Parallel imports of patented goods – applicable exhaustion regime

Until July 1 2009 patent rights in Switzerland underlied a national exhaustion regime. This meant that patent rights in specific products were exhausted (ie, no longer enforceable for those products) only if the products were put on the market in Switzerland. Therefore, owners of a Swiss patent could prohibit parallel imports of patent-protected products.

This led to a price differentiation for patent-protected products, and products were sold in Switzerland at considerably higher prices than in neighbouring countries. For this reason, Parliament amended the patent exhaustion regime. It introduced the regional exhaustion standard, which means that patent rights in specific products are exhausted if they are put on the market within the European Economic Area (EEA) by the patent owner itself or with its permission. In cases where patent protection has only subordinate significance for the functional characteristics of the product, international exhaustion applies (ie, the patent owner cannot enforce its patent right with respect to a product that has been put on the market by itself or with its permission).

This rule has applied since July 1 2009 but until recently there have been no decisions regarding the applicability of international exhaustion due to subordinate significance of the patented features. However, on July 14 2016 the Federal Patent Court issued Decision S 2016_006 on this issue.

On July 12 2016 the plaintiff, a car manufacturer, filed a request with the Federal Patent Court based on a European patent validated in Switzerland. The request was directed against an unofficial importer of cars, including cars manufactured by the plaintiff and delivered to other countries. The plaintiff asked the court to prohibit the defendant from selling or re-exporting a specific car (identified by the vehicle identification number), as well as prohibiting the (parallel) import of certain types of car from outside the EEA and their sale or re-export.

The court did not consider the second request because it was insufficient to indicate which products were covered by the request by indicating their type designation or model name. A specific indication with respect to the technical features of the covered products was required.

With respect to both requests, the court held that the infringement of the plaintiff's patent was unsubstantiated. The plaintiff filed an opinion from its patent attorney on the question of infringement and mainly cited the result of this opinion (ie, that the patent was infringed). However, the court requires that the substantiation be part of the complaint itself – a reference to a party opinion is insufficient. In this respect, even in cases where the products in question originate from the patent owner, it is still necessary to substantiate the infringement in detail and with respect to the specific products at issue.

Although the single judge did not consider or reject all the requests, he did discuss the applicable exhaustion regime. As the specific car mentioned in the first request had initially been delivered to Macedonia, which is not an EEA member, regional exhaustion was ruled out. However, he had to examine whether patent protection had only subordinate significance for the goods at issue.

Subordinate significance is assumed if the plaintiff does not provide plausible reasons for the opposite case. In the case at hand, the plaintiff argued that the claimed apparatus for circulating a coolant in a turbocharger was an important and inseparable part of the cooling system of the turbocharger. Without this apparatus there would be an increased production of noise, a decrease of motor power, damages to components due to overheating and a substantive reduction of safety.

The court consulted the description of the patent at issue and held that the apparatus prevented factors causing noise made by the coolant flowing into the turbocharger (ie, into a hot turbocharger in an idling state of a vehicle that has been started again). There was no mention of the other aspects (ie, the decrease of motor power, overheating or reduction of safety). This led the court to conclude that the patented apparatus was a "nice to have" feature in the context of the vehicles, which meant that the patent protection for that apparatus had only subordinate significance. Therefore, international exhaustion applied. Notwithstanding the other reasons for rejection of the plaintiff's claims, the patent could not be enforced against the import of cars initially delivered to Macedonia by the car manufacturer or with its permission.

Lessons learned
The requirements to avoid international exhaustion appear to be rather high, in particular with respect to complex products such as cars, where most of the patent rights concern not the whole product, but rather only some component thereof. The content of the description may be crucial for answering the question of significance. Accordingly, this should be taken into account when drafting future patents. Further, in cases dealing with parallel imports into Switzerland, it will be useful to file comprehensive evidence for the significance of the patented components or features for the entire product that would be affected by the decision.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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