080001G8IĐDXEISHESNEEUEUEENHGSEIEH 292.1.2.1 The concept of IPR exhaustion - - G55 ng ng 292.1.2.2 Conditions triggering IPR exhaustion - GĂ nhe eeeu 302.1.2.3: Legal consequerices Of TPR exhaustion sesoeoeeeeaadeseiinrennsenainnasrdspis 332-13 Types OF SXHAUSHON FEBÏTf6 can cess tinsndaa biernaue 11158500161 268852 352.1.3.1 National exhaustion ccccccsecssessssececeeteeceeeesseceneeeeesseeeeseaseeseseeeesensons 352»1.3,2 REGIONE] 6KHUSHGII seccsceccsnmcenesasanneness ceniaeaetsannsen aE GHSS000G006191846415000/105876 372.1.3.3 International exhaustiOn - c5 ng như 382.1.3.4 ConcÏuSiOn ST TH nu no ke 41

22 THEöYY Gii traderiiaFk GXNAUSTION WW 101.01 csssisias ngeitua nga gen 0àg10161001401121)03086205136036508938 432.2.1 Definition and functions of trademark - - 5< S5 9 vn krsvre 432.2.2 Features of trademark exhaustion - - ng ngàn 452.2.2.1 Trademark exhaustion may be forestalled by the origin indicating anddistinguishing function of trademarks - - - - 5 HH Hy Hư 452.2.2.2 An international exhaustion regime better fits trademark 472.2.2.3 Trademark exhaustion significantly affects certain products 492.2.3 Trademark exhaustion in some commercial activities «+ <<« 492.2.3.1 Parallel import of trademarked goods - - che 492.2.3.2 Repair of trademarked Øö05 s 4544485 n2 66: 385 01555 0Hš GE 380556 380006/014004388 522.2.3.3 Contractual restrictions and trademark exhaustion -. - >»- 53

MS DN cy nn 57, CHAPTER 3: TRADEMARK EXHAUSTION UNDER THE TRIPS AGREEMENT 58B.L Introd uction ccccsssscccssssceesssecesscessnecessneessneecseaceeesecescsenaaeseseaeseeseeeeseseeecenaconaeeesseons 583.2 International conventions related to trademark exhaustion - sec ceeeee 582.2.1, The Patis CoiiVeföOT ee-oesiesseeeereeeeessdoksrnrsseesseoeingkesienazdiu Sii055008.0.d093000880i80 188 60

eA Í Ï nagnvossaagtaettnistuetetenrsaeviEÌBS0E90E010010 0955 M00800100G008-8040'-DS/2NBIGI-GRG 0010GM0051200045.000g000000013005 62

3.3 An overview of the TRIPS Agreemert - cc < t1 cv 21 HH g1 H1 Hy rệt 63 doth Features OF De: 1P Agree ssssssreeveoerrenstrggrrirnsintrsBSNBi cami 1714018000.7.180083 84 63 3.3.2 Principles of the TRIPS Agreement .- S121 2E cv 65

3.3.3 The concept of consistency with the TRIPS Agreement -.- 67

3.4 Trademark exhaustion-related issues under the TRIPS Agreement 67

3.4.1 Conditions triggering trademark exhaustion - 5c ccccsxcccccsesee 68 3.4.2 Legal consequences of trademark exhaustion c5 55s c<cssxzeces 70 3.4.3 Trademark exhaustion regime under the TRIPS Agreement 71

3.4.3.1 TRIPS flexibilities and the exhaustion regime - 7c c2 qe 3.4.3.2 Relevance to the Paris Convention and to GA TT « «5< s<s<2 75 3.4.4 Trademark exhaustion in cases of repair of trademarked goods 77

3.4.5 Trademark exhaustion in cases of contractual restrictions - ‹‹- 77

BAS: LPM RTA A os, scsaposss sarsaenanarncnnn ormtemenasamctansn seacwenametierevaretandithiinaennmenemenanns 78 3.4.5.2 Minimum standards - cv v.v 1101111711111 1111111111111 ke 80 3.5 Concluding 0o chẽ §2

CHAPTER 4: TRADEMARK EXHAUSTION IN THE LAW AND PRACTICE OF THE US AND TE oe vu nneenneenesgnnnnnnnies << 960690000661000010060080906060106100.98iss2DDESĐSVĐSGSERSSSDDNEEESEIDESEIIBDHDHSDBDHREEESNPNHSSRSSM §3 Á L1, UỄ cuyneiiiniiessniobsiisissgissgSESES41014805003559561KSYEDSSGDIESSSE.SSESSS0519S5XEXEESESSIS4194490052581 83 4.1.1, Legal basis Tuy Iradeifidtk eVHBHUSÙOiisesesnseseesunnrssrbnnntndnioruistoorndrirgriiisadsg 83 4.1.2 Conditions and legal consequences of trademark exhaustion 84

4.1.2.1 Conditions of trademark exhaustiOn G1 it 85 lu] cee LR CONSEQUENCES massessnnnrtrttrrorntbtrrrertvtetisgtetrtnoitotiSTDHGEHDEREUEAIEGGHN010090000108058003000 87 4.1.3 Exhaustion regime for trademark and parallel importation - 88

4.1.3.1 Continuous efforts to bar parallel imports cesses 55 5 5< 91 me, 89 4.1.3.2 A restriction on parallel importation of pharmaceuticals 96

4.1.4 Trademark exhaustion in cases of repair of trademarked goods 98

4.1.4.1 Legality of repair of trademarked goods -. cà sec 99 4.1.4.2 Distinction between repair, reconstruction, and recycling - 99

4.1.4.3 Lawful repair and trademark InÍringemeiI -sscsccererrrree 101 4.1.5 Trademark exhaustion in cases of contractual restrictions - 103

4.1.5.1 Contractual restrictions and the survival of trademark exhaustion 103

4.1.5.2 Trademark exhaustion in cases of breach of contractual restriction 106

4.1.6 COTICÏUSIOT 7G G 2 G0 Ọ TH họ T09 6e 108 AD, TEU ả dan 4 ng at cts st EBLE TREK RR RRL SCOR GN 108 4.2.1 Legal basis for trademark exhaustion - se, 109 4.2.2 Conditions and legal consequences of trademark exhaustion 111

4.2.2.1 Conditions triggering the regional trademark exhaustion 112

4.2.2.2 Legal consequences of the regional trademark exhaustion 114

4.2.3 The regional exhaustion regime and parallel importation - 116

42.3.1 The regi” me of regional GRHAUSTON sesseesassseennnonntrstiriirtrdrornigtotgtnstgsrgekEoash 116 4.2.3.2 Repackaging of parallel-imported pharmaceuticals -‹- 119

4.2.4 Trademark exhaustion in cases of repair of trademarked goods 124

4.2.5 Trademark exhaustion in cases of contractual restriction 126

4.2.5.1 Contractual restrictions and survival of trademark exhaustion 126

4.2.5.2 Trademark exhaustion in case of breach of contractual restriction 127

AZ G COMOIIBIO Rag -e«eesseseosroegudoninsoaiudestsitgiiocguiAi0srđiipsEioguiicsiogiiogBiidSiHILBNHUESA300511030 98008881 131 4.3 Concluding rernaTKS - 5 5H HH HH TH C00711 70 132

v_ CHAPTER 5: TRADEMARK EXHAUSTION IN THE LAW AND PRACTICE OF VIETNAM.133Dood c HOE WOE NO vccsenesssn ss ncxmeaawannseamsamnseuns asnanwsnatianensiievuanéoaunumnneannmasansasnuenanaveneneenneunnswnneens 1335.2 Legal basis of trademark exhaustion cccccsccssecesseesceseecsseesaeeesscensesseseeeceseeesse 1335.2.1 An overview of Vietnam’s intellectual property laW c.ccccceccey 1345.2.2 The provisions on trademark exhaustion 00 cccccccsececceessccseeessessseseens 1375.3 Conditions and consequences of trademark exhaustion - +ccccccscc<x s2 1385.3.1 Conditions triggering trademark exhaustion :ccccscccssecessscesseessseseeeees 139

Ae eee ]klE SxensanurinnvietrtenernnstinotgiidgSGi0GL2N1.03518029000160080.5900800101300038 388 139

5 Bala2s THE 6 an ẽố.ố.ốố ố ẽố 1415.3.2 Legal consequences of trademark exhaustion .ccccccssesceessssssseessereseeeees 1445.4 Exhaustion regime and parallel imports cccccccccsssessesceesseereesscesccsseseeueasensenses 145Sul, Decree Nee GSA ss aces sansnmamnan eisansmasmananinsannes inisnsicnneomawiennanisitinnnnnnnanreninasiniise 1455.4.2 Circular No 825/2000/TT-BKHCNMT 0 c:cccsccscscesseseeesseeeseeeeseeseeneee 146

ce trungigu0TDG02/G9000G00000001E0000H9YIISHHSIBISGEINNGHHMHNGGHLS0G.300000T0T9500E5007000ĐHSDGBDNSGIAN80000)5800E/09⁄0SP5/GIG5E 1475.4.3.1 International exhaustion for trademark :.ccccccsssssscessecsssseeessesseseeeenes 148AI) 79 an ố ố ố 1505.4.4 Parallel imports of pharmaceutiCaÌS «6s Sáng xe 1525.4.4.1 Definition of parallel import of medicines - 5c ss« se 1535.4.4.2 Conditions of parallel imports - Ăn ng, 1535.4.4.3 Specific cases of parallel imports Gv vn sư 1545.4.4.4 Repackaging and sticking of auxiliary labeÌS «55s s2 1545.5 Exhaustion in cases of repair of trademarked goods -‹ 5< «+ s+<v<<+ 156

ee ee 1565.5.2 PHACHCS chuannnbnnuonrrinnidittiiitittiaitiTi0lBSGHHAEAEISESRSSASI455/8500501378/013000552048.0880101178390/080005E 1575.6 Trademark exhaustion in cases of contractual restrICtIOnS S.ccccscằ: 1585.6.1 Contractual restrictions in trademark licensing contractS 1585.6.2 Territorial restrictions and trademark exhaustion - -‹«sc<< << 1595.7 Concluding r€TTIATKS << s9 Họ Ti nh ngư 163CHAPTER 6: TRADEMARK EXHAUSTION IN LAW AND IN PRACTICE — A COMPARISONBETWEEN VIETNAM AND THE TRIPS AGREEMENT, US, AND EU . 1656.1, IntrodUction cssssnianamsasannaas emai inane ARNE nENARD EARS 1656.2 Legal basis for trademark exhauStiOn Gv ng HH Hệ, 1656.3 Conditions and legal consequences of trademark exhaustion - «5< «- 1666.3.1 Conditions triggering trademark exhaustion -. s55 s« se 1666.3.1.1 COMSENL 8 166

MR CoM 0 oe 1676.3.2 Legal consequences of trademark exhaustion sccesseessseeeeeeeeeeceesseneees 1686.4 The exhaustion regime and parallel ImportatiOrn - 5s ng ren 1696.4.1 TRIPS flexibility and difference at exhaustion regIme -. ««: 1696.4.2 Justification for the CiMlerente ccs isssiscacsncrmenccanrs cacccnmcsneanmarmanmnaasssernes 1706.4.2.1 The US and the EU: The role of policy 0.0.0 ccecceeeseseessereeeeesseeeseeseeseasees 1706.4.2.2 Vietnam: A compliance with the socio-economic context and policy 1736.5 Trademark exhaustion in cases of repair of trademarked goods 1816.5.1 Compatibility with the TRIPS Agreemeit - nen seeiereire 1816.5.2 Disparities by comparison with US and EU laws - cà 181]6.6 Trademark exhaustion in cases of contractual restrICtIO'S c2 1826.6.1 Compatibility with the TRIPS Agreement cà che 182

6.6.2 Disparities by comparison with US and EU laws -ccc s55 183

a 184 CHAPTER 7: PROPOSALS FOR THE IMPROVEMENT OF VIETNAMESE LAW ON TRADEMARK EXHAUSTION 0 ccessseeseccccenesterecsecensseeccereuseecesaueeseccusanseseeeensanegeesesessqes 186

II Noo 0v (OQT.ddẨ 186

tuc cối ó0 45 186

Vidic TỘIREEIÌEHTEoneeiananasandindtbisaniiagidinnoidiuantigdb8,cseeaZd64008l06g0.0903gg440s1g46-B0id.psgiiggessoseiadskscliudinsrozgEiI88001 187 7.4 Specific proposals 1 a 190

74.1 Legal basis of trademark Gx HAUS 00 cenncmresmennnennnansnincsnaammmaseansncenins 190 7.4.2 Conditions, legal consequences and the trademark exhaustion regime 193

7.4.2.1 Amendments and supplements to LÍP - - 55+ + sssssxssxsee 193 7.4.2.2 Amendments and supplements to Decrees 6+5 <<<s+ssseecxe 194 PAS Parallel WAPOA seoesce-sa<-<escodgHg HE gà gÄ20sonsg SNGEINNSEG.E.2đ08ixziisuioiđgi1zgi0a06800388 195 7.4.3.1 A new Circular on parallel] impOrtS che 195 7.4.3.2 Provisions on the quality control of parallel imported goods 197

7.4.3.3 Provisions on the price management of imported goods 198

7.4.3.4 Amendments and supplements to Decision No 1906/2004/QD-BYT 198

7.4.4 Trade mark exhaustion in cases of repair of trademarked goods 200

7.4.4.1 Definition of repair of trademarked goods + cà sex cee 200 7.4.4.2 Legality of repair of trademarked goods - 5S c cà eeccecer 201 7.4.4.3 Repairs of trademarked goods as trademark infringements 201

7.4.5 Trademark exhaustion in cases of contractual restriCtIOnS - 202

7.4.5.1 General direction of the improveme€nI - sư 202 7.4.5.2 Supplements to the current legisÌatIOI -.- sàng 203 7.5 Summary anid final remarks vscscnssiocessessesoveanmnansnsserenncenonemncnssticansenesconceiwncaveness 204 APPENDICES saccceseceresapepsswesanqusencspsaqweneqadcratingsesstnaccsnesoncnensenshiiedhili dei Shiai iW ATTEN 206 TABLE OF CASES pcccccsscescxsevsmensvsennsvenensensennneerne nner eccuseveumeraneenseesesuesavsien quenstuniedeetisecenicesinies 215 OFFICIAL DOCUMENTS HH ng HH HH HH gi 220 )18900.7 10) 226

CHAPTER 1INTRODUCTION1.1 Background

IPR exhaustion derives from the exhaustion doctrine that has now been incorporated intothe national laws of many countries as a result of the implementation of the TRIPS

Agreement, which allows states to do so (Article 6).” The doctrine was originally created

to put a limitation on the exclusivity of IPRs as it determined the point at which certainIPRs relating to a specific product ended According to the doctrine, IPR exhaustionoccurs when the products are put on the market by or with the consent of the IPR ownersafter which they no longer have the right to control the further circulation of the products.The buyers, at least, have their discretion in using, giving, offering for sale, and re-sellingthese products The right to control imports or exports of the products is, in principle, also

so limited when a regional or international exhaustion regime is applied

IPR exhaustion is recognized as an extremely complicated issue because of its linked legaland economic aspects Further, it covers the area where intellectual property law and

competition law interact.* “The relationship between intellectual property protection and

competition policy raises complex issues, which have received different legislative

solutions and produced a controversial and abundant literature.”° More specifically, the

exercise of exclusive IPRs may cause non-tariff barriers to consumers’ access to protected goods and services and thus to the smooth circulation of these products Theapplication of the exhaustion doctrine aims at balancing the conflict between the interests

IPR-of the IPR holder and those IPR-of consumers and between IPR protection and safeguardingfree market circulation From the point of view of international trade, the fundamentalpurpose of the exhaustion doctrine is to prevent intellectual property owners from usingtheir exclusive rights to partition the global market IPR exhaustion is at heart, therefore,not so much a matter of intellectual property as such but rather of economics It is alsodifficult to assess the effects of every type of exhaustion regime The effects of eachexhaustion regime “differ[s] widely among countries, [industries] and across the various

forms of IPRs”.° With respect to countries, the US favors national exhaustion, the EU opts

for a regime of regional exhaustion while the situation is less clear in certain otherdeveloped countries With respect to IPR forms, an international regime seems to be moresuitable for trademarks than for patents and copyrights

With respect to international legal instruments, the TRIPS Agreement is the mostimportant legal too! dealing with IPR exhaustion in general and trademark exhaustion in

? The TRIPS Agreement is Annex IC of the Marrakesh Agreement Establishing WTO, signed in Marrakesh,

Morocco on 15 Apri! 1994, <http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm>.

* On the interaction between intellectual property law and competition law, see Anderman, Steven D (ed.),

The Interface between IPRs and Competition Policy, Cambridge University Press, 2008; Pham, Alice, Competition Law and Intellectual Property Rights: Controlling Abuse or Abusing Control? CUTS International, Jaipur, Inida, 2008; Hart, Tina & Fazzani, Linda & Clark, Simon, Hart, Tina & Fazzani, Linda

& Clark, Simon, /ntellectual Property Law, 5" edn., Palgrave Macmillan, 2009.

? UNCTAD-ICTSD Project on IPRs and Sustainable Development, Resource Book on TRIPS and

Development, Cambridge University Press, 2005, p 571.

° Fink, Carsten and Maskus, Keith E (eds.), Intellectual Property and Development: Lessons from recent

economic research, A co-publication of the World Bank and Oxford University Press, 2005, p 172.

particular This Agreement reflects International efforts to eliminate all barriers tointernational trade and affirms that exhaustion is one of the most important trade-relatedaspects of IPRs Besides some minimum standards, the TRIPS Agreement providesflexibilities for the WTO Member States in designing the laws relating to IPR exhaustion.From the standpoint of international intellectual property rules, each country is permitted

to adopt its own policies and rules with respect to exhaustion of rights — and to parallelimportation as well Due to these TRIPS flexibilities, disparities in the legal frameworkfor trademark exhaustion of the WTO Member States still exist, just as they did before theestablishment of the TRIPS Agreement

With respect to Vietnam, and in line with the dramatic change of legal frameworkresulting from the promulgation of a new Constitution in 1992, IPR exhaustion - an issue

contains trade aspects - was initially covered in the Civil Code 1995 (at Article 803.2)’

and exhaustion of trademarks was first provided for in Decree No 63/CP (at Article

53.3(b)).Š Since that landmark stipulation, the concept of exhaustion of rights has been

recognized in Vietnam, although the word “exhaustion” is not to be found in Vietnameselegal normative documents even though it is in Article 6 of the TRIPS Agreement UnderVietnamese law, it is explicitly stated that an international exhaustion regime applies to

trademarks (as provided at Article 125.2(b) of LIP)? and parallel importation is lawful with respect to medicines (as provided at Decision No 1906/2004/QD-BYT)'° Despite

this, “Vietnam is still a country in transition and there are claims by both Vietnamese andforeign scholars that the legal framework is inconsistent and incomplete at least where

trade is concerned.”!! This observation is completely correct in the area of trademark

exhaustion law where some provisions are still unclear and many provisions needed fordealing with trademark exhaustion are insufficient or absent The issue of exhaustion hasonly been treated by administrative agencies in a handful of cases (particularly, Tribeco

and Kingmax)'* and has not so far been referred to in any court decisions Generally, issues concerning IPR exhaustion are still new to Vietnam These shortcomings existed

earlier and continued to arise when Vietnam became the 150” WTO member in 11

January 2007 The question is how the country follows the TRIPS minimum standards andtakes advantages of the TRIPS flexibility on the IPR exhaustion by utilizing the options

available thereof “to the fullest”!” to implement its provisions in a manner that is

” The Civil Code of the Socialist Republic of Viet Nam passed by the National Assembly in Oct 1995 and

effective from | Jul 1996.

® Decree No 63/CP 24 Oct 1996 of the Government on detailed regulations concerning industrial property

This Decree was invalid since the Civil Code 2005 took the effect on July 1, 2006.

? LIP of 2005, No 34/2005/QHI 1

!° Decision No 1906/2004/QD-BYT of 28 May 2004 of Minister of Health promulgating the Regulation onarallel imports of medicines for prevention and cure of human diseases.

'' Moéll, Christina, Rules of Origin in the Common Commercial and Development Policies of the European

Union, JuristfBrlaget in Lund, 2008, p 277.

'2 The TRIBECO case was settled by Vietnam's administrative authorities (1999-2001) and related toconditions triggering exhaustion of industrial designs For further details, see infra Part 5.3.1.2 Vietnam’sadministrative authorities also dealt with KINGMAX relating to parallel importation For further details, seeinfra Part 5.4.3.2.

® Matthews, Duncan and Munoz-Tellez, Viviana, Parallel Trade: A User's Guide (in Krattiger, Anatole,Mahoney, Richard T and Nelson, Lita (eds.)), J/ntellectual Property Management in Health andAgricultural Innovation: A Handbook of Best Practices, p 1433.

consistent with its interests and strategies.'* As already shown by the practice of other

countries, those obligations and rights are not easy to implement

IPR exhaustion per se is, undoubtedly, a complicated field of law When effectively used,IPR exhaustion becomes a useful instrument for curbing anti-competitive practices as well

as meeting the interests of both consumers and IPR holders The use of exhaustion toaddress anti-competitive practices is workable with any exhaustion regime irrespective ofnational, regional or international exhaustion A national exhaustion prevents intellectualproperty holders to expand the scope of certain rights; impose anti-competitive restrictions

on purchasers; and segment domestic market A regional or international exhaustionprevents intellectual property holders to expand the scope of certain rights and bar them to

segment regional and international markets.'° As a result, exhaustion helps to foster

economic development and social welfare

Trademarks, because of their origin indicating and distinguishing function, limitedability to create market power, and ability to enjoy an unlimited period of protection(particularly in comparison with patents and copyrights), is differently treated whereexhaustion is concerned to the way other intellectual property objects are treated and this

remains a controversial issue.'° Nobody questions exhaustion of patents and copyrights

whereas an application of trademark exhaustion is still seen as contentious Furthermore,

an international exhaustion regime seems to better fit trademark law whereas a nationalexhaustion regime is generally applied to patents and copyrights Repair of trademarkedgoods (and, admittedly, of patented goods) is relatively common whereas it does notreally apply in the case of copyrights Also due to the characteristics of trademarks,competition rules are sometimes unnecessary to intervene in contractual restriction

involving trademarks '”

The complexity of trademark exhaustion and the current situation of Vietnam’s law ontrademark exhaustion attracted the author’s special attention The subject “Trademarkexhaustion and proposals for an improvement of Vietnamese trademark law”, has thusbeen chosen as the topic of this research

1.2 Purpose

This research has two aims: the first is to scrutinize and clarify certain aspects oftrademark exhaustion and the second is to draw the implications for an improvement ofVietnam’s trademark law

* Correa, Carlos M., /PRs, the WTO and Developing Countries: The TRIPS Agreement and Policy Options,

Zed Books Ltd., 2000, p 225; Duran, Esperanza and Michalopoulos, Constantine, /PRs and Developing Countries in the WTO Millennium Round, The Journal of World Intellectual Property, Vol 2, Issue 6, 1999,

pp 871-872.

$ Nguyen, Nhu Quynh, Nguyen, Nhu Quynh, Exhaustion as a tool to address abusively anti-competitive

practice uses of intellectual property rights, \P&Competition Policy/CDIP/Study/02/2011, The WIPO Project on Intellectual Property and Competition Policy, Nov 2010.

In this dissertation, trademark exhaustion is mainly compared to the exhaustion of patents and of

copyrights.

The differences between trademark exhaustion and exhaustion of other intellectual property objects(particularly patents and copyrights) will be clarified in infra Part 2.2.

In order to achieve the first aim, it explores the theoretical, legal, and practical aspects oftrademark exhaustion Specifically, the theory of trademark exhaustion is introduced byfocusing on both the formation and development and the contents of the exhaustiondoctrine, the three types of exhaustion regime (national, regional, and internationalexhaustion), arguments for the applicability of the exhaustion doctrine to trademarks, thecharacteristics of trademark exhaustion, and trademark exhaustion in some commercialacts (parallel importation of trademarked goods, repair of trademarked goods, andcontractual restrictions involving trademarks) The legal and practical aspects oftrademark exhaustion are then clarified by examining the following issues: trademarkexhaustion as addressed in the TRIPS Agreement, trademark exhaustion in the law andpractice of the US, EU, and Vietnam, the consistency between Vietnamese law ontrademark exhaustion and the TRIPS Agreement, and differences and similarities betweenVietnamese law and practice relating to trademark exhaustion and their counterparts inboth the US and the EU.

Based on conclusions that being drawn from carefully investigating the exhaustiondoctrine in general and trademark exhaustion in particular as well as from considerations

of Vietnam’s socio-economic context, this research makes proposals for an improvement

of Vietnamese law on trademark exhaustion This is its second purpose The improvement

is intended to make the law on trademark exhaustion more comprehensive, consistent, andviable Beyond this, the aim is to protect and balance the respective interests of trademarkowners, producers of trademarked goods and consumers; remove barriers to trade; andfoster healthy competition The ultimate target is to strengthen economic development andsocial welfare

This second goal is achieved by reviewing current Vietnamese law on trademarkexhaustion in the light of the State’s general direction for improvement of the country’slegal system, as found in the Strategy for the Development and Improvement of Vietnam's

Legal System to the Year 2010 and Direction for the Period up to 2020.!Ÿ The current law

on trademark exhaustion is assessed by examining many issues such as its compatibilitywith the socio-economic context of Vietnam, consistency with the TRIPS Agreement and

by covering cases arising in practice

1.3 Delimitation

This research does not go further than an exploration of trademark exhaustion andtrademark exhaustion-related implications for an improvement of Vietnam’s trademarklaw Its boundaries are further determined as follows:

First, the research scrutinizes trademark exhaustion rather than IPR exhaustion ingeneral or exhaustion for other form of IPRs It is worth noting that this dissertation onlyfocuses on trademark exhaustion The first reason is that trademark exhaustion containsmany questionable points Many questions concerning trademark exhaustion arecontroversial as will be seen below (in Part 2.2.2.) Some have even queried whether theexhaustion doctrine can apply to trademarks at all by referring to the reward theory, theorigin function of trademarks, and the exclusivity of IPRs Besides this, other issues are

'® See Resolution No 48-NQ/TW of the Politburo of the Communist Party of Vietnam of 24 May 2005 on

the Strategy for the Development and Improvement of Vietnam s Legal System to the Year 2010 and the Direction for the Period up to 2020, <the translation can be found at http://www.moj.gov.vn>.

still on the table such as whether an International exhaustion regime can be applicable totrademarks or only national and regional rules; and how to deal with the complex issuesarising from practices such as repair of trademarked goods and the application ofcompetition rules to restrictive provisions in trademark license contracts.

For Vietnam, an investigation of trademark exhaustion will be of considerable interest topolicymakers, enterprises, and consumers Although ambiguities remain in Article125.2(b) of LIP, trademark exhaustion has, to some extent, been provided for more clearlythan for other forms of IPRs In Vietnam, as in many other countries, trademarks are themost popular industrial property object (For full details, see Appendix 1) In addition, thecomplaints and disputes over IPRs brought to the competent state agencies for resolutionare almost all trademark cases

IPR exhaustion in general will still be briefly introduced (in Part 2.1.1.) as the background to

a better understanding of trademark exhaustion Also, references to patent and copyrightexhaustion or exhaustion of other categories of IPRs will still be made for the purpose ofcomparison It should be noted that this research focuses on questions of physical productsand exhaustion in the digital environment is outside its scope

Second, the research explores trademark exhaustion under the TRIPS Agreement ratherthan all international conventions relating to the topic It should be stressed that there are

no international conventions - including the TRIPS Agreement - specifically dealing withtrademark exhaustion Additionally, the TRIPS Agreement is not the only multilateralagreement on IPR exhaustion The Agreement, however, is the most important pillar ofWTO covering intellectual property It obligates WTO Member States to implementminimum standards of protection of all categories of intellectual property, namelycopyright, trademark, geographical indication, plant breeders’ rights, industrial designs,patent, layout design of integrated circuits, and undisclosed information These

standards are enforced by a special mechanism, the so-called Dispute Settlement

Understanding By establishing this unit, WTO requires its member states to foster IPRprotection at both the national and international levels However, in practice, the DisputeSettlement Understanding is used by developed countries to threaten to withdraw, oractually withhold, trade benefits in other areas of economic interest to the targeted

developing countries.'? From 1995 to 2007, the US brought six cases to the Dispute

Settlement Understanding against selected developing countries and the EU did soonce.? The TRIPS Agreement effectively became a legal tool allowing developedcountries to crush developing ones for purposes other than IPR enforcement

In terms of IPR exhaustion-related issues, the TRIPS Agreement provides both theminimum standards and flexibilities for the WTO Members (as will be analyzed inChapter 3) The TRIPS Agreement precludes disputes conceming the question of IPRexhaustion from the WTO dispute settlement system (Article 6) A WTO Member, thus,can not bring a case before a WTO panel against another Member based on the reason thatthe latter applies an exhaustion policy that cause detrimental consequences to the former.However, the TRIPS Agreement itself does not clarify the concept of exhaustion Nothing

' See Deere, Carolyn, The Implementation Game: The TRIPS Agreement and the Global Politics ofIntellectual Property Reform in Developing Countries, Oxford University Press, 2009, pp 156-157

20 As Carolyn Deere’s statistic, these cases are: US v Pakistan (1996), US v India (1996), EU v India

(1996), US v Argentina (1999), US v Brazil (2000), US v China (2007) [bid, p 157.

prevents parties from requesting a WTO panel to clarify this concept inscribed in the

TRIPS Agreement.”! In practice, moreover, the exhaustion policy adopted by a WTO

Member State may become a disputed subject in bilateral trade relations between therelated WTO Member States IPR exhaustion turns out to be one of the key issues thatdeveloped countries expect to see included in bilateral trade agreement with developing

countries if they are to secure TRIPS-plus reform.”

Because of the above-mentioned reasons, WTO Members must consider TRIPS indesigning, implementing law on IPR exhaustion in general, and trademark exhaustion inparticular The Members follow the TRIPS-minimum approach by complying with theTRIPS-minimum requirements of IPR exhaustion-related issues On the other hand, theyshould take advantages of the TRIPS flexibility on the IPR exhaustion in a manner that is

consistent with its interests and strategies.””

Third, the research focuses on the law and practice of trademark exhaustion of Vietnam,the US and the EU rather than those of other countries The US Supreme Court was thefirst court in the world that touched on the issue of IPR exhaustion and the first saledoctrine was born in the US, while the terminology of “exhaustion” was born in the EU

US law is characterized by a national exhaustion regime, whereas EU law is the keyexample of a regional regime Both the US and the EU are very used to resolvingexhaustion cases in general and trademark exhaustion cases in particular The US is well-known for the use of the “material difference” exception to prevent parallel importationand also has much experience in dealing with very complicated matters relating totrademark exhaustion (and IPR exhaustion in general) such as repair of trademarked goodsand restrictive provisions in trademark license contracts The EU law on trademarkexhaustion, in general, also reaches an advanced level Both the EU’s statutes and caselaw on the conditions triggering trademark exhaustion, the legal consequences of suchexhaustion, and restrictive provisions in trademark license contracts are well developed.The EU has also resolved the problems arising in pharmaceutical parallel imports cases inits own impressive manner Repackaging of pharmaceuticals usually happens in the course

of parallel trade of these products and the EU has much experience in dealing with thiscomplex activity As well as looking at the US and the EU, the experiences of and lessonstaught by other developing countries such as ASEAN members and India will be referred

to but these will not be scrutinized in detail It is important to keep in the mind that

?! Davey, William J and Zdouc, Wemer, The Triangle of TRIPS, GATT and GATTS, (in Cottier, Thomas

and Mavroidis, Petros C., /ntellectual Property: Trade, Competition, and Sustainable Development, World Trade Forum, Vol.3.), The University of Michigan Press, 2003, p 66; Abbott, Frederick M., The Doha Declaration on the TRIPS Agreement and Public Health: Lighting a Dark Corner at the WTO, loumal of International Economic Law, Vol 5, 2002, p 493.

See Fink, Carsten, Entering the Jungle of IPRs Exhaustion and Parallel Importation, (in Fink, Carsten and

Maskus, Keith E., supra note 6), The International Bank for Reconstruction and Development/World Bank,

2005, p 184; Swanson, Tait R., Combating Gray Market Goods in a Global Market: Comparative Analysis ofIntellectual Property Laws and Recommended Strategies, Houston Journal of International Law, Vol 22, 2000; Carolyn, Deere, supra note 19, Table 5.1, p 152 For the case of Vietnam, the question of [PR exhaustion was haggled during the process of negotiating the Bilateral Trade Agreement of US and Vietnam.

® Correa, Carlos M., supra note 14 In the recommendation for developing countries in the TRIPS

implementation, Duran and Michalopoulos put TRIPS flexibility as the first of the priority list of suggestions and one of the flexibilities that developing countries should exploit is parallel importation See Duran, Esperanza and Michalopoulos, Constantine, supra note 14, pp 871-872.

“[t]here is no one-size-fits all model of law.”4 The development and improvement of the

Vietnamese law on trademark exhaustion must, above all, be based on the country’sspecific context International examples of law making and implementing are importantbut should be carefully reviewed

Fourth, the research emphasizes the five following matters rather than other trademarkexhaustion-related matters They are: (i) conditions triggering trademark exhaustion; (ii)legal consequences of trademark exhaustion; (iii) the exhaustion regime and parallelimportation of trademarked goods; (iv) repair of trademarked goods; and (v) contractualrestrictions involving trademarks The first and second are basic matters of trademarkexhaustion (and IPR exhaustion in general) They are regarded as the basis for aninterpretation of all other matters relating to trademark exhaustion The conditionstriggering trademark exhaustion help determine the exhaustion regime itself and thelegality of parallel trade in trademarked goods The permissibility of the repair oftrademarked goods is seen as one of the legal consequences of trademark exhaustion Forinstance, under Article 7.1 of Directive 2008/95/EC (also Article 13 of Regulation (EC)

No 207/2009), trademark exhaustion occurs at the point goods “have been put on themarket in the Community” by the trademark owner or with his consent By this provision,the regime is seen as one of regional exhaustion Also under Article 7.1 of Directive2008/9S/EC (and Article 13.1 of Regulation (EC) No 207/2009), after puttingtrademarked goods on the EU market, the trademark owner no longer has the right toprevent the use of such a trademark in relation to the goods As an evident consequence ofthis, the repair of trademarked goods is lawful under EU law

Parallel trade, obviously, is only one of many consequences when a regional orinternational exhaustion regime is applied In other words, parallel trade is only allowablewithin the framework of an international or regional exhaustion rule However, paralleltrade, especially parallel importation, is the most problematic consequence of exhaustiondue to its direct effects on the interests of a nation and its enterprises and consumers.Parallel imports will, therefore, be mentioned throughout this research even it does notexplicitly focus on the issue

This research also has an emphasis on pharmaceutical parallel importation and its relation

to the trademark exhaustion issue Although the legitimacy of parallel trade wasestablished in the TRIPS Agreement and re-affirmed in the Doha Declaration, paralleltrade in patented pharmaceuticals has so far been one of the most heatedly debated topics.Multi-national pharmaceutical companies complain that parallel trade of patentedpharmaceuticals denies them adequate protection of their patent rights and prevents themfrom recouping the costs of pharmaceutical development including R&D, regulatoryapproval as well as the amortization of the cost of unsuccessful drug development Incontrast, the developing (and least developed) countries, suffering from the burdens of

high disease levels and lacking resources to pay for high priced medicines,” support

4 Nguyen, Thanh Tu, Competition Law in Technology Transfer under the TRIPS Agreement: Implications

for Developing Countries, doctoral dissertation, Lund University, Sweden, 2009, p 351.

* Recently, as currently reported by WHO, access to essential medicines remains a challenge for most

people in developing countries (as well as in least developed countries) Researchers have found that the reasons for this result from the low availability and unaffordable prices of medicines while, at the same time, people in those countries are seriously affected by devastating diseases In 2008, an estimated 33.4 million

liberalization of the parallel trade in patented pharmaceuticals to fulfill basic human needs.

In addition, developing countries have a greater focus on consumer interests, socialwelfare and health care policy concerns One difficulty is thus that “[d]espite the use ofparallel imports [ ] being consistent with TRIPS, a number of governments and theresearch- based pharmaceutical industry strongly objected to their use in some developing

countries.”“° The question is how these countries, which include Vietnam, can get the

most benefit from the flexible provisions on parallel trade Pharmaceutical parallelimportation, therefore, has been a topic of non-stop discussion among developed,developing, and least-developed countries

In regard to Vietnam, parallel importation of medicines tied to the prevention and cure ofhuman diseases is expressly permitted by virtue of a specific legal document, namelyDecision No 1906/2004/QD-BYT Despite this, the price of life-saving medicines is stillhigh in comparison even to other developing countries; quality is also a worrying problem

in the Vietnamese market Additionally, the volume of parallel imported pharmaceuticalsinto Vietnam is very small and the authorities that deal with parallel import of medicinesface many difficulties The issues relating to the parallel import of pharmaceuticals aretherefore worth discussing with a view to fmding the best solution for the country

The last two matters covered, namely repair of trademarked goods and contractualrestrictions involving trademarks, are more complicated areas of trademark exhaustionlaw They require review not only of intellectual property law but also of the interactionbetween intellectual property law and other relevant laws such as those relating toimport and export, quality control, price management, competition, and contract laws ingeneral In Vietnam, recent trademark exhaustion-related cases in these areas revealtheir complexity The Vietnamese laws and regulations regarding them are insufficient

or lacking The improvement of the laws and regulations on such matters is undoubtedly

people worldwide were infected with HIV and that year some 2.7 million people became infected with the virus Notably, more than 95% of all HIV-positive people are in low-and middle-income countries In the same year, there were 247 million cases of malaria (resulting in nearly one million deaths) of which most are children living in Africa, and an estimated 1.3 million people died from tuberculosis for which the greatest number of deaths was in the South-East Asia Region See WHO, Essential Medicines: Biennial Report 2008-2009, <http://www.who.int/medicines/s16822e.pdf>; A Cameron, M Ewen, D Ross-Degnan and D Ball, R Laing, Medicine prices, availability, and affordability in 36 developing and middle-income

countries: a secondary analysis, 2008,

<http://www.who.int/medicines/technical_briefing/tbs/lancetmedprices.pdf>; WHO & HAI (Health Action

International), Measuring medicine prices, availability, affordability and price components, 2" edn., 2008,

<http://www.who.int/medicines/areas/access/OMS_Medicine_prices.pdf>; WHO, HIV/AIDS Programme: Highlights 2008-09, — <http://whqlibdoc.who.int/publications/20 10/978924 1599450_eng.pdf>; © WHO, Malaria Fact Sheet No94, April 2010, <http://www.who.int/mediacentre/factsheets/fs094/en/print.htmI>:;WHO, Tuberculosis Fact Sheet No! 04, Mar 2010, WHO/EMP/2010.I, <http:/www.who.intmediacentre/factsheets/fsI04/en/> Regarding developing countries’ views on parallel trade of pharmaceuticals, see: Nguyen, Nhu Quynh, Parallel Trade of Patented Pharmaceuticals: A Discussion from Developing Country Pespective, 23 Feb 2011, <http://ssrn.com/abstract=1767823>.

76 Roffe, Pedro & Tansey, Geoff & Vivas-Eugui, David (eds.), Negotiating Health: Intellectual Property

and Access to Medicines, Earthscan, 2006, p 16 (words omitted) A typical example is the three-year campaign against parallel imports (and compulsory licensing) of pharmaceuticals in the South African court, claiming that the South African 1997 Medicines and Related Substances Control Amendment Act violated the TRIPS Agreement and would destroy patent protections by giving the health minister overly broad powers to produce, or import more cheaply, versions of drugs still under patent.

mecessary It should be noted that matters relating to the recycling and reconstruction ofttrademarked goods are outside the scope of this research.

finally, this research is limited to proposals for an improvement of Vietnam $s law onttrademark exhaustion rather than those of any other country The proposals are alsollimited to Vietnam’s law on trademark exhaustion, not those on IPR exhaustion orIintellectual property law in general

With respect to the US, a common law country, the source of law is “predominantly

ffounded on a system of case law or judicial precedent."??” Additionally, the US trademark

exhaustion-related legislation (acts, regulations, and guidelines) is scrutinized This

ssecond source is generally “derived from case law and judge made law.’”° This research

only deals with US federal law, not state law The EU legal framework being a hybridsystem with the characteristics of both common law and civil law, the issue of trademarkexhaustion in fact originated in the case law but is governed by both statutory and casellaw Thus, both case law and legislation (such as regulations, directives, and decisions oftthe EU Commission and Council) are described and analyzed As with the US, EU law isregarded as the law of the whole the EU and the laws of the EU Member States are notconsidered except in some certain cases (in Part 4.2.4., for instance) Differing in this fromtboth the US and the EU, Vietnam belongs to the civil law system and statutory law is themain form of law.*! Thus, current legal normative documents on trademark exhaustion-

7 Regarding this method, see Research Methodology, Doctoral Course in Research Methodology and Legal

Writing, 1 Sept to 19 Oct 2006, Faculty of Law, Lund University, Sweden; Banakar, Reza and Travers, NMax (eds.), Theory and Method in Socio-Legal Research, Hart Publishing, Oxford and Portland Oregon,

2005; Nguyen, Ngoc Dien, Một số van dé lý luận vẻ các phương pháp phan tích luật viết, [Some theoretical

itssues of analytical methods of written laws], Judicial Publishing House, 2006.

8 In the Vietnamese system, the term “traditional legal method” is not used However, the methods of

description and analysis (as well as comparison) are widely used in legal research.

Cruz, Peter de, Comparative law in changing world, 2" ed., Cavendish Publishing Limited, 1999, p 44

Ibid.

°”! In Vietnam, two forms of laws are currently officially recognized as sources of law They are customary

liaw and statutory law, in which the latter is the main form Customary law is recognized at Article 3 of the Civil Code 2005 Accordingly, customary law is applied in cases where the matter is neither provided for by liaw nor agreed upon by the parties but such application must not contravene the principles provided in the Civil Code 2005 See Bui, Xuan Phai, Pháp luật Xã hội chu nghĩa (Socialism Law], (in Nguyen, Thi Hoi and Le, Vuong Long (eds.), Nội dung cơ bản của Môn hoc Ly luận Nhà nước và Pháp luật [The Main Contents of the Subject of State and Law Theory]), The Transportation Publishing House, Hanoi, 2008, pp 233-234; Nguyen, Ngoc Dien, supra note 27, pp 10-11.

related issues will be what are analyzed here.” In addition to this, some relevant cases

resolved by administrative agencies will also be discussed but these are not sources ofVietnamese law In addition to national and regional law, international treaties.specifically the TRIPS Agreement, as also scrutinized as a source of law In term ofhierarchy, trademark exhaustion-related provisions in the TRIPS Agreement overridesnational laws on the issue and the national laws must be designed in compliance with theTRIP Agreement according to the “pacta sunt servanda”’ principle (as addressed in Article

26 of the Vienna Convention on the Law of Treaties 1969).*> The TRIPS Agreement and

the US and EU laws (including case law and legislation) used in this doctoral research are

in English and mostly found in the official and highly prestigious legal websites of WIPO,

WTO, US, and EU.“ With respect to very early cases (for instant, Adams v Burke),”” the

đescription and analysis may be based on secondary sources such as books and articles.Vietnamese legal stipulations relating to trademark exhaustion (and IPR exhaustion ingeneral) were mainly translated into English by the author (this will be clearly indicated inthe footnotes to the next chapters) Besides that, the author also exploits the EnglishVersion of such stipulations as are published on the WIPO website

It is worth noting that cases relate to exhaustion of other intellectual property objects,particularly patent, copyright and industrial design exhaustion, are also explored even ifthe research focuses on trademark exhaustion In some cases, the aim is to compare

trademark exhaustion to exhaustion of other intellectual property objects.” In others,

patents, industrial design, and copyright exhaustion are investigated if there is an absence

of trademark cases on the issue, if seminal cases relate to exhaustion of other intellectual

32 According to the Law No 17/2008/QH12 of 3 Jun 2008 on Enactment of legal normative documents, the

hierarchy of legal normative documents in Vietnam’s legal system is as follows: (1) constitution, laws (codes), and resolutions enacted by the National Assembly; (2) ordinances and resolutions enacted by the Standing Committee of the National Assembly; (3) orders and decisions enacted by the President of the State; (4) decrees enacted the Government; (5) decisions enacted by the Prime Minister; (6) resolutions enacted by the Council of Supreme People’s Court judges and circulars enacted by the Chief Judge of the Supreme People’s Court; (7) circulars enacted by the Director of the Supreme People’s Prosecutorate; (8) circulars enacted by a minister or a chief of a ministry-equivalent agency; (9) decisions enacted by the Auditor General of the Office of State Audit; (10) joint-resolutions co-enacted by either the Standing Committee of the National Assembly or the Government and political-social organizations; (11) joint- circulars co-enacted by the Chief Judge of the Supreme People’s Court and the Director of the Supreme People’s Prosecutorate, or by ministers/chiefs of ministry-equivalent agencies and the Chief Judge of the Supreme People’s Court, the Director of the Supreme People’s Prosecutorate, or by minister, and by ministers and/or chiefs of ministry-equivalent agencies; (12) legal normative documents enacted by People’s Committee at the local levels.

3 Article 26 of the Vienna Convention of the Law of Treaties provides that “[e]very treaty in force is

binding upon the parties to it and must be performed by them in good faith.” See The Vienna Convention of the Law of Treaties, <http://untreaty.un.org/ilc/texts/instruments/english/conventions/!_1_1969.pdf>.

4 For = examples, <htp:/www.wipoin > (WIPO); <http://www.wto.org> (WTO);<http://www westlaw.com>, <http://supreme.justia.com> (US); <http://www.europa.eu.int>,

<http://www.oami.eu.int >(EU).

* Adams v Burke, 84 US (17 Wall.) 453 (1873)

3 For instance, in infra Part 4.1.2.1, the copyright case Quality King [Quality King Distributor v L'AnzaResearch International, 523 U.S 135 (1998)] and certain patent cases are referred to in order to clarify thedifference between the conditions triggering trademark exhaustion and those triggering exhaustion of

copyrights or patents.

property objects and those cases are applicable to trademark issues.”” Specifically, with

respect to the US and EU, the investigated non-trademark cases may well be precedentsand cited in trademark cases The common law, differing here from civil law, is based onthe doctrine of precedent, or stare decisis (which means standing by things previously

decided).” 8 “The central idea of precedent derives from a basic notion of justice: that like

cases should be treated alike.”” Accordingly, later cases must follow earlier cases when

they are regarded as analogous As stated in the Stanford Encyclopedia of Philosophy:

“{a]n analogical argument in legal reasoning is an argument that a case should be treated

in a certain way because that is the way a similar case has been treated.’“° Generally, the

case at hand is regarded as similar to the decided case when two cases are analogous interm of their facts Sets of facts are not analogous in the abstract, but in the context of a

legal issue.*' Admittedly, the requirement of analogy is met if both cases are relevant to a

doctrine or to two doctrines that relate to the same legal issue.’? Given that, patent,

copyright, and other intellectual property cases may be cited in trademark cases when they all

relate to the exhaustion doctrine and are based on the same or similar underlying principles.”

The sources of law are first described and analyzed in terms of the literal or plain meaning

of court decisions and stipulations Also, the context in which the court decisions areissued or statutes are promulgated, the purpose of such issuance or promulgation, thelegislative history, and the relation of such laws to other laws (both earlier and currentlaw) are taken into account Theoretical, legal, and practical knowledge and experiencesubsequently play an important role in the interpretation of a law and the underlyingreasons thereof “[I]t is important that the rules of interpretation be relatively predictable,

stable, and determinate “4

Intellectual property law and IPR exhaustion per se contain trade-related aspects.”° Trademark exhaustion, thus, “is a subject demanding the economist’s investigation”.“° In

” For instance, in infra Part 4.1.5.1., the rulings of US courts in some patents cases, namely Quanta [Quanta

Computer, Inc v LG Electronics, Inc., 128 S Ct 2109 (2008)], TransCore [TransCore, LP and TC License, Ltd, v Electronic Transaction Consultants Corporation, US Court of Appeals for the Federal Circuit, 2008-

1430, decided 8 Apr., 2009], Keeler [Keeler v Standard Folding Bed, 157 U.S 659 (1985)], and General Talking Pictures [General Talking Pictures Corp v Western Electronic Co., 304 U.S 175] are explored tohelp in understanding contractual restrictions and survival of trademark exhaustion under the US law

® Bix, Brian, Jurisprudence: Theory and Context, Thomson Sweet & Maxwell, 4" edn., 2006, p 146;

Hondius, Ewoud (ed.), Precedent and the law (Reports to the XVIIth Congress International Academy of Comparative Law Utrecht, Jul 16-22, 2006), Bruylant Bruxelles, 2007, p 11.

” Bix, Brian, ibid, p 147

© Stanford University (the US), Stanford Encyclopedia of Philosophy, Precedent and Analogy in LegalReasoning, <http://plato.stanford.edu/entries/legal-reas-prec/>

Ibid.

® Ibid In this article, common law systems’ legal reasoning concerning analogy was broadly understood as follows:

So knives may be analogous to guns if the issue concerns weapons, but knives may also beanalogous to teaspoons if the issue concerns cutlery Duress may be analogous to provocation ifthe issue concerns defenses, but duress may also be analogous to incitement if the issue concernscomplicity.

® In infra Part 5.3.1.2, the Tribeco case (settled by the Vietnamese administrative authorities) regardingindustrial design is analyzed to clarify conditions triggering trademark exhaustion under Vietnamese law andpractice.

“ Bix, Brian, supra note 38, pp 155-156

© With regard to the economics of IPRs and competition, see Landes, William M., and Posner, Richard A.,

The Economic Structure of Intellectual Property Law, The Belknap Press of Harvard University, 2003;

HH

other words, one cannot avoid using economic description and analysis in this research.Nonetheless, it must be noted that it will not employ a purely economics analysis.

Law reflects economics and economics help to explain law at the deepest level.” Based on

this notion, economic analyses will be used to explain the formation of the exhaustiondoctrine in Chapter 2 In addition, also in Chapter 2, economic analyses help to investigatethe economic consequences of the application of particular exhaustion rules In otherwords, two-sided effects of each exhaustion regime (on availability and quality of goods,price, foreign direct investment and technology transfer, and trade and competition) aredrawn out by analyzing relevant economic research Furthermore, the suitability of aninternational exhaustion regime for trademark exhaustion is assessed in Chapter 6 bycalculating and analyzing official statistics of the Vietnam economy such as those relating

to exports and imports and the average fluctuation amplitude of the price consumer index

A cost-benefit analysis'Š will also be used in this research As Matthew D Adler and Eric

A Posner put it, the application of a cost-benefit analysis tests the efficiency of a policy orlegal norm “In particular, do the benefits of the policy [or legal norm] to society exceed

the costs?” In Chapter 6, the author uses a cost-benefit analysis in arguing that for

Vietnam, the benefits of an international exhaustion regime for trademark outweigh thecosts thereof A costs and benefits test will also be implemented before making proposalsfor the improvement of the Vietnamese law on trademark exhaustion

Additionally, the comparative method is used in my research in many places In the legalfield, the comparative method is briefly described as that method of study, whereby two ormore legal systems or legal subject matters are investigated with a view to betterunderstanding the differences and similarities between them Thanks to the application ofthe comparative method, the general and the special in different legal systems, therelations of one legal system with other legal systems, the character of these relations, and

reasons for similarities/differences are revealed.” Furthermore, the legal comparative

method is also used when studying foreign laws in comparison with domestic laws withthe aim of providing solutions for domestic problems From this perspective, thecomparative method plays an important role in the adaptation of one socio-legal system toanother and facilitating law reform as Peter de Cruz maintained:

Maskus, Keith E., The WTO, IPRs and the Knowledge Economy (ed.), Edward Elgar Publishing Limited (UK), 2004.

“6 Cole, Daniel H and Grossman, Peter Z., Principles of Law and Economics, Pearson Prentice Hall, 2004, p 55

‘7 In order to understand this observation, see Cooter, Robert and Ulen, Thomas, Law and Economics, 3'° edn., Addison-Wesley, 2000; Cole, Daniel H and Grossman, Peter Z., ibid; Le, Vuong Long, “Nguồn gốc,

bản chất, chức năng, kiểu, hình thức pháp luật” [Origin, nature, function, and forms of law], Giáo trình Lý

luận Nhà nước và Pháp luật [The Textbook of State and Law Theory], The Publishing House of PublicSecurity, 2010, pp 109-110; Le, Minh Tam, “Pháp luật Xã hội Chủ nghĩa” [The Socialism Law] Giáo trình

Lý luận Nhà nước và Pháp luật [Textbook of State and Law Theory}, The Publishing House of Public Security, 2010, p 480.

“8 For further details of cost-benefit analysis, see Adler, Matthew D., and Posner, Eric A (ed.), Cost-BenefitAnalysis: Legal, Economic, and Philosophical Perspectives, The University of Chicago Press, 2001, p 17.Ibid.

°° See Cruz, Peter de, supra note 29, p 9 and p 22; Kiekbaev, Djalil I., Comparative law: Method, Science

or Educational Discipline? EJCL, Vol 7.3 Sept 2003, <http://www.ejcl.org/73/art73-2.html>; M.A.Glendon, M.W Gordon, and Ch Osakwe, Comparative Legal Traditions St Paul, Minn., 1994, pp 7-8

[The method helps to select] which laws might be adopted and adapted toparticular local needs and conditions In this way, the comparative law methodwill assist in informing any efforts aimed at improving the law in these countries

so that their people may be the ultimate beneficiaries.”

The core comparison in this research is the comparison of trademark exhaustion under theTRIPS Agreement as well as in law and practice of the US and the EU with that ofVietnam The TRIPS Agreement, US, EU, and Vietnam are regarded as the legal systems

in this comparison Moreover, as already indicated in the delimitation, the comparison willnot focus on all the trademark-related issues but only on the five following legal subjectmatters: (i) conditions triggering trademark exhaustion; (ii) legal consequences oftrademark exhaustion; (iii) exhaustion regime and parallel importation of trademarkedgoods; (iv) repair of trademarked goods; and (v) contractual restrictions involvingtrademarks Each legal system is investigated in separate chapters, namely Chapters 3, 4,and 5 and they are compared in Chapter 6

Some may argue that this comparison gives an overlap between Chapter 3, 4, and 5 andChapter 6 and that the comparative method is used in Chapter 6 only However, in myview, the selected comparison mode is the best for the following reasons First, a subjectmatter-based comparison is not easily applied and could not be used effectively in thisresearch where many legal systems and legal subject matters are dealt with Second, theselected comparison mode in this research is highly efficient as it combines a subjectmatter-based comparison and a legal system-based comparison Due to the differencesamong the legal systems (particularly as Vietnam is a civil law country whereas the US is

a common law country, and the EU applies a combined legal system with important rolesattaching to both statutory and case law), an independent chapter is need to clarify the fivesubject matters relating to trademark exhaustion of each legal system This writing allowsdiscussing non-legal aspects such as history and policy for a full interpretation of theselegal systems The differences and similarities of these legal systems are pointed out andexplained when the subject matters of such legal systems are put together for acomparison in a separate chapter This mode makes the comparison more intensive andcomprehensive Third, an overlap between Chapter 3, 4, and 5 with Chapter 6 is preventedwhen the author foresees the problem and keeps in mind in the writing Finally, althoughthe word of “comparison” is included in Chapter 6’s title only, the comparative method isused in the whole dissertation In particular, the method is applied to clarify the exhaustiondoctrine, the first sale doctrine, the implied license doctrine, and the relationship of thesethree doctrines (in Chapter 2) The method is also used to compare the three exhaustionregimes i.e national, regional, and international ones and to distinguish trademarkexhaustion from exhaustion of patents and copyrights (also in Chapter 2) At this point,comparison enables us to find a reasonable answer to the questions of whether theexhaustion doctrine is applicable to trademark and which exhaustion regime is the mostsuitable for them The findings of the commonalities and differences in the laws andpractices governing trademark exhaustion in the US and the EU are drawn out in acomparative study (in Chapter 4) Moreover, the current Vietnamese laws and regulations

on trademark exhaustion are clarified by comparing the current position with the pre-LIPstipulation on the issue (in Chapter 5) The comparative method is thus comprehensively

'! Cruz, Peter de, ibid, p 24

13

used to compare trademark exhaustion in the law and practice of Vietnam with those ofthe US and EU as well as to assess Vietnamese law’s consistency with the TRIPSAgreement on trademark exhaustion (in Chapter 6) All the above-mentioned comparisonsare to answer the following question: what are the lessons for Vietnam in handlingtrademark exhaustion-related cases and in improving its laws on the matters.

In order to reach an accurate and effective comparison, my research not only exploresthe wordings of statues and cases but also takes into consideration relevant aspects of

legal history, socio-economic development, and policy.*” Thus, besides the similarities

and differences as such, the underlying reasons for these similarities and differences arealso reviewed

To conclude, the traditional legal method and the comparative method are the two maintools applied independently or in combination in this research

1.5 Previous research and materials

As already indicated at the outset, IPR exhaustion is quite a new subject in Vietnam, and

there seems little written on it by Vietnamese authors or in Vietnamese.” There is

abundance of English materials on exhaustion-related issues Nevertheless, no book orarticle deals comprehensively and efficiently with the exhaustion doctrine or trademark

exhaustion per se ` Recent works have focused on some aspects of IPR exhaustion such

as parallel trade,” exhaustion regimes, °° and the exhaustion of rights in the TRIPS

Agreement.°” Most of the available materials focus on the US and/or the EU situation and

is written from a US or EU viewpoint Research on trademark exhaustion (and IPRexhaustion in general) in relation to developing countries is very limited Musungu and Oh

* Regarding the comparative role of these aspects, see Bogdan, Michael, Comparative Law, Kluwer

Norstedts Juridik Tano, 1994, p 77; Nguyen, Quoc Hoan, (ed.), Giáo trình Luật so sánh [Textbook of Comparative Law], The Publishing House of Public Security, 2008, p 43.

* Until now, there have been only a few articles on exhaustion and parallel import by Vietnamese authors

For instance, Nguyen, Thanh Tam, Pháp luật vẻ sở hữu công nghiệp trong hoạt động thương mai [Industrial property law in trade], (in Giáo trình Luật thương mại [The Textbook on Trade Law], Nguyen, Viet Ty (ed.)), Vol 2, The Public Security Publishing House, 2006, p 330; Nguyen, Nhu Quynh, Ly thuyết hết

quyên và vấn dé nhập khẩu song song [The exhaustion doctrine and the issue of parallel importation], The

Jurisprudence Journal, No 1/2006, pp 47-53; Nguyen, Nhu Quynh, Pháp luật về hết quyên sở hữu trí tuệ và

nhập khẩu song song ở một số nước ASEAN {Exhaustion of IPRs and parallel imports in some ASEAN

countries], The Jurisprudence Journal, No 12/2009, pp 28-36.

* In 2008, Ekaterina Shekhtman and Evgeniy Sesitsky issued a paper on the topic but it mainly focused on

parallel importation of trademarked goods in EEA and the North American Free Trade Area (NAFTA) SeeSheckhtman, Ekaterina and Sesitsky, Evgeniy, supra note 2

* For instance, Farquharson, Melanie and Smith, Vincent, Parallel Trade in Europe, Sweet & Maxell, 1998;

Hays, Thomas, Parallel Importation Under European Union Law, London: Sweet & Maxwell, 2004; Stothers, Christopher, Parallel Trade in Europe: Intellectual property, Competition and Regulatory Law, Hart Publishing, 2007; Hiebert, Timothy H., Parallel Importation in US Trademark Law, Greenwood Press 1994; Richman, Steven, Shades of Gray: Current Legal Issues Regarding Parallel Imports in the US and Latin America, New Jersey Lawyer Magazine, Oct 2003.

* For instance, Keeling, David T., /PRs in EU Law, Vol [ - Free Movement and Competition Law, Oxford

University Press, 2003; Fink, Carsten and Maskus, Keith E., supra note 6.

” For instance, UNCTAD-ICTSD, supra note 5; Carvalho, Nuno Pires de, The TRIPs Regime of

Trademarks and Designs, Kluwer Law International 2006; Correa, Carlos M., Trade Related Aspects of IPRs — A Commentary on the TRIPs Agreement, Oxford University Press, 2007.

surveyed exhaustion regimes in sixty-two developing countries."” They did not, however,

explore other legal matters relating to exhaustion Based on economic research, CarstenFink and Keith E Maskus tried to make proposals for both developed and developing

countries when setting exhaustion and parallel import policy.” Their conclusion for developing countries, regretfully, was that “there are no easy solutions for policy” and

“no systematic evidence exists to assess the effects of parallel imports and parallel exports

in developing countries ol

In terms, of trademark exhaustion, there are the considerable contributions of Timothy H.Hiebert” and Marc Stucki Based on historical, political and legal reasoning, Hiebert

focused on concerns surrounding parallel imports in US law while Stucki confined his

attention to EU law and the WTO Agreements all in the light of the principle of freemovement of goods Other articles have looked at the issue of exhaustion in particular

contexts, such as the Silhouette caseTM and the First Council Directive 89/104/EEC of 21

December 1998 to approximate the laws of the Member States relating to trademarks (now

Directive 2008/95/EC dated 22 October 2008).

In undertaking this research, the author faced a scarcity of materials on repair oftrademarked goods The Guideline and the Resolution of AIPPI on trademark exhaustion

on in cases of recycling and repair of goods,” and the research of the Institute of European

Studies of Macau (IEEM) on spares and repairs of IPR-protected goods provide some

good hints towards exploring the issue M

This research does not depend on these earlier works; however, it could not have beencompleted without using these valuable resources The materials I do use have mainlybeen gathered from books, published articles, monographs, and electronic resources.Statistics and the findings of some reports and surveys are used in this dissertation Thestatistics are official and already published; the reports and surveys were implemented by

prestigious and widely recognized individuals and organization.

3 Musungu, S and Oh, C., The Use of Flexibilities in TRIPS by Developing Countries: Can They Promote

Access to Medicines?, WHO Study on IPRs, Innovation and Public Health, Geneva: WHO and South Centre, 2006, p 99.

* For further details, see Fink, Carsten and Maskus, Keith E., supra note 6

© Ibid., p 9

®\ Ibid., p.11

%* For further details, see Hiebert, Timothy H., supra note 55.

® For further details, see Stucki, Marc, Trademarks and Free Trade, Swiss Papers on European Integration,

Printed in Switzerland, 1997.

* Carboni, Anna, Cases about Spectacles and Torches: Now, can we see the Light?, [1998] EIPR

§5 O'Toole, Franis and Treannor, Colm, The European Union's Trade Mark Exhaustion Regime, WorldCompetition 25(3): 279-302, 2002; Ohly, Ansgar, Trade Marks and Parallel Importation — RecentDevelopments in European Law, IIC, Vol 30 (1999).

* AIPPI, Working Guidelines, Question Q205, Exhaustion of IPRs in cases of recycling and repair of goods,

<http://www aippi-china.org/wtyj/wt/200905/P020090506505343653399 pdf>; AIPPI, Resolution, Question Q205, Exhaustion of IPRs in cases of recycling and repair of goods, Congress Boston 2008,

Additionally, the results of more than 40 interviews (with 21 people have beeninterviewed) are part of the input to this research The interview is widely recognized as a

useful tool in collecting data and supporting certain observations.” In order to gather

trademark exhaustion-related materials and interpret trademark exhaustion-related matters,the author interviewed many experts and representatives from international organizations,universities, State agencies, and law firms (for the full list of interviews, see Appendix 2)

These interviews were semi-structured,” almost all were face-to-face and they were

effected during the whole time I was working on this research The list of interviewquestions were prepared so as to be suitable for each interviewee and the interviews were

recorded by way of written notes by the author.’

Finally but significantly, the sources of international and national laws are indispensableinput of this research They are international legal instruments, particularly the TRIPSAgreement and the statutes and cases of the US, EU, and Vietnam as already explained inPart 1.4

Regarding EU law, it should be noted that, as the consequence of the entering into force of

the Treaty of Lisbon on 1 December 2009,” new terms (including names of courts and

articles in TEC) were introduced For the purpose of uniformity and consistency, in thisdissertation, the new terms are used In particular, Article 28 is now Article 34, Article 30

is now Article 36, Article 81 is now Article 101, Article 82 is now Article 102, CFI is nowGeneral Court, Community is now Union, European Community is now Union, and

common market is now internal market.” The pre-Lisbon Treaty terms, however, still

exist in citations and some discussions of previously ruled cases by ECJ It should benoted that though the ECJ's official name was changed from the "Court of Justice of the

Part 6.4.2.2, the WHO survey on the application of exhaustion regimes in developing countries is referred to

in order to support the argument that an international exhaustion regime is selected by most developing countries.

* Bogdan, R C and Biklen, S K., Qualitative research for education: An introduction to theory and

methods, Boston: Allyn and Bacon, Inc, 1982 (cited by Hoepfl, Marie C in Choosing Qualitative Research:

A Primer for Technology Education Researchers, Journal of Technology Education, Vol 9, No.1, 1997,

<http://scholar lib.vt.edu/ejournals/JTE/v9n1/hoepfl.html>) Regarding the role and method of interviews, see also Gubrium, Jaber F and Holstein, James A., (eds.), Handbook of interview research: context & method, Thousand Oaks, CA: Sage, 2002; Punch, Keith F., /ntroduction to Social Research: Qualitative and

Quantitative Approaches, London: Sage, 1998; Wadsworth, Yoland, Do /t Yourself Social Research, zmedn., St Leonard, NSW: Allen & Unwin, 1997; Bell, Judith, Doing Your Research Project, 2" edn.,

Buckingham: Open University Press, 1993; Rubin, Herbert J and Rubin, Irene S., Qualitative Interviewing: The Art of Hearing Data Thousand Oaks, CA: Sage, 1995.

” Semi-structured interviews are conducted with a number of prepared questions and new questions are

brought up during the interviews as a result of what interviewees say See Patton, M Q., Qualitative

Evaluation and Research Methods, 2" edn., Newbury Park, CA: Sage Publications, Inc., 1990; Lindlof, T.R and Taylor, B.C., Qualitative Communication Research Methods, 2" edn., Sage Publications,

Thousand Oaks, CA (2002).

” The author has kept all the memoranda of the interviews

” The Treaty of Lisbon amends the Treaty on European Union and the Treaty establishing the European

Community 2007, OJ 2007/C 306/01 The Treaty establishing the European Community was renamed the Treaty on the Functioning of the European Union (OJ 2010/C 83/01).

Regarding the new numbering of Articles 2, 30, 80, 81 of TEC, see the Tables of equivalences referred to

in Article 5, the Treaty of Lisbon, OJ 20/C 306/01 Regarding the changes of “Court of First Instance”,

“community”, “European Community”, and “common market”, see Section A Horizontal Amendments of the Treaty of Lisbon, ibid.

European Communities” to the "Court of Justice", term ECJ continues to be used because

in English it is still most common to refer to the European Court of Justice.”

1.6 Outline

This work is divided into seven chapters Chapter 1 contains general remarks on previousresearch on the topic, on the purposes, delimitations, methods, and materials used in theresearch, and on its value Chapter 2 scrutinizes the theoretical aspects of IPR exhaustionand trademark exhaustion in particular First, an overview of the exhaustion doctrine isprovided Specifically, a justification for the formation of the exhaustion doctrine and thedevelopment of the doctrine are introduced In addition, comparisons between theexhaustion doctrine and both the first sale doctrine and the implied license doctrine aremade Next is a section on IPR exhaustion with special reference to the concept of IPRexhaustion, the conditions triggering IPR exhaustion, the legal consequences of IPRexhaustion, and the types of exhaustion regimes Three types of exhaustion as well as thesocial and economic effects of each type are clarified Chapter 2 is also devoted to atheoretical consideration of trademark exhaustion Because of the differences in thefunction and time limit of trademark protection in comparison with other IPR objects(patents and copyrights, for example), trademark exhaustion contains distinguishing marksbesides the common features of IPR exhaustion Thus, the definition and function oftrademarks are viewed as fundamental Views of the applicability of the exhaustiondoctrine to trademarks are discussed and certain features of trademark exhaustion are alsoconsidered Finally, theoretical aspects of trademark exhaustion in three commercial activitiesare clarified They are trademark exhaustion in the cases of parallel importation of trademarkedgoods, the repair of trademarked goods, and trademark-related contractual restrictions

Chapter 3 deals with trademark exhaustion under the TRIPS Agreement A shortintroduction to international conventions relating to IPR exhaustion and an overview of

the features and principles of the TRIPS Agreement are mentioned first After that,

specific matters relating to IPR exhaustion in general and trademark exhaustion inparticular are analyzed The flexible provisions and minimum standards of trademarkexhaustion under the TRIPS Agreements are analyzed To some extent, the TRIPSprovisions on the issue are put in the relation with the Paris Convention and GATT.The objective is to clarify how trademark exhaustion is covered by the TRIPSAgreement

In Chapter 4, trademark exhaustion in the law and practice of the US and the EUrespectively are scrutinized In addition to statues, landmark cases relating to trademarkexhaustion in the US (for instance, Kmart, 757 ever I," Lever Bros Co v US,” "Lever II."

Lever Bros Co v US,”’ Champion Spark Plug,'® Karl Storz,’? Quanta,®° and

TM The Court of Justice of the European Union includes the Court of Justice, the General Court, andspecialized courts See Article 9F of the Treaty of Lisbon, OJ 2007, C 306/21

” Kmart Corp v Cartier, Inc, 486 US 281 (1988)

15 Lever Bros Co v US (Lever I), 877 F 2d 101 (D.C Circuit 1989)

” Lever Bros Co v US (Lever ÍJ), 981 F 2d 1330 (D.C Cir 1993)

"3 Champion Spark Plug Co v Sanders, 331 U.S 125 (1947)

” Karl Storz Endoscopy America, Inc v Surgical Technologies, Inc., 285 F.3d 848 (9" Cir 2002)

®° Quanta, supra note 37

[RUNG TAM THONG TIN THự vị

TransCore®') and the EU (for instance, Grundig-Consten, Peak Holding,® Zino

Davidoff.** and Silhouette®*) are taken into account Although there are differences in

rulings, stipulation, and the level of sufficiency of the laws on IPR exhaustion (andtrademark exhaustion in particular) between the US and the EU, the issue derived fromand has long existed in both the US and the EU and their laws are well developed Thesecan be regarded as helpful references for Vietnam in improving its laws and regulations ontrademark exhaustion

Chapter 5 explores trademark exhaustion in the law and practice of Vietnam Based on anunified structure, as were the previous chapters (and the subsequent ones), the Chapterscrutinizes the conditions triggering trademark exhaustion, the consequences of trademarkexhaustion, the exhaustion regime for trademarks, the repair of trademarked goods, andcontractual restraints involving trademarks Current law on trademark exhaustion-relatedissues and some relevant administrative cases are also discussed To assist in providing a

comprehensive interpretation, some invalid legal normative documents® relating to

trademark exhaustion are mentioned in this Chapter (Decree No 63/CP, for instance).°’

The core legal findings are that the staple issues of trademark exhaustion are provided forrelatively clearly Shortcomings, however, still exist in current regulations on trademarkexhaustion (and industrial property right exhaustion in general) and do not fully cover alltrademark exhaustion-related issues arising in practice

Chapter 6 considers the consistency of Vietnamese law on trademark exhaustion in thelight of the provisions of the TRIPS Agreement A comparison between trademarkexhaustion in the law and practice of Vietnam and those of US and EU is also drawn Inany case, Vietnam is at the centre of the comparative research The underlying reasons forany disparities will, to some extent, be explained by referring to Vietnam’s legislation,policy, and socio-economic circumstances As a result, Vietnam’s current law ontrademark exhaustion is fully assessed In addition, helpful references for Vietnam fromthe laws and practices of the US and the EU will be pointed out

Based on the findings in the previous chapters (particularly chapters five and six), theauthor submit a set of proposals for an improvement of the Vietnamese law on trademarkexhaustion in the fmal chapter 7 Before considering the detailed proposals, the purposesand principles of the improvement are stated The general proposals that are considered asthe ground for the specific proposals in this final section are then introduced afterward

él TransCore, supra note 37.

® Joined cases 56 & 58/64, Etablissement Consten SARL & Grundig-Verkaufs-GmbH v EC Commission,[1966] ECJ 299

Case C-16/03, Peak Holding AB v Axolin-Elinor AB, formerly Handelskompaniet Factory Outlet iLöddeköpinge AB, [2004] ECR I-11313.

TM Joined cases C-414/99 to 416/99 Zino Davidoff v A&G Imports [2001] ECR I-8691

®> Case 355/96, Silhouette International Schmied v Hartlauer Handelsgesellschaft, [1998] ECR 1-4799

86 According to Article 81 of Law on Enactment of Legal Normative Documents, 2008, No 17/2008/QH12,legal normative documents shall become fully or partially invalid in the following cases: (i) the periods ofvalidity expire as stipulated in legal documents; (ii) legal documents are amended, revised or replaced withnew legal documents of the same State agencies that issued those legal documents in the first place; and (iii)legal documents are abrogated or abolished by means of an official document of a State competent agency

° Decree No 63/CP, supra note 8 However, the Civil Code 1995 has been replaced by the Civil Code

2005 See The Resolution of Implementation of the Civil Code 2005, No 45/2005/QH 11.

The heart of the proposals is an amendment to certain unsound provisions and an additionrelating to certain absences in the current Vietnamese law on trademark exhaustion (thathaving being already shown in the previous two chapters) Finally comes a generalconclusion to the research.

1.7 Contribution

As already mentioned in the previous sections (especially the sections on background anddelimitation), trademark exhaustion and the trademark exhaustion-related mattersdiscussed in this dissertation closely link to IPR protection, consumers’ interests, freemarket circulation, healthy competition, and both national and international trade.Moreover, a comprehensive review of trademark exhaustion and trademark exhaustion-related matters, as indicated in the section on earlier research, is quite new in Vietnam and

to some extent even at the international level It is hoped, therefore, that to some extent,this research will contribute to legal science, legal reform, and practice relevant thereto.Fist, the research is intended to enrich legal science by virtue of its discussion of thetheoretical aspects of IPR exhaustion, trademark exhaustion, and trademark exhaustion-relatedspecific matter and the analyses and comparisons of the trademark exhaustion regimes underthe TRIPS Agreements and in the law and practice of US, EU, and Vietnam

Second, the research may help to improve the Vietnamese law on trademark exhaustion.This research presents both general directions and specific proposals for an improvement

of Vietnamese law on trademark exhaustion with a view to better complying with theTRIPS minimum standards and fully utilizing the TRIPS flexibilities on trademarkexhaustion-related issues; fitting the country’s circumstances and international practice;and establishing a comprehensive, consistent, and enforceable law on trademarkexhaustion Vietnamese legislative agencies may use the outputs of this research inmaking legal normative documents on trademark exhaustion (and IPR exhaustion ingeneral), particularly the conditions and legal consequences of trademark exhaustion, theexhaustion regime and parallel importation of trademarked goods (including parallelimportation of pharmaceuticals), trademark exhaustion in cases of repair of trademarkedgoods and trademark exhaustion in cases of contractual restrictions As a result, not onlyintellectual property law but also other relevant laws such as competition, contract, export-import, quality control, and price management laws could be improved Furthermore, it ishoped that this research will be valuable for Vietnam by way of making known its tradepolicies relating to trademark exhaustion as there is always a close link between IPRexhaustion and trade

Third, Vietnam’s judicial agencies may wish to refer to the discussion of the theoreticalaspects of IPR and trademark exhaustion and my analyses and comparison of trademarkexhaustion under the TRIPS Agreement as well as under the different legal systemsconsidered, and the proposals offered by this research in solving trademark exhaustion-related issues likely to appear in practical cases Also, if Vietnamese law and policymakers wish to accept certain proposals of this research, the practical contribution isindicated In particular, such legal improvement may have an effect on the practice

19

relating to trademark exhaustion In this sense, my research seeks actively to effectVietnam’s practices relating to trademark exhaustion.

Finally, other countries may find this research valuable It is hoped that it will provideuseful references not only for Vietnam but also for other developing countries Moreover,the author’s comments on policy, legislation, and case law of US and EU relatingtrademark exhaustion may be of interest to them

To conclude, the theoretical and practical values and contributions of this research are not verydifficult to recognize However, it should be stressed that as a social research, the real meaning

of these contributions heavily depends on who accepts them and to what extent and how theyare accepted It goes further than the author’s ability to be able to predict this

CHAPTER 2THEORY ON IPR EXHAUSTION ANDPARTICULARLY TRADEMARK EXHAUSTION2.1 Theory on IPR exhaustion

Basic theoretical questions on IPR exhaustion and trademark exhaustion in particular

will be explored in this Chapter.*® The theoretical basis of exhaustion helps interpret the

law and practice of different countries (and regions) with respect to both IPR andtrademark exhaustion and helps us to make proposals for the improvement ofVietnamese trademark law In this Chapter, the terminology relating to IPR and

trademark exhaustion will be defined.”

This section deals with the basic theoretical questions relating to IPR exhaustion Thosequestions concern the concept of IPR exhaustion; the formation and development of theexhaustion doctrine; the relation between the exhaustion doctrine and the first saledoctrine as well as the implied license doctrine; the conditions triggering IPR exhaustion;the legal consequences of IPR exhaustion; types of exhaustion regimes; and the social andeconomic effects of each regime

2.1.1 The exhaustion doctrine

The exhaustion doctrine is a legal doctrine” arising in the field of intellectual property law

which aims at determining the limits of the exclusivity of IPRs The intent is to balance:

7 Theory plays a very important role in determining the relevant practice and their relation is correlative.

The theory derives from and applies to the practice Through such application, the theory is then perfected.Regarding this observation, see Ngo, Doan Vinh, Bàn về vấn dé lý luận, [A discussion of theory], National

Political Publishing House, 2009, pp 141-142.

'' This Chapter is based on the following main sources: Ganslandt, Mattias and Maskus, Keith E., /PÑ,

Parallel Imports and Strategic Behavior, IFN Working Paper No 704, 2007, Research Institute of Industrial Economics, Sweden; Keeling, David T., supra note 56; Anderman, Steven D., supra note 4; Ganea, Peter, supra note 1; Heath, Christopher, Parallel Imports and _ International Trade,

<www.wipo.int/edocs/mdocs/sme/en/atrip_gva_99/atrip_gva_99 6.pdf>; Carvalho, Nuno Pires de, supra note 57; Heath, Christopher (ed.), Parallel Imports in Asia, Kluwer Law International, 2004; Garner, Bryan

A (ed.), Black’s Law Dictionary, 8" edn., Thomson West, 2004; Wehmeier, Sally (ed.), Oxford AdvancedLearner'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,

<http://www.iisd.org/pdf/2007/paralle!_importation.pdf>; 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 IntellectualProperty Law, Berkeley Technology Journal ; Vol 13: 827,

<http://www ftc.gov/bcp/workshops/warranty/comments/nimmerraymondt2.pdf.>; The NERA Study.

» 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

21

(i) IPR protection against safeguarding market circulation and fair competition and (ii) the IPRholder's interest against the consumer’s interest The substance of the exhaustion doctrine isthat IPR owners no longer have the right to control further distribution of the IPR-embodiedproduct once it has been placed on the market by themselves or with their consent.

As a legal doctrine, the exhaustion doctrine was built up by legal scholars and establishedthrough precedents It plays an important role in interpreting the law, indicating thepolicies underlying legislation, guiding courts in making decisions placing court decisions

in their proper perspective The exhaustion doctrine is especially important for commonlaw systems in supporting both policy and law relating to intellectual property andcompetition With respect to countries that belong to the common law system, theexhaustion doctrine is itself classifiable as a source of law However, with respect tocountries that belong to the Civil law system, “{t]he doctrine is not a recognized source of

law but it has exercised a great influence in the development of law."”” In order to be

applied to practice, the doctrine must first be enacted in statutes

2.1.1.1 The formation and development of the exhaustion doctrine

As already mentioned, the doctrine was formed to limit the legal monopoly of IPRs,balance IPR protection and market circulation as well as effective competition and balanceIPR holders’ interests and consumers’ interests The starting point of the argument is theneed to protect IPRs by granting IPR holders a “bundle of rights” including certainexclusive rights The exercise of these rights may lead to barriers to the free movement ofgoods and services on the market, distort competition, and prevent consumers havingaccess IPR-embodied products In other words, there is a potential conflict between IPRprotection and both the free movement of goods and services and the existence of

effective competition The application of the exhaustion doctrine is one of the solutions

for minimizing those barriers and conflicts

The necessity of IPR protection: For a long time, creative products have been recognized

as a very important element in promoting economic development and enhancing socialwelfare Both classical and modern economists agree that economic growth process isfostered by two sources: (i) capital and labor; and (ii) technology (in which intellectual

property is included).”2 The correlation of these sources has gradually changed Kamil

Idris — the former General Director of WIPO - concluded that tangible property such asland, labor, and capital used to be standards for comparing economic situations This is no

doctrine, see Northwestern University-School of Law (Chicago, the US), Law and Positive Political TheoryConference: Legal Doctrine and Political Control, Apr 29-30, 2005; Zahle, Henrik, Legal Doctrinebetween Empirical and Rhetorical Truth A Critical Analysis of Alt Ross’ Conception of Legal Doctrine,EJEL (2003), Vol 14, No 4, 801-815 According to a Vietnamese Dictionary, doctrine is a system of ideasand theoretical interpretation in a certain area See Từ điển Tiếng Việt [Vietnamese Dictionary], theInstitution of Language, Danang Publishing House, 2003, p 98 Doctor Ngo Doan Vinh asserts that adoctrine must reflect system of ideas and views with respect to a certain subject of research, be verified, andcontain truthfulness See Ngo, Doan Vinh, supra note 88, pp 146-147

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-LawSystem, < 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, <http://www.unctad.org/en/docs/dp_154.en.pdf>; FactorContributions to East Asian Economic Growth, <http://www.galbithink.org/topics/ea/account.html>

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, andharmonizing 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 atleast a certain period

According to the theory of national rights, as mentioned by M de Boufflers, deputy to theFrench National Assembly in the report that introduced the patent statute of 1791, “thepatent [and IPR protection in general] would not do more than recognizing a property that

is “personal, independent and prior to every transaction”, because it consists of theacknowledgement of the existence of a piece of knowledge — something that exists only in

the mind of the inventor and that is, since its inception, recognized as his own property."”"

Simply put, rights to intellectual property are natural, they pre-exist the law because theyresult from knowledge which is something that lies inside our heads

The main point of the reward theory” is that the creation of literary, artistic, scientific

works and industrial property objects is their creator’s contribution to society It isrecognized as necessary to reward IPR holders for their creative endeavor or the acquiredgoodwill in their product by giving them monopoly rights for a certain period

According to the incentive theory, innovators invest their time, efforts, and money increating literary, artistic and scientific works and other industrial property objects; thus, it

is necessary to grant them exclusive rights for a limited time to encourage them tocontinue to innovate and produce new products To some extent, this thesis is similar tothe reward thesis However, the key of the reward thesis is granting exclusive rights tocreators as a compensation for their invention and creativity; whereas the key to the

incentive thesis is that granting exclusive rights to creators encourages for their future

innovation and creativity

Proponents of the disclosure thesis assume that when innovators disclose theirinformation, society benefits from their creative results; in exchange society mustrecognize and protect the innovators’ rights upon intellectual property

% Kamil Idris, Sở hữu trí tuệ: Một công cụ đắc lực dé phát triển kinh tế, Tổ chức Sở hữu trí tuệ thé giới,

[Intellectual Property: A Power Tool for Economic Growth}, WIPO Publication, p 55

* Silbey, Jessica, The Mythical Beginnings of Intellectual Property, George Mason Law Review, Vol 15,Winter 2008, Number 2; Régibeau, Pierre and Rockett, Katharine, The relationship between intellectualproperty law and competition law: an economic approach, pp 508-510 (in Anderman, Steven D., supranote 4); Nguyen, Thanh Tu, supra note 24, pp 38-39.

Carvalho, Nuno Pires de, A Estrutura dos Sistemas de Patentes e de Marcas — Passado, Presente eFuturo [“The Structure of the Patent and Trademark Systems — Past, Present and Future], Lumen Juris, Rio

de Janeiro, 2009, p 73 The English translation was prepared by the author

% See Howells, John, The Management of Innovation and Technology: The Shaping of Technology andInstitutions of The Market Economy, Sage Publication Ltd, 2005; Keeling, David T., supra note 56, Ganea,Peter, supra note 1; Landes, William M and Posner, Richard A., supra note 45, p 4; Drahos, Peter, APhilosophy of Intellectual Property, Dartmouth Publishing, Aldershot, 1996, pp 72-91.

Zs

In addition to these theses, researchers also suggest there is an economic basis for IPR

exclusivity.” The reason is that the fixed costs (capital, engineering) needed for creating

an intellectual asset and adapting it to commerce (organizing production facilities, testing,labeling, marketing, and distribution) is very high “However, once these fixed costs arepaid and the good is ready for market, the actual marginal production and distribution

costs are comparatively small.” Creators, thus, are granted exclusive rights “in order to

support prices above marginal distribution costs, thereby earning a return that

compensates for the costs of investing in new ideas, cultural goods, and reputations.”””

The barriers caused by IPR exercise: Intellectual property law confers on an IPR holder a

“bundle of rights” One crucial objective is to create incentives for investors since they are

able to receive revenue as compensation for their investment and efforts.'°°A patent grants

an inventor the right to prevent others from making, using, selling, offering for sale, orimporting the invention without his or her consent Copyright grants its holder the right toprevent others from reproducing or distributing the work A trademark grants its holderthe right to prevent others from using identical or similar signs for goods or services thatare identical or similar to those in respect of which the trademark is registered where suchuse is likely to cause consumer confusion The existence of these legal monopoly rights as

such never harms the market or the consumer '°' However, the exercise of this exclusivity,

on the other hand, causes a negative impact on consumers’ access to and the smooth

circulation of goods and services and on competition itself 102 as David T Keeling states:

If the owners of IPRs could rely on those rights in order to prevent furtherdealing in goods which they had marketed, those owners would have amagnificent tool for dividing up markets, practicing differential pricing, stifling

intra-brand competition and generally engaging in anti-competitive behavior a

The exercise of IPRs may create barriers to both domestic and international trade as

Govaere observed: “IPRs were widely recognized to be indispensable barriers to trade.”!%

Market circulation may be jeopardized if IPR owners have the right to control movement ofthe IPR protected products With regard to international trade, the principle of free movement

shows that there is a customary conflict between the exercise of IPRs and such a principle.'°

Free movement is widely understood to mean that products can circulate internationally

*” See Ganslandt, Mattias and Maskus, Keith E., supra note 89

%8 Ibid., pp 5-6 The marginal cost of an additional unit of output is the cost of the additional inputs needed

to produce that output Marginal cost and average cost can differ greatly For example, suppose it costs

$1000 to produce 100 units and $1020 to produce 10! units The average cost per unit is $10, but themarginal cost of the 10 Ist unit is $20, < http://www.econmodel.com/classic/terms/mc.htm >

Ibid.

'00 Korah, Valentine, An Introductory Guide to EC Competition Law and Practice, 9" edn., Hart Publishing,

Oxford and Portland, 2007, pp 335-336.

'0! See Seville, Catherine, EU Intellectual Property Law and Policy, Edward Elgar Publishing Limited,

2009, pp 321-324; Grundig-Consten, supra note 82

!% About the existence/exercise dichotomy, see Grundig-Consten, ibid, Jones, Alison and Sufrin, Brenda,

EC Competition Law, 3'° edn., Oxford University Press, 2008, pp 781-784.

!% Keeling, David T., supra note 56, p 75

'4 Govaere, Inge Dr, The Use and Abuse of IPRs in E.C Law, Sweet & Maxwell, 1996, p 25

'°5 Wilkinson, Rorden, Multilateralism and the World Trade Organisation: The Architecture and Extension

of International Trade Regulation, Routledge, 2000; Woods, Lorna, Free Movement of Goods and Serviceswithin the European Community, Ashgate, 2004.

in the same way as domestically There should be no or as little as possible hindrancebarring a product’s way from market A to market B There should be no obstacles at theplace of exportation, at national borders, or at the destination that would make thecirculation of products impossible, more expensive, or slower IPRs are territorial incharacter and are essentially based on national law, whereas the free movement principle

as incorporated in international law aims at reducing or even abolishing barriers to trade

arising from the fact that products are crossing national boundaries.'°° In addition, IPR

Owners exercising their exclusive rights may cause barriers for free trade Theexhaustion doctrine, hence, needed to be created as a balance between IPR protectionand the free movement of goods and services both nationally and internationally

The exercise of the legal monopoly created by an IPR does not itself limit competition.Not all IPRs are monopolies and nor do all exercises of IPRs cause negative effects oncompetition Only abusive exercise of these rights, namely abuse of IPRs (and misused

of IPRs)'°’ may cause anti-competitive practices Nonetheless, it should be stressed that

not all IPR abuses are IPR-related anti-competitive practices.!08 Determination of which

types of practices are anti-competitive and which anti-competitive practices constitute aviolation of antitrust law vary among national laws and even are different from case tocase Certain practices may be viewed as per se illegal while others may be subject torule of reason Resale price maintenance, for example, is viewed in most jurisdictions as

being per se illegal whereas exclusive dealing may be subject to rule of reason.'TM

IPR-related anti-competitive practices can be coordinated conducts (such as cartels,collusion, conspiracy, mergers, predatory pricing, price discrimination and price fixingagreements) and unilateral conducts by intellectual property holders (such as refusals tolicense and tying)

IPR protection also relates to consumers’ interests In case of over-protection or protection of IPRs, market circulation is not guaranteed, competition is distorted, andconsumer welfare will be affected They are prevented from accessing and benefiting fromcreative activities and their end-products

under-The exhaustion doctrine - A balancing solution: under-There are many ways to balance IPRholders’ interests and those of consumers’ and safeguard the smooth circulation of goods

and services.’ '0 Examples are a provision allowing compulsory licenses of a patent; the

use of published works where permission and payment of royalties and/or remunerationsare not required and where permission is not required but the payment of royalties and/or

other remuneration is required; and provisions on competition relating to IPRs.'!! In

'% This observation is supported by the establishment and implementation of the GATT and GATS agreements

!” Although there are some minor differences between “abuse of IPRs” that is common use in EU and

“misuse of IPRs” that is preferred to use in the US, the former is used in this study In the TRIPSAgreement, only the former is used (see Articles 8.2 and 40.2)

Regarding the concept of IPR-related anti-competitive practices, see Nguyen, Nhu Quynh, supra note 15 OECD, Glossary of Statistical Terms, <http://stats.oecd.org/glossary/detail.asp?ID=3 | 45>.

!!9 See Nguyen, Nhu Quynh, Tổng quan về quyên sở hữu tri tuệ [An overview of Intellectual Property

Rights, in Le, Dinh Nghi and Vu, Thi Hai Yen (eds.), Giáo trình sở hữu trí tuệ [Text book on Intellectual Property], The Vietnamese Education Publishing House, 2009, pp 41-42.

'"' See Articles 31(b), 13, 8.2, and 40 TRIPS Agreement

25

addition, doctrines have been formed to ensure the desired end is achieved and one of

them is the exhaustion doctrine.''? The doctrine is designed to foster effective competition

among producers, and to benefit consumers IPR exhaustion limits the legal capacity ofproducers to control the movements of goods and services after the first sale or lawfulplacing on the market, and reduces the potential for trade-restrictive (including anti-competitive) behaviors The flow of goods and services across borders is significantlyaffected by the exhaustion regime that a country adopts Under a national doctrine, themovement of goods and services may stil! be blocked by IPR holders Under a fullyinternational doctrine, goods and services flow freely across borders after they have beenfirst sold or placed on the market under certain conditions anywhere in the world

Concerning its development, it is widely accepted that the first signs of the exhaustion

doctrine appeared in the US In the patent case Adams v Burke,''? the US Supreme Court

discussed the issue of exhaustion of IPRs for the first time.''* This case involved an

attempt by the holder of a patent on a funeral casket lid to impose territorial restrictions on

a purchaser’s resale of caskets incorporating that lid The Supreme Court held that thepatent holder’s control over the invention was exhausted on the first sale The SupremeCourt concluded that:

“[I]n the essential nature of things, when the patentee, or the person having hisrights, sell a machine or instrument whose sole value is in its use, he receives theconsideration of its use and he parts with the right to restrict that use The article,

in the language of the court, passes without the limit of the monopoly That is tosay, the patentee or his assignee having in the act of sale received all the royalty orconsideration which he claims for the use of his invention in that particularmachine or instrument, it is open to the use of the purchaser without further

restriction on account of the monopoly of the patentees.”' !?

The word “exhaustion” (erschdpfung in German) “has been first used by the Court of the German Empire [ ] in a number of judgments in the early years of the twentieth

century.”''® As early as 1902, the German Reichsgericht''” held that “if the patentee has

marketed his products under the protection of a right that excludes others, he has enjoyed

the benefits that a patent right confers on him and thereby consumed his right.”! '§ Based

"2 The fair use doctrine also puts a limitation on monopoly IPRs This doctrine allows the use of copyrightedworks and trademarks without permission of the copyright and trademark owners in certain cases

''3 Adams v Burke, supra note 35

''4 The first signs of IPR exhaustion were found in the earlier patent case Bloomer v McQuewan In thiscase, the US Supreme Court explained that “when the machine passes to the hands of the purchaser, it is nolonger within the limits of the monopoly.” Bloomer v McQuewan, 55 U.S (14 How.), 539 (1853).However, not until 20 years later was the first sale/exhaustion doctrine ruled on by the US Supreme Court in

a “more typical exhaustion case”, namely Adam v Burke See Stern, Richard H., Quanta Computer Inc v

LG Electronics Inc — comments on the reaffirmation of the exhaustion doctrine in the US, EuropeanIntellectual Review, E.I.P.R 2008, 30(12), pp 527-528.

LẺ Adams v Burke, supra note 35, at 456

''6 Keeling, David T., supra note 56, p 75

! In English, Reichsgericht means Court of the German Empire See Federal Court of Justice Celebrates 30"

Anniversary, German Law Journal, <http://www.germanlawjournal.com/index.php?pageID=I 1 &artID=10>.H8 $1 RGZ 139-Duotal, cited by Christopher Heath, Parallel Imports and International Trade, supra note 89

on this, the exhaustion doctrine “is generally considered to be a creature of German law

[and its] paternity is ascribed to the German jurist Joseph Kohler.” 7

Originally, the exhaustion doctrine was created by the industrialized countries and wasfirst applied to patents with a view to putting a “restriction on account of the monopoly of

the patentees.!?9 It was first referred to in judgments rather than in statutory law.

The role of the exhaustion doctrine has been increasingly recognized Countries haveacknowledged the doctrine in case law or/and statutory law with at least the application of a

national exhaustion regime.'?' An exception to this did occur in France in the 1960s French

courts allowed the proprietor of a trademark to control the use and distribution of atrademarked product until it reached the end-user In the late 1980s, however, French courts

changed this view and exhaustion has now been formally recognized in French law '??

The terms “exhaustion” or “exhaustion of IPRs” are not usually used in statutory law but havebeen applied in case law However, besides court judgments, the issue of exhaustion can berecognized by provisions on the rights of the IPR owner or provisions on parallel trade (theconcept of parallel trade will be defined in Part 2.2.3.1.) “Most advanced legal systems haveattained that essential minimum, [namely national exhaustion] because [n]o country has any

reason to permit the portioning of its domestic market on the basic of IPRs."'?3

Furthermore, the object of application of the exhaustion doctrine has been widened Theexhaustion doctrine was first applied to patents Its applicability has now been expanded

to cover many other IPRs, such as industrial design, trademark, copyright and analogousrights, and plant variety rights

New developments of the exhaustion doctrine are shown by its appearance within regionaland international agreements The typical illustrations for this are EU statutory law and thecase law on the regional exhaustion and WIPO/WTO-administered agreements onexhaustion of IPRs These will be discussed below

Nowadays, legal scholars, economic researchers, and judges have refined and developedthe exhaustion doctrine The doctrine has long proved its academic and practical value andhas becomes one of the most important issues in the intellectual property and competitionpolicy of many countries

2.1.1.2 The exhaustion doctrine in relation to the first sale doctrine and the implied

license doctrine

According to the first sale doctrine, IPR owners forfeit the right to control further

distribution of the IPR-protected product once the product has been first sold by them or with their consent The core of the implied license doctrine is that without any territorial

restriction in the license contract, the IPR-protected product can move freely and an IPR

owner has no right to intervene in the subsequent circulation of the product For example,

(i) if the license contract contains clauses on territorial restriction and requires the licenseeput the notices on the product such as “Not for sale in the licensor’s country” or “For use

'? Keeling, David T., supra note 56, p 75

'° Adams v Burke, supra note 35

'2! Keeling, David T., supra note 56, p 78

'2 Ibid, p 79

'3 Ibid, p 78

a7

in the licensee’s country only”, then the IPR owner could object to their resale in the licensor’scountry; and (ii) if there is no territorial restriction clause in the license contract, the goods can

be exported to and resold in the licensor’s country as well as in other countries

The exhaustion doctrine, the first sale doctrine, and the implied license doctrine share thesame goal, that is to constrain the potential exclusivity of IPRs and their core is theexhaustion of IPRs Still, there are the following differences between the three doctrines.With regard to origin, the exhaustion doctrine derived from Germany, whereas the firstsale doctrine was born in the US and the implied license doctrine originated from theUnited Kingdom As mentioned, the exhaustion doctrine is linked to the German juristJoseph Kohler “The first sale doctrine is derived from the common law of alienation ofpersonal property It has been characterized as a right attaching generally to the ownership

of all species of property.”!”* It was born in US and first referred to in the case of Adams

v Burke in 1873 The available materials show that the implied license doctrine was

invented and developed by English courts based on rules of contract law.'?°

In terms of application, the exhaustion doctrine, as already mentioned, is applicable whenthe product has been placed on the market by the IPR owner or with his consent The firstsale doctrine is applicable when the product has been first sold by IPR owner or with hisconsent Nevertheless, distinguishing between the exhaustion doctrine and the first saledoctrine has a theoretical significance only; the application of the two doctrines leads tothe same results “The implied license doctrine under English law only attachesimportance to proper notification of distribution limits to all subsequent users of thepatented product The classical exhaustion doctrine suggests, however, that limits to apatent right are inherent rather than dependent upon a patentee’s clearly expressed

intentions.”!?“ The doctrine of exhaustion of IPR is not subject to the discretion of the title-holder, but is automatic !?’

With respect to scope, with both the exhaustion doctrine and the first sale doctrine, the

geographical scope of exhaustion depends on the exhaustion regime the country applies.Accordingly, exhaustion may take place within the territory of one country under anational regime or across the borders of two or more countries under regional and internationalregimes According to the implied license doctrine, the scope of exhaustion depends completely

on the discretion of licensor and licensee as evidenced by the license contract

Notwithstanding some disparities between the three doctrines, so far as the history isconcerned, there has recently been something of a mix among them in practice.Nowadays, US courts use the term “the exhaustion doctrine” instead of “the first sale

doctrine” and in fact apply the exhaustion doctrine to their judgments.'”® The exhaustion

doctrine and the first sale doctrine are used as alternative terms The implied licensedoctrine is applied as a part of the exhaustion doctrine In particular, countries that apply

'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.

'28 Jazz Photo Corp v Int’l Trade Comm'n, 264 F 3d 1094, 1105 (Fe.Cir.2001); Quanta, supra note 37