Abstract

This article considers how to balance the benefits to consumers
and to creators of intellectual property from enforcing exclusive rights with the benefits to consumers and to competitors from permitting free-riding in the context of resale of trademarked goods. Exclusive rights limit the incentive-undermining effect of one person reaping the benefits of another’s investment without paying. The first sale rule in copyright, patent, and trademark law complements the rationale for exclusive rights. Once a person has paid the price demanded by the rights-holder for the article embodying the expression, invention, or source-indicating symbol, the free-riding concern has normally been addressed. The first sale rule permits the buyer to resell that article. Consumers of intellectual property benefit from encouraging the fixation of original expressions, disclosure of novel and non-obvious inventions, and promulgation of symbols indicating the source, qualities, and characteristics of products. Trademarks are unique because consumers retain an interest in maintaining creators’ exclusive rights to source-indicating symbols beyond providing an incentive to produce the information. To ensure continuity in a symbol’s ability to distinguish one supplier’s goods from others and protect consumers’ ability to locate goods that satisfy their needs in the future, the law limits buyers’ rights to resell goods bearing others’ marks. Consumers may be misled if trademark goods are modified, repackaged, or incorporated into other goods that are then resold with the trademark affixed. Stimulated by a 2010 Ninth Circuit opinion prohibiting such resales even if buyer is not confused, this article explores the proper scope of the trademark first sale defense.