June 1, 2016

“Patents — The Last Border Guard?,” ACC Docket, June, 2016

By Bryan K. Wheelock, Principal

A country’s national laws govern intellectual property rights — such as patents, trademarks, and copyrights — and determine their validity and infringement. For this reason, these rights have generally been regarded as territorial, as having a separate existence. This meant that a sale under a patent, trademark, or copyright in one country did not exhaust the corresponding right in another. Thus the sale of a product covered by an intellectual property right in one country, did not prevent the owner of that intellectual property right in a different country from blocking the importation of the product first sold abroad. The territoriality conferred by intellectual property rights has generally permitted the owners of those rights to segment the market, exploiting the rights differently in each country. Examples include adopting a local pricing strategy that allows the owner to maximize profits, without fear that the pricing differential will cause a product sold cheaply in one country to flow to another country where the product is higher priced. Not only does this market segmentation maximize the IP rights-holder’s profits, but it also makes the product more widely available, since the rights-holder can price the product according to local conditions.

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