The Interactions of Exhaustion and the General Law: A Reply to Duffy and Hynes

In Statutory Domain and the Commercial Law of Intellectual Property, Professors John Duffy and Richard Hynes argue that exhaustion— the doctrine that limits a patentee’s or copyright holder’s control over goods in the stream of commerce—was created and functions to confine Intellectual Property (“IP”) law within its own domain and prevent it from displacing other laws. Exhaustion, in their description, sets aside a space that other areas of the law, such as contracts and property, are left to regulate. Like Duffy and Hynes, we believe that the intersection of IP and commercial law is an important topic with serious ramifications that would benefit from more scholarly attention, so we welcome their contribution to the ongoing debate over exhaustion. It is a debate in which the three of us have been deeply engaged, and one in which we rarely find ourselves entirely aligned. However, when it comes to many of Duffy and Hynes’s fundamental insights about the relationship between IP and other areas of law, we not only agree with each other, we also agree with them. And we suspect most scholars engaged in the exhaustion debate would as well. Like Duffy and Hynes, the scholarly consensus acknowledges that other areas of law—most notably contracts— have a role to play in structuring transactions even when exhaustion limits copyright and patent exclusivity. IP law does not and should not exist in a vacuum. It must take into account the rights and obligations established under other bodies of law. So far so good. But Duffy and Hynes make broader claims about the origins of exhaustion and its relationship to other bodies of law. That is where we part ways. They argue that the desire to confine IP law within its own domain and prevent it from displacing other laws is the exclusive explanation for both the emergence of exhaustion and its current function. In doing so they reject the idea that courts developed exhaustion in light of long-standing common law principles. Acknowledging the common law origins of the doctrine, they suggest, requires courts to wield exhaustion as a bludgeon, pummeling any commercial law doctrine that stands in its way. In this Essay, we explain why we are not persuaded. We first discuss the role of the common law in shaping the exhaustion doctrine. We show that the evidence Duffy and Hynes offer is inconclusive, incomplete, and at times inaccurate. Close examination of early exhaustion cases paints a more complex picture that cannot be squared with the idea that exhaustion was created independently of common law principles. Next, we explain how Duffy and Hynes mischaracterize the prevailing scholarly understanding of exhaustion and how the approach they advocate would strip exhaustion of any normative content. While we agree that exhaustion draws a line between the domain of IP law and other laws and thus prevents the former from displacing the latter, the placement of that line is far from arbitrary, and has always reflected policy considerations. Finally, we note that Duffy and Hynes’s theory oversimplifies the relationship between IP law and state law, partly because it does not fully consider federal preemption