In the case at hand, could one argue that the sale was “conditional”, since the buyer of the book was put on notice of the condition that the book could only be sold or distributed in India? Since the relevant condition was breached by selling outside India, might one argue that there was a breach of contract?
Of course, a breach of contract does not immediately translate to a breach of copyright. In fact, in this case, it may be difficult to argue for breach of copyright, since section 14 of the Copyright Act 1957 saves from copyright infringement any sale or distribution of copies that are “already in circulation”. But could one persuasively argue that any future buyer of the book was on “notice” of the condition and had to adhere to it in terms of not selling the said book outside India?
If this were possible, we (as ordinary consumers) have something to worry about. For all that the IP owner would now need to do is to craftily place such conditions and impact our freedom to do what we wished with a legitimately purchased product. In short, the doctrine of exhaustion as we know it, could be whittled down considerably.
Mrinalini Kochupillai and me authored an article last year dealing with parallel imports and principles of exhaustion in the patent context. We highlight this worrying prospect of conditional sales and advocate for an amendment to ensure that exhaustion is respected in its true spirit and that all “conditions” of sale that attempt to whittle it down are ignored. I reproduce the extracts below, where we deal with this issue in the light of a US Supreme Court case, Quanta vs LGE:
“The Quanta decision is notable for another reason: it leaves open the question of whether or not a “conditional sale” precludes exhaustion. In other words, if the patentee or her licensee imposes a condition on the sale, such as the fact that the product can be used only once, can it be said that the rights in the patented good are still “exhausted” and a buyer is free to ignore the condition? There is a distinction between a suit for patent infringement and a suit for breach of contract.
US case law is almost unanimous in accepting that there could be a breach of contract claim in such cases. However, the court in Quanta did not explicitly decide as to whether the breach of such a condition would constitute a patent infringement as well. The court simply stated that in this particular case, the sale was an “unconditional” one.
Therefore under US law, it may well be possible to introduce “conditions” to accompany sales and thereby erode the principle of “exhaustion”.
Indian law ought to prevent against such a possibility by expressly indicating that exhaustion will prevail, notwithstanding any condition attached to the sale.
….We therefore propose the following amendment:
107B. Exhaustion of Rights
(1) For the purposes of this Act, the rights of a patentee or anyone claiming through such patentee shall be exhausted after a patented article has been sold once anywhere in the world (including within India), by or with the authorization of such patentee.
(2) The provisions of section 107B(1) shall apply in case of sale of any patented article, notwithstanding:
i) any contractual stipulation to the contrary by the patentee or her authorized representatives.
ii) The specific form of transaction between the patentee or her authorized representative and the buyer. In particular, any attempt to classify what is in essence a “sale” of an article as a licence shall be ignored for the purposes of this section.
iii) any notice in relation to the article placed by the patentee or her authorised representatives or any other party selling the patented article; unless such notice is essential to ensure public health or safety.”
For those interested in accessing the full text of this piece, please click here for a free download. Perhaps a clause stipulating that rights over works be exhausted after the first sale, notwithstanding any conditions or notices ought to be introduced into our copyright act to make the position clearer (along with an attendant provision that the same shall not constitute a breach of contract as well). What better time to advocate for such a clause than now when a copyright amendment bill is being scrutinised by a Parliamentary standing committee.