Patent holder A has a patent on a special dough kneading machine whose drive system enables particularly uniform processing of large quantities of dough. A does not distribute the machine himself, but leaves the manufacture and distribution in Europe to a licensee who markets the patented machines in France.
One of these machines is first sold to a large bakery chain, then passed on to a smaller bakery as a used machine, and after a few years sold to a dealer in used catering equipment. Finally, it ends up with B, an independent master baker.
B uses the machine intensively for many years. In the process, he repeatedly replaces worn parts, such as belts, motor bearings, and kneading tools. Occasionally, he also replaces housing parts and modernizes the control system to bring the machine up to current safety standards. However, he does not change the basic mechanism of the patented drive system—this remains unchanged throughout.
When A learns of B's use of the machine, he files a lawsuit for patent infringement and wants to prevent B from continuing to use it.
The principle of exhaustion states that the patent holder's rights to a specific product expire with the first lawful sale of that product. Once the patent holder has sold a patent-protected product or it has been placed on the market with their consent, they are no longer entitled to control the further use or resale of that specific item. The idea behind this is that the patent holder has realized their economic gain with the first sale.
With the first lawful placing on the market by his licensee, his rights to this specific sold item are exhausted. The fact that the machine was subsequently resold several times—from the bakery chain to the used equipment dealer to B—is legally irrelevant. A cannot prohibit subsequent users from using or reselling the machine. His economic advantage has already been realized with the first sale, so he cannot assert any additional claims under the patent.
For the buyer, the principle of exhaustion means legal certainty. He can freely use or resell a purchased patent-protected product without running the risk of being prosecuted for patent infringement. This prevents the patent holder from subsequently asserting additional claims against buyers or third parties.
For B, as the final buyer of the dough kneading machine, the principle of exhaustion means that he may freely use and resell the machine without A being able to take action against him for patent infringement. B can therefore rest assured that his use is lawful as long as he uses the original device. This prevents A from subsequently asserting additional claims against B or other intermediate purchasers, despite the initial sale having already taken place.
Exhaustion applies exclusively to products that have been placed on the market within the European Economic Area (EEA) with the consent of the patent holder. If, on the other hand, the initial sale takes place outside the EEA, exhaustion does not apply. If such products are later imported into the EEA (parallel import), the patent holder can invoke his patent and prohibit further distribution. This allows him to control the EEA market independently of sales in third countries.
In the case of the dough kneading machine, the decisive factor is that the machine was lawfully placed on the market in the EEA by A's licensee. Only then does the principle of exhaustion apply. If, on the other hand, the first sale had taken place outside the EEA – for example, in the US – and the machine had only been imported into Europe later (parallel import), A could continue to invoke its patent and prohibit use or distribution.
For B, this means that in the event of a dispute, he must also be able to prove that his machine was originally sold in the EEA with the consent of the patent holder. Only then does exhaustion protect him from A's claims.
An essential prerequisite for exhaustion is the consent of the patent holder to the placing on the market. This can be given either by the patent holder himself or by an authorized person. Consent also includes sale by an affiliated company, provided that the latter was authorized to place the product on the market. Without such consent, exhaustion does not occur.
In the example with the dough kneading machine, the necessary consent of the patent holder is given because A did not take over the distribution himself, but transferred it to his licensee. The latter was expressly authorized to sell the machine in the EEA. This means that the product was lawfully placed on the market and exhaustion occurred. If, on the other hand, an unauthorized third party (patent infringer) had placed the machine on the market without A's consent, exhaustion would not have occurred and A could continue to take action against all subsequent users, including B.
A key problem area of exhaustion is the repair of patent-protected products. The buyer is allowed to repair a purchased device as long as this involves the replacement or restoration of worn parts. However, if the measure goes beyond the scope of a repair and effectively leads to the manufacture of a new product, this is no longer considered exhaustion, but rather a renewed use of the invention, which requires a license. The distinction between permissible repair and impermissible new production is often difficult and is a frequent point of contention in practice.
In the case of the dough kneading machine, this means that B may repair the machine if individual parts such as belts, bearings, or kneading tools wear out. Such work constitutes typical repairs and is covered by the principle of exhaustion. However, it becomes problematic if B replaces or modernizes so many components that the machine is practically as good as new—for example, by completely replacing the drive system, the control system, and essential components. In this case, A could argue that B has effectively manufactured a new machine, for which a license would be required. Whether B's interventions still qualify as permissible repairs or already cross the line into impermissible new production is thus a classic question of demarcation that would have to be clarified by a court in the event of a dispute.
