The High Court has recently clarified that the law on exhaustion of IP rights after sale in Australia is in line with the US.

In summary, Seiko (collectively) commenced proceedings in the Federal Court of Australia alleging that Calidad had infringed its patent rights in printer cartridges. In particular, it said, to put it plainly, taking used Epson printer cartridges, drilling a hole in the side and refilling them with ink (and in some cases providing a modified chip for communication with the printer) was an infringement of the patentee's rights.

Calidad ultimately appealed and asked that the High Court hold that, in cases of this kind, a doctrine that a patentee's monopoly rights of use and sale with respect to a product arising from statute are exhausted upon the first sale of that product (the "exhaustion doctrine") should be applied instead of the existing 'implied licence' doctrine.

The practical question for the court was whether the drilling and refilling modifications made to the product to enable its re-use amounted to a making of a new product and thereby infringed the patentee's exclusive rights on that basis.

The High Court found that the modifications to the original Epson cartridges did not amount to an impermissible making of a new product and that the exhaustion doctrine should be accepted which throws out a decades old 'doctrine of implied licence'. The refilled and restored cartridges were merely modified versions of the products sold by Seiko. The modifications were within the scope of the rights of an owner of a chattel to prolong the life of a product and make it more useful.

What this means in practice

What this means is that it should not be an infringement to repair or modify a product in future – to date that has been somewhat of a grey area. There is likely many other uses for existing products that could not be reimagined commercially due to the risk of infringement of patent rights. While the High Court is unlikely to have been cognisant of nor motivated by the sustainability angle, the acknowledgement of the court to apply a doctrine of exhaustion will provide an avenue for innovation of existing products that may have the ultimate impact of helping reduce waste.

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