No patent
infringement where a product is
modified for re-use
The High Court of Australia has handed
down its decision in Calidad v Seiko Epson. 1
The case involved whether modifications
made to certain patented products to
enable their re-use amounted to the
making of a new product and infringed
patent rights. The majority of the
High Court found that the patentee
was unable to stop purchasers of its
patented products from modifying
the products and re-selling them.

The patentee, Seiko Epson Corporation,
owns two patents relating to Epson
branded printer cartridges. The Epson
cartridges were designed for single use.

Ninestar Image (Malaysia) SDN BHD, a
third party to the proceedings, purchased
discarded used Epson printer cartridges
from third party suppliers who acquired
them from recycling facilities and
other sources. Ninestar reconditioned
the used cartridges so that they were
suitable for resale as generic, recycled
replacement cartridges. The work
involved in reconditioning the cartridges
included refilling the cartridges with
ink, and reconfiguring or rewriting the
information on the memory chip of the
cartridge, or replacing the memory
chip with another. The appellants
in this case (Calidad) acquired the
modified cartridges from Ninestar and
imported them into Australia for sale.

The High Court considered whether
the modifications made to the Epson
printer cartridges to enable their
re-use amounted to the making of
a new product and infringed Seiko
Epson Corporation’s patent rights.

The application of the ‘implied licence’
doctrine has been the approach taken
in these circumstances in Australia for
over 100 years. This doctrine provides
that where patented goods are obtained
without restriction on their sale or use,
the purchaser of the goods has ordinary
rights of ownership because the law
implies a full licence to use those
goods. Seiko Epson Corporation alleged
that Calidad infringed the patents
because the modifications made to the
original Epson cartridges were such
as to extinguish any implied licence.

Seiko Epson Corporation was successful
before the Full Federal Court, which
found that the modifications made
to the original Epson cartridges
were not authorised by any implied
licence. The Full Court was of the
view that the modifications to the
original Epson cartridges constituted
a making of a new embodiment of
the invention claimed in the patents,
and thus the sale of those modified
cartridges was a patent infringement.

Calidad appealed to the High Court,
where that decision was overturned.

The majority of the High Court was
critical of the implied licence doctrine
The majority of the High Court also
found that the modifications to the
original Epson cartridges did not
amount to an impermissible making
of a new product, and that the refilled
and restored cartridges were merely
modified versions of the products sold
by Seiko Epson Corporation. Such
modifications were found to be within
the scope of the rights of the owner of
the cartridges to prolong their life and
make them more useful, and were thus
not an infringement of the patents.

As a consequence of this decision,
Patentees will no longer be able to
enforce post sale limitations on the use
of products relying on retained patent
rights but may still be able to impose such
limitations via contractual restrictions.

Magda Bramante | Senior Associate
BSc LLB LLM FIPTA
magda.bramante@pof.com.au Calidad Pty Ltd & Ors v Seiko Epson Corporation & Anor [2020] HCA 41
1
Melbourne Level 16
333 Collins St
Melbourne VIC 3000
1
Contact Calidad Pty Ltd
us & info@pof.com.au
Ors v Seiko Epson Corporation +61
& Anor
[2020] 3 9614
1944 HCA 41
and instead endorsed the ‘exhaustion
of rights’ principle, which is the
applicable law in the United States and
Europe. Under the exhaustion principle,
the patentee’s rights are exhausted
after the first sale of the product.

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