The High Court handed down its decision yesterday in Calidad Pty Ltd & Ors v Seiko Epson Corporation & Anor[1].

Seiko Epson Corporation owns two patents relating to the Epson cartridges, which it manufactures and sells. Once those printer cartridges are sold and used, a third party obtains them and modifies them to be refilled and re-used. The appellants in this case (Calidad) acquired the modified cartridges from the third party 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 implied licence doctrine was considered. 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 Court of the Federal Court, which found that the modifications made to the original Epson cartridges were not authorised by any implied licence. The Full Court found 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 an infringement.

Calidad appealed to the High Court where the decision was overturned. The High Court considered that the patentee’s rights are exhausted upon the first sale of that product. It 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.