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Exhaustion and First Use Doctrine

Posted Wednesday, August 20, 2014 by Daniel Mills

If you’ve ever wondered why you can buy or sell used goods without violating intellectual property rights, the reason why is known as “Exhaustion” or the “First Sale” doctrine.
Once an item that is protected by Trademark, Copyright, or Patent is sold into the marketplace, the holder of the intellectual property rights loses certain elements of protection. One limitation, is that the rights holder cannot control the resale of the item. Without “First Use” doctrine, we wouldn’t have garage sales, flea markets, eBay, or Craigslist. What would the Bargain Hunter do?! This is why you can buy used books and video games at stores, and why you can buy authentic luxury merchandise from sites like eBay.
Another limitation is that the rights holder cannot control the use of its products once they are sold. When you buy something, say a bottle of Coca-Cola, that is covered by one or more types of intellectual property protection, you can repurpose that product without violating intellectual property laws. You can use your Coke bottle to hold flowers, sand, coins, etc., and you can even use it as a component in some other product altogether. For example, you could make a chandelier of Coke bottles and not violate trademark law as there is no confusion.
There are limitations to what the doctrine will allow however. A key component of intellectual property law is centered on confusion. Consumers cannot be confused about the origin, quality, seller, condition, or affiliation with the manufacturer. So one must be careful when re-selling even unopened brand new goods to not do so in a way that would confuse the purchaser in any area just mentioned. When it comes to repurposing goods, there should be no confusion as to where the repurposed product came from and who made it. If the trademark of the protected product is so prominent that a purchaser may reasonably believe that the new product was made by the original holder of the trademark, there could be infringement. .
Many companies would love to be able to control not only where you could buy their products, but also how they are used. Fortunately, intellectual property law exists, in part, to protect the rights of the creators and owners, but to also serve the consumer by not allowing the rights holders too much control over the sale, distribution, or use of their goods once they have entered the stream of commerce.
As with any area of the law, each case is dependent on the facts, and the “First Sale” doctrine is nuanced and complex, especially with the popularity of eBay and Craigslist. If you have questions about any of the topics raised here, please contact me or any other qualified attorney.

Exhaustion and First Use Doctrine ›› Ruttler Mills PLLC