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Q3. Parallel Import involving Patent Rights

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Q. We sell products in Japan and another country and own the patent rights used for the products. Certain of our products sold in the other country are imported into and sold in Japan by an importer. Does the sale by the importer constitute patent infringement?

A.
If the patented products which are duly placed in the distribution channel are assigned to or otherwise acquired by a third party in Japan and subsequently used or reassigned in Japan, such products are not subject to the application of the patent rights, and such use or reassignment does not constitute patent infringement. Specifically, any party who acquires patented products placed for distribution in Japan may use them or assign them to third parties at its discretion in Japan, regardless of the patent owner's intention. This is because the patent right is deemed to have fulfilled its purposes and the effect thereof is deemed to have been exhausted, once patented products are duly placed for distribution in the market by the patent owner (i.e., domestic exhaustion).

However, a question remains as to whether the so-called parallel import by the importer in question (i.e., importing patented products, placed for distribution and purchased in a foreign country, into Japan and selling the same in Japan) may be considered comparable to the above resale in Japan. The question is, if patented products are duly placed for distribution in a foreign country, whether the patent rights in the foreign country as well as in Japan may be deemed to have fulfilled the purposes and been exhausted, or, in other words, whether the effect of the patent rights is deemed to have been exhausted not only in the foreign country but also worldwide (i.e., international exhaustion).

Under the principle of the Patent Law, patent rights of an invention in one country are deemed independent of any patent rights of the same invention in any other country (i.e., principle of patent independence). In addition, the effect of patent rights in one country are governed by law thereof, and may be recognized only within its territory (i.e., territoriality principle).

Under the above two principles, it may be possible to deem that patent rights which have been exhausted with respect to products duly distributed in one country only relate to the effect thereof in the foreign country. The past prevailing theory was also that assignment or other acts concerning imported goods in Japan constituted patent infringement.

However, adhering to such theory may materially preclude international transactions in present trade where international product distribution has become exceedingly active. Given such a background, the Supreme Court ruled in its July 1, 1997 judgment that, once the patent owner hands over patented products outside Japan, the patent rights do not extend to the assignee or any of the subsequent acquirers, unless there is any specific agreement with the assignee for restricting the purchaser thereof and the restriction is expressly indicated on the patented products (although the Court did not recognize the above international exhaustion).

Therefore, by applying the Supreme Court ruling to your case, the import and sale in Japan by the importer in question constitute patent infringement only if your company has agreed with a purchaser of your patented products in the foreign country to exclude Japan from the permitted sales territory and if such agreement is indicated on the patented products. Otherwise, the import and sale in Japan by the importer does not constitute patent infringement.

At customs, it is deemed that the parallel import of genuine goods involving patent rights does not constitute patent right infringement, unless there is specific agreement between the patent owner and the acquirer of patented products restricting the purchasers thereof and such agreement is indicated on the patented products.

Division in Charge

Office for Intellectual Property Right Infringement and International Trade, Manufacturing Industries Bureau
Tel: +81-3-3501-1701
Fax: +81-3-3501-6588

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Ministry of Economy, Trade and Industry
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