Calidad Pty Ltd v Seiko Epson Corporation [2020] HCA 41
Property law; patents; infringement of; doctrine of exhaustion
Facts: Seiko Epson Corporation (Epson) had the patent rights for certain component parts of a ‘single-use’ ink cartridge for its printers. The cartridge had a sealed ink compartment and an electronic device which disabled printing when the ink ran low. This design was intended to force users to purchase a new cartridge. Calidad purchased empty Epson cartridges from original users, drilled a hole in the ink compartment, refilled and resealed the compartment, and reset or replaced the electronic component. They resold these cartridges as ‘refillled’ cartridges. Epson alleged that this process infringed their sole right, as patent holders, to exploit the patented cartridges. Specifically, they argued that Calidad was manufacturing new cartridges, from parts taken from empty ones.
Issue: Was Calidad manufacturing new cartridges or only modifying existing ones? Did a modification and resale of an existing cartridge breach Epson’s patent rights?
Decision: The process of refilling a cartridge and resetting the electronic device was a modification of the existing cartridges, not the manufacture of new ones. Reselling modified cartridges did not infringe Epson’s patent rights.
Reason: The holder of patent rights has the sole right to exploit their invention. This includes manufacturing and selling products that incorporate the patented components. But the patent holder’s rights are exhausted once such products are sold. The person who becomes owner of the products can deal with them freely, unless contractually bound to the patent holder not to do so. Neither the original purchasers nor Calidad was so bound. Calidad had not infringed Epson’s patent rights by modifying and reselling the cartridges. The court said [at 67]:
"When a small hole was made in the printing material container of the original Epson cartridge to enable it to be refilled with ink, the cartridge did not cease to exist, and it was not made anew when the two holes were sealed. The product did not cease to exist when the memory chip was substituted."