Although it may not be immediately apparent, a number of types of goods are connected with intellectual property rights. The vast majority of products are, for example, marked with a trade mark. Goods may further contain various patented technologies, reproductions of copyright works, reproductions of computer programmes or other intangible assets. Most of these rights are conceived as exclusive, which consequently means that the holder of such an intellectual property right is fundamentally entitled to regulate the placing of goods on a particular market or other dealings with goods in trade within such a market. Given that absolute control by the rights holder in relation to specific goods would be highly impractical, the individual acts regulating intellectual property rights contain the institute of so-called exhaustion of rights.

First, it is appropriate to mention the provision of Section 11(1) of the Trade Marks Act (Act No. 441/2003 Coll., as amended), which regulates the issue of exhaustion of rights arising from a trade mark, as follows: “the proprietor of a trade mark shall not be entitled to prohibit its use on products which have been placed on the market in the Czech Republic by that proprietor or with his consent.” Subsection 2 of the cited provision then extends the scope of exhaustion of the right to the entire European Economic Area: “the proprietor of a trade mark shall not be entitled to prohibit its use on products which have been placed on the market in a Member State of the European Communities or another state forming the European Economic Area by that proprietor or with his consent.” Subsection 3 of the cited provision then contains a certain substantive limitation of the institute of exhaustion of rights arising from a trade mark: “the provisions of the preceding paragraphs shall not apply where the proprietor of the trade mark has legitimate reasons to prohibit the subsequent commercial use of the products, in particular where the condition or nature of the products has been changed or impaired after they have been placed on the market.”

What follows from the above for the practice of a Czech trader? The absolutely fundamental question is whether goods marked with a trade mark have been placed on the market (in the territory of the EEA) with the consent of the proprietor of the trade mark or not. If so, the first transfer of ownership of a particular piece of goods results in the exhaustion of rights arising from the trade mark in the above-mentioned sense, whereby further distribution and sale of that piece of goods does not constitute infringement of the trade mark. The opposite case is a situation where goods have been placed on the Community market without the consent of the proprietor of the trade mark, for example in cases where the goods were intended for sale in the United States. In that case, every further distributor or seller of the goods commits infringement of the trade mark with all the consequences arising therefrom. Naturally, some proprietors are lenient towards such conduct, however, particularly in the case of luxury brands, the opposite may be true. For these reasons, it may be important for a trader to know the origin of the goods which he offers.

On a similar principle as in the case of trade marks, the legal regulation also functions in other areas of intellectual property rights. In the area of copyright, the issue of exhaustion of rights is regulated by the provision of Section 14(2) of the Copyright Act (Act No. 121/2000 Coll., as amended), which provides: “By the first sale or other first transfer of ownership of the original or of a reproduction of a work in tangible form, which has been effected by the author or with his consent in the territory of a Member State of the European Communities or another contracting party to the Agreement on the European Economic Area, the author’s right of distribution in relation to such original or reproduction of the work for the territory of the European Communities and other contracting parties to the Agreement on the European Economic Area is exhausted; the right of rental of the work and the right of lending of the work remain unaffected.” It thus follows from this provision that if, with the consent of the rights holder, the first sale (in the territory of the EEA) of a reproduction of a work (computer programme) on a tangible medium takes place, the rights holder is no longer entitled to regulate further distribution (dissemination) of such reproduction. This means that other persons may further offer and sell these “distributed reproductions”, which may be important particularly in the case of so-called OEM licences, etc.

The Inventions and Rationalisation Proposals Act (Act No. 527/1990 Coll., as amended) then regulates this issue most briefly, as follows: “The patent proprietor shall have no right to prohibit third parties from dealing with a product which is the subject-matter of the protected invention if that product has been placed on the market in the Czech Republic by the patent proprietor or with his consent, unless there were reasons for extending the rights arising from the patent to the said activities.”

This text was translated from Czech to English using an AI translator.