Exhaustion Of Patent And Trademark Rights In Canada

• Published date: 03 March 2022
• Subject Matter: Intellectual Property, Patent, Trademark
• Law Firm: Gowling WLG
• Author: Mr Michael Crichton and Reed W Taubner

Do you know what the 'exhaustion' of intellectual property rights means? Or that the law in this area governs whether the import of genuine IP-protected goods is lawful or not?

If your business is involved in or interested in the movement into Canada of goods protected by an intellectual property right, then you need to understand what the law on 'exhaustion' of the relevant right is in Canada. In fact the law on exhaustion depends on which intellectual property right is concerned.

The term exhaustion refers to the law governing whether an intellectual property right (such as a registered trademark or a patent) can be enforced by way of an infringement action, against the sale of genuine goods originally placed on the market in another country and then parallel imported into Canada.

Canada's patent and trademark legislation does not provide for a statutory defence called 'exhaustion' in the way that is found in many other countries. Rather, in Canada, when we refer to exhaustion we use the term in a generic way, the legal questions at play being slightly different: generally speaking the principles governing the assessment of infringement are applied irrespective of the geographical origin of the goods. This is a 'common law' approach, with principles very much in keeping with those applied historically in the UK (indeed still today, to some extent), and in Australia. The approach is international in nature but potentially subject to restrictions on the facts.

Canada's 'exhaustion' regime therefore governs (among other things) rules on parallel imports of genuine goods into Canada - what genuine goods can be imported and from where. Here is some more detail:

Patents

In Canada, there is no statutory provision addressing the concept of "patent exhaustion". Nonetheless, the common law in Canada supports the basic principle that a purchaser of a patented product acquires an implicit right to use the product without restriction.¹ Indeed, Canadian courts have equated the rights acquired by a purchaser of a patented product with an implied license.² There are, however, exceptions.

In particular, when a patentee sells a patented product, ownership of that product is transferred to the purchaser. Accordingly, subject to any agreed upon restrictions, the purchaser has the exclusive right to do as it wishes with the product without fear of infringing the patent, and the patentee no longer has any rights with respect to that product.³ Where there are restrictive...