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.

 Read full article ► 

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

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.

 Read full article ► 

Tags: Australia, Exhaustion, Implied licence, Patent law

When Does Importation of Refurbished and Refilled Printer Ink Cartridges Infringe a Patent?

If you have purchased a consumer-grade printer at any time during the past decade or so, then you will be well aware that the manufacturers of these products have mostly adopted the so-called ‘razor-and-blades’ business model.  According to this model, an initial item – such as an inkjet printer – is sold at a low price (possibly below cost) in order to increase subsequent sales of consumable supplies – i.e. ink cartridges.  Unsurprisingly, an entire industry has evolved to supply cheaper ‘generic’ versions of these consumables, either by manufacturing copies or, more commonly, by refurbishing and refilling used cartridges.  Printer manufacturers, in their turn, have developed a range of strategies in an effort to thwart generic competition and maintain an effective monopoly on the sale of consumables.

For example, some of the measures employed by original equipment manufacturers (OEMs) are physical, such as forming uniquely-patterned structures (‘interface patterns’) on the exterior of ink cartridges so that they can only be installed into the specific printer models for which they are intended.  Other strategies involve more sophisticated technological measures, such as configuring memory chips installed in the ink cartridges – which perform a legitimate function in monitoring ink usage and level to prevent damage to print heads that results from operating the printer with an empty cartridge – to frustrate efforts to reset the memory contents.  If the memory chips cannot be reset or reproduced by a generic supplier, then even a refilled cartridge will fail to function with a printer that interrogates the memory and finds an indication that it is empty.

Intellectual property rights also play a role in the ongoing struggle between OEMs and generic suppliers.  In some jurisdictions (though not, it must be said, Australia) registered design rights can be used to protect the physical appearance of cartridges – including ostensibly functional interface patterns – and thus prevent the manufacture and sale of copies.  Functional improvements in cartridge technology can also be protected by patents, again enabling the sale of copies to be restrained through infringement actions.

However, refurbishing and refilling of cartridges represents a grey area for IP laws.  The default legal position is that once a product (which the common law would class as a ‘chattel’) has been sold, the purchaser becomes the owner, and is free to deal with it as he or she wishes, including reselling, donating, or disposing of it, whereby any subsequent owner may enjoy the same rights of possession.  This raises the question of whether there can be infringement of an IP right, such as a patent, when instead of making and selling a copycat product, a competitor legally acquires spent ink cartridges and restores them to (roughly) their original condition for resale?  The answer – as I am sure any lawyer will tell you – is ‘it depends’.

A decision issued by Justice Burley in the Federal Court of Australia addresses a particularly interesting variation on this theme.  Seiko Epson Corporation v Calidad Pty Ltd [2017] FCA 1403 concerns the collection, refurbishment, and refilling of ink cartridges for Epson-branded printers outside Australian jurisdiction, and subsequent importation and sale of the refilled cartridges by Calidad.  While the case covers a range of issues, including trade mark infringement, trade practices and contract law, the most substantial aspect of the decision – and the one of greatest interest to this blog, of course – is whether or not importing and selling the refurbished cartridges constitutes infringement of Seiko’s Australian patents covering certain features of its cartridges.

The short answer, according to Burley J, is ‘it depends’!  In particular, it depends upon exactly what is done in the course of refurbishment, and whether this results in the product being ‘materially altered’, insofar as it is ‘an embodiment of the invention as claimed.’  If you want to know what that means, and how his Honour arrived at this unique conclusion, read on.

 Read full article ► 

Tags: Australia, Exhaustion, Implied licence, Patent law