Patent Exhaustion: A Nuanced Approach

There were two recent decisions – one in the USA and one in the UK – which dealt with the important but seldom-discussed concept of patent exhaustion.  Patent exhaustion in essence means this: the initial authorised sale of a patented item terminates all patent rights to that item, for the reason that the owner of the patent (the patentee) has been rewarded for its ingenuity by that sale.

The UK decision was that of Nestec v Dualit, and it dealt with that absolute necessity of modern life, the Nespresso machine, and more particularly the capsules that are used to make a cup of coffee.  Nestec has a patent relating to a capsule extraction device and it sued Dualit for making and selling a capsule that was compatible with the Nespresso (and cheaper than the official capsule).