Exhaustion regimes

In patent law, exhaustion refers to the geographical scope of patent protection. National exhaustion means that the protected rights of a product are exhausted in the country in which it is placed on the market, thus making parallel imports illegal. Regional exhaustion enables patented goods to be traded freely within a predetermined economic area, which means that parallel imports are permitted within this area. International exhaustion means that parallel imports are permitted worldwide.

When talking about parallel imports, the term “exhaustion” needs to be understood in the context of rights protected under intellectual property law. Intellectual property law confers on the owner of a product the exclusive right to determine when, in which country, at what price and in what manner they wish to place the product on the market for the first time. These rights are exhausted, i.e. used up, when the owner or someone else with the owner’s permission places the product on the market for the first time. A distinction is made between national and international exhaustion. Under national exhaustion, the protected rights are not affected within the country if the protected product is placed on the market abroad. Parallel imports are not permitted. Under international exhaustion, the owner of the protected rights cannot forbid a parallel import if the protected product was placed on the market abroad. International exhaustion has applied to trademark protection in Switzerland for many years, while patent protection has been governed by unilateral regional exhaustion in the European Economic Area since 2008.

Contrary to popular belief, parallel imports of medicinal products are already possible today in some instances. This is true of medicinal products that are no longer protected by a patent, and these account for a substantial proportion of the pharmaceutical market today. Parallel imports of patented products with prices set by the state are not permitted.

Switzerland goes further than many other countries in allowing some parallel imports. Unrestricted parallel trading is currently possible in a number of emerging economies in Latin America and South East Asia, but no industrialised country has implemented this exhaustion regime. The EU permits parallel imports only within the internal market. In this respect it is closed to third countries, a situation that applies not only to patents but to all intellectual property rights.