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A Quick Look at the Exhaustion of Intellectual Property Rights and Defences against IP Infringement Claims under the Vietnam IP Law
(Ngày đăng: 2020-03-04)

A Quick Look at the Exhaustion of Intellectual Property Rights

and Defences against IP Infringement Claims under the Vietnam IP Law


Email: vinh@bross.vn


Exhaustion of Rights and its Legal Implications


According to the WIPO, exhaustion means the consumption of rights in intellectual property subject matter as a consequence of the legitimate transfer of the title in the tangible article that incorporates or bears the intellectual property asset in question. Exhaustion, therefore, is a natural consequence of the intangible nature of the assets covered by intellectual property, such as expressions, knowledge, reputation, quality, origin. Because of their intangible nature, they do not follow the tangible article with which they are associated[1]


The exhaustion of intellectual property rights stems from the exhaustion doctrine of intellectual property rights or also widely known as first sale doctrine whereby a product bearing an intellectual property subject matter is marketed by the owner of intellectual property rights or by the consent of the owner, he has no longer the right to control over the distribution and commercial exploitation of that product[2].


Let us take a simple example, namely a judge of the US Court of Appeals, Richard Allen Posner once said that in the absence of exhaustion, if every time a car owner wished to resell his/her used car needed to request a license from the car maker, that would lead to an absurd situation of implying automatic compulsory[3].


Therefore, exhaustion of intellectual property rights generally recognized by the world is essentially the loss of the right holder’s entitlement to sue the third party, even without the owner's permission, if the third party circulates, resells, or distributes goods bearing such intellectual property rights, if the goods are deemed to have been legally marketed by the right holder or by another party authorized by him.


The natural existence of exhaustion of intellectual property rights often attaches, in practice, to the phenomenon of parallel trade or parallel importation, which is characterized in that the importer purchases genuine products bearing brand F being legally sold in the territory A for resale of them in the territory B, wherein the price of the genuine product F in the territory B offered by the brand owner or his authorized parties is higher than that of the importer offered. The market where F-branded products are distributed at the same time by the two parallel channels, is called as the gray market.


No infringement of industrial property right if exhaustion of right found


Section 125(2)(b) of the IP Law provides for that the right hoder has no right to prevent others from circulating, importing, exploiting utilities of products which were lawfully put on the market including overseas markets.


As such, the Vietnamese law considers that parallel import is not an infringement of industrial property rights, that is, the act of importing, distributing and selling products imported in parallel manner belonging to one of four circumstances[4] as follows may help you defend yourself against claims of IP infringement, if two conditions are met: (i) the F-branded product has been marketed regardless of domestic or foreign markets, and (ii) the entity or individual that brought the product to the market whether is the owner of the brand F or any other party authorized by the owner of the brand A[5].

However, please keep in mind that the IP Law only refers to industrial property rights (exclusive rights to inventions, industrial designs, trademarks, geographical indications, etc.) without mentioning copyright and related rights. Therefore, it is understandable that Vietnam chose to quietly express its position towards the exhaustion of rights in copyright and related rights. As a result, it is unclear whether the acts of reselling, distributing, exporting, communicating to the public ... the work by a person who has purchased it legally from the beginning to be resold for a third party would be regarded as infringement of intellectual property rights


Should you have specific needs, please contact: vinh@bross.vn; cellphone 84-903 287 057, 84-4-3555 3466; Wechat: wxid_56evtn82p2vf22; Skype: vinh.bross.


Bross & Partners, a renowned and qualified Patent, Design, Trademark and Copyright agent of Vietnam, constantly ranked and recommended by the Managing Intellectual Property (MIP), World Trademark Review (WTR), Legal 500 Asia Pacific, AsiaLaw Profiles, Asia IP and Asian Legal Business, is providing clients all over the world with the reliable, affordable contentious and non-contentious IP services including enforcement, anti-counterfeiting,  litigation regarding trademark, trade name, industrial design, patent, copyright and domain name.


[1] See more WIPO, INTERFACE BETWEEN EXHAUSTION OF INTELLECTUAL PROPERTY RIGHTS AND COMPETITION LAW, Committee on Development and Intellectual Property (CDIP), Eighth Session, Geneva, November 14 to 18, 2011

[2] See more Dr. Nguyen Nhu Quynh, Vice Inspectorate of Ministry of Science and Technology, Pháp luật về hết quyền sở hữu trí tuệ và nhập khẩu song song ở một số quốc gia Asean, Tạp chí Khoa học và Công nghệ Việt Nam No. 21 in 2013

[3] See: Jack Walters & Sons Corp. v. Morton Building, Inc., 737 F.2d 698, 704 (7th Cir. 1984)

[4] See more “4 Defenses to trademark infringement claim in Vietnam you should know”: http://bross.vn/newsletter/ip-news-update/4-Defenses-to-Trademark-Infringement-Claim-in-Vietnam-You-Should-Know

[5] Article 21. Decree No. 103/2006/ND-CP as amended. Use of industrial property subject matters

1. Acts of circulation of goods specified at Point d, Clause 1, Point b, Clause 2, Point b, Clause 5 and Point b, Clause 7, Article 124 of the Intellectual Property Law shall include acts of selling, displaying for sale, shipping products.

2. Products that are legally marketed, including foreign markets defined at Point b, Clause 2, Article 125 of the Law on Intellectual Property are understood to be products that the owner or his licensee including compulsory licensing has marketed domestically or abroad.


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