Exhaustion Of Right

Author:Mr André Sarmento
Profession:Clarke, Modet & Co

Compatibility of the Industrial Property restrictive effects with the freedom of trade and competition required by the European integration

A predictable tension with the territoriality of the Industrial Property rights (DPI) derives from the process of European construction and consolidation of the Community market.

The issue driving to the analysis is shown by the fact that the freedom of trade and competition, values assigned to the European Union, collide with the monopoly at national scale conferred by the DPI. The simple exercise of exclusive rights could, potentially, hinder the free movement of goods within the Community.

As a way of solving the exposed dichotomy, there is the concept of exhaustion of rights. This rule was developed by the case law of the European Union Court of Justice and, thereafter, transposed to the laws of the Member States. The national Legislation expressly provides the exhaustion of rights through its inclusion under various Articles throughout the Portuguese Industrial Property Code.

The exhaustion of rights doctrine establishes that the holder of a specific DPI, or someone with his/her consent, by placing a product under his/her monopoly on the market, exhausts the exclusive right, concerning the referred product in the European economic area. Thus, the goods are no longer in that legal sphere and may be even sold elsewhere.

Together with the exhaustion of DPI's, the concept of parallel imports is often mentioned. This is an import made beyond the official distribution circuit of a product. The person, who does this, is a third party different from the product manufacturer and distributers. The parallel importer purchases goods in a market where they are cheaper and places them in another market for a more expensive resale. It should be noted that the products sold by parallel imports are genuine. The importer is not a counterfeiter.

Parallel imports, according to the European Commission and the Court of Justice, are beneficial to the European Economic Area, seeing that they balance the market prices of the different Member States.

The territorial scope of the exhaustion should also be referred. The Portuguese legislator has chosen to apply the exhaustion of rights only to the scope of the European Economic Area. But, it is worth noting that, although there cannot be exhaustion in brands at international level, with regard...

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