57 Pages Posted: 20 May 2011 Last revised: 18 Jan 2014
Date Written: January 23, 2012
The first-sale doctrine, which limits the exclusive rights that survive the initial authorized sale of an item protected by such rights, has never been fully explored and articulated. Recently, insights borrowed from modern antitrust law and economics are invoked to provide a seemingly robust theoretical foundation for undermining exhaustion rules or narrowing their scope and thereby strengthen IP owners’ control over downstream distribution and use of the goods they produce. It has been suggested that just as antitrust law has recognized the efficiency of post-sale restraints and relaxed its hostility towards them, so should IP law permit their imposition and provide remedies for their breach. This Article shows that, with the exception of certain instances, this trend is misguided and should be resisted, not because the insights from modern antitrust are irrelevant, but because insights from modern antitrust do not support a case against the first sale doctrine.
The main benefits of post-sale restrictions involve situations of imperfect vertical integration between co-producing or collaborating firms, and occur during the production and distribution phases or shortly thereafter. In such situations, contracting around the first sale doctrine should be permitted. Beyond such limited circumstances, however, the first sale doctrine promotes important social and economic goals: it promotes efficient use of goods embodying IP, guarantees their preservation, and facilitates user-innovation. When a closer look is taken at what modern antitrust law can offer, it can be seen that it confirms the validity and supports the continued vitality of the first sale doctrine.
Keywords: first sale doctrine, exhaustion, parallel imports, parallel trade, gray market, copyright, patant, trademark, intellectual property, antitrust, competition, vertical restraints
JEL Classification: K21, L41, L42, O34
Suggested Citation: Suggested Citation