How the Australian High Court Found that Refurbished Ink Cartridges do not Infringe Seiko Patents

Recently, I wrote about the decision of the High Court in Calidad Pty Ltd v Seiko Epson Corporation [2020] HCA 41, with particular focus on the Court’s finding, by a 4-3 majority, that the first sale of a patented product exhausts the patentee’s exclusive rights in that product.  In this article, I will look at the other aspect of the Court’s decision, namely its finding (again by 4-3 majority) that Epson printer ink cartridges that had been refurbished, refilled, and resold in Australia, did not infringe patents relating to aspects of the cartridges, which are owned by Seiko.

As we shall see, the decision of the High Court majority on infringement depended upon a distinction between use of a patented product following sale, and making of a new embodiment of the patented product.  It did not depend upon whether the (old) ‘implied licence’ doctrine, or the (new) ‘exhaustion’ doctrine applies under Australian law.  In this sense, it was not necessary for the Court to overturn over a century of law to replace the doctrine of implied licence with one of exhaustion, although it did so nonetheless, and it is that aspect of the case that has attracted most attention.

The reasoning of the majority on infringement is important, however, in giving guidance to lower courts, patentees, and providers of refurbished goods, on the circumstances in which modifying, repairing, or reconstituting of depleted or otherwise ‘expired’ goods may result in patent infringement.

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Tags: Australia, Exhaustion, Implied licence, Infringement, Right of repair

COVID Update – October Filings Down, as Pandemic Pain not Shared Equally Among Attorney Firms

Last month I reported that, against the trend of 2020, September was a busy month for Australian patent filings, with standard applications up by 8.1% on the same month in 2019.  (In fact, following more recent additions and corrections in IP Australia’s records, the increase is even higher, at 9.2%.)  But, sadly, any optimism this might have generated was short-lived, with October filings down by 7.9% on last year.  Numbers of new filings originating in Australia, the US, Japan, and Europe were all substantially lower than in October 2019, although applications from China once again bucked the trend.  Filings from all other countries were comparable to 2019, down by just 0.7%.

Counted at the end of October, Chinese applicants have filed 1822 Australian standard patent applications during 2020, just 6% behind Australian applicants at 1937.  This compares with 1410 applications filed by Chinese applicants at the same time in 2019.  Most of these gains have come in the second half of the year, with monthly filings from China being substantially higher than during 2019 in every month since June.  If this trend continues for the final two months of the year, Chinese residents will surpass Australians for the first time as the second largest users of the Australian patent system after the US.

Chinese applicants also continued to make ridiculously high use of the innovation patent system, reflecting the effect of subsidies back in China, rather than any inherent value of the innovation patents themselves.  By the end of October, Chinese residents had filed 1719 innovation patent applications, compared with just 332 at the same point in 2019.  Meanwhile, Australian residents filed 801 innovation patent applications, with a further 618 coming from the rest of the world combined.  With just nine months remaining until its abolition, the innovation patent system is now looking very much like the laughing stock that it has long been regarded as by some critics.

For the ‘coronavirus-affected’ period from March to October, the number of standard patent applications filed in Australia is 2.4% below the same period last year while provisional filings are down by 3.0% overall.  However, a relatively large number of provisional applications are filed by self-represented applicants, and the decline in professionally prepared and filed provisionals is slightly higher, at 4.4%.

While all of this means fewer standard and provisional filings for the patent attorney profession generally, the pain has not been shared equally.  Indeed, some sectors of the market, and individual firms, have seen growth in their filings compared with 2019, while others have experienced more significant declines.  Very broadly speaking, the best place to be, in terms of 2020 patent filings, is a medium-sized or large privately-held firm, although micro-practices and medium-sized firms within the listed groups have also collectively increased their share of standard patent filings during the pandemic.

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Tags: Australia, COVID-19, Patent analytics, Patent attorney profession

Australian High Court Finds that Sale of a Patented Product Exhausts Patentee’s Rights

In a significant judgment, the High Court of Australia has changed an aspect of patent law in Australia, ruling by a 4-3 majority that the first sale of a patented product exhausts the patentee’s exclusive rights in that product: Calidad Pty Ltd v Seiko Epson Corporation [2020] HCA 41.  For over a century, an alternative approach, based on an ‘implied licence’ theory, has applied.  While the distinction between these two approaches may not necessarily produce a different outcome in most practical circumstances, the implied licence approach has generated complications, and left Australian law out-of-step with some of our major trading partners, most notably the US and the European Union.  For reasons of simplification and harmonisation, therefore, the High Court’s ruling will be welcomed by many – myself included.

The decision of the High Court majority is also notable for the fact that the court has wasted no time in recognising the ‘objects clause’ in section 2A of the Patents Act 1990.  This clause, which sets out underlying purposes of the Act (in economic and social terms) was only enacted in February 2020, and this is literally the very first patent case that the High Court has decided since then.

The case involves printer ink cartridges, and in particular the refurbishment, refilling, and resale of cartridges, which are generally available at a lower price than cartridges sold by the original manufacturer.  Australian consumers will therefore be pleased to learn that the High Court has determined – in addition to the esoteric legal question of ‘exhaustion’ – that, in this case at least, the refilled cartridges do not infringe patent rights held by the original manufacturer, and can therefore be imported and sold in Australia.  I will discuss the ‘exhaustion’ aspect in this article, and save a review of the infringement decision for a separate post.

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Tags: Australia, Exhaustion, Implied licence, Patent law