States May Face Patent Liability For Importing Drugs

In a recent paper, Penn State Professor Daniel Cahoy analyzed the importation of inexpensive drugs from Canada and other countries. His research looked at potential liability for patent infringement by various levels of government. Cahoy arrived at several conclusions:

  • Both private organizations and municipalities share the same, crushing liability under the Patent Act;
  • Despite Eleventh Amendment immunity, state governments face nearly equivalent liability for takings claims based on the Fourteenth Amendment;
  • The federal government confronts liability under the Fifth Amendment that broadens its exposure under the recognized just compensation statute; and
  • Attempts by Congress to modify the Patent Act to permit importation would likely constitute an unconstitutional taking.

Cahoy, Daniel R., “Patent Fences and Constitutional Fence Posts: Property Barriers to Pharmaceutical Importation” . Fordham Intellectual Property, Media & Entertainment Law Journal, Vol. 15, Winter 2005.

Note: Under U.S. Law, the first sale (AKA “Exhaustion”) doctrine does not apply to products sold in a foreign country.

United States patent rights are not exhausted by products of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent.

Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001), cert. denied, 536 U.S. 950 (2002).