Calidad Pty Ltd v Seiko Epson Corporation

an electronic device driven by a higher voltage than the memory driving voltage;

a plurality of terminals including a plurality of memory terminals electrically connected to the memory, and a first electronic device terminal and a second electronic device terminal electrically connected to the electronic device, wherein:

the plurality of terminals each include a contact portion for contacting a corresponding terminal of the plurality of apparatus‑side terminals,

the contact portions are arranged in a first row of contact portions and in a second row of contact portions, the first row of contact portions and the second row of contact portions extending in a row direction which is generally orthogonal to the insertion direction,

the first row of contact portions is disposed at a location that is further in the insertion direction than the second row of contact portions,

the first row of contact portions is longer than the second row of contact portions, and,

the first row of contact portions has a first end position and a second end position at opposite ends thereof,

a contact portion of the first electronic device terminal is disposed at the first end position in the first row of contact portions and

a contact portion of the second electronic device terminal is disposed at the second end position in the first row of contact portions."

The facts

1. The facts as found by the primary judge are in substance as follows. Seiko sells printer products, including printer cartridges ("original Epson printer cartridges"), under or by reference to the trade mark "EPSON". All original Epson printer cartridges embody the invention claimed in Seiko's patents.
2. There are several different types of original Epson printer cartridges, and each type is designed to fit a different range of Epson printers. All original Epson printer cartridges have an integrated circuit chip mounted on or connected to a printed circuit board (or integrated circuit board). But the type of circuit chip fitted to each type of printer cartridge is peculiar to that type of cartridge and has differing compatibility with Epson printers.
3. A memory chip on an original Epson printer cartridge stores information about the printer cartridge. The memory chip's primary function is to store information about the amount of ink remaining in the cartridge. When the memory chip signals to the printer that the ink remaining in the cartridge is below a pre‑determined level, the printer ceases to operate. Other functions of the memory chip include storing information about the original size of the ink supply (for example, whether it is a regular or high‑capacity cartridge), the expiration date of the cartridge, and the length of time since the cartridge was first inserted into the printer. The memory chip has two different operating modes: "normal" mode and "test" mode. A cartridge is in normal mode when in use in a printer, and test mode is selected when the chip is being tested after manufacture or when certain types of data stored on the chip are rewritten.
4. Seiko designs and manufactures original Epson printer cartridges with the intention that, once the ink in the cartridge has been consumed, the purchaser will discard the used cartridge and purchase another new original Epson printer cartridge to replace it. There is, however, a substantial international trade in recovering discarded used printer cartridges and reconditioning them for resale at cheaper prices than new original replacement cartridges.
5. Ninestar is one of the world's largest manufacturers of generic printer consumables and is part of that trade. It purchases discarded used original Epson printer cartridges from third party suppliers who acquire them from recycling facilities and other sources, and then Ninestar reconditions the used cartridges to a standard suitable for resale as generic, recycled replacement cartridges. The work involved in reconditioning the used original Epson printer cartridges varies between the different types of cartridge.
6. When Ninestar acquires a used original Epson printer cartridge, the information on the cartridge's memory chip records that the cartridge is "used", such that the cartridge will not produce ink when connected to a printer because the chip conveys information to the printer that the cartridge is empty. In order to make the used cartridge ready for resale, it is necessary for Ninestar both to refill the cartridge with ink, and to reconfigure or rewrite the information on the memory chip, or replace the memory chip with another, so as to indicate to any printer in which the cartridge is installed that it is not used or empty.
7. Apex Microelectronics Co Ltd ("AMC") is a related company of Ninestar and a manufacturer and supplier of equipment that rewrites the memory of memory chips installed in original equipment manufacturer ("OEM") printer cartridges, including the memory chips installed in original Epson printer cartridges. AMC also manufactures and supplies replacement integrated circuit chips ("compatible chips") that may be substituted for the OEM chips. Ninestar engages AMC to rewrite the memory chips installed on some of its used original Epson printer cartridges and fits AMC compatible chips to others.

Proceedings at first instance

1. Calidad purchased from Ninestar and imported into Australia and resold to purchasers in Australia 11 different categories of original Epson printer cartridges reconditioned by Ninestar. Seiko alleged that, by so doing, Calidad infringed the claims of its patents. Calidad accepted that each of the reconditioned printer cartridges fell within the claims of Seiko's patents but contended that it had a complete answer to the allegation of patent infringement, on the basis either that Seiko's patent rights in relation to the cartridges were exhausted upon Seiko's initial sale of the cartridges or, alternatively, that by selling the cartridges to the initial purchasers, Seiko impliedly licensed the initial purchaser, and all subsequent purchasers, to use the cartridges despite Seiko's patent rights in respect of the cartridges.
2. The primary judge held[395] that a defence relying on the exhaustion theory was not available under the law in Australia and that while the implied licence defence succeeded in respect of four of the categories of cartridges (Categories 1, 2, 3 and A, described below), on the basis that the modifications that Ninestar made to those original cartridges in the process of reconditioning them did not materially alter them, the defence failed in respect of the remaining categories of cartridges because the modifications which Ninestar made in reconditioning those categories of cartridges did materially alter them.
3. The primary judge usefully summarised the 11 different categories of original Epson printer cartridges, and the extent of modifications involved in each, as follows[396]: No Type of modification Calidad model / type

Current (all cartridges sold after April 2016, excluding the Calidad 260H referred to in Category 1)

                                                                                                  (1) Preparation


                                                                                                  (2) refilling processes +                                                                                           Calidad 260 Std (originally Epson T200)

Category 1 Formerly, Calidad 260H (originally Epson T200XL) (3) Reset in normal mode;

                                                                                                  (4) Normal mode R&D processes+

                                                                                                  (1) Preparation
                                                                                                                                                                                                                      Some Calidad 253 (originally Epson 133)

Category 2 (2) Refilling processes +

                                                                                                  (3) Reset/reprogram in test mode for ink level, cartridge status                                                    Some Calidad 258 (originally Epson 138)

                                                                                                  (4) Test mode R&D processes +

                                                                                                  (1) Preparation
                                                                                                                                                                                                                      Some Calidad 253 (originally cartridges other than Epson 133)

Category 3 (2) Refilling processes +

                                                                                                  (3) Reset/reprogram in test mode for model number, ink colour, ink level, cartridge status and date of manufacture  Some Calidad 258 (originally cartridges other than Epson 138)

                                                                                                  (4) Test mode R&D processes +

Category A Cartridge categories 2 or 3 above, without the gas membrane cut (95% of cases) 5% of Calidad 253 and Calidad 258 cartridges

Former (all cartridges sold before April 2016)

                                                                                                  (1) Preparation

Category 4 (2) refilling processes + Calidad 260H (originally cartridges other than Epson T200XL)

                                                                                                  (3) Chip replacement process

                                                                                                  (4) Compatible chip R&D processes +

Category 5 Same as category 4 cartridges which have also had interface pattern cutting process Some Calidad 250

                                                                                                                                                                                                                      Some Calidad 253

Category 6 Same as categories 2 or 3 plus interface pattern cutting process Some Calidad 258

                                                                                                                                                                                                                      Some Calidad 250 imported in 2014-2015

Category 7 Categories 5 or 6 cartridges plus replace integrated circuit assembly Some Calidad 253 imported in 2014-2015

                                                                                                                                                                                                                      Some Calidad 258 imported in 2014-2015

                                                                                                                                                                                                                      Some Calidad 250

Category B Cartridge categories 5, 6, or 7 above, without the gas membrane cut (95% of cases) Some Calidad 253

                                                                                                                                                                                                                      Some Calidad 258

1. The primary judge set out each step in the process of modifying the original Epson printer cartridges, corresponding to the middle column of the preceding summary.
2. Step 1, "preparation", consisted of inspecting an original Epson printer cartridge to confirm that it was the correct type and in a suitable condition to be restored, emptying and cleaning the cartridge in preparation for refilling, removing any residual ink inside the cartridge by inserting a vacuum device, washing the cartridge with water in cases where the original ink contained pigment (rather than dye), and preparation of the outlet hole by removing the original seal that was broken when the cartridge was first used.
3. Step 2, "refilling", consisted of creating a second hole - or injection port - by inserting a needle into the middle of the main side of the cartridge, infusing ink through that hole, using the vacuum device to extract air from the outlet hole, and then resealing the injection port and outlet hole by placing pieces of thin clear plastic over them and applying force and heat to effect a seal.
4. Step 3, "reset in normal mode", was a process by which the data stored on the memory chip in the addresses relating to the ink level and cartridge status was rewritten from one series of binary bits to another, to record that the ink volume was "full" and that the cartridge status was either "unused" or "has been used previously but is not yet empty". That process takes only seconds and involves holding the terminals of the cartridges up to a connector to equipment that causes the rewriting to take place.
5. Step 4 took different forms: "normal mode research and development processes", "test mode research and development processes", and "compatible chip research and development processes". Step 4 in respect of "normal mode research and development processes" consisted of steps that had to be undertaken to identify the mechanisms of the original Epson printer cartridges and their interaction with Epson printers, to enable the modifications identified above to take place. It included obtaining used and unused samples of the original Epson printer cartridges; inspecting them in order to ascertain the path that the ink follows inside the cartridge and understand where the sensor is located; determining how the memory chips operate by removing a seal on top of the memory chip, removing protective layers to reveal circuitry around each transistor, photographing each block of circuitry including each transistor (of which there could be hundreds) and conducting electrical testing; determining the interface protocol by which the printer and chip communicate by use of an oscilloscope to identify the data stored and determine what it means and the memory addresses at which information needs to be read or written; and, finally, programming electronic equipment to "reset" the data relating to ink level and cartridge status. These processes required a reasonable degree of expertise and entailed an invasive examination of sample original Epson printer cartridges. In respect of "test mode research and development processes", in addition to the processes undertaken in respect of normal mode, this step required determination of how to activate test mode and the applicable interface protocol for test mode with the use of specialist third party technology which, the primary judge found, was a costly, time‑consuming process requiring considerable expertise and skill. Finally, in respect of "compatible chip research and development processes", in addition to understanding the mechanical and physical attributes of original Epson printer cartridges and the interface protocol by which the printer and chip communicate, this step involved understanding the electrical circuitry by removing a seal on top of the cartridge and protective layers to reveal the circuitry around each transistor, photographing each block of circuitry and transistor, and then testing, constructing and simulating the circuitry using automation software and, with that information, designing and developing a compatible memory chip to substitute for the chip in the original Epson printer cartridge.

(1) Step 1 - the preparatory work - involved no change to the printing material container identified in integer [1] of the claim, it required only that the printing material container be adapted to be attached to a printing apparatus by being inserted in an insertion direction, and that aspect of the container was not materially altered.

(2) Step 2 - refilling - involved minor physical alterations to the cartridge container in the result of creating an injection port or a slit in the gas membrane, but those changes bore no relationship to the subject of the integers of the claim.

(3) Step 3 - reset in normal mode - did not entail material alterations since, properly construed, the claim distinguished between the memory chip and the matter stored on it (whether it be data, software or otherwise) and the combination of integers claimed was thus the existence of the chip as part of the combination and not for a monopoly referable to the content of the chip.

(4) Step 4 - normal mode research and development processes - was irrelevant in that that work was anterior to the making of changes to the embodiment of the claimed invention (the claim being for a product, not a process) and, in any event, the research and development concerned alterations made to the information contained in the memory chip, which was not a feature of the invention as claimed.

1. The primary judge also found that the modifications made to the Category 2 cartridges did not have a material bearing on the manner in which the original Epson printer cartridges embodied the invention as claimed, in substance because:

(1) the work comprising steps 1 to 3 was not materially different from the work comprised in steps 1 to 3 for Category 1 cartridges; and

(2) the primary difference between Categories 1 and 2 was that the resetting or reprogramming of the memory chip was undertaken in test mode and required a greater degree of research and development to be able to rewrite its contents, but the fact that there was an additional degree of difficulty in preparing to make the alterations to the memory was legally irrelevant.

1. The primary judge found that steps 1 and 2 for the Category 3 cartridges were the same as for Category 1, and, although step 3 was more complicated, and involved additional modifications to the contents of the memory chip, that fact was irrelevant for the reasons given in relation to Category 2 cartridges. Consequently, the primary judge concluded that the Category 3 cartridges were within the scope of the implied licence. Category A cartridges - being cartridges otherwise within Category 2 or 3 that do not have the gas membrane cut in the modification process - were likewise held to be within the scope of the implied licence.
2. Category 4 cartridges had not been sold since April 2016 and were modified from original Epson printer cartridges acquired from outside Australia. Steps 1 and 2 for Category 4 cartridges were the same as for Category 2 cartridges. Step 3, however, was different in that, instead of reprogramming or resetting the integrated circuit chip in the cartridge, the integrated circuit boards were removed from the cartridges using a cutting tool, the memory chips on the integrated circuit boards were replaced with generic memory chips, and then each integrated circuit board so fitted with a generic memory chip was refitted to a cartridge although not necessarily, or, in all probability, at all, to the same cartridge from which the circuit board had been removed. As set out in the table above, the Category 4 cartridges also involved a different step 4 to that in the preceding categories of cartridges, being the research and development of a compatible memory chip.
3. The primary judge held that, because Category 4 cartridges had their original memory chips removed from the original Epson printer cartridges and replaced "with an entirely different item of hardware", step 3 in relation to Category 4 cartridges fell "on the wrong side of the line for the implied licence to be maintained"[397]. In his Honour's view, that process of removal and replacement materially affected, and changed, "the embodiment [of the patented device] that Seiko sold"[398].
4. Category 5 cartridges were modified in the same way as Category 4 cartridges but with the addition of cutting off the "interface pattern". The interface pattern was part of the exterior shape of one of the short sides of the original Epson printer cartridge and was the means by which Seiko physically limited the range of Epson printers to which the cartridges could be fitted.
5. The primary judge held that because integer [1] of the patent requires that the printing material container be adapted to be attached to a printing apparatus by being inserted into it, the interface pattern formed part of the mechanism by which Seiko's embodiment achieved that function, and although the modifications made might be regarded as "borderline", in the context of "the present analysis" they fell on the wrong side of the line of the implied licence.
6. Like Category 4 cartridges, Category 6 cartridges had not been sold since April 2016. The processes used to modify these cartridges were the same as for Category 2 and 3 cartridges but with the addition of cutting off the interface pattern in the manner described in the case of Category 5 cartridges. The primary judge held that, as with Category 5 cartridges, cutting off the interface pattern led to the conclusion that Category 6 cartridges were beyond the scope of the implied licence.

Proceedings before the Full Court of the Federal Court

1. Each member of the Full Court of the Federal Court of Australia held that the primary judge erred, but for different reasons. Greenwood J considered[399] that the primary judge failed to examine the "true scope and content" of the implied licence. His Honour posited[400] that the implied licence included "all the normal rights of an owner" or the "'absolute right' to deal with the product as the buyer thinks fit", and so included the right to "hire, sell, otherwise dispose of the product, offer to sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things". But, his Honour said, the implied licence did not include the right to make the product, and, in his Honour's view, the modifications made to each category of cartridge constituted making an article embodying the integers of a claim defining Seiko's invention[401].
2. Jagot J reasoned similarly but in more detail. Her Honour noted that step 2 of the process for all categories of cartridges involved drilling a new hole in the ink container to enable it to be filled with fresh ink, and then sealing both the new hole and the original hole by the application of plastic with heat and pressure. Her Honour stated that, although the primary judge regarded that as but a "minor physical alteration" with no relationship to the claimed invention, in her Honour's view it was more, because, at the moment that the new hole was created, there was no longer an essential integer of the claimed invention, namely, a "printing material container", and that remained so until the new seals were applied[402]. And in her Honour's view, the modifications carried out by Ninestar in refilling and resealing the ink container could not be regarded as a repair because the original Epson printer cartridges as sold and ultimately acquired by Calidad could not be re‑used (since the ink container was empty and the memory chip recorded that the container was empty of ink), but the product as "repurposed" was capable of re‑use. Her Honour regarded that as the making of a new embodiment of the invention and thus beyond the scope of the implied licence[403].
3. Jagot J considered that, in the case of Category 4 cartridges, because the memory chip was substituted (which required removal of the printed circuit board from each cartridge and the attachment of a new substitute chip to each of the printed circuit boards), and because the printed circuit boards with substitute chips installed were supplied in bulk separately from the cartridges from which they had been removed and were then refitted to different cartridges to those from which they had been removed, the original Epson product as sold necessarily ceased to exist either at the moment its printed circuit board was removed or by the time the new chip was attached to a printed circuit board and that printed circuit board was inserted into a different cartridge. In her Honour's view, the functional equivalence of the substituted memory chips was beside the point. The product was no longer the product that Seiko had sold[404].
4. Jagot J also considered that the same was true of Category 5 cartridges, and, contrary to the primary judge's conclusion, that the cutting off of the interface pattern on Category 5 cartridges was not just "borderline" but rather enabled "a new kind of adaption for attachment to the printer"[405]. For that reason, her Honour said, it was clearly a new embodiment of the claimed invention containing all of the integers of the claim.

"It may be accepted that the actual status of the memory (that is, whether it shows the cartridge as full, empty or anywhere in between) is not part of the claim, but the fact that the claim involves a memory driven by a memory driving voltage is not irrelevant. Considered in the context of the product as sold, which is essential to the scope of the implied licence to use the product without infringement of the patents, the fact that the re‑purposing of the cartridges, as a minimum, involves re‑programming the chip to change the memory supports the conclusion that the imported Calidad cartridges are outside the scope of any possible implied licence or any concept of repair."

1. Yates J reasoned[410] that, whereas the primary judge's analysis of Calidad's cartridges was confined to the materiality of the modifications made to the claimed features of the invention, the correct approach was to ask whether, in each particular category, the modifications that Ninestar made to the original Epson printer cartridges altered them in such a way that they were, in substance, different articles from those Seiko had put into the market. And in his Honour's view, the modifications made in each category of cartridge materially altered the original Epson printer cartridges that Seiko had put into the market and amounted to remanufacture of the discarded original Epson printer cartridges to produce reborn printer cartridges that could not be said to have been of Seiko's making.

Repair and modification

1. In cases of this kind, where the question is whether steps taken to recondition or restore a used patented article constitute an infringement of the patent, the principle is clear. Consistently with the release that an implied licence in the contract of sale effects from the exclusive rights in s 13 of the Patents Act 1990, the purchaser has the liberty to "use" or "sell" the article but not to "make" a new article. The implied licence therefore permits a purchaser to repair and restore the article which embodies the patented invention, or otherwise to use the article, but not to make a new one. As Lord Halsbury famously observed in Sirdar Rubber Co Ltd v Wallington, Weston & Co[411]:

"The principle is quite clear although its application is sometimes difficult; you may prolong the life of a licensed article but you must not make a new one under the cover of repair."

1. Likewise, in Solar Thomson Engineering Co Ltd v Barton[412], Buckley LJ (with whom Orr and Goff LJJ agreed) endorsed the observations of Swinfen Eady J at first instance in Sirdar Rubber[413], where his Honour stated that:

"The purchaser of a patent article has a right to prolong its life by fair repair, but he has not a right to obtain ... a substantially new article made in accordance with the invention, retaining only some subordinate part of the old article so that it may be said that the combination is not an entirely new one."

1. And, in Buckley LJ's view[414]:

"The cardinal question must be whether what has been done can fairly be termed a repair, having regard to the nature of the patented article."

1. Subsequently, in United Wire, Lord Hoffmann observed[415]:

"Repair is one of the concepts (like modifying or adapting) which shares a boundary with 'making' but does not trespass upon its territory. I therefore agree with the Court of Appeal that in an action for infringement by making, the notion of an implied licence to repair is superfluous and possibly even confusing. It distracts attention from the question raised by section 60(1)(a) [of the Patents Act 1977 (UK)], which is whether the defendant has made the patented product. As a matter of ordinary language, the notions of making and repair may well overlap. But for the purposes of the statute, they are mutually exclusive. ...

In Solar Thomson ... Buckley LJ quoted the remark of Lord Halsbury LC ... [and] said that the question was one of fact and degree and ... that the 'cardinal question' was whether 'what has been done can fairly be termed a repair, having regard to the nature of the patented article'. The context shows that Buckley LJ saw no difference between this question and the question of whether, having regard to the nature of the patented article, the defendant could be said to have made it. Speaking for myself, I prefer the latter formulation."

1. But more recently, in Schütz (UK) Ltd v Werit (UK) Ltd, Lord Neuberger (with whom Lord Walker, Lady Hale, Lord Mance and Lord Kerr agreed) confirmed the utility of the distinction between repair of a patented item and the making of a new one[416]:

"The approach of Buckley LJ [in Solar Thomson] supports the notion that, subject to the overriding point that it should not obscure the central issue of whether the alleged infringer 'makes' the patented article, it may sometimes be useful to consider whether the alleged infringer is repairing rather than 'making' the article. ...

The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves 'making' of a new article rather than constituting a repair of the original article. Repair of an item frequently involves replacement of one or some of its constituents."

1. His Lordship then referred to the example of repairing a roof by the replacement of tiles or repairing a house by replacement of the roof and continued[417]:

"In the more directly relevant context of chattels rather than buildings, the normal use of 'making' and 'repairing' demonstrates the same point. Works to a ship or a motor car, which involve removal and replacement of defective significant constituent parts, could be substantial in terms of physical extent, structural significance, and financial cost, without amounting to 'making' a ship or motor car, as a matter of ordinary language: in such a case, they would be 'repair' of the existing ship or motor car."

1. Although, as has been seen, the law of patent infringement in the United States is affected by its recognition of the exhaustion theory[418], the United States approach to the question of how much a patented item may be changed without making a new item is essentially similar to the Anglo-Australian approach under the implied licence theory, albeit that, in the United States, the distinction between repair and making is described in terms of the difference between modifications, improvements and repairs on the one hand and reconstruction in the sense of making a "substantially new article"[419] on the other. Thus, in Aro Manufacturing Co Inc v Convertible Top Replacement Co Inc[420], the United States Supreme Court stated:

"This Court's decisions specifically dealing with whether the replacement of an unpatented part, in a patented combination, that has worn out, been broken or otherwise spent, is permissible 'repair' or infringing 'reconstruction', have steadfastly refused to extend the patent monopoly beyond the terms of the grant. ... [A]lthough there is no right to 'rebuild' a patented combination, the entity 'exists' notwithstanding the fact that destruction or impairment of one of its elements renders it inoperable; and ... accordingly, replacement of that worn-out essential part is permissible restoration of the machine to the original use for which it was bought."

1. To the same effect, in Hewlett-Packard Co v Repeat-O-Type Stencil Manufacturing Corporation Inc[421], the United States Court of Appeals, Federal Circuit said this:

"Generally, when a seller sells a product without restriction, it in effect promises the purchaser that in exchange for the price paid, it will not interfere with the purchaser's full enjoyment of the product purchased. The buyer has an implied license under any patents of the seller that dominate the product or any uses of the product to which the parties might reasonably contemplate the product will be put. ...

The authority to use and sell a purchased device, however, does not include the right to make a new device or to reconstruct one which has been spent. Reconstruction, ie, the re‑creation of a patented combination, is an infringement because such activity is beyond the implied authorization to use and sell a patented device. As the Supreme Court has stated:

'The decisions of this Court require the conclusion that reconstruction of a patented entity, comprised of unpatented elements, is limited to such a true reconstruction of the entity as to "in fact make a new article," after the entity, viewed as a whole, has become spent. In order to call the monopoly, conferred by the patent grant, into play for a second time, it must, indeed, be a second creation of the patented entity ... Mere replacement of individual unpatented parts, one at a time, whether of the same part repeatedly or different parts successively, is no more than the lawful right of the owner to repair his property.'

Aro Mfg Co v Convertible Top Replacement Co, 365 US 336, 346 ... (1961) ... (citations omitted)."

1. The reasoning in Hewlett-Packard is notable inasmuch as it proceeded from an implied licence conception of patentees' rights later repudiated by the Supreme Court of the United States in Lexmark. But, for present purposes, the significance of the decision in the former case (which relevantly is not affected by the choice between implied licence and exhaustion theories) is twofold. First, it represents a clear recognition that the purchase of used second-hand patented single-use printer cartridges, their modification to render them refillable, and their resale, did not infringe the patent, because the modifications made did not cause the cartridges to cease to exist[422]:

"HP correctly states that ROT's modification is not conventional repair. The caps on the purchased cartridges are not broken or defective. On the other hand, neither is ROT's modification a 'reconstruction' of the patented combination. A reconstruction occurs after the patented combination, as a whole, has been spent, when 'the material of the combination ceases to exist.' Wilson v Simpson, 50 US ... 109, 123 ... (1850)."

1. Secondly, the Court of Appeals specifically rejected the notion that, because the cartridges were designed and marketed as single‑use cartridges, the modification of them to render them refillable necessarily crossed the boundary of permissible repair and impermissible reconstruction[423]:

"HP also argues that the boundary between 'permissible repair' and 'impermissible reconstruction' turns on the intention of the patentee. HP contends that it has clearly manifested its intent that the ink jet cartridges be ... discarded once they are empty; HP does not sell refillable cartridges, and HP does not sell ink refills. Because it has always manifested an intent that its cartridges be discarded, it argues, the creation of refillable or refilled cartridges are unauthorized acts which constitute an infringement of its patents. HP in effect argues that any change to a patented product that is not intended by the patentee constitutes reconstruction. ... We do not agree ... [A]bsent a restriction having contractual significance, a purchase carries with it the right to modify as long as reconstruction of a spent product does not occur. ... The question is not whether the patentee at the time of sale intended to limit a purchaser's right to modify the product. Rather the purchaser's freedom to repair or modify its own property is overridden under the patent laws only by the patentee's right to exclude the purchaser from making a new patented entity." (emphasis added)

1. Importantly, the same idea was emphasised by the Privy Council in Canon Kabushiki Kaisha v Green Cartridge Co (Hong Kong) Ltd[424], in which it appears to have been regarded as going without saying that commercial refilling of single‑use cartridges and selling them at less than the price of new cartridges was not an infringement of patent.
2. In Jazz Photo Corporation v International Trade Commission[425], the United States Court of Appeals, Federal Circuit applied similar reasoning in concluding that the purchase of used second-hand single-use cameras and their refurbishment by removal of the cardboard outer cover of each camera, opening the sealed body of the camera (usually by cutting at least one weld), replacing the winding wheel or modifying the film cartridge to be inserted, resetting the film counter, replacing the battery in flash cameras, winding new film out of a canister onto a spool or into a roll, and resealing the body using tape or glue and applying a new cardboard outer cover, was not an infringement of patent[426]. As in Hewlett‑Packard, the Court held that it was not to the point that the patentee intended that the cameras be single‑use cameras or that it was manifest that the cameras were intended to be single-use cameras[427]. The Court also rejected a contention that because the cameras were refurbished using assembly-line procedures in which parts were mixed and matched between cameras, the process was reconstruction[428]. Consistently with earlier decisions of the United States Court of Appeals, Federal Circuit in Dana Corporation v American Precision Co Inc[429] (which concerned the mass-production refurbishment of used heavy-duty truck clutches), and of the United States Court of Claims in General Electric Co v United States[430] (which concerned the mass-production refurbishment of patented gun mounts), the Court in Jazz Photo reasoned that the adoption of assembly-line refurbishment and reassembly without regard to where each component had originated was simply a matter of efficiency and economy with the same effect as if each camera had been individually refurbished by disassembly and reassembly of its original components with replacement parts used to replace worn elements[431].
3. The reasoning in Jazz Photo was also later referred to with approval in Varex Imaging Corporation v Richardson Electronics Ltd[432]. It was noted[433] there that courts considering whether a defendant had made a new article by refurbishing it after the device has become spent must analyse the nature of the defendant's actions; the nature of the device and how it is designed (namely, whether one of the components has a shorter useful life than the whole); and whether a market has developed to manufacture or service the part at issue.
4. Given that the Patents Act 1990 is in relevant respects similar to the English legislation, the utility of the distinction between, on the one hand, repair or "use" and, on the other hand, "making" - being a distinction that Lord Neuberger emphasised in Schütz - is just as significant here as it is in England, and given that English, United States and Australian approaches to patent infringement are grounded in comparable techno-economic considerations, there is no reason why the concept of repair and modification falling short of making (or "reconstruction" as it is termed in the United States) should be conceived of in any narrower sense than it is in the United Kingdom or the United States.

Conclusion

1. In the result, the appeal should be allowed in part and the orders of the Full Court varied accordingly. The respondents should pay the costs of the appeal to this Court.

2. Patents Act 1990 (Cth), s 13(1), Sch 1 (definition of "exploit"). ↑

3. (1908) 7 CLR 481. ↑

4. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15; [1911] AC 336. ↑

5. Seiko Epson Corporation v Calidad Pty Ltd (2017) 133 IPR 1. ↑

6. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 28; [1911] AC 336 at 353. ↑

7. Calidad Pty Ltd v Seiko Epson Corporation (2019) 270 FCR 572. ↑

8. Viro v The Queen (1978) 141 CLR 88; Privy Council (Limitation of Appeals) Act 1968 (Cth); Privy Council (Appeals from the High Court) Act 1975 (Cth). ↑

9. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 509-510 per Griffith CJ (referring to Bloomer v Millinger (1864) 68 US 340 at 351 and Adams v Burke (1873) 84 US 453 at 456), 524 per Barton J (referring to Bloomer v McQuewan (1853) 55 US 539 at 549 and Adams v Burke (1873) 84 US 453 at 456). ↑

10. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 510 per Griffith CJ, quoting Adams v Burke (1873) 84 US 453 at 456. ↑

11. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 510. ↑

12. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 510. ↑

13. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 511-512. ↑

14. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 512. See also at 526-527 per Barton J. ↑

15. National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481 at 512 per Griffith CJ. ↑

16. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 22; [1911] AC 336 at 347. ↑

17. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 22; [1911] AC 336 at 347. ↑

18. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 22; [1911] AC 336 at 347. ↑

19. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 22; [1911] AC 336 at 347. ↑

20. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 23; [1911] AC 336 at 348. ↑

21. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 23-24; [1911] AC 336 at 348-349. ↑

22. National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 28; [1911] AC 336 at 353. ↑