## Facts

- BBS Kraftfahrzeugtechnik AG (BBS) owned a Japanese patent titled “Wheel for Automobile.”
- BBS also held a similar patent right in Germany covering the same or similar wheel technology.
- Kabushiki Kaisha Racimex (Racimex) obtained aluminum automobile wheels that were produced and sold in Germany pursuant to BBS’s German patent rights.
- Racimex sold those wheels until about August 1992.
- Jap-Auto Products (Jap-Auto) imported the wheels into Japan, sourcing them from Racimex.
- BBS filed suit in Japan against Jap-Auto and Racimex, asserting infringement of its Japanese patent based on the importation and sale of the wheels in Japan.
- Jap-Auto and Racimex defended on the ground that BBS’s patent rights were exhausted because the goods had been placed into commerce in Germany through an authorized sale.

## Issues

1. Does an authorized sale of a patented product outside Japan exhaust the patentee’s Japanese patent rights so that the patentee cannot assert Japanese patent infringement against importers and sellers of those genuine products in Japan?
2. If foreign sales can exhaust Japanese patent rights, what conditions (if any) allow the patentee to avoid exhaustion, such as a clear reservation excluding importation into Japan?

## Decision

- The court ruled that BBS’s Japanese patent rights were exhausted as to the wheels at issue because they were genuine products placed into commerce through an authorized sale abroad.
- As a result, the importation and resale in Japan by Jap-Auto and Racimex did not constitute infringement of BBS’s Japanese patent rights for those units.
- The court recognized that exhaustion may not apply where, at the time of the authorized foreign sale, the patentee clearly reserved the Japanese market (for example, by an effective restriction communicated in a way that binds the buyer and is identifiable to downstream purchasers); absent such a reservation, exhaustion applies.
- The court’s disposition favored the defendants, rejecting BBS’s attempt to enforce its Japanese patent against the parallel imports on these facts.

## Legal Principles

- An authorized first sale of a patented product can terminate (exhaust) the patentee’s right to control subsequent distribution of that specific item, including through importation and resale.
- Where the patentee (or authorized seller) has already realized the economic return from an authorized sale, using patent law to block later resale of the same genuine product can amount to a second recovery for the same unit.
- Patent exhaustion can apply even when the authorized first sale occurs outside Japan, limiting the patentee’s ability to use Japanese patent rights to stop parallel imports of genuine goods.
- A patentee seeking to avoid exhaustion must clearly and effectively reserve the Japanese market at the time of the authorized foreign sale; a mere later objection to importation is not enough.

## Conclusion

BBS sued Jap-Auto and Racimex in Japan for infringement of its Japanese wheel patent based on the importation and sale of wheels that had been lawfully produced and sold in Germany under BBS’s German patent rights, but the court held that BBS’s authorized foreign sale exhausted its Japanese patent rights as to those items, so the parallel imports were not infringing absent a clear, effective reservation of the Japanese market at the time of sale.


BBS Kraftfahrzeugtechnik AG v. Kabushiki Kaisha Racimex, Case No. Heisei 7(wo)1988 (1997)