Calidad Pty Ltd v Seiko Epson Corporation

The High Court of Australia considered a dispute between Seiko Epson Corporation (Seiko Epson) and Calidad Pty Ltd concerning alleged infringement of patent rights. Seiko Epson claimed that Calidad Pty Ltd had infringed its patent rights by importing into Australia modified, used printer ink cartridges for sale. These cartridges, originally manufactured by Seiko Epson, had been acquired by a third party, modified for re-use, and then imported into Australia.

The central legal issues before the High Court were whether the modifications made to the used ink cartridges constituted an impermissible "making" of a new product, thereby infringing Seiko Epson's exclusive rights under the *Patents Act 1990* (Cth). The Court was also required to consider the applicability and scope of the doctrine of exhaustion of patent rights, which posits that a patentee's exclusive rights are exhausted upon the first authorised sale of a patented product, and the doctrine of implied licence, which suggests that the sale of patented goods confers an implied licence on the purchaser to use the product.

The High Court determined that the modifications made to the cartridges did not amount to an impermissible "making" of a new product. The Court affirmed the continued application of the implied licence doctrine, holding that the sale of patented goods by a patentee carries with it an implied licence to use and deal with those goods. This implied licence is not extinguished by subsequent repairs or modifications to the product, provided those actions do not fundamentally alter the nature of the patented invention. The Court reasoned that the modifications in question were aimed at restoring the cartridges to a usable state and did not create a new invention or infringe the essential features of Seiko Epson's patents.

Consequently, the High Court allowed the appeal, setting aside the orders of the Full Court of the Federal Court of Australia. The Court ordered that the applicants' claims of patent infringement be dismissed, with the matter remitted to the primary judge for the determination of a separate claim for pecuniary relief.