Article 69 of the current PRC Patent Law (the “Law”) established the “Patent Exhaustion Doctrine,” providing: “None of the following shall be deemed an infringement upon a patent right: (1) using, promising to sell, selling or importing any patented product or product directly obtained through a patented process after such product is sold by the patentee or with the permission thereof; …”

There are several reasons for such a provision: firstly, a patentee can profit from his patent through manufacturing or licensing the manufacturing of the patented product and it would not be fair to allow the patentee to profit twice from the same product; secondly, granting a patentee the right to profit repeatedly from the same patented product would also hinder the utilization and absorption of the patent. In addition, any law granting such a right would be difficult to enforce as a practical matter.

The patentee can be either Chinese or foreign, and the “sale” of patented products can be made either in China or abroad; this means that under the Law both domestic and international exhaustion apply to products sold or licensed to be sold by the patentee. In order to make the provision clearer, the concept of “parallel import” was incorporated in Article 69. Consequently, parallel importation of a patented product will not be treated as an act of infringement, nor will be selling patented products in foreign countries, or selling or using such products imported into China. However, the Law is silent on how exhaustion will apply to imported products sold outside China under contractual restrictions. Two things need to be pointed out about the patent exhaustion doctrine....