At a Glance
Traditionally, market competition and consumer welfare have to some extent been protected by the limited control that manufacturers have over their products after their first sale – their monopoly under IP law is lifted (“exhausted”) and they seize to have physical possession of the products, making it more challenging to enforce contractual restrictions.
IP exhaustion operates at every level of our economy. It allows wholesalers to sell products covered by copyright, including products distributed in copyrighted packaging, to retailers without first securing distribution licenses from the manufacturers. It also permits retailers to sell products to consumers without obtaining distribution licenses.