Aftermarket Calidad Beats OEM Epson in High Court

Aftermarket Calidad Beats OEM Epson in High Court

The High Court of Australia handed down its judgement, as promised on November 12, 2020, in favour of Calidad Pty Ltd (Calidad) over Seiko Epson Corporation (Epson).

The case was over the rights to remanufacture and resell used printer cartridges.

The full bench of seven judges allowed the appeal to proceed and in a 115-page judgement, set aside the previous orders made by the Federal Court of Australia on 5 July 2019 and 29 October 2019. Its judgement in favour of Calidad revoked all previous judgements and also awarded all costs related to each level in favour of Calidad.

The case was over empty, used printer cartridges that had previously been manufactured and sold under the brand name “Epson”. China-based Ninestar had obtained such empty cartridges from a number of sources and remanufactured, “modified and refilled” them for re-use. Calidad acquired the modified cartridges from Ninestar and imported them into Australia for sale to the public. Epson claimed, under Australian laws, that Calidad did not have a “license” from Epson to do this so they exercised their legal rights where “a patent gives the patentee the exclusive rights … to exploit the invention”. The term “exploit” is defined to include “make, hire, sell or otherwise dispose of the product” and to “use” it.

The appeal concerned the scope of a patentee’s exclusive statutory rights to exploit an invention which is a product, and whether modifications made to a product to enable its re-use amounted to a making of a new product and infringed the patentee’s exclusive rights on that basis.

The High Court, Australia’s final appeal court, rejects more cases than it can hear, particularly patent cases. However, this case has proven to be an exception as special leave was granted in late 2019. In so doing, the High Court sent a clear message that it considers it appropriate to provide clear guidance around exhaustion of patent rights and the right of repair.

The agreement by the High Court of Australia to entertain the case has captured the attention of industry and government leaders alike. Calidad’s success is expected to set a precedent across the country in many other industries too.

Robin Kenyon (pictured), the managing director of Calidad, told RT Media’s David Gibbons he was pleased the case, which has stretched back 5 years, is over. “Let’s celebrate with a drink, David when you next visit your home in Australia,” he said. “This case was attractive to the High Court which obviously wants to rejuvenate some outdated legal processes that still cling to old laws from Britain. There will be many industries that will be positively impacted by this judgement today.”

Insights

This is not the first time Calidad has encountered a lawsuit where courts have argued over “implied license” or “exhaustion of rights”. In 2015, Calidad lost a case against Epson based upon cartridges it sold and sourced from a different supplier. Why do similar cases have different results?

• The products from Calidad’s former suppliers were cloned copies of the OEM;
• In this case, Ninestar has demonstrated it will always legally support its customers that sell its products, even when, as in this case, it may have to go through many appeals over many years. Ninestar claimed through the process that it maintained confidence in its products.

Ninestar’s Legal Perspective

Ninestar’s main building in Zhuhai also houses its legal team.

One of Ninestar’s legal team, familiar with the case, told RT Media, “Ninestar was aware of the severity of patent issues in the Australian market, as with other global markets, and strictly followed recycling processes and techniques that would be compliant with local laws. Further, we designed our own patented wafers to replace that of the OEM’s. From the perspective of recycling laws as well as intellectual property rights, Ninestar’s remanufactured products legitimately do not infringe the OEM’s patents.”

“In spite of all this, we still got sued by the OEM in Australia. After five long years of litigation,  and persistently defending our partner at each level of the courts in Australia, Ninestar finally won and received the recognition from the High Court.”

“It is worth emphasizing again, that the wafers used to replace Epson’s as part of the remanufacturing process, must be patented and not allowed to fall into the protection range of the OEM’s complex patent portfolio. The OEM has a pool of patents in its wafers covering communication protocol between the chip and the printer, methodology of chip data reading and writing, chip data storage structure, etc.”

The OEM also filed lawsuits against third parties in order to protect some of the above-mentioned patents in other countries. The use of patent-infringing wafers as part of the remanufacturing process in Australia, or any other major continents, are highly likely to result in OEM litigation.”

A full history of this case, provided by the High Court as of January 2020, is provided at the end of this article.

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Appellants Chronology:

THE HIGH COURT OF AUSTRALIA SYDNEY REGISTRY No. S329 of 2019
CALIDAD PTY LTD ACN 002 758 312 First Appellant CALIDAD HOLDINGS PTY LTD ACN 002 105 562 Second Appellant CALIDAD DISTRIBUTORS PTY LTD ACN 060 504 234 Third Appellant BUSHTA TRUST REG Fourth Appellant and SEIKO EPSON CORPORATION First Respondent EPSON AUSTRALIA PTY LTD ACN 002 625 783 Second Respondent

Part I:
I certify that this chronology is in a form suitable for publication on the internet.

Part II:

7/3/2013:  Australian Patent No 2009233643 (643 Patent) for a Printing material container and board granted.

October 2013:  Seiko Epson Corporation and Epson Australia Pty Ltd (together, Seiko), and Calidad Pty Ltd, Calidad Holdings Pty Ltd, and Calidad Distributors Pty Ltd entered into the Settlement Deed.

17/08/2015:  Seiko sent a cease and desist letter to Calidad Pty Ltd, Calidad Holdings Pty Ltd, Calidad Distributors Pty Ltd, and Bushta Trust Reg (together, Calidad) alleging infringement of the 643 Patent, trademark infringement, breach of the Settlement Deed, misleading or deceptive conduct and breach of the Business Names Registration Act 2011 (Cth).

20/08/2015:  Australian Patent No 2013219239 (239 Patent) for a Printing material container granted.

1/09/2015: Seiko commences proceedings in the Federal Court of Australia, including (relevantly) for infringement of the 643 Patent.

24/09/2015: Seiko filed their Amended Originating Application and Further Amended Statement of Claim to include infringement of the 239 Patent.

April 2016: Cartridges in categories 1, 2, 3, and A begin to be sold.

April 2016: Calidad ceases selling cartridges in categories 4, 5, 6, 7, and B.

29/11/2017: Reasons for judgment of the Federal Court of Australia comprising Burley J, reported as Seiko Epson Corporation v Calidad Pty Ltd (2017) 133 IPR 1; [2017] FCA 1403:
• cartridges in categories 1, 2, 3, and A did not infringe claim 1 of the patents; and
• cartridges in categories 4, 5, 6, 7, and B did infringe claim 1 of the patents.

16/02/2018:  Reasons for judgment of the Federal Court of Australia comprising Burley J, reported as Seiko Epson Corporation v Calidad Pty Ltd [2018] FCA 104 (f01m of declaratory relief and costs).

16/02/2018:  Orders of Burley J.

9/03/2018:  Calidad filed a Notice of Appeal from those parts of the judgment of the Federal Court of Australia given on 29 November 2017 that found that cartridges in categories 4, 5, 6, 7, and B infringed claim 1 of the 643 Patent and 239 Patent.

3/04/2018:  Seiko filed a Notice of Cross-Appeal from those parts of the judgment of the Federal Court of Australia given on 29 November 2017 that found that cartridges in categories 1, 2, 3 and A did not infringe claim 1 of the 643 Patent and 239 Patent.

3/04/2018:  Seiko filed their Notice of Contention.

24/04/2018:  Calidad filed their Notice of Contention in the Cross-Appeal.

5/07/2018:  Reasons for judgment of the Full Court of the Federal Court of Australia comprising Greenwood, Jagot, and Yates JJ, reported as Calidad Pty Ltd v Seiko Epson Corporation (2019) 370 ALR 563; (2019) 142 IPR 381; [2019] FCAFC 115 (FCJl):
• upheld cross-appeal; and
• overturned findings that cartridges in categories 1, 2 3, and A did not infringe claim 1 of the patents.

5/07/2018: Orders of the Full Court of the Federal Court of Australia comprising Greenwood, Jagot, and Yates JJ dismissing Calidad’s appeal and allowing Seiko’s cross-appeal.

27/09/2018: Reasons for judgment of the Full Court of the Federal Court of Australia comprising Greenwood, Jagot, and Yates JJ, reported as Calidad Pty Ltd v Seiko Epson Corporation (No 2) [2019] FCAFC 168 (declaration of infringement and form of injunction).

29/10/2019: Order of the Full Court of the Federal Court of Australia comprising Greenwood, Jagot, and Yates JJ (declaration of infringement and form of injunction).

2/08/2019: Calidad filed their Application for Special Leave to Appeal to the High Court of Australia from the whole of the judgment of the Full Court of the Federal Court of Australia given on 5 July 2019.

15/11/2019: Calidad was granted leave to amend their application for Special Leave to Appeal to include orders 1 to 4 made by the Full Court of the Federal Court on 29 October 2019 and was granted special leave to appeal from the whole of the judgment of the Full Court of the Federal Court of Australia given on 5 July 2019, together with orders 1 to 4 made by the Full Court of the Federal Court of Australia on 29 October 2019.

20/11/2019: Calidad filed their Amended Application for Special Leave to Appeal to the High Court of Australia from the whole of the judgment of the Full Court of the Federal Court of Australia given on 5 July 2019, together with orders 1 to 4 made by the Full Court of the Federal Court of Australia on 29 October 2019.

29/11/2019: Calidad filed their Notice of Appeal to the High Court.