The principle of trademark rights exhaustion

With the rapid development and popularization of electronic products, new types of trademark infringements have emerged. Instead of counterfeiting registered trademarks, some merchants recycle the products of a right owner and market the refurbished products bearing the right owner’s trademark. When a lawsuit is filed, the doctrine of exhaustion of rights is usually cited as the main grounds of defense.

The exhaustion of trademark rights means that after a branded product is sold or transferred by the trademark owner or by others with the consent of the owner, the trademark right is exhausted. The trademark owner or others with the consent of the owner have no right to ban others from reselling or using the product. The doctrine aims to properly balance the interests of trademark owners and product owners.

The exhaustion of trademark rights in effect is an owner’s loss of control over products bearing its trademark. However, the owner does not lose all extensions of the trademark right. The bond between the trademark and the product cannot be severed. If a legally obtained product damages a trademark’s intrinsic values, including distinctiveness and goodwill, during reprocessing and reselling, it may still infringe the owner’s exclusive right to use the trademark.

Linda Zhao is a partner in the Beijing office of GoldenGate Lawyers. She can be contacted on +86 10 5870 2028 or by email at lzhao@goldengatelawyers.com