In its decision from the year 1999 (BGE 126 III 129), the Federal Supreme Court set up the principle of national exhaustion for patent law whereby the patent owner can legally prevent his patent-protected products, that he has launched into a foreign market, to be imported into Switzerland against his will. The principle of national exhaustion has been controversially discussed since the Federal Supreme Court's decision.

Since then, the Federal Council many times discussed alternatives to national exhaustion. It steadily held to the principle of national exhaustion but advocated measures for the prevention of abuse of patent law.

On 21 December 2007, the Federal Council presented parliament with a regulation recommendation with its dispatch on an amendment to the Patent Act (Decision on the system of patent law exhaustion). It gave priority to long-term politically innovate viewpoints (promotion of dynamic competition, which is based on the successive introduction of new and better products).

The proposal was politically debated by the two Councils. Eventually, a majority of both Councils agreed to the following regulation: basically, the principle of unilateral (i.e. without establishing a reciprocal agreement) regional exhaustion in relationship to European Economic Area member states should be applied.  Patent-protected products that are placed on the market within the European Economic Area with the consent of the patent owner can be imported without his consent. The import of those products, which have been placed on the market outside of the European Economic Area by the patent owner, continues to be possible when the patent protection for the functional characteristics of the product is of only secondary importance. For products whose prices are fixed by the state both in Switzerland and abroad, the Councils will decide whether the patent owner’s consent for importation is necessary. National exhaustion is therefore valid to this extent. This specifically affects pharmaceutical products. Article 27b of the Federal Agriculture Act (SR 910.1) remains unchanged. International exhaustion continues to be valid for agricultural means of production and capital goods.

In the course of dealing with the question regarding exhaustion, the Councils decided to abolish Article 14, para. 3 of the Therapeutic Products Act (SR 812.21). This specifies that the Swiss Agency for Therapeutic Products (Swissmedic) may permit an approved original medication as long as it has not been simplified for import because the original medication is patent protected. With the deletion of Article 14, para. 3 from the Therapeutic Products Act, parliament wanted to distinguish between public law duties and private law enforcement regarding patent laws.

Exhaustion of patent rights is concerned with the relationship between a patent owner’s right to prohibit use (exclusivity) and the rights to use a patent-protected product through the acquisition of such rights. If a person lawfully entitled to a patent puts the product protected by this patent into circulation, his/her right to prohibit use of this product as granted by the patent, infringes on the rights of the person who acquired these rights-based tangible property. According to the principle of exhaustion, the rights to prohibit use of a patent-protected product as conferred through a patent are used up or exhausted when the person holding the patent puts this product into circulation or when it is put on the market with his permission.  The rightful owner of the patent loses the authority to make commercial use as well as resale of the product by a third party dependent on his permission if he has put the patent-protected product into circulation.
The controversy surrounding the exhaustion of patent rights has to do with the territorial limits of the principle of exhaustion. At issue is whether the exclusive right to a product based on a patent effective in Switzerland can be exhausted when the product is put into circulation outside of Switzerland by the rights holder or with his permission. There are three basic variants: the system of national exhaustion, regional exhaustion, or international exhaustion.

According to the principle of national exhaustion of patent rights, the exclusive rights for a product protected by a patent granted domestically expire when the product is brought into circulation domestically with the permission of the patent rights holder. The legal owner of the product acquires the right to freely use and further circulate the product.  If a protected product is brought into circulation abroad, the domestic rights to the product are not exhausted. Importing a product which was put into circulation abroad requires the permission of the rights holder.

According to the principle of regional exhaustion, the exclusive rights for a product in countries belonging to the same economic area (e.g., EU, EEA) expire when the product is brought into circulation with the permission of the patent owner in any one of the countries belonging to the economic group. This means that the patent owner can therefore not oppose the resale of the protected product within the economic area.  However, the patent owner’s exclusive rights are retained in the countries of the economic area when the protected product is brought into circulation outside of the economic area.

According to the principle of international exhaustion, the exclusive rights to a product arising from a national patent expire when the product is put into circulation either domestically or abroad with the permission of the patent owner. The patent owner cannot oppose the trans-border resale of the product abroad.

Parallel imports are products which are acquired abroad and resold domestically outside the normal manufacturer distribution channels by an importer who wishes to exploit a price gap. The parallel importer is thus in the position of competing directly with the manufacturer of the product. The significant incentive for parallel importation is the differential between the buying price abroad and the selling price domestically, whereby federal tax, costs and profit margin must be added in.
In a narrow sense, the term “parallel imports” refers to the trans-border trade of products based on intellectual property rights. The option of parallel imports for protected products is determined by the system of exhaustion for the associated intellectual property rights, however, it is not exclusively dependent on this.