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8/13/2019 05 International Enforcement of IP Rights
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05 International Enforcement of IP RightsIntroduction
Part III of TRIPS established detailed enforcement obligations on all WTO members to create judicial means that
permit an IP owner to enforce its rights through private action before judicial authorities
Before TRIPS, no Intl IP Treaty addressed the issue of effective IP Rights Enforcement
WTO Dispute Settlement Understanding
Sets forth the WTO dispute settlement process
Commercial Piracy
Note -- the reading here doesn't add much substance.. Basically, commercial piracy is costly
Overview of Problems Face by Businesses to Protect IP
Loss of revenue/sales
Costs for IP enforcement
Lawyers
Hiring external investigators/enforcers
Loss of jobs, even?
Detriment to good will?
Decrease in quality of products in marketplace
Magnitude of Commercial -- Industry Estimates
Copyright Piracy
Trademark Counterfeiting
Patent Infringements
How to limit commercial piracy
Part III of TRIPS
Enforcement obligations on all WTO members
Dispute settlement
Set forth in the WTO Dispute Settlement Understanding (DSU)
ACTA
Anti-Counterfeiting Trade Agreement
Enforcement Obligations Under TRIPSPart III of TRIPS is divided into five sections:
General obligations
Civil procedures and remedies
Provisional measures
Border controls, and
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Criminal sanctions
Introduction
Art. 41 TRIPS :
Membersshall ensurethat enforcement procedures ... so as topermit effective action against any act
of infringement of intellectual property rights .... including expeditious remedies to prevent
infringements and remedies which constitute a deterrent to further infringements. These procedures shallbe applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for
safeguards against their abuse.
Civil/Provisional Remedies
see p. 696
Artt. 42-50 TRIPS require WTO members to provide:
Tools for effective civil enforcement against commercial piracy i.e. possibility of civil litigation
Evidentiary presumptions
Injunctions
Damages adequate to compensate the right holder
Mechanisms for the disposal of infringing goods, materials, and implements used to create those
goods
Specifically, Art. 50 TRIPS provides for injunctive relief
Availability of ex parte injunctive relief is considered fundamental
Criminal Sanctions
see p. 699
Art. 61 TRIPS provides for criminal sanctions:
Membersshall provide for criminal procedures and penaltiesto be applied at least in cases of wilful
trademark counterfeiting or copyright piracy on a commercial scale. Remedies available shall include
imprisonment and/or monetary fines ... In appropriate cases, remedies ... shall also include the seizure,
forfeiture and destruction of the infringing goods and of any materials and implements the predominant
use of which has been in the commission of the offence. Members may provide for criminal procedures
and penalties to be applied in other cases of [IP] infringement ... in particular where they are committed
wilfully and on a commercial scale
China -- Measures Affecting the Protection and Enforcement of IP Rights (Criminal Procedures)
(WTO Panel Report 2009) (p. 700)
Facts
USA complained that China's laws violated Art 61 because they did not provide for criminal
sanctions for certain acts of piracy on a commercial scale
China's laws specified levels/tiers of activity.
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USA argued that "any commercial activity" should be considered "on a commercial scale"
i.e. some activities that fall below China's legal standards should still be considered "on a
commercial scale" to trigger TRIPS protection
Issue
Are China's threshold for criminal procedures and penalties consistent with Art 61 TRIPS?
i.e. what does piracy/counterfeiting "on a commercial scale" mean?
Held
Counterfeiting or piracy "on a commercial scale" refers to counterfeiting or piracy carried on at
the magnitude/extent of typical commercial activity w.r.t. a given product in a given market
i.e. compare against the size of the market for legitimate goods in the country where the
piracy/counterfeiting is taking place
Rule
What constitutes a commercial scale for counterfeiting
AnalysisThe TRIPS statute uses the word "scale", which refers to activities of a certain size
i.e. not ALL activities constitute activity on a commercial scale
i.e. the statute is not written to imply that any/all commercial activity is targeted
In this case, consider the following factors:
The items being pirated; the number of goods
Money -- the price of the goods
The period of time over which infringements can be added up to satisfy the thresholds
The US provided shoddy evidence: non-credible news articles
Anecdotal evidence
Taken from US sources, not Chinese sources (i.e. they do not establish the size of the
markets/scale of activities that constitute "a commercial scale" in China)
Notes
Note 1, p. 705 - The best sources of the size of counterfeiting in China are Multinational
Corporations (MNCs). But they don't. Why?
Because they don't want to anger the Chinese govt
Note 4, p. 706 - ACTA
FILL THIS IN!!
Note 2, p. 676 - Calculating Losses
This is just an informational example. But a flaw in the reasonsing is: the method
assumes that every counterfeit sale would be a sale of the legitimate product
Grey market
e.g. companies with valid IP rights (e.g. a subsidiary) selling a legitimately
manufactured/licensed good from a lower-price market and reselling that good in a
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higher-price market
Border Controls
TRIPS Minimum Standards
Artt 51-60 TRIPS provide for special border enforcement obligations on thecountry of importation
Members shall ... adopt proceduresto enable a right holder, who has valid grounds for
suspecting that the importation ofcounterfeit trademark or pirated copyright goodsmay take
place,to lodge an application ...for the suspension by the customs authoritiesof the release into
free circulation of such goods.
Members mayenable such an application to be made in respect of goods which involve other
infringements of intellectual property rights...
Members mayprovide for corresponding procedures ...[for] goods destined for exportation ...
China -- Measures Affecting the Protection and Enforcement of IP RIghts (Customs
Measures) (WTO Panel Report 2009) (p. 708)
Facts
USA args that Chinese authorities lack the authority to order the destruction or disposal
of infringing goods required by Art 59 of TRIPS
China law created a "compulsory scheme" so that Chinese Customs could not exercise
their discretion to destroy goods; instead, they must give priority to disposal options that
allow infringing goods to enter channels of commerce and harm the right holder
e.g. activities are: Donation to social welfare bodies, Sale to the right holder,
Auction
USA args that the measures treat auction and other disposal methods as "compulsory
pre-reqs" that renders auction mandatory in certain circumstances (where USA would want
destruction or disposal)
China args that the measures express a "preference" for certain disposition methods
For auction, the Chinese measures say that:
Where confiscated goods infringing on IPR cannot be used in social public
welfare (e.g. donations), and the IPR holder has no intention to buy them, then
Customs can auction them off, after eradicating infringing features
USA args that if none of the first 3 options (social public welfare, selling back to IPR
holder, and auction) are not available, then (and only then) can the Chinese Customs
authorities destroy the goods
Issue
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Does the Chinese meet TRIPS Art 59 standards for disposal/destruction?
Held
(1) The Chinese Customs laws/measures meet the standards of TRIPS Art 59 w.r.t.
disposal/destruction
USA loses - USA has not established that the Customs measures, on their face,
OBLIGE Customs to auction the infringing goods
(2) The Chinese Customs laws/measures DO NOT MEET the standards of TRIPS Art 59
w.r.t. re-selling the goods
USA Wins here
The simple removal of the TM is not enough (other than in "exceptional cases") to
permit release of goods into the channels of commerce
Rule
Analysis
The Chinese law DOES allow Customs to destroy goods before auction
The law only creates a PREFERENCE for other types of disposal/disposition
US Approach to Border Controls
see p. 712
Ross Cosmetics Distribution Centers Inc v. United States (Ct Intl Trade 1994) (p. 714)
Held
Ptf's products are not counterfeits
However, Ct sustains Customs' finding of likelihood of confusion w/ ptf's packaging for"gorgeous"
Packages identical to that of GORGEOUS shall be denied entry
EU Approach to Border Controls
see p.
Administration des Douanes et Droits Indirects v. Rioglass SA, Transremar SL (ECJ 2003) (p.
722)
Held
A measure of detention under customs control, such as that at issue in the main
proceedings, cannot be justified on the ground of protection of commercial and industrial
property w/in the meaning of Art 30 EC
Private Enforcement - Procedural and Substantive ConcernsRecognition and Enforcement of Foreign Court Judgments
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We did not discuss this in lecture.. Add notes if you can, but do the stuff we covered
first.
Sarl Louis Feraud Intl v. Viewfinder Inc (2d Cir 2007) (p. 738)
Held
Analysis
The fair use doctrine balances the competing interests of the copyright laws and the First
Amendment
Exhaustion of Rights and Gray Market GoodsWhat are Gray Market Goods?
Gray Market Goods a.k.a. Parallel Imports are different than commercial piracy
They are authentic goods that are intended for a foreign market, but are diverted or imported, without
permission of the IP owner, into a country where the IP owner has valid IP Rights.
The problem is: whether the IP owner has the right to prevent the importation of gray market goodsby parties who do not have the consent of the IP owner (since the goods themselves may not actually be
illegal)
Owners' rights often depend on the country's approach to "exhaustion"
Exhaustion of IP Rights
Generally refers to exhaustion of the distribution right (right of IP owners to prohibit distribution)
International Exhaustion: A first sale of a good anywhere in the world exhausts distribution right (i.e.
after importation)
National Exhaustion: Exhaustion occurs only if the first sale of the goods occurs within the country of
importation
Regional Exhaustion: Exhaustion occurs if the first-sale occurs within a particular region (e.g. the EU)
Exhaustion of Trademarks
Intro
Countries have adopted different approaches. Even TRIPS Art 6 says "nothing in this Agreement
shall be used to address the issue of exhaustion of IP rights
Complex issues arise in connection with gray market importation of TMed goods
Main problem: to determine exhaustion when a TM is simultaneously used by the
registered TM owner and other affiliated and unaffiliated entities
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In Both the US and EU, an authorized first sale by related companies leads to exhaustion
Distinguish
EU - Regional Exhaustion
If there is economic link (broader std than US approach)
Licensees and exclusive distributors --> economic link
US - International ExhaustionIf there is "common control" btwn owner and subject (e.g. parent / subsidiary)
Licensees and exclusive distributors --> no "common control"
But in both EU and US, an authorized first sale by a "related company" constitutes an
exhaustion of distribution rights under TM law
(More on this follows)
EU Approach to TM Exhaustion
EU adoptsRegional exhaustionof TMs
Exhaustion applies where the owner of a TM in the importing state and the owner of the TM in
the exporting state are (1) the same; or (2) if they are not the same, but they are "economically
linked"
Does not require affiliation (e.g. parent/sub relship not required)
Only needs license to use TM, or exclusive distributorship
IHT Internationale v. Ideal Standard GmbH (ECJ 1994) (p. 746)
Facts
American Std (AS) is a an American company
A French subsidiary of AS had the French TM, "Ideal Standard"
French subsidiary sold TM to SGF (a French Company)
SGF assigned the TM to another French company, CICh (so now CICh has the
French TM for Ideal Standard)
AS also had German subsidiary, Ideal-Standard GmbH
Another Germany co, IHT, was a subsidiary of CICh (therefore imported goods in
France, using the French Ideal Standard TM), and sold the goods in Germany
Ideal Standard GmbH sought to enjoin IHT from marketing goods in Germany
under the Ideal Standard TM (because of likelihood of confusion btwn the IHT-owned
French Ideal Standard tm in Germany and the Ideal Standard GmbH-owned Ideal
Standard tm in Germany)
Claimed consumer confusion
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Issue
Is there exhaustion of rts where TM has been assigned for one or several Member
States ONLY and there is NO ECONOMIC LINK btwn assignor and assignee?
Held
No -- no exhaution of rights
Rule
Art 30 EEC
NO Quantitative restrictions on products traveling btwn the EU countries
ART 36 EEC
Exceptions are OK when necessary to protect IP Rights
Analysis
This holding illustrates the "economic link" standard.. I think
Also, there is no unlawful restriction on trade btwn Member States w/in the
Meaning of Articles 30 and 36 where a subsidiary operating in Member State A, of a
manufacturer established in Member State B, is to be enjoined from using a particular
name (as a trade mark) because of the risk of confusion with a device having the same
origin
The holding remains true even if (a) the manufacturer is lawfully using the
disputed name in his country of origin under a trademark protected there, (b) he
acquired that trademark by assignment, and (c) the trade mark originally belonged to a
company affiliated to the undertaking which, in Member State A, opposes the
importation of goods bearing the disputed trademark
US Approach to TM Exhaustion
USA adoptsInternational exhaustionof TMs (broader scope than EU)
But USA int'l exhaustion applies only to goods sold by an entity under the "Common
control"of the US Trademark Owner
What DOES trigger International Exhaution
Sales of TMed goods ANYWHERE, by an entity under the "common control" of the USTM owner will trigger exhaustion
e.g. In US, an authorized first sale by "related companies" constitutes exhaustion of
distribution rts under TM law
What DOES NOT trigger International Exhaustion
Sales of goods by independent third parties will NOT trigger exhaustion of TM
distribution rights in those goods
Standard = "Common Control"
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e.g. a subsidiary of a parent co, or e.g. 2 separate subsidiaries of the same parent -->
under the "common control" of the parent TM owner
a mere licensee or an exclusive distributor would NOT be under the "common control"
of the TM owner
K Mart Corp v. Cartier, Inc (US 1988) (p. 751)
Facts
526 of 1930 Tariff Act prohibits importing "into the US of any merchandise offoreign manufacture, if such merchandise bears a TM owned by a US citizen/entity,
unless with written consent"
"Common Control Exception" -- the ban does NOT apply IF:
Goods mfg'd abroad by the TM owner or its affiliate, i.e. IF:
Foreign AND US TM owners are the same person or entity, OR
Foreign and US TM owners are parent / subsidiaries, or subject
to common ownership or control, OR
The goods manufactured abroad bear the TM with the
AUTHORIZATION of the mark's US owner
Respondents (an association of US tm holders and two of its members) brought
suit in Fed Dist Ct seeking (1) delcaration that the Customs Service regulation is
invalid and (2) injunction against its enforcement
Issue
Is the "common control exception" valid?
Rule
526 of 1930 Tariff Act prohibits importing "into the US of any merchandise of
foreign manufacture, if such merchandise bears a TM owned by a US citizen/entity,
unless with written consent"
"Common Control Exception" -- The restrictions do not apply to imported articles
when: (Goods mfg'd abroad by the TM owner or its affiliate), IF:
(1) Both the Foreign AND US trademark/trade name are owned by the same
person/entity, OR
(2) The Foreign and US TM owners are parent / subsidiaries, or subject to common
ownership or control, OR
(3) The goods manufactured abroad bear the TM with the AUTHORIZATION of the
mark's US owner
Held
Court held that the "common-control" exception is consistent with 526
Court struck down the "authorized-use" exception of the Tariff Act, but left
the other 2 provisions intact
Provisions (c)(1) and (c)(2) are CONSISTENT with 526 (i.e., they
comply with ..)
BUT Provision (c)(3) is NOT CONSISTENT with the statute, and
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cannot stand
The "authorized use" exception denies a domestic trademark holder the
power to prohibit importantion of goods made by an indep foreign manuf where
the domestic tm holder has authorized the foreign manuf to use the mark
Analysis
The gray market arises in any of three general contexts:
Case 1 -- A US firm purchases from an independent foreign firm the
rights to register and use the independent foreign firm's TM as a US
TM, and to sell its foreign-manufactured products in the US
Issues that arise:
Parallel importation
Foreign firm may also import goods to US --
competes w/ the US firm that has the TM to sell the
goods
Foreign mfcr sells its goods outside US, and a 3rd
party who purchases them abroad could legally import
them back to US
Intra-brand competition (i.e. US firm competing with the
Foreign firm that legally imports in the US)
This type of gray market is banned by 526 -- US firm can
prevent importation of these goods
Case 2 -- US firm registers the US TM for goods that are mfg'd abroad
by an affiliated manufacturer
Case 2a: The US firm is a subsidiary of a foreign manufacturer
-- the subsidiary registers, under its own name (or the mfcr assigns
to the subsidiary's name) a US TM that is identical to the parent's
foreign TM
Issues that arise: Parallel importation by a 3rd party who
buys the goods overseas) creates a gray market
Case 2b: The US firm is the parent company, and the foreign
mfcr is a subsidiary manufacturing company
Case 2c: The US firm is the parent company, and the foreign
mfcr is an unincorporated manufacturing division of the US co
Issues that arise: Parallel importation
This type of gray market is banned by 526. BUT, the "common
control" exception lifts the ban..
(i.e. the US company could not stop the importation of
products made under Case 2)
Case 3 -- The US company holds a US TM; authorizes an
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independent, foreign manufacturer to use the TM (usually the US holder
sells to the foreign manufacturer an exclusive rt to use the TM in a
foreign place, but contracts w/ the foreign manufacturer to prevent the
foreign manufacturer from importing its TMed goods into the US)
Issues that arise: Gray market -- if the foreign mfcr, or a 3rd
party, imports into the US, the foreign-made goods will compete on
the gray mkt w/ the holder's goods
This type of import is NOT banned by 526 -- i.e. a US firm
could not stop parallel importation in this case (and it should be
able to)
Prof's Notes
The Common control exception is provided by an agency regulation
( 19 CFR) => it cannot be inconsistent with federal law i.e. with 526 of
the 1930 Tariff Act
Source of ambiguity 526 of the 1930 Tariff Act => meaning of:
Manufactured abroad, and
Owned by
Case 1 => clearly within the ban
Case 2(a) => possibly outside the ban ... is there a TM
owned by a US subject?
Case 2(b) => possibly outside the ban... are the goods
merchandise of foreign manufacture?
Case 2(c) => possibly outside the ban... are the goods
merchandise of foreign manufacture?
Case 3 => clearly within the ban
NOTE: consider Lever Brothers
42 of the Lanham Act => No importation of foreign goods
with identical (legitimate) TMs, but physically different
independently from the affiliation issue
Lever Brothers v. United States (DC Cir 1993) (p. 755)
FP
Lever US (LUS) is American co
Lever UK (LUK) is LUS' British Affiliate
Both LUS and LUK make deodorant soap under the "Shield" TM, and hand
dishwashing liquid under the "Sunlight" TM. The marks are registered in each
country
The US and UK versions of the products are formulated differently, for
regional preferences
US and UK also both have slightly different packaging
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Issue
Held
42 of Lanham Act bars the importation of goods that bearing a trademark
identical to a valid US trademark, but which are physically different from the
US goods (even though the use of the TM is valid
ANALYSIS
Consumer confusion is an issue. i.e. if the goods were formulated the same,then there likely wouldn't be an issue. However, in this case, the goods are
formulated differently, AND packaged differently.. But had the same marks
Exhaustion of Copyrights
EU Approach to Copyright Exhaustion
Regional exhaustion- same as TM and patents
Consent approach
US Approach to Copyright Exhaustion
At first, national exhaustion (the first-sale doctrine used to apply a "National Exhaustion"
standard
BUT NOW, the Supreme Court has decided that the US follows International Exhaustion
(based on Kirtsaeng)
Quality King Distributors v. L'anza Research International (US 1998) (p. 760)Facts
L'anza (L) manufactured shampoos and other products, in the US
L also sold product in foreign markets (where they are cheaper)
L copyrighted the labels it put on bottles
L shipped products to UK; UK shipped to Malta; from Malta, products came back
through Quality King (QK) to the US (parallel import)
L only sold through authorized retailers; advertised at trade shows; through trade
magazines, and stuff
QK sold products through any ol' stores
602(a) of Copyright Act --> right to prohibit the unauthorized importation of
copies
Issue
Is 602(a) limited by the provision of 109(a)?
Held
109(a) does not apply to parallel importation -- only applies to goods made in
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USA
Rule
602(a) of Copyright Act --> right to prohibit the unauthorized importation of
copies
"Importation into the US, without the authority of the owner of the copyright
under this title, of copies or phonorecords of a work that have been acquired
outside the US is an infringement of the exclusive right to distribute copies or
phonorecords under 106, actionable under 501
Act 106 = exclusive rights (e.g. right to distribute, right to copy, right
to make derivative works, etc)
Act 106 specifies that 106 is limited by 107 - 120
109(a) = First Sale Doctrine --> Copyright exhausts upon first sale;
i.e. legit purchaser of (C)ed works are
"Notwithstanding the provisions of 106(d), the owner of a
particular copy or phonorecord lawfully made under this title, or
any person authorized by such owner, is entitled, without the
authority of the owner, to sell or otherwise dispose of the
possession of that copy or phonorecord
Analysis
Court interpreted "lawfully made under this title" to mean only goods made in the
US
Act, a US law, can only affect US goods
Therefore, First-Sale doctrine does not apply to foreign-made goods
Notes
The court only specified that the FSD applies only to goods made in the US; not
where they were first sold
Omega S.A. v. Costco Wholesale Corporation (US 2010) (p. 764)
Facts
Omega made watches in Switzerland, and sells them globally
Engraved on the watches is a U.S. copyrighted "Omega Globe Design"
Issues
Held
First-Sale Doctrine is unavailable as a defense to the claims under 106(3)
(exclusive rights) and 602(a) (imports) because there is no genuine dispute that
Omega manufactured the watches bearing the Omega Globe Design in Switzerland
Rule
Analysis
Notes
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Based on Quality King, the first-sale doctrine should not have applied in this case,
because the watches were not made in the United States
Issue =
Goods manufactured abroad
First sold abroad, then imported abroad, and RESOLD by Costco
So, First-Sale does not apply here. i.e. Copyright holder still
See the Circuit Split notes at left
Kirtsaeng (2d Cir 2013) (Print-out)
Facts
Entity in US had for textbooks
Gave authorization to print/publish the textbooks abroad
Goal was to segment the market
Textbooks were sold cheaper abroad than in the US
Some foreign-made books were imported into US; other books were published in
the US and sold here
owner
Issue
Does first-sale doctrine apply to imported copies of U.S.-copyrighted works
manufactured abroad, i.e. do the words "lawfully made under this title" restrict the
scop of th 109(a) first-sale doctrine geographically?
Held
Analysis
109(a) says nothing about geography -- no geographic restriction
It doesn't matter where the goods are MANUFACTURED or First-Sold
First-sale doctrine applies internationally
i.e. if first sale occurs overseas, then owner in the US cannot
prevent parallel import of genuine products
"Lawfully made under this title" means:
Lawfully made --> only authorized copies
Under this title --> copies made "in accordance with" or "in
compliance with" the Copyright Act
Notes
Kirtsaeng (2nd Circuit) held: Goods produced abroad, First sold in US --> No
exhaustion of ; i.e. owner can stop the importation of the goods if they are not
authorized
This decision allows the "off-shoring loophole" that Omega prevented.
"International Exhaustion" -- if the first sale occurs abroad, it exhausts
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copyright
BUT THE SUPREME COURT OVERRULED OMEGA
If goods produced abroad, then independently of whether they are first sold
in the US or abroad, the rights are still exhausted
Kirtsaeng is the law
US follows International Exhaustion
Exhaustion of Patents
EU Approach to Patent Exhaustion
Regional Exhaustion (same as TMs and Copyrights)
US Approach to Patent Exhaustion
National Exhaustion
Merck & Co v. Primecrown Ltd (ECJ 1996) (p. 769)
Facts
Merck claims that Primecrown infringed its UK patents for a hypertension drug
M Claims that PC carried out parallel imports of the drugs into the UK
(i.e. from Spain & Portugal)
Note: At the time, those drugs were not patentable subject matter in Portugal and
Spain
Issue
Do Art 30 and 36 of the EEC Treaty preclude the application of national legislation
which grants the holder of a patent for a pharma product the right to oppose
importation by a 3rd party of that product from another Member State, in
circumstances where the holder
1st put the product on the market in that state after that state's accession to
the EC, but before the subject matter could be protected by patent in that State?
Held
Yes
Analysis
Merck entered the Spanish and Portuguese markets voluntarily; i.e. they weren't
forced to by a compulsory license
Jazz Photo Corp v. International Trade Commission (Fed Cir 2001) (p. 772)
Facts
Fuji film made single-use disposable cameras
Some cameras were First sold in US; others were first-sold abroad
Appellant Jazz Photo imports to the US used cameras that were refurbished by
various overseas "re-manufacturers
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EC said JP's actions constituted banned reconstruction of goods
Issue
Did appellant's actions constitute patent infringement?
Held
No patent infringement for cameras that Fuji first sold abroad; but patent
infringement for cameras first sold in the US
i.e. Fuji could prevent importation of cameras first-sold abroad, but could not stop
the importation of cameras that were first-sold in the US
Analysis
"imported articles of solely foreign provenance are not immunized from
infringement of US patents"
Articles of "solely foreign provenance" means authorized international first
sales
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