There has been a new development in Calidad Pty Ltd v Seiko Epson Corporation [2019] FCAFC 115 (Calidad v Seiko) relating to remanufactured printer cartridges. Australian businesses dealing in products with re-purposed, re-manufactured or re-used parts should keep aware of developments in the law in this area.

Background to the Calidad v Seiko matter

The matter involves a long running dispute between two parties:

  1. Seiko, the manufacturer and original seller of EPSON branded printer cartridges, and
  2. Calidad, the Australian distributor of "repurposed" printer cartridges that are made by refilling used EPSON cartridges collected from consumers.

Seiko alleged that the distribution and sale of remanufactured cartridges in Australia infringes several Australian patents for printer cartridges held by Seiko. Calidad contended that because the printer cartridges were acquired from consumers who had legitimately purchased EPSON branded printer cartridges from Seiko, there can be no patent infringement as those consumers have decided to pass on the printer cartridges for repurposing, re-filling and subsequent sale.

Previous Judgments in the Calidad v Seiko matter

The matter has passed through several stages of the Australian Courts. Initially Justice Burley found that some of Calidad’s printer cartridges infringed Seiko’s Australian patents, while some did not. However, in a subsequent decision, Justices Greenwood, Jagot and Yates of the Full Federal Court found that all of Calidad’s printer cartridges were infringing.

The judges reasoned that the EPSON branded printer cartridges were sold to consumers with an implied licence from Seiko – the implied licence permits the consumer to do certain things with the cartridge (for example to use it, or to onsell it) without infringing Seiko’s patents. However, for various reasons, the judges decided that the activities undertaken by Calidad’s supply partners in "repurposing" the printer cartridges were not activities permitted by the implied licence. Consequently Calidad was found liable for patent infringement, having distributed the offending cartridges within Australia.

In reaching their decision, the judges embarked upon on a detailed technology-specific analysis of the particular procedure that had been used to repurpose and refill the printer cartridges (resulting in a different result for different models of printer cartridge according to Burley J). This left Australian businesses with some uncertainty around what repair and repurposing activities, at a general level, might remain permissible in dealing with patented products.

New Developments in the Calidad v Seiko Matter

Last Friday (15 November 2019) the High Court of Australia granted an application for special leave to consider whether the "implied licence" doctrine ought to prevail under Australian law or whether, instead, an "exhaustion of rights" doctrine should apply.

In other countries, including the United States, it is generally the case that once a patentee makes a sale to a legitimate purchaser, the patentee’s rights in relation to the purchased product are exhausted. Consequently the patentee is not in a position to bring patent infringement proceedings if that same product is subsequently repurposed, remanufactured or reused by the legitimate purchaser (or a subsequent person who has legitimately taken ownership of the product).

If the High Court chooses to apply an "exhaustion of rights" analysis in the Calidad v Seiko matter, then the outcome of the case may well be different. This will change the landscape significantly for Australian businesses and patent owners, providing certainty for businesses dealing in repurposed products, but creating a new problem for patentees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.