Common Law vs. Statutory Bases of Patent Exhaustion

Abstract

The pending Supreme Court case Lexmark v. Impression Products reveals the full breadth of disagreement about the exhaustion doctrine in patent law. In practical terms, the doctrine could mean almost everything - a mandatory rule applicable to all domestic and international sales of patented goods - or almost nothing - an optional rule applicable only to domestic sales that patentees can easily avoid by contract. This essay shows that this breadth of disagreement arises from a more fundamental disagreement over the legal basis for the doctrine, with judges, lawyers and academics deeply divided over whether the doctrine is based on judicially fabricated common law or a specific statute. The essay reiterates and further clarifies our position, first advanced in our prior article, that the doctrine is based on statutory interpretation and is designed to avoid broad constructions of intellectual property rights that would interfere with the vast and complex body of common-law rules and statutory provisions governing commercial transactions. The essay also replies to two prior responses to our original article and concludes with a modest hope for what we think is a first necessary step toward clarity in this area: We hope that the Supreme Court will identify the legal basis for the exhaustion doctrine.

Keywords: Intellectual Property, Patent Law, Commercial Law, Common Law, Statutory Interpretation, Exhaustion Doctrine

JEL Classification: K11, K21, K23, O34