Seiko Epson Corporation v Calidad Pty Ltd

3.2 A patentee's rights to control the use of patented goods after sale 80 The exclusive rights of the patentee pursuant to s 13(1) of the Act are, during the term of the patent, to exploit the invention and to authorise another person to do so. The definition of "exploit" in the Dictionary (Schedule 1 to the Act) is: exploit, in relation to an invention, includes: (a) where the invention is a product - make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process - use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use. 81 The exclusive right to "use" a product the subject of a patent means that upon sale or resale of a product the patentee will have continuing control of the use. The purchaser of a chattel such as a garden hose or a fishing rod which is the subject of a patent can never consider himself or herself to be entitled to all of the usual incidents of ownership, because the patentee could impose limitations on his or her "use". However, there is a level of impracticality about this arrangement. It creates a tension between the notion that the purchaser of a chattel is its owner who can deal with it as he or she wishes, and the notion that a patentee can continue to have control over any use to which the chattel may be put after sale. Historically, 2 competing theories were developed to address this tension, both of which operated to confer on the purchaser of the fishing rod untrammelled rights to use it as its owner. 82 One arises from the notion that upon a first authorised sale of a chattel by or with the approval of a patentee, the patentee exhausts all patent rights in the subject matter of its invention. This is often called the "exhaustion of rights" doctrine. This is the approach that has been adopted for many years in the United States and which was recently confirmed by the United States Supreme Court in Lexmark. The other is that there exists an implied licence to use a chattel in any manner in which the purchaser desires upon purchase, unless the patentee imposes conditions at the time of sale. Both of these theories were considered in the influential decision of National Phonograph. The majority in the High Court (National Phonograph Co of Australia Ltd v Menck (1908) 7 CLR 481) favoured an approach that broadly adopted an exhaustion of rights approach. On appeal to the Privy Council ((1911) 12 CLR 15), this was overturned and an implied licence approach was adopted, in the manner set out below. 83 In National Phonograph the National Phonograph Company (NPC) sold Edison records that were made "in accordance with, and under the protection of, the letters patent" (at 17). That is, the records embodied the invention claimed. NPC's business model was to sell its records to intermediaries ("jobbers") under contracts that enabled them in turn to sell them to dealers. The dealers were themselves subject to contracts with NPC which imposed restrictions upon how they could sell the records. It was a term of the dealer contract that if the dealer was removed from the list of authorised dealers, then he could no longer sell, deal in or use, either directly or indirectly, the records. The defendant had his name removed from the list of dealers and yet declared that he was free to dispose of the goods as he wished. He was found not to have acted in breach of any contract, but was nevertheless bound not to make use of the patented products in any way inconsistent with restrictions imposed by the patentee of which he was given notice. 84 The relevant part of the dispute concerned whether the rights conferred upon a patentee pursuant to s 62 of the Patents Act 1903 (Cth), which gave the patentee full power, sole privilege and authority to "make, use, exercise, and vend the invention", entitled the patentee to constrain Mr Menck (the question of importation did not arise). 85 In the High Court, the majority found that a patentee is not entitled to impose conditions upon the sale or use of patented articles separately from any contract that it might have with a subsequent purchaser. This conclusion arose from a survey of the law of England and the United States as it stood at the time of the decision (that is, 1908), and the conclusion was that neither demonstrated a clear line of authority (7 CLR at 518 per Griffiths CJ). The majority favoured the view that it is an elementary principle of the law of personal property that the owner of chattels has an absolute right to use and dispose of them as he or she thinks fit, and that no restrictions can be imposed upon this right, except by positive law or by contract. The right asserted by NPC depended on whether the words "use" and "vend" in s 62 of the Patents Act 1903 (Cth) imposed such a restriction. Chief Justice Griffiths, as one of the judges in the majority, found that neither term could be construed, on the authorities, in such a way as to warrant a deviation from the elementary principle and broadly found that a patentee exhausts all patent rights upon the first sale of the goods. 86 NPC appealed to the Privy Council ((1911) 12 CLR 15), which overturned the decision of the High Court, Lord Shaw delivering the judgment. The Privy Council found that it was not in question that the elementary principle that an owner may use and dispose of ordinary goods as he or she thinks fit remains correct. It recognised that there exists a tension (referred to as a "difficulty" at page 22) between that principle, and the right of property granted under the Patents Act by way of monopoly "to make, use, exercise, and vend the invention … in such manner as to him seems meet". The tension was reflected in the two separate and conflicting strands of reasoning between the majority in the High Court (Griffiths CJ, Barton, and O'Connor JJ) and the dissentient judges (who, on this point were Isaacs J and possibly Higgins J). The former found that upon sale of a chattel the subject of a patent, the product "passed out of the limit of the monopoly". The latter preferred an analysis whereby any conditions imposed by the sale by the patentee simply ran with the goods. 87 The Privy Council rejected both approaches. Lord Shaw said (at 23 to 24, emphasis added): There is no doubt that, if the doctrine contended for by the appellants and affirmed by the dissentient Judges in the Court below were to be given effect to, namely, that the conditions imposed by the patentee run with the goods, a radical change in the law of personal property would have been made. But if that latter view be an extreme view, and if the restriction upon alienation, use or otherwise of the chattel purchased, be a restriction arising from the fact that the person who has become owner has done so with the knowledge brought home to him of the limitation of his rights of alienation or otherwise, then there seems to be no radical change whatever.… These limitations are merely the respect paid and the effect given to those conditions of transfer of the patented article which the law, laid down by Statute, gave the original patentee power to impose. 88 It is relevant to one of the present arguments that in this passage the Privy Council emphatically rejected that conditions imposed by a patentee "run with the goods". The Court adopted the language of licence. It said (at 24): It may be added that where a patented article has been acquired by sale, much, if not all, may be implied as to the consent of the licensee to an undisturbed and unrestricted use thereof. In short, such a sale negatives in the ordinary case the imposition of conditions and the bringing home to the knowledge of the owner of the patented goods that restrictions are laid upon him. 89 It was in this way that the Privy Council was able to reconcile the tension that it had earlier identified. It did so by adjusting "the incidence of ownership of ordinary goods with the incidence of ownership of patented goods in such a manner as to avoid any collision of principle" (at 22). In its conclusion (at 28) it said (emphasis added): In their Lordships' opinion, it is thus demonstrated by a clear course of authority, first, that it is open to the licensee [of the patentee], by virtue of his statutory monopoly, to make a sale sub modo, or accompanied by restrictive conditions which would not apply in the case of ordinary chattels; secondly, that the imposition of these conditions in the case of a sale is not presumed, but, on the contrary, a sale having occurred, the presumption is that the full right of ownership was meant to be vested in the purchaser; while thirdly, the owner's rights in a patented chattel will be limited if there is brought home to him the knowledge of conditions imposed, by the patentee or those representing the patentee, upon him at the time of sale. It will be observed that these propositions do not support the principles relied upon in their absolute sense by any of the Judges of the Court below. On the one hand, the patented goods are not, simply because of their nature as chattels, sold free from restriction. Whether that restriction affects the purchaser is in most cases assumed in the negative from the fact of sale, but depends upon whether it entered the conditions upon which the owner acquired the goods. On the other hand, restrictive conditions do not, in the extreme sense put, run with the goods, because the goods are patented. 90 It is to be noted that in this and other passages, the focus is upon the owner's rights in a "patented chattel". That is, the physical embodiment of the invention, as defined by the claims. 91 Contrary to the view of Griffiths CJ in the High Court, their Lordships did not consider that the law so stated was at all novel. They considered that it arose from a clear lineage that could at least be traced to statements of Lord Hatherley LC in Betts v Willmott (1871) LR 6 Ch App 239 (Betts v Willmott). In that case it was held that if the owner of a patent manufactures and sells the patented article in France, the sale carries with it a licence to use the article in England. Lord Hatherley LC said (at 245): …unless it can be shewn, not that there is some clear injunction to his agents, but that there is some clear communication to the party to whom the article is sold, I apprehend that, inasmuch as he had the right of vending the goods in France or Belgium or England, or in any other quarter of the globe, he transfers with the goods necessarily the license to use them wherever the purchaser pleases. When a man has purchased an article he expects to have control of it, and there must be some clear and explicit agreement to the contrary to justify the vendor in saying that he has not given the purchaser his license to sell the article, or to use it whereever he pleases against himself. 92 It is particularly relevant to the present case that this passage identifies that the implied licence arising upon the sale includes a licence upon the part of a person who has acquired a patented product abroad to import it into the country. Here, Ninestar acquired the original Epson cartridges abroad, modified them and then CDP acquired those products from Ninestar and imported them into Australia for subsequent sale. 93 As to the nature of the right of the patentee to limit subsequent use, the Privy Council endorsed the following reasoning of Farwell J in British Mutoscope and Biograph Co Ltd v Homer (1901) 1 Ch 671 (British Mutoscope) at 673 - 674 (emphasis added): … it has recently been held in Incandescent Gas Light Co. Ltd. v Brogden that a purchaser who buys with knowledge of the conditions under which his vendor is authorised to use the patented invention is bound by such conditions, and that such conditions are not contractual, but are incident to and a limitation of the grant of the license to use, so that if the conditions are broken there is no grant at all. 94 This passage provides an indication that whilst the patentee may impose restrictions upon a purchaser or subsequent title holder of the patented product, the licence does not arise strictly from contract but rather as an incident of the nature of the patent rights. 95 The Privy Council in National Phonograph moved on to approve the observations of Cozens-Hardy LJ in McGruther v Pitcher (1904) 2 Ch 306 at 312 who remarked that in an action by a patentee claiming an injunction to restrain an infringement of patent it is open to the defendant to plead a licence by the plaintiff. His Lordship said: That license may be express, or it may be implied from the sale by the patentee of the patented article, but, if the defendant pleads a license, then it is competent for the plaintiff to reply, "The license which I granted is a limited licence, and you, the person who has now got the patented article, were aware it was only a limited licence, and you cannot therefore defend yourself against my claim for an infringement of my patent, because you are going outside the license which to your knowledge I gave with reference to this article". 96 It is apparent from this passage, as well as from the passage quoted from page 28 of National Phonograph in [89] above that the onus lies upon the patentee to establish that upon sale, conditions limiting the use that may be made of the patented product are notified to the owner, and that in the case of any subsequent owner, they too have notice prior to coming into ownership. 97 On the facts of National Phonograph the defendant was not free to deal with the goods as he wished, because the NPC had given him notice of restrictions that it wished to impose upon any dealings with goods. Despite having acquired the patented records, that notice was sufficient to constrain the defendant. The conclusion of the Privy Council was as follows (at 28-29, emphasis added): Applying these principles to the present case, the result is this: the respondent, Mr Menck, has been acquitted of every charge of violation of contract which was laid against him by the appellants. He has also succeeded in showing that the claim made by the appellants as patentees was in its nature extreme and unsound in law. But he made this mistake: he assumed that, being guiltless of violation of contract, he was as free as an ordinary member of the public who had acquired possession of articles embodying the appellants' patent. His misfortune, however, consists in this, that by the very fact that he entered into contractual relations with the appellants, he has become seized with the knowledge of the conditions on which they dispose of their goods, and he is not free to propone the plea that such conditions have not been brought home to him. When he therefore announced his intention to deal in these articles as ordinary articles of commerce, he must be held to have pursued a mistaken course, the course of treating himself as an unrestricted instead of a restricted trader. In this particular case the result may involve some hardship to him, but their Lordships cannot see their way to a departure from the principle that a restriction rests upon a purchaser of goods which are covered by a grant of patent, and which have come into the possession of a purchaser in the full knowledge of the restrictions imposed by the patentee upon their disposal. 98 Accordingly, there is a presumption that a sale sub modo (sale without restriction) confers an unrestricted right of use upon the purchaser or subsequent owner of the patented product, which covers at least the rights to import, use and dispose of the product. To avoid this consequence, a patentee must make a sale subject to limitations which are effective to restrict the importation, use or disposal of the product by the purchaser or successor in title to the purchaser. It must show that notice of any restriction was brought to the knowledge of the purchaser at the time of sale. 99 In T. A. Blanco White's Patents for Inventions, 4th ed (1974) at 3-219 (Blanco White) the learned authors say (emphasis added): A sale of a patented article made by a patentee gives to the purchaser, in the absence of notice to the contrary, license under the patent to exercise in relation to that article all the normal rights of an owner, including the right to resell. It follows that in order to establish infringement the patentee must prove that alleged infringing articles were not made by him, either here or abroad [citing Betts v Willmott at 242, 244]. The position is the same where the article has been made in the United Kingdom under license from the patentee, or (it would seem) where in any other way it comes upon the United Kingdom market with his consent;… The implied license extends to repair of the article bought - to the "prolonging of its life" - but not to renewal under pretence of repair; for repair is one of the normal activities of an owner, but sale of one patented article gives the purchaser no license to make himself others. 100 In Interstate Parcel Express Co Pty Ltd v Time-Life International (Netherlands) BV (1977) 138 CLR 534 (Interstate Parcel) the High Court referred to National Phonograph in obiter dicta. In that case, a bookseller imported books from an American wholesaler and sold them in Australia. In response to an allegation of copyright infringement, the bookseller submitted that it took the books free of any restrictions, relying on National Phonograph. Justice Gibbs quoted (at 540) the first sentence of the passage in Blanco White set out above, and also the following passage from 10-104, as summarising the decided case law in relation to implied licences upon sale of patented products: In the absence of any express term to the contrary, when a patented article is sold by or with the consent of the patentee (or the proprietor of a registered design) the purchaser will take it together with a full license to deal with it as if it were not patented. Further, any person into whose hands it may later come is entitled to assume that such a full license has been given with it; it makes no difference that he may later discover that this was not so, if he was ignorant of it at the time of purchase. 101 After setting out aspects of the reasoning of the Privy Council in National Phonograph, Gibbs J expressed doubt that the conditions that may be imposed by a patentee conformed with normal principles of licences, but nevertheless, noting that the long line of distinguished judges had concluded that it was so, accepted that it was indeed the consent or licence of the patentee to use the article that might be implied from the sale (at 542). Justice Stephen considered that such a licence arises from the "quite special case" of the sale by a patentee of patented goods, which turned upon the unique ability which the law confers upon patentees of imposing restrictions upon what use may, after sale, be made of those goods (at 549). His Honour said (at 549 - 550); But, to ensure that consequence despite the existence, albeit in the instance unexercised, of this power on the patentee's part, the law treats the sale without express restriction as involving the grant of a license from the patentee authorising such future use of the goods as the owner for the time being sees fit. The law does this because, without such a license, any use or dealing with the goods would constitute an infringement of the patentee's monopoly in respect of the use, exercise and vending of the patent. A sale of goods manufactured under patent is thus a transaction of a unique kind because of the special nature of the monopoly accorded to a patentee; the license, whether absolute or qualified, which arises upon such a sale is attributable to the existence and character of that monopoly. 102 It follows from the principles set out in National Phonograph and as subsequently interpreted that, if a restriction of the right to use was not imposed as a condition of the purchaser's acquisition of the goods, but at another time or by some other means is sought to be imposed by the patentee, it is not effective. 103 This was the view taken by Jacob J (sitting in the United Kingdom Patents Court) in Roussel-Uclaf v Hockley International Ltd [1996] RPC 441 (Roussel). In that case, the patentee, Roussel, made a pharmaceutical product in France and supplied it to a Chinese joint venture company. The defendant, Hockley International, an English company, acquired the product directly or indirectly from the Chinese company. The European law of patent exhaustion did not apply, because there was no relevant sale inside the European economic zone. Hockley International relied upon the National Phonograph principles in asserting that it took the product free of any restrictions. Justice Jacob found that it did, and stated the applicable principle as follows (at 443): It is the law that where the patentee supplies his product and at the time of the supply informs the person supplied (normally via the contract) that there are limitations as to what may be done with the product supplied then, provided those terms are brought home first to the person originally supplied and, second, to subsequent dealers in the product, no license to carry out or do any act outside the terms of the license runs with the goods. If no limited license is imposed on them at the time of the first supply no amount of notice thereafter either to the original supplyee (if that is the appropriate word) or persons who derive title from him and turn the general license into a limited licence. 104 That reasoning was adopted by Arnold J in HTC Corporation v Nokia Corporation [2013] EWHC 3247; [2014] RPC 19 at [156]. 105 Justice Jacob confirmed that Roussel, as the patentee, must establish the relevant restriction (at 443), and accordingly, bore the onus. In relation to the supply by Roussel to the Chinese company, Roussel relied upon a practice of labelling the goods with restrictions as to re-export. However, the Court held that it had not established that the particular products in question bore those labels, or that a restriction was imposed or brought home by any other means (at 443 - 444). Accordingly, no conditions were imposed on that subsequent supply. 106 In relation to supply to Hockley International, Roussel relied upon a letter sent directly by Roussel to Hockley asserting that the products were subject to conditions as to sale and use. Justice Jacob considered that this was not a restriction imposed as a condition of Hockley's acquisition of the products; the time for imposing such condition having passed with the making of the contract of supply (at 444): Next I turn to the position of the defendants as subsequent supplyees. Had it been brought home to them that there are such conditions? In a sense it is virtually impossible to do this once it has not been established that it was not brought home to the original purchasers. What is relied upon is indeed the letter which I have just quoted. That says in the previous sentence: "it is not correct that our client's technical grade material is freely available to the world market without conditions as to its use". That is a pretty opaque way, if it be intended, to say that there is a positive imposition of a limited permission to use. … The question is not whether the market is grey or any other colour or shade, but whether or not conditions of a limited licence were imposed when the product was first supplied by Roussel. This letter of 24 December 1993 does not convey to the defendants that the product was originally supplied subject to a limited licence. 107 The essence of the licence is that it arises automatically upon the unconditional sale of the patented product. The patentee must act to negative the licence if limitations are to apply. 108 National Phonograph was recently considered and applied by Dowsett J in Austshade Pty Ltd v Boss Shade Pty Ltd [2016] FCA 287; (2016) 118 IPR 93 (Austshade). In that case, at [80], his Honour drew the following conclusions in relation to the application of National Phonograph: 80. The decision in National Phonograph establishes three primary propositions: • First, the principle applicable to ordinary goods bought and sold is that the owner may use and dispose of those goods as he or she thinks fit. Notwithstanding any agreement which such owner may have made with the person from whom he or she bought the goods (by which he or she is bound contractually), he or she is not bound, in his or her capacity as owner, by any restrictions concerning the use or sale of the goods. Hence it is, "out of the question" to suggest that any such restrictive conditions run with the goods. The rights of an intermediate owner in that "capacity" are to be distinguished from the contractual arrangements which may bind him or her in dealing with the person from whom the goods were acquired. The point is that the intermediate owner may give to his or her purchaser, good title to the goods, notwithstanding any contractual restriction imposed upon the intermediate owner at the time of his or her acquisition of the goods. • Second, the general doctrine of absolute freedom in the disposal of chattels of an ordinary kind is, in the case of patented chattels, subject to the restriction that the person purchasing them, having knowledge of the conditions attached by the patentee, which knowledge is clearly brought home to him at the time of sale, is bound by that knowledge and accepts the situation of ownership subject to the limitations. In other words, a patentee may bind the power of a purchaser to deal with the goods, but such limitation will only bind a subsequent purchaser from that purchaser if the former has, at the time or purchase, actual knowledge of the limitations. • Third, in the case of such a resale, it is not presumed that conditions imposed on the vendor by the patentee will bind the subsequent purchaser. Rather, the sale will be presumed to have vested the full right of ownership in the subsequent purchaser unless the conditions imposed by the patentee have been brought home to him or her at the time of sale. Hence it is not sufficient that the ultimate purchaser may know of the patent and its application to the goods acquired. There must be actual knowledge of the limitations imposed by the patentee at the time of the first sale. 109 The following propositions are relevant to the consideration of the present dispute, and arise from the cases above. 110 First, it is important to be clear about references to "a patented product" or a "patented chattel" or similar language. In each instance this is a reference to a product that embodies the invention as claimed in the patent in suit. It was in this manner that the cases referred above used these and similar terms. 111 Secondly, any restriction or limitation notified by the patentee does not run with the patent and goods in rem, but rather applies in personam as an obligation on the owner of the goods from time to time, contingent upon the provision to the owner of notice prior to or at the time of taking title to the patented product; National Phonograph at 23 - 24 and 28 - 29; Betts v Willmott at 245; Austshade at [80]. 112 Thirdly, the onus lies on the patentee to establish that the first and subsequent dispositions were subject to restrictive conditions; National Phonograph at 28; Interstate Parcel at 540; Rousel at [443]. Although Seiko contends that an evidentiary onus lies on the Calidad parties to establish their entitlement to re-sell repaired or modified original Epson cartridges, there is no dispute between the parties that Seiko bears the legal onus in respect of the imposition of any restrictive conditions. 113 Fourthly, the rights conferred by an acquisition of patented goods without notice of any restriction from the patentee are in the nature of a somewhat unusual implied licence that arises from the intersection of patent rights and the "elementary principle" of the law of personal property that the owner of chattels has an absolute right to use and dispose of them as he or she thinks fit; National Phonograph at 22, 28; British Mutoscope at 673 - 674; Interstate Parcel at 542 (Gibbs J), and 549 (Stephen J). Seiko submits that an aspect of the implied licence is that it arises in order to give "business efficacy" to a transaction involving a patented article in line with the purchaser's commercial expectations, citing BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283 (BP Refinery), and the reference by Gibbs J in Interstate Parcel to "business efficacy" (at 542). In this context, it submits that whilst upon a sale of a patented product the implied licence would arise, on the facts of the present case an uncertain number of the original Epson cartridges were discarded by the first purchaser (in recycling bins and the like). Upon that occurring, it is no longer necessary to give business efficacy to the initial or any subsequent sale. To infer the grant of an implied licence to an entity which obtains patented goods after they have been discarded would, it submits, be contrary to the purpose of granting an implied licence, which is giving effect to a purchaser's commercial expectations so as to give business efficacy to the sale. 114 However, Seiko's submission tends to load the use of the words "business efficacy" by Gibbs J in Interstate Parcel with freight that his Honour did not intend. His Honour had already noted (at 541) the unique nature of the implied licence that arises from the intersection of patent rights and the "elementary principle". There is no suggestion in the authorities, including Interstate Parcel, that the implied licence arises only in circumstances where business efficacy was required. Indeed, Seiko's submission tends to isolate but 1 of the 5 conditions that the Privy Council found in BP Refinery (at 283) must be satisfied in order for a term of a contract to be implied. 115 Furthermore, a first owner of patented goods obtained without restriction may do with them as he or she thinks fit; National Phonograph at 24. That includes selling the goods, giving them away or throwing them away. As Blanco White noted at 10-104, any person in whose hands the patented product subsequently falls is entitled to assume that such a full licence has been given with it. Unless the patentee makes it clear to all concerned that it is not giving the usual licence, then no restriction is applicable. 116 It is irrelevant whether a person acquires title from the first purchaser by a subsequent sale or by other means such as a gift. In this context, once title has passed from the patentee to the first purchaser without a restrictive condition of sale, the patentee is unlikely to have any ability to impose such a condition upon subsequent title holders; see Interstate Parcel at 549 (Stephen J); Austshade at [80] (third bullet point); Rousel at 444. 117 Fifthly, the authorities demonstrate that there is no difficulty implying the licence where the patented goods are first sold outside of the patent area (that is, broadly, outside Australia); Betts v Willmott at 245; National Phonograph at 24; Rousel. This has direct application in the present case, where Ninestar purchased the original Epson cartridges from a third party overseas, who in turn appears to have obtained those cartridges from users overseas. CDP in turn acquired the Calidad products from Ninestar and imported those products into Australia.

3.5.2 The United Kingdom law 146 Seiko relies upon the United Kingdom authorities concerning repairs. In Sirdar Rubber Co v Wallington Weston & Co (1907) 24 RPC 539 (Sirdar Rubber) at 543 Lord Halsbury said: 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. 147 This statement of principle was endorsed by Lord Buckley (Orr and Goff LJJ agreeing) in Solar Thomson at 554, who went on to approve (at 555) the reasoning of the trial judge in Sirdar Rubber (Swinfen Eady J) to the effect that the purchaser of a patented article has a right to prolong its life by fair repair, but does not have a right to obtain, without licence from the patentee, 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. In Solar Thomson, in concluding that the repair defence was made out, the Court identified that 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. If it is, any purchaser of such an article is impliedly licensed to carry it out or to contract with someone else to carry it out for him. 148 In the United Kingdom, the right to repair a patented product is no longer characterised as arising from an implied licence. 149 In Canon Kabushiki Kaisha v Green Cartridge Co (Hong Kong) Ltd [1997] AC 728 (Canon) Lord Hoffman (with whom their Lordships agreed) said that the concept of a licence, which is something which "makes an action lawful which without it had been unlawful" (citing Thomas v Sorrell (1674) Vaughan 330, 351) is "not really" applicable to the repair of a patented article. His Lordship said at 822: Because repair is by definition something which does not amount to the manufacture of the patented article, it is not an infringement of the monopoly conferred by the patent. It cannot therefore be an unlawful act and needs no special licence to make it lawful, unless as part of a general implied licence to use the patented product at all, which is sometimes used to explain why mere user does not infringe the patentee's monopoly. But this is perhaps better regarded as a consequence of the exhaustion of the patentee's rights in respect of the particular article when it is sold. In Solar Thomson, however, (at pages 560-561) the Court of Appeal extended the concept into the field of copyright by holding that a purchaser of an article is impliedly licensed to infringe the owner's copyright in drawings of parts of that article so far as is necessary to enable repairs to be carried out. This is a genuine implied licence since, without it, the reproduction of the parts would be unlawful. 150 The shift of ground from Solar Thomson portended in Canon was reinforced in the decision of United Wire. In that case the decision of Lord Hoffman (Lords Steyn, Cooke and Bingham and Hutton agreeing) found that the proper analysis did not lie in considering whether there was an implied licence to repair a patented product once it had been sold, but whether in conducting work (whether defined as "repair", "modification" or "adaptation") there was a "making" of the product within the meaning of that term under s 60(1)(a) of the Patents Act 1977 (UK) (UK Patents Act). That section provides that a person infringes a patent if (emphasis added), "where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise", without the consent of the patentee. Their Lordships also set to one side an analysis that might arise from the doctrine of exhaustion of rights as it is applied in "European" patent systems. 151 His Lordship said (emphasis added): 70. Where however it is alleged that the defendant has infringed by making the patented product, the concepts of an implied license or exhaustion of rights can have no part to play. The sale of a patented article cannot confer an implied license to make another or exhaust the right of the patentee to prevent others from being made. A repair of the patented product is by definition an act which does not amount to making it: as Lord Halsbury LC said of the old law in Sirdar Rubber Co Ltd v Wallington, Weston & Co (1907) 24 RPC 539 at 543: you may prolong the life of a licensed article but you must not make a new one under the cover of repair. 71. Repair is one of the concepts (like modifying or adapting) which shares a boundary with "making" that 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 license to repair is superfluous and possibly even confusing. It distracts attention from the question raised by section 60(1)(a), 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. The owner's right to repair is not an independent right conferred upon him by license, express or implied. It is a residual right, forming part of the right to do whatever does not amount to making the product. 152 On the facts, the House of Lords upheld the decision of the Court of Appeal. The patents in suit related to the construction of mesh screens used in vibrating sifting machines sold to the oil exploration industry. When drilling fluid, known as drilling mud, has been pumped down a wellbore it returns to the surface carrying drill bit cuttings and other solids which must be removed in order to recycle the drilling fluid. Claim 1 was for a sifting screen assembly for use in a vibratory sifting machine comprising a frame and two screens superimposed on one another which are adhesively secured to the edges of the frame, the upper screen having a relatively fine mesh and the lower screen having a relatively course mesh, both screens being tensioned and the upper screen being at a lower tension than the lower screen so that when the frame is vibrated the screens strike each other so as to affect or assist in effecting clearing of blockages or to prevent or reduce the possibility of blockage of the screens. 153 The defendant operated a business acquiring frames from the patentee's customers, stripping them down to the bare metal, recoating them and attaching 2 layers of mesh, course below and fine above and which satisfy the requirements of the claim. Lord Hoffman, in rejecting that the defence applied on the facts, accepted that the frame was an important part of the assembly but said at [73]: … It is quite true that the defendants prolonged the useful life of the frame. It would otherwise presumably have been scrapped. But the screen was the combination of frame and meshes pre-tensioned by attachment with adhesive according to the invention. That product ceased to exist when the meshes were removed and the frame stripped down to the bare metal. What remained at that stage was merely an important component, a skeleton or chassis, from which a new screen could be made. 154 In Schütz the UK Supreme Court (Lord Neuberger P, Lord Walker, Lady Hale, Lord Mance and Lord Kerr SCJJ agreeing) followed Lord Hoffman's reasoning in United Wire and developed it somewhat. 155 The subject of that case was a patent for an intermediate bulk container (IBC) which is a large container of two-part construction used for the transport of liquids consisting of a metal cage into which a large plastic bottle is fitted. The claim in suit was for a container for transporting and storing liquids, having an exchangeable container made of plastic and an outer sleeve consisting of vertical and horizontal lattice bars made of metal surrounding the and container and supporting it. The claim focussed on the way that lattice bars of the cage were configured and went on by describing the contact points of the lattice bars being welded together at intersection points which were "characterised" in a certain, detailed way so as to add to the strength and durability of the joins. 156 The defendant, Werit, supplied plastic bottles to replace those used in used IBCs sold by the patent licensee, Schütz. A third party, Delta, acquired discarded IBCs put on the market by Schütz and replaced the original bottles with the bottles supplied by Werit. Delta then offered these cross-bottled IBCs for sale in the market in competition with the original Schütz IBCs. 157 Lord Neuberger applied a multifactorial approach in determining that the work performed in replacing the plastic bottles in the IBCs did not amount to a "making". He concluded at [78] saying: … However, in this case, it appears to me that it is a classic example of identifying the various factors which apply on the particular facts, and, after weighing them all up, concluding, as a matter of judgement, whether the alleged infringer does or does not "make" the patented article. In the present case, given that (a) the bottle (i) is a freestanding, replaceable component of the patented article, (ii) has no connection with the claimed inventive concept, (iii) has a much shorter life expectancy than the other, inventive, component, (iv) cannot be described as the main component of the article, and (b) apart from replacing it, Delta does no additional work to the article beyond routine repairs, I am of the view that, in carrying out this work, Delta does not "make" the patent that article. 158 The decisions in these cases provide some guidance on the question of modifications made to patented products, but are not directly on point in the present case. The older "repair" cases ask the "cardinal" question of whether a repair has been done having regard to the nature of the patented article. That assumes that the owner performing the repairs has the benefit of an implied licence. But in the present case, the anterior question must be asked as to whether the implied licence survives the modifications made to the original Epson cartridges. 159 A similar difficulty arises in the "making" cases more recently adopted in the United Kingdom. As Lord Hoffman said in United Wire at [70], where the allegation is that the defendant has infringed by making, the concept of implied licence (to repair) or exhaustion of rights can have no part to play. That is because if there is no "making" there is no need for a licence. But that assumes that making in the jurisdiction is the relevant infringement alleged. 160 In none of these cases did the court consider whether the implied licence arising from a sale sub modo was extinguished by modifications made to the patented product and, if so, what (if any) modifications could be made. That question arises on the facts of the present case because modifications were made prior to importing the Calidad product. None of these cases, nor the authorities stemming from National Phonograph consider this question.

3.5.3 When modifications extinguish the implied licence 161 In the present case, CDP imported the products after Ninestar had modified them. The only defence available to Calidad is that the importation of the Calidad products falls within the umbrella of the implied licence. 162 A distinction must be drawn between two sets of rights that may be available to an owner of a patented product who takes it without restriction. First, the rights available to deal with the product without restriction. These rights concern the importation, sale and use of the patented product. Secondly, rights to repair the product (under an implied licence to repair) or otherwise perform acts which fall short of a "making" (pursuant to a residual right to do acts less than a "making"). The present case concerns only the first of these. 163 The proper question is accordingly not based on a repair or making analysis, but rather whether the implied licence can be said to apply in circumstances where one owner of the product, Ninestar, has modified it and then passed title in it to CDP. The relevant question then becomes; at what point has an owner of the embodiment made changes to it such that the implied licence arising from a sale sub modo is extinguished? No authority appears to have directly addressed this topic. 164 For the reasons developed below, in my view the threshold question to consider is whether or not the modified product is materially the same embodiment of the invention as claimed as the product that the patentee sold without restriction. That is not an inquiry that is at large. The right of the patentee to impose restrictions upon sale arises because the product is an embodiment of an invention as claimed. The question is not whether or not the product was altered or repaired, but whether the product, insofar as it is an embodiment of the invention as claimed, was materially altered, such that the implied licence can no longer sensibly be said to apply. 165 The implied licence arises from the disposition by a patentee of a particular embodiment of its invention. As noted in National Phonograph (at 22, 28), the patented goods are not free of restriction simply because they are chattels, but because the patentee has chosen not to exercise its right to impose restrictions on their use arising under the relevant Patents Act. 166 The basis for the implied licence is because of the sale of the particular patented product. That is, a physical product that embodies the features claimed in the patent. When such a product is sold by or with the authority of the patentee, the authority passed on to subsequent owners of the product is a permission relating to that embodiment of the features of the claimed invention. Accordingly, while the sale sub modo will remove the ability of the patentee to restrict a purchaser from importing, selling, using or disposing of the product, the licence is necessarily confined to such rights insofar as they apply to the particular embodiment sold with the approval of the patentee. 167 The extent to which modifications are to be regarded as relevant must be examined in the context of the exclusive right of a patentee to "exploit" the invention as conferred by s 13 of the Act. It is constrained by the extent to which any alleged infringing product falls within the claims of the patent. This is seen by the language of the definition of "exploit", which in the chapeau identifies that the exclusive rights of the patentee exist "in relation to an invention", being the invention as claimed. 168 The plurality noted in D'Arcy v Myriad Genetics Inc [2015] HCA 35; (2015) 258 CLR 334 at [14] (French CJ, Kiefel, Bell and Keane JJ, citations omitted): … The function of the claim was described by Lord Russell of Killowen in 1938 as "to define clearly and with precision the monopoly claimed, so that others may know the exact boundaries of the area within which they will be trespassers." Its limiting role was emphasised: It and it alone [defines] the monopoly; and the patentee is under a statutory obligation to state in the claims clearly and distinctly what is the invention which he desires to protect. Lord Russell's observations have stood the test of time in the United Kingdom as "[t]he best-known statement of the status of the claims in UK law". They also describe the function of the claim mandated by s 40(2)(b) of the Act. As succinctly, but accurately, stated in a recent Australian text that function is "to define what it is that the patentee has exclusive right to, during the term of the patent." 169 In short, the exclusive rights of a patentee to constrain the conduct of the owner of a patented product can only arise insofar as that product is an embodiment of the invention as claimed. Otherwise the scope of the patentee's rights would exceed the rights conferred by the Act. 170 This approach is supported by the long-established approach to the question of infringement of patent rights. Whilst the Act itself contains no definition of infringement, the fundamental rule is that there will be no infringement unless the alleged infringer has taken all of the essential features of the patentee's claim; Rodi and Wienenberger AG v Henry Showell Ltd [1969] RPC 367; Olin Corporation v Super Cartridge Co Pty Ltd [1977] HCA 23; (1977) 180 CLR 236 at 246; 14 ALR 149 at 157; Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd [2005] FCAFC 220; (2005) 67 IPR 230 at [49], [50]. An act of alleged infringement that falls short of possessing all of the integers of the claim will not (leaving aside the application of s 117 of the Act) amount to infringement; Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54 at [56]. 171 As Calidad submits (in the context of a "making" analysis), it is the relationship between the features of the product and the invention claimed that is relevant. It is those aspects of the product that benefit from monopoly rights. Attention must focus upon the patent and product as sold insofar as it is a representation of the invention as claimed. As Lord Neuberger said in Schütz at [25], it is hard to see what else could be the subject matter of the "making". The same applies to the implied licence. 172 That is not to say that the invention as claimed is not to be considered as a whole, or that particular integers are to be taken out of context or divorced from the combination of integers which make up the invention, but rather where modifications have no bearing on the invention as claimed, they are unlikely to amount to a material modification of the product. This was the approach taken in Schütz at [61], [63] and is applicable in the present case. 173 However, factors such as whether or not the modification concerns a freestanding, replaceable component of the patented article, whether modifications are made to something described as a subsidiary component of the article (each of which was identified in Schütz as relevant) or factors such as whether the part modified or replaced is durable and so forth (identified in Solar Thomson as relevant) have no role to play in considering the modifications for present purposes. 174 Calidad submits that in considering modifications the Court should take into account the inventive step or inventive concept identified in the patent and reflected in the claims. To the extent that modifications do not bear upon the inventive concept then they are less relevant and less likely to have a bearing on the question. This, they submit, was the approach taken in Schütz. Furthermore, they submit that the language of inventive concept has been adopted in Australian courts in several contexts, including questions of entitlement pursuant to s 15 of the Act (Polwood Pty Ltd v Foxworth Pty Ltd [2008] FCAFC 9; (2008) 165 FCR 527 at [61]), sufficiency pursuant to s 40 of the Act (Apotex Pty Ltd v Warner-Lambert Company LLC (No 2) [2016] FCA 1238; (2016) 122 IPR 17 at [258]) and lack of inventive step (Apotex Pty Ltd v Sanofi-Aventis [2009] FCAFC 134; (2009) 82 IPR 416 at [159]. 175 However, the approach taken in Schütz in recognising the potential relevance of the inventive concept to analysing modifications arose in the context of the "making" analysis, which is not the present inquiry. It was also heavily influenced by the approach of European courts, including the German Bundesgerichtsof, which takes into account the extent to which the "technical effects of the invention" (that is, the inventive concept) are reflected by the replaced parts. The admonition made by the High Court to be cautious of the direct application of post 1977 United Kingdom law, influenced as it is by concepts of European law not presently applicable in Australia, suggests that a single judge would be cautious in adopting that approach in the present case; Lockwood Security Products Pty Ltd v Doric Products Pty Ltd [2004] HCA 58; (2004) 217 CLR 274 at [66], [67]. The Australian cases cited by Calidad are, in my view, not analogous. 176 Seiko urges that for the present purposes the "correct comparator" is not between the invention as claimed and reflected in the original Epson cartridges on the one hand, and the modified Calidad products on the other, but rather between the original Epson cartridges as products and the Calidad products. This approach is to diminish the role of the invention as claimed and embodied in the original Epson cartridges. For the reasons set out above, I do not consider that approach to be appropriate. 177 Seiko also submits that in considering the modifications made, the Court would also consider the research and development effort required by Ninestar in order to enable the modifications to take place. In this respect, Seiko particularly emphasises research and development work conducted in order to make changes to the memory on the memory chip of the original Epson cartridges. That consideration is also irrelevant to consideration of the modifications. I address this further in the context of reviewing the invention as claimed in the patent. 178 This process of reasoning leads to the conclusion that to assess whether or not the implied licence continues after modifications are made one must consider the significance of modification work done on a product and how the modifications in question relate to the features of the patented product that are defined by the claim. Where that work done, or alteration made, does not concern a claimed feature, then the work is irrelevant to the analysis. That is because the patentee's rights to limit the use of the patented product arise because the product represents an embodiment of the claimed features. This involves the 3-staged factual inquiry undertaken below; first, what is the scope of the invention as claimed (which is addressed in section 4), secondly, what is the manner in which the patentee's product is an embodiment of the invention as claimed (section 5) and thirdly, to what extent do the modifications made affect the patented product insofar as it represents an embodiment of the claims (section 6).

7.3 The relevant law 307 Section 17 of the TM Act provides that a trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person. Subsection 7(4) provides that "use of a trade mark in relation to goods" means use of the trade mark upon, or in physical or other relation to, the goods (including second-hand goods)". 308 Subsection 120(1) of the TM Act provides that a person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered. 309 The primary issue between the parties is whether or not the word EPSON as it appears in the 2 samples may be characterised, in context, as "use as a trade mark". In E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2010] HCA 15; (2010) 241 CLR 144 (Gallo) at [43] the plurality (French CJ, Gummow, Crennan and Bell JJ, and at [87] Heydon J agreeing) approved the following statement of the Full Court in Coca-Cola Co v All-Fect Distributors Ltd [1999] FCA 1721; (1999) 96 FCR 107: Use "as a trade mark" is use of the mark as a "badge of origin" in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods. See Johnson & Johnson Aust Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 341, 351. That is the concept embodied in the definition of "trade mark" in s 17 - a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else. 310 The Full Court in Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91; (2016) 243 FCR 152 (Besanko, Nicholas, Yates JJ) (Scandinavian) observed, citing established authority, that the question of whether there has been use of the trade mark as a trade mark depends on the context in which the mark is used. The Court noted (at [26], [27]) that in Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd [1963] HCA 66; (1963) 109 CLR 407 (Shell Co of Australia Ltd) per Kitto J (Dixon CJ, McTiernen and Owen JJ agreeing) relevantly said: [at 422] But the context is all-important, because not every use of a trade mark which is identical with or deceptively similar to a registered trade mark infringes the right of property which the proprietor of the mark possesses in virtue of the registration. … [at 425] With the aid of the definition of "trade mark" in s. 6 of the Act, the adverbial expression may be expanded so that the question becomes whether, in the setting in which the particular pictures referred to were presented, they would have appeared to the television viewer as possessing the character of devices, or brands, which the appellant was using or proposing to use in relation to petrol for the purpose of indicating, or so as to indicate, a connexion in the course of trade between the petrol and the appellant. Did they appear to be thrown on to the screen as being marks for distinguishing Shell petrol from other petrol in the course of trade? 311 Both parties in the present case referred to and relied upon the following passage from Kerly's Law of Trade Marks and Trade Names (14th Ed), at paragraph 14-025, as a correct statement of the law in this country: A question arises as to whether the offending sign needs to be visible at the point of sale. It is submitted that this is not a requirement, provided that when the sign does become apparent it is understood to be a sign used in the course of trade in relation to the relevant goods.

8.2 The relevant law 335 Section 148 of the TM Act does not expressly confer any rights of action upon a trade mark owner. It is a criminal penalty provision within Part 14 of the TM Act, which is entitled 'Offences'. It provides as follows: 148 Goods with false trade marks Indictable offence (1) A person commits an offence if: (a) the person: (i) sells goods; or (ii) exposes goods for sale; or (iii) possesses goods for the purpose of trade or manufacture; or (iv) imports goods into Australia for the purpose of trade or manufacture; and (b) any of the following applies: (i) there is a registered trade mark on the goods; (ii) there is a mark or sign on the goods that is substantially identical to a registered trade mark; (iii) a registered trade mark on the goods has been altered, defaced, added to, wholly or partly removed, erased or obliterated; and (c) the registered trade mark, or mark or sign, was applied, altered, defaced, added to, wholly or partly removed, erased or obliterated, as the case requires, without: (i) the permission of the registered owner, or an authorised user, of the trade mark; or (ii) the application being required or authorised by this Act, a direction of the Registrar or an order of a court. Penalty: Imprisonment for 5 years or 550 penalty units, or both. 336 It may be seen that s 148 in broad terms is directed to the conduct of a person who deals in goods (s 148(1)(a)) to which a registered trade mark has been applied or altered, defaced or removed (s 148(1)(b)) and where the application, alteration, defacing or removal was done without the permission of the registered owner (s 148(1)(c)). 337 The offence under s 148 is not actionable in the Federal Court, but rather, by operation of s 68 of the Judiciary Act 1903 (Cth) and ss 4G and 4J of the Crimes Act 1914 (Cth), that jurisdiction is conferred on those courts of the states and territories which have jurisdiction in respect of indictable offences that it may be dealt with summarily; see British American Tobacco Exports BV v Trojan Trading Co Pty Ltd [2010] VSC 572; (2010) 90 IPR 392 (Trojan) at [16]. 338 It is necessary to consider the general principles relevant to the question of whether a private right of action arises. 339 In O'Connor v S P Bray Ltd [1937] HCA 18; (1937) 56 CLR 464 at 477-8, Dixon J observed: The difficulty is that in such a case the legislature has in fact expressed no intention upon the subject, and an interpretation of the statute, according to ordinary canons of construction, will rarely yield a necessary implication positively giving a civil remedy. As an examination of the decided cases will show, an intention to give, or not to give, a private right has more often than not been ascribed to the legislature as a result of presumptions or by reference to matters governing the policy of the provision rather than the meaning of the instrument. Sometimes it almost appears that a complexion is given to the statute upon very general considerations without either the authority of any general rule of law or the application of any definite rule of construction. 340 Later, in Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 (Sovar) at 405, Kitto J described the process as follows (emphasis added): The legitimate endeavour of the courts is to determine what inference really arises, on a balance of considerations, from the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation … It is not a question of the actual intention of the legislators, but of the proper inference to be perceived upon a consideration of the document in the light of all its surrounding circumstances. … A particular difficulty arises where the enactment which prescribes the conduct is accompanied by the express provision of a criminal sanction for the enforcement of its requirements. On the prima facie principle that expressio unius est exclusio alterius [the expression of one is the exclusion of others] there is ground for a countervailing inference of an intention that in the event of a contravention the specifically provided remedy shall be the only remedy …The task of deciding which inference is the true one was faced in relation to provisions of the Factory Acts for the fencing of dangerous machinery as long ago as Groves v Lord Wimborne, (1898) 2 QB 402, when it was held, upon consideration of the general scope of the Act and the nature of the statutory duty, the nature of the injuries likely to arise from a breach of the duty, the amount of the penalty provided in case of breach, and the kind of person upon whom it might be imposed (see per Vaughan Williams LJ (1898) 2 QB, at p 416), that the provision of a penalty was plainly intended by way of addition to the individual's remedy by action for damages. 341 In Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 (Byrne) Brennan CJ, Dawson and Toohey JJ said at 424 (citations omitted): A cause of action for damages for breach of statutory duty arises where a statute which imposes an obligation for the protection or benefit of a particular class of persons is, upon its proper construction, intended to provide a ground of civil liability when the breach of the obligation causes injury or damage of a kind against which the statute was designed to afford protection. The question is one of the construction of the statue, although as Dixon J pointed out in O'Connor v S P Bray Ltd, an examination of the statute "will rarely yield a necessary implication positively giving a civil remedy". One generalisation that can be made is that where the persons upon whom the statutory obligation is imposed are under an existing common law duty of care towards the persons whom the statute is intended to benefit or protect, the statutory prescription of a higher or more specific standard of care may, in the absence of any indication of a contrary intention, properly be construed as creating a private right. 342 In the same case McHugh and Gummow JJ, in considering a submission that it would be "but a small step to attribute to the Parliament an intention" that the provisions of an award which are intended for the benefit of employees as a class of persons, are to be enforceable by an action for damages, said (at 458): The result would have to be that there was "arising under" a law "made by the Parliament", in the sense of s 76(ii) of the Constitution, a new species of "matter". However, where a question arises as to the creation of new rights and liabilities which will engage Ch III of the Constitution, it is to be expected that the Parliament will clearly state its will. That consideration is significant in a case such as this. 343 In Trojan, the Court considered the question of whether s 148 of the TM Act confers a civil right of action on a trade mark owner in the context of an application to strike out the plaintiff's pleading for failure to disclose a cause of action. In that context it referred, inter alia, to the above authorities and particularly considered the nature, scope and terms of the TM Act, for whose benefit the statutory duty is imposed, the pre-existing law, and whether any civil remedy for breach of s 148 applies. The Court remarked (at [62]) that with the benefit of hindsight, it would have been preferable to have dealt with the legal issue by way of preliminary determination, or an expedited trial on liability, when considerably more time would have been allocated to the detailed hearing and consideration of the matter, leading to a final determination of the question. The Court observed that the respondent "makes some very valid criticisms" of the plaintiff's (BAT) proposed cause of action and concluded by saying (at [63]): … But, given the state of the law in relation to the tort, the absence of direct authority in relation to this specific Act, the various arguments put forward by BAT, and the limited time given to the hearing of this application, I am not persuaded that BAT's claim ought to be summarily disposed of. 344 This lukewarm endorsement of the position of BAT, made in the context of an application for summary disposal, does not represent binding authority on the subject. 345 It is apparent that the primary task of the Court is to determine whether, upon its proper construction, Parliament intended to confer a separate civil right of action upon the owner of a registered trade mark when there is a breach of the obligation which causes damage of a kind against which the statute was designed to afford protection; Byrne at 424. This will involve a balance of considerations arising from the principal objects of the TM Act, having regard to its public aims, scope and purpose (Byrne at 425), as well as its nature and the terms of the statute, including, but not limited to, consideration of the class of persons for whom the protection is given, the nature of the evil against which it is directed, the conduct prescribed and the pre-existing state of the law; Sovar at 405.

8.3 The scheme and relevant provisions of the TM Act 346 The High Court considered the scope and purpose of the Trade Marks Act 1955 (Cth) (1955 Act) in Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45 (Campomar), observing that it struck a balance between various disparate interests. At [42] the Court observed: … [T]he Australian legislation has manifested from time to time a varying accommodation of commercial and the consuming public's interests. There is the interest of consumers in recognising a trade mark as a badge of origin of goods or services and in avoiding deception or confusion as to that origin. There is the interest of traders, both in protecting their goodwill through the creation of a statutory species of property protected by the action against infringement, and in turning this property to valuable account by licensing or assignment. … 347 That statement has been endorsed in the context of the present TM Act; JT International SA v Commonwealth of Australia [2012] HCA 43; (2012) 250 CLR 1 (JT International) at [30] (French CJ), [68] (Gummow J). The trade mark legislation in general does not confer a "statutory monopoly" in any crude sense. Rather, it represents an accommodation between the interests of traders, in the use of trade marks in developing the goodwill of their businesses and turning this to account by licensing arrangements, and the interests of consumers, in recognising trade marks as a badge of origin of goods or services and avoiding deception or confusion as to that origin; JT International at [68] (Gummow J). Strictly speaking, the right subsisting in the owner of a trade mark is a negative and not a positive right. It is to be understood as a right to exclude others from using the mark, and cannot be viewed as separate from the trade in connection with which it is used. It is for the protection of that trade in goods that property is recognised in a trade mark; JT International at [348] (Keifel J). 348 The balance of interests between consumers, who will see and rely upon trade marks, and the good will developed by the traders who use them, is struck by the various provisions of the TM Act. 349 Part 3 of the TM Act concerns trade marks and trade mark rights. Section 17 provides that a trade mark is a sign used or intended to be used to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person. 350 Subsection 20(1) provides: If a trade mark is registered, the registered owner of the trade mark has, subject to this Part, the exclusive rights: (a) to use the trade mark; and (b) to authorise other persons to use the trade mark; in relation to the goods and/or services in respect of which the trade mark is registered. 351 It is clear that the exclusive right to use and authorise the use of the trade mark conferred by s 20(1) is limited to the use of that mark in the sense defined in s 17, namely as a sign used to distinguish goods or services in the course of trade by a person from goods so dealt with or provided by any other person. Whilst that is not made explicit in the language of s 20, this subsection follows the practice, to which Kitto J alluded in Shell Co of Australia Ltd at 426, of the legislation omitting to specify that the exclusive right of use is a right to use as a trade mark. However, as Burchett J noted in Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd [2000] FCA 876; (2000) 100 FCR 90 (Koninklijke Philips) at [11] (Hill and Branson JJ agreeing), having regard to the legislative history and the unvarying course of authority, the right conferred by s 20(1) must be understood to be so limited. This observation is relevant to the construction of s 148. 352 Subsection 20(1) provides that if a trade mark is registered, the registered owner has (subject to some exceptions) the exclusive rights to use the trade mark and to authorise others to use the trade mark in relation to the goods and/or services in respect of which the trade mark is registered. Subsection 20(2) provides that the registered owner also has the right to obtain relief under the TM Act if the trade mark has been infringed. Section 21 states that a registered trade mark is personal property and that equities in respect of it may be enforced in the same way as equities in respect of any other personal property. A registered trade mark may be assigned or transmitted, with or without the associated goodwill and for all or some only of the goods and/or services for which it is registered: s 106. 353 Part 4 of the TM Act provides for an application for registration, and includes within Division 2 the grounds for rejecting an application which include; that the trade mark is not capable of distinguishing or not in fact distinguishing the applicant's goods or services in respect of which the trade mark is sought to be registered (s 41); that the trade mark is likely to deceive or cause confusion (s 43); and that the trade mark is substantially identical with or deceptively similar to another trade mark already on the register (s 44). 354 Part 5 provides that any person may oppose the registration of a trade mark on any of the grounds set out in Part 4 Division 2 (apart from the ground that the trade mark cannot be represented graphically) and also on the grounds; that the applicant is not the owner of the trade mark (s 58), that the opponent has earlier used a similar trade mark (s 58A); that the applicant does not intend to use the trade mark (s 59); that the trade mark is similar to a trade mark that has acquired a reputation in Australia (s 60); that the trade mark contains or consists of a false geographical indication (s 61); and that the application is either defective (s 62) or made in bad faith (s 62A). 355 It may be seen that Parts 3, 4 and 5 of the TM Act impose requirements upon the registration of a trade mark that are designed, broadly, to ensure that the register remains "pure" in the sense that, viewed from the angle of consumers, it is maintained as an accurate record of marks which perform their statutory function, namely to indicate the trade origins of the goods to which it is intended that they be applied; Health World Ltd v Shin-Sun Australia Pty Ltd [2010] HCA 13; (2010) 240 CLR 590 (Health World) at [22] (French CJ, Gummow, Heydon and Bell JJ). 356 The rights of the trade mark owner to sue for infringement are set out in Part 12 of the TM Act. 357 Subsection 120(1) provides: A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered. 358 Other rights are conferred in ss 120(2) and (3) but it is not presently necessary to refer to those. 359 Section 121 adopts some significance in the present debate. In broad terms, it provides, among other things, that a person infringes a trade mark if that person alters or partially removes or obliterates a representation of a trade mark applied to goods within the scope of a trade mark registration, in contravention of a prohibition notice. It provides as follows: 121 Infringement of trade mark by breach of certain restrictions (1) This section applies to a registered trade mark if the registered owner, or an authorised user of the trade mark having power to do so, has caused to be displayed on goods (registered goods) in respect of which the trade mark is registered, or on their package, or on the container in which they are offered to the public, a notice (notice of prohibition) prohibiting any act that is under subsection (2) a prohibited act in relation to the goods. (2) Each of the following is a prohibited act: (a) applying the trade mark to registered goods, or using the trade mark in physical relation to them, after the state, condition, get-up or packaging in which they were originally offered to the public has been altered; (b) altering, or partially removing or obliterating, any representation of the trade mark applied to registered goods or used in physical relation to them; (c) if the trade mark has been applied to registered goods, or used in physical relation to them, together with other matter indicating that the registered owner or authorised user has dealt with the goods - removing or obliterating, totally or in part, any representation of the trade mark without totally removing or obliterating the other matter; (d) applying another trade mark to registered goods or using another trade mark in physical relation to them; (e) if the trade mark has been applied to registered goods or used in physical relation to them - using on the goods, or on the packaging or container of the goods, any matter that is likely to injure the reputation of the trade mark. (3) Subject to subsection (4), a person infringes a trade mark to which this section applies if the person: (a) is the owner of registered goods; and (b) in the course of trade, or with a view to a dealing with the goods in the course of trade: (i) does an act that is prohibited under the notice of prohibition; or (ii) authorises that act to be done. (4) The trade mark is not infringed if the owner of the goods: (a) acquired them in good faith and without being aware of the notice of prohibition; or (b) became the owner of the goods by virtue of a title derived from a person who had so acquired them. 360 Section 122 is set out under the chapeau "When is a trade mark not infringed?" and provides that a person does not infringe a registered trade mark in a series of listed certain circumstances. 361 Section 123 provides an exception to infringement where the impugned trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark. This section is of no application in the context of Seiko's trade mark infringement case addressed in section 7 above, because the parties accept that once the modifications were made to the original Epson cartridges such that they became what is defined above to be the 'Calidad products', they ceased to be products or goods to which Seiko applied the Epson trade mark, and so on no view could the Epson trade mark have been applied with the consent of the registered owner. This is relevant to the application of s 148 of the TM Act in the present case. 362 Section 126 provides that the relief that a court may grant in an action for trade mark infringement includes an injunction and damages or an account of profits (s 126(1)), and may include an additional amount of damages for infringing conduct that may be regarded as flagrant (s 126(2)). Section 129 provides that a person who has been the subject of groundless threats of legal proceedings may obtain a declaration, injunctive relief restraining the defendant from making a threat and damages. 363 In Part 13 of the TM Act, provision is made to protect registered trade marks by allowing the Comptroller-General of Customs to seize and deal with goods that are imported into Australia, if the importation infringes, or appears to infringe, a registered trade mark ; s 131. 364 Part 14 of the TM Act is entitled "Offences". In broad terms, section 145 makes provision for offences where a person, without permission, alters, adds to or removes or obliterates a trade mark that has been applied on or in relation to goods (or services) dealt with or provided in the course of trade. This section is in effect is a companion provision to s 148 in the sense that s 145 makes it an offence to alter, deface or remove a registered trade mark from goods, and s 148 provides that it is an offence to deal in those goods. It provides: 145 Falsifying or removing a registered trade mark Indictable offence (1) A person commits an offence if: (a) a registered trade mark has been applied to goods, or in relation to goods or services; and (b) the goods or services are being, or are to be, dealt with or provided in the course of trade; and (c) the person: (i) alters or defaces the trade mark ; or (ii) makes any addition to the trade mark ; or (iii) wholly or partially removes, erases or obliterated the trade mark; and (d) the person does so without: (i) the permission of the registered owner, or an authorised user, of the trade mark ; or (ii) being required or authorised to do so by this act, a direction of the registrar or an order of a court. 365 Section 145(2) provides for a summary offence in the same terms as s 145(1), with the exception that s 145(3) provides that the fault element for paragraphs (2)(a), (b) and (d) is negligence. 366 Section 146 is entitled "Falsely applying a registered trade mark" and in broad terms provides that a person commits an offence if the person applies a mark or sign to goods or in relation to goods or services, the goods or services are being, or are to be dealt with or provided in the course of trade, the mark or sign is or is substantially identical to the registered trade mark, and the person applies the mark or sign without the permission of the registered owner, an authorised owner or being required to do so by the TM Act or a direction of the Registrar or an order of a court.

(2009) 82 IPR 416

(2016) 122 IPR 17

(2013) 250 CLR 640

(2016) 118 IPR 93

(1977) 180 CLR 266

(2010) 90 IPR 392

(1995) 185 CLR 410

(2000) 202 CLR 45

(1999) 96 FCR 107

(2015) 258 CLR 334

(1988) 13 IPR 385

(2010) 241 CLR 144

(2005) 67 IPR 230

(2010) 240 CLR 590

(1977) 138 CLR 534

(2012) 250 CLR 1

(2000) 100 FCR 90

(2004) 217 CLR 274

(1908) 7 CLR 481

(1911) 12 CLR 15

(1937) 56 CLR 464

(1977) 180 CLR 236

(2011) 203 FCR 293

(2008) 165 FCR 527

(1998) 194 CLR 355

(1998) 88 FCR 354

(2016) 243 FCR 152

(2013) 100 IPR 583

(1963) 109 CLR 407

(1967) 116 CLR 397

(1982) 42 ALR 177

(1996) 186 CLR 574

(2005) 150 FCR 1

(1991) 30 FCR 326

(2016) 335 ALR 144

(1987) 17 FCR 274

(2006) 156 FCR 380

(1999) 48 IPR 1

[2009] FCAFC 134

[2013] HCA 54

[2016] FCA 287

[1999] FCA 1721

[2000] FCA 876

[2004] HCA 58

[1937] HCA 18

[1977] HCA 23

[2011] FCA 1126

[1998] HCA 28

[1998] FCA 1463

[2005] FCA 972

[2011] FCA 1428

[2016] FCAFC 22

[2016] FCA 1238

[1995] HCA 24

[2017] FCAFC 54

[2005] FCAFC 220

[2010] HCA 13

[2008] FCAFC 9

[2016] FCAFC 91

[1963] HCA 66

[1996] HCA 38

[2016] FCA 280