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Thailand: Exhaustion of Intellectual Property Rights

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Thailand: Exhaustion of Intellectual Property Rights

As a greater number and variety of products and services emerge globally, protection and enforcement of intellectual property rights is one of the most significant issues that businesses need to focus on with regard to their business operation.

Recently, there have been many discussions around the world regarding intellectual property rights regarding the new nature of goods and services, especially in this digital era. One of the big cases that IP courts and lawyers in many countries took note of is the case of, “Tom Kabinet”., This case raised the controversial issue of the “first sale doctrine” aka the “exhaustion of rights principle”. In this article, we will investigate the first sale doctrine/exhaustion of rights principle under the current intellectual property law of Thailand.

The first sale doctrine/ exhaustion of rights is recognised as the exception of IP infringement. Once the products have been lawfully put on the market, the rights holders who had received fair remuneration for the first sale, cannot control further distribution. This doctrine applies to Copyright, Patent and Trademark laws.

In Thailand, the first sale doctrine is incorporated under Section 36(7) of the Patent Act (No. 3) B.E. 2542 (1999) and most recently under Section 32/1 of the Copyright Act (No.2) B.E. 2558 (2015). Please note that although the Trademark Act (No. 3) B.E. 2559 (2016) does not contain any provision relating to the exhaustion of rights principle, the court has been applying such doctrine in cases for a long time.

Copyright Law

The first sale doctrine is currently outlined under Section 32/1 of Copyright Act. However, prior to the amendments, Section 32, paragraph 1 recognised the exception of copyright infringement. If the copyrighted product that is resold does not conflict with a normal exploitation of the copyright work by the owner of copyright and does not unreasonably prejudice the legitimate right of the owner of copyright, such act is not deemed an infringement of copyright. It seems that the court has been applying the first sale doctrine with Section 32 in order to compensate the lack of first sale doctrine in the Copyright Act in the past.

Regarding the exhaustion of digital right, it is problematic in practice because Section 32/1 of the Copyright Act does not clearly state whether or not the doctrine applies to digital goods, such as music files and e-books. However, it appears that the distribution of digital goods is at risk of infringing a copyrights owner’s exclusive rights because it is impossible to sell the original file when that file has been altered and incorporated in a new material object when transferred through the online market platform. Thus, the first sale doctrine may not be applicable as a defence, which makes the transfer of digital goods at risk of being deemed an infringement of the copyright owner’s exclusive rights.

Considering the recent CJEU’s judgement in its Tom Kabinet second-hand e-book case, the court ruled that the supply of e-books qualifies as “communication to the public”; not an act of distribution as in the case of physical books. Thus, the principle of exhaustion of rights does not apply. In Thailand, this issue is still contentious because the court has not yet provided a clear answer to this problem in any decision. Therefore, it remains unclear whether or not Thailand will adopt the same principle as in the judgement of CJEU.

In order to provide clarity to the exhaustion of digital rights principle and the boundaries of Section 32/1 of the Copyright Act, some scholars have suggested that the exhaustion of digital rights principle should be incorporated into the Copyright Act as a separate provision from the conventional first sale doctrine, and that the technological measures should be adopted thus to further ensure protection of exclusive rights of the copyright owner with regard to digital copies of work. For instance, “forward-and-delete” technology was developed by ReDigi Inc. and Amazon. It could detect any unauthorised copies in a seller’s device and delete those copies when transferring to the buyer’s computer thus to ensure the copyright owner that there is only one copy in existence after the transaction. Furthermore, IBM has developed an Aging File System which can control the number of digital copies. This technology allows the file to gradually degrade over time.

Patent Law

As Thailand is a WTO member, it is therefore required to implement TRIPS obligations by incorporating the exhaustion of rights principle into the Patent Act in order to support free circulation of goods. According to Section 36(7) of the Patent Act, the use, sale, having in the possession for sale, offering for sale or importing the patented product into Thailand is not considered patent infringement, provided that such product has been produced or sold with the authorisation or consent of the patent owner. Section 36(7) could imply that Thailand has adopted the international exhaustion of rights.

However, for a design patent, it is not certain whether or not Thailand adopts the international exhaustion of rights because the chapter on design patents under the Patent Act does not contain a provision similar to Section 36(7). Moreover, there has been no court precedent on this issue so far.

Trademark Law

Section 44 of the Trademark Act provides only the rights of the registered trademark owner without stating any exceptions of infringement or the exhaustion of rights. However, the court has applied the exhaustion doctrine in several cases by allowing parallel importation of genuine goods protected under the Trademark Act. The Supreme Court ruled in its Judgement No. 2817/2543 that: when the trademark owner sells the products for the first time, he/she had already received fair remuneration from such sale and use of the trademark. The trademark owner thus has no rights to subsequently restrain the buyer from reselling such goods. The Supreme Court in its Decision No. 297/2546 also adopted the same approach.

Nevertheless, it is still ambiguous whether parallel importation of genuine products bearing a trademark registered in Thailand will be allowed in every case because it has not yet been incorporated into the Trademark Act.

Under the current global business situation, there is an ever increasing variety of goods and services which do not have a conventional nature, and there are plenty of business transactions and relationships that are different from the traditional way of doing business. For this reason, the intellectual property right owners should keep themselves updated with new laws and amendment of laws in order to widen their understanding and to be more aware of their rights concerning the control of further distribution or resale of the intellectual property products. This will also help the business operators to avoid any potential risk of infringing another person’s intellectual property rights in their course of business.

Meanwhile, rights holders should be aware of this principle of exhaustion of right as it affects them in limiting their exclusive rights of intellectual property and their ability to act against parallel imports or unauthorised resellers of their products. The rights holders should look for other remedies available under other laws. In particular, products that are controlled or require a licence under other laws, e.g. the Customs Act, Consumer Protection Act and Industrial Product Standards Act.