In our November 1995 Newsletter (N.S. 186), we reported on the Tokyo High Court's decision in the case of Jap Auto Products, K.K. v. BBS Kraftfahrzeug Technique AG (commonly referred to as the Aluminum Wheel Case), which seemed to apply a doctrine of international exhaustion of patent rights so that sale of a patented product by the patentee or with its consent anywhere in the world precluded one from using a Japanese patent to prevent importation, sale or use of that product in Japan. The decision that importation into Japan of a wheel purchased from the owner of the corresponding patent in Germany did not infringe the Japanese patent on the product has now been upheld on its facts by the Japanese Supreme Court but based on different reasoning. The Supreme Court concluded that the patentee's rights had been limited by an implied license which accompanied the sale of the product in Germany. If the original contract of sale had specifically excluded the right to resell into Japan and had the goods borne a statement to this effect so that no third party might be misled into believing that a license existed, the court would have barred the import. The Supreme Court further indicated that similar provisions would apply to sales by a subsidiary or "related" company (without defining what it meant by "related") and that it was irrelevant whether a patent existed in the country of first sale.

Although the idea of domestic exhaustion of rights is well established in Japanese law, it remains to be seen what the full impact of the case may be. The case has caused considerable discussion in interested circles and suggestions have been made that legislation may be appropriate to reverse the decision. In view of the current political state in Japan, however, this seems unlikely and the uncertainty caused by this decision is likely to be with us for a while.