4 min read

As IP practitioners, you have probably noticed counterfeit watches being sold at local markets, sometimes hidden from immediate view by the seller.  Over the past ~30 years, growth in online retailing (including third party retailers) has allowed counterfeiters to flourish and expand into goods such as footwear, leather goods, perfumes, jewellery and even pharmaceuticals.  A 2019 OECD Report puts the value of counterfeit and pirated goods at US$509 Billion which corresponds to approximately 3.3% of global trade.

Criminal Offences under Trade Marks Act 1995

So what can brand owners do to combat the counterfeiters in Australia?  Apart from commencing trade mark infringement proceedings, Part 14 of Australia’s Trade Marks Act 1995 also outlines a series of criminal offences in relation to registered trade marks, including:

  • Section 145 ‒ Falsifying or removing a registered trade mark;
  • Section 146 ‒ Falsely applying a registered trade mark;
  • Section 147 ‒ Manufacturing a die, etc. for use in a trade marks offence.
  • Section 147A – Drawing etc. trade mark for use in offence;
  • Section 147B – Possessing or disposing of things for use in trade mark offence
  • Section 148 ‒ Goods with false trademarks.

Each of these criminal provisions feature both summary and indictable offences with differing fault elements (intention, knowledge, recklessness or negligence) which must be proven depending on the offence.  If there is a prosecution for an offence under Part 14, Section 160 establishes the criteria to be used in determining a natural person’s state of mind and his/her responsibility for the conduct of employees and agents.

Any person may institute proceedings to commit a person for trial for an indictable offence under the Trade Marks Act 1995.  While private prosecutions for trade mark offences are possible, they are extremely rare as the costs involved are generally considered to outweigh the benefits.  In practice, criminal proceedings for offences under the Trade Marks Act would most likely be brought by the Australian Federal Police or the Department of Public Prosecutions.   Unfortunately for brand owners, such prosecutions are rarely brought in Australia (presumably on the basis that such actions are insufficiently “important”) and are typically confined to cases which primarily involve organised crime or public health and safety issues.  The penalties for such offences range from a term of imprisonment (12 months for summary offence or 5 years for indictable offence) and/or fines (60 units for summary offence or 550 units for indictable offence) or both.  On 1 July 2020, the value of one (1) penalty unit was increased to AU$222 (~US$160).  Given the enormity of the counterfeit goods market, we think that such penalties are likely to be regarded as insignificant and simply “the cost of doing (counterfeit) business”.

Miscellaneous Offences

Section 150 to 157 also establish a number of other miscellaneous offences, namely:

  • Section 150 – Aiding and abetting offences;
  • Section 151 – False representations regarding trade marks;
  • Section 152 – False entries in Register etc.;
  • Section 153 – Disobeying summons etc.;
  • Section 154 – Refusing to give evidence etc.;
  • Section 156 – Acting or holding out without being registered;
  • Section 157 – False representation about Trade Marks Office;

The penalties for such offences range from a term of imprisonment (up to 2 years) or fines (up to 150 units) depending on the particular offence.  Section 150 relates to aiding and abetting conduct including doing “an act outside Australia which, if it were done in Australia, would be an offence against this Act.  In such circumstances “the person is taken to have committed that offence and is punishable accordingly”.

Sections 151 – 157 are largely directed toward “administrative” offences such as the use of the ® symbol on or in relation to goods or services when the relevant trade mark is not currently registered in Australia.  While brand owners should be aware of how to avoid such offences (for example, by utilising the TM symbol rather than ® or by specifying the country in which the mark is actually registered), these provisions are unlikely to offer brand owners any significant assistance with the prevention of counterfeit goods being sold in Australia.

Customs Notices and ACL

Apart from the actions outlined above, brand owners should also lodge a “Notice of Objection” which allows Australian Customs to seize potentially infringing goods when being imported into Australia.  Under Australian legislation, the importer of the seized goods must make a claim for their return, otherwise they will be forfeited to the Commonwealth. This claim must include information which will assist the brand owner in contacting the importer and prevent further importations.

As China is a global manufacturing centre, it is also a significant source of counterfeit goods.  In this regard, Chinese Customs also has the power to seize infringing goods including those being either imported to or exported from China.  Brand owners should consider recording their trade marks with Chinese Customs, in an attempt to reduce the prevalence of counterfeit goods in other parts of the world.

An action could also potentially be brought against counterfeiters (by the Australian Competition and Consumer Commission) under Australia’s consumer protection law the Australian Consumer Law (ACL) which relates to conduct that is misleading and deceptive (or is likely to mislead or deceive) but again such actions would be rare.

Remedies and options are available to brand owners, however, active policing of the marketplace is required to protect brand value and minimise the trade in counterfeit goods being sold in Australia.

Authored by Nathan Sinclair and Sean McManis

8 min read

In the recent decision of Ceramiche Caesar S.p.A. V Caesarstone Ltd [2020] FCAFC 124 (28 July 2020) the Full Federal Court decided that the primary judge had erred in finding “honest concurrent” use of the CAESARSTONE mark.  The decision also considers the requirements for “quality control” and a finding of “authorised use”.

Proceedings

The decision involved Ceramiche Caesar S.p.A’s (Ceramiche Caesar) appeal of the primary judge’s decision to allow Caesarstone Ltd’s (Caesarstone) Australian Trade Mark Application No 1058321 for the word mark CAESARSTONE (CAESARSTONE Mark) to proceed to registration for certain class 19 floor and wall goods on the basis of honest concurrent use.

The decision also involved proceedings in Ceramiche Caesar’s appeal of the primary judge’s decision to allow Caesarstone’s Australian Trade Mark Application No 1211153 for

to proceed to registration for certain goods and services in classes 19, 35 and 37 (Caesarstone Device Mark) and to allow Caesarstone’s Australian Trade Mark Registration No 1211152 for the word mark CAESARSTONE to remain registered for services in classes 35 and 37 (Caesarstone Services Word Mark).

The parties agreed that the result in the first proceeding would determine the results in the second proceedings and almost entirely determine the result in the third proceeding.  The discussion below therefore relates only to the first proceeding.

Facts

The appellant, Ceramiche Caesar, has manufactured ceramic tiles for indoor and outdoor flooring and wall cladding in Australia since 1988. Effective from 23 November 2004, Ceramiche Caesar has had a registration in class 19 covering  “ceramic tiles for indoor and outdoor use” for a CAESAR device mark:

The respondentCaesarstone, is an Israeli company that manufactures and sells large quartz slabs which have been labelled on the underside of the slab with the mark “CAESARSTONE” since 1987.

Caesarstone’s slabs were distributed in Australia from 2003 by two distributors: Caesarstone’s licensee, Tessera Stones and Tiles Pty Ltd (Tessera) and Tessera’s sub-licensee, Carsilstone Pty Ltd (Carsilstone). In 2006, Caesarstone incorporated an Australian subsidiary, Caesarstone Australia Pty Ltd (Caesarstone Australia).

From 2003 the distributors, Tessera and Carsilstone, sold the slabs to stonemasons in Australia who would then convert them into finished products, including benchtops and countertops, vanities and surrounds and splashbacks, which would then be sold on to customers.

Ceramiche Caesar’s CAESAR device mark registration was cited against the  application to register the CAESARSTONE mark on 2 June 2005.  To overcome this citation, Caesarstone amended its goods specification to disclaim “tiles” as follows:

Panels for floors, floor coverings, wall cladding, ceilings; non-metallic covers for use with floors and parts thereof; profiles and floor skirting boards; none of the foregoing being in the nature of tiles.”

The CAESARSTONE application was subsequently successfully opposed by Ceramiche Caesar, with the Registrar’s delegate deciding that the CAESARSTONE mark was deceptively similar to the CAESAR device mark and that, based on the facts, the exception for “honest concurrent use” under s 44(3)(a) and/or “prior continuous use” under s 44(3)(4) of the Trade Marks Act 1995 should not apply.

Caesarstone appealed the decision and the primary judge in Caesarstone Ltd v Ceramiche Caesar S.p.A. (No 2) [2018] FCA 1096 (Caesarstone (No 2)). found that there had been “honest concurrent use” of the CAESARSTONE mark on floor panels and wall cladding and that the use of the CAESARSTONE mark by Caesarstone’s distributors was “authorised use”.

On the appeal the two main issues in dispute in the first proceedings were whether the primary judge erred in concluding that:

(1) there was honest concurrent use of the CAESARSTONE mark on the designated Class 19 goods;

(2) the prior use of the trade mark was authorised use under Caesarstone’s control”.  [1]

Honest concurrent use

The interpretation of the disclaimer of “tiles” in the goods description was crucial to the question of whether there was honest concurrent use.

Caesarstone argued that the exclusion of “tiles” from its specification was of no significance because it did not limit the goods specifically listed in the specification.  They relied on the primary judge’s finding that the disclaimer did not “subtract all content from” the words “panels for floors” and “wall cladding”.  [2]

Ceramiche Caesar argued that the disclaimer effectively excluded tiles.  As the primary judge found that the goods in honest concurrent use were floor panels and wall cladding in the nature of tiles, there was therefore no honest concurrent use of the mark in respect of the goods covered by the application.

Their Honours considered that “as a matter of plain English, the words “none of the foregoing being in the nature of tiles” operate to limit the class 19 goods to include only panels for floors, floor coverings and wall claddings which are not in the nature of tiles”.  They said that “the primary judge’s conclusion that the tile disclaimer did not “subtract all content” from the words “[p]anels for floors, floor coverings, and wall cladding” which are not “in the nature of tiles” was a statement of the obvious” and “not a statement which supports the conclusion that the tile disclaimer was “ineffectual” in the sense contended for by the respondent”.  [3]

The Full Court held that the primary judge erred in finding honest concurrent use because honest concurrent use must be in respect of the goods covered by the application. In this case, the finding of honest concurrent use was for goods which were all “in the nature of tiles”.  As tiles had been expressly excluded from the specification they were not covered.

The Full Court also refused Caesarstone’s request to remove the disclaimer, because this would effectively widen the scope of the registration to include tiles.

Authorised use

While the Full Court found that there had not been honest concurrent use, and the second question of whether Caesarstone’s use would have been “authorised use” did not therefore strictly arise, the judges considered the question briefly.

Section 8(1) of the Trade Marks Act 1995 states that a person is an authorised user “if the person uses the trade mark under the control of the owner of the trade mark” and section 8(3) provides that:

(3) If the owner of a trade mark exercises quality control over goods or services:

(a) dealt with or provided in the course of trade by another person; and

(b) in relation to which the trade mark is used;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.

The primary judge’s finding that Caesarstone’s prior concurrent use was authorised use under Caesarstone’s control and therefore use in accordance with section 8(3) of the Trade Marks Act was on the basis that Caesarstone:

“(1) gave instructions regarding slab transport and storage to the Australian distributors;

(2) provided technical and marketing support services to the Australian distributors;

(3) sought to exercise quality control by ensuring that the Australian distributors provided fabrication and installation manuals to the stonemasons, and contributing to the content of these manuals.”  [4]

However, on appeal their Honours decided that the evidence did not support this and that the primary had judged erred in finding authorised use.

The Full Court stated that “Authorised use requires the trade mark applicant to establish “control as a matter of substance”: Lodestar Anstalt v Campari America LLC [2016] FCAFC 92(2016) 244 FCR 557 (Lodestar) at [97]. What constitutes control as a matter of substance is informed by the function of the trade mark, which is to indicate a connection in the course of trade with the registered owner – see PioneerKabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56(1977) 137 CLR 670 (Pioneer) at 683 per Aickin J”. (pgh 39).  [5]  The court also noted “the critical enquiry is whether there was quality control with respect to the designated goods”.

The court held that Caesarstone did not exercise quality control because the control was not in relation to the designated goods, being panels for floor covering and wall covering.  Further the quality control was not in relation to the work of the stonemasons who fabricated the slabs into the finished products and were therefore responsible for the ultimate quality of the designated goods.  Their honours found that “not only did Caesarstone not have any contractual relationship with the stonemasons, but there was no evidence that Caesarstone ever inspected the stonemasons’ work or conducted any quality control regarding the final product.” [6]

In relation to the evidence on which the primary judge based his finding of quality control, the court noted that:

  1. Caesarstone’s storage and transport instructions only ensured that the slabs were not damaged, they did not enforce quality control over the finished products covered by the application being the panels for floor covering and wall cladding;
  2. The installation and fabrication manuals provided by the distributors to stonemasons were for guidance only and the “provision of technical information is not, at least of itself, the exercise of quality control”. [7]
  3. There were no terms relating to “quality control standards, brand guidelines, marketing approval mechanisms or rights of inspection of fabricated product” in Caesarstone’s distribution agreement with Tessera. [8]

Authorised use on a wider basis

The primary judge had also found that there had been control “on a wider basis than… exercising quality control”.  However, their Honours held that this was not the case because “the application of the mark to a slab is not indicative of control over the designated goods” [9] and the various claims of wider control, such as Caesarstone’s website listing ideas on possible uses for the slabs did not “operate to constrain or demand the stonemasons to use the slabs in any particular way or require fabrication in any particular way” [10].  Further, the general communications between Caesarstone and its distributors did not include reporting back to Caesarstone on the ultimate application of the slabs and did not “translate into a finding of “control” over the designated goods”.  [11]

Decision

Their honours found that the primary judge erred in concluding that there had been honest concurrent use in respect of the goods covered by the amended application. They also found the claimed use was not authorised use under Caesarstone’s control and that Caesarstone did not exercise quality control and general control on a wider basis.

The second proceeding was resolved in the same way as the first and third proceeding also went the same way as the first.

The appeals in all three proceedings were allowed, the primary judge’s orders were set aside, Ceasarstone’s application numbers 1058321 and 1211153 were refused and registration number 1211152 was cancelled.

Takeaway

The decision is an important reminder that quality control must be exercised as a matter of substance. This is essential if the use of the trade mark is to be considered authorised use that can be relied upon by a registered owner for the purposes of defending a non-use removal action, or to support an applicant’s claim to registration based on use.

It serves as useful clarification that disclaimers in goods specifications are to be interpreted as a matter of plain English and is a reminder that to establish “honest concurrent use”, it is necessary to prove use on the goods covered by the application.


[1] Ceramiche Caesar S.p.A. V Caesarstone Ltd [2020] FCAFC 124 (28 July 2020), paragraph 22.

[2] Ibid, paragraph 27.

[3] Ibid, paragraph 29

[4] Ibid, paragraph 45.

[5] Ibid, paragraph 39.

[6] Ibid, paragraph 60.

[7] Ibid, paragraph 52.

[8] Ibid, paragraph 58.

[9] Ibid, paragraph 64.

[10] Ibid, paragraph 70.

[11] Ibid, paragraph 75.

Authored by Michelle Howe and Sean McManis

Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA 1662 (10 October 2019)

Question: When is a name that is used to distinguish, not being used to distinguish?

Answer: When it is a style name

The Case

In Federal Court proceedings Pinnacle Runway Pty Ltd (“Pinnacle”) alleged infringement of its trade mark registration for DELPHINE by Triangl Group Ltd (“Triangl”). The allegation concerned the use of that word in relation to bikinis.

The key issue and basis of the ultimate decision is neatly summarised by Justice Murphy:

Triangl admitted that, over a period of six weeks, it marketed and sold in Australia a bikini style in three different floral designs under the TRIANGL Trade Mark using the name DELPHINE, but denied using DELPHINE “as a trade mark”. It argued that it employed the TRIANGL Trade Mark to distinguish its products from those of other traders and it only used DELPHINE as a “style name” so as to assist consumers to differentiate that one of its many bikini styles from its other styles. It put on evidence to show that there is a widespread practice in the women’s fashion industry in Australia of using style names in relation to women’s fashion garments, including swimwear, and that women’s names are commonly so used. Triangl contended that consumers were used to this practice and that its use of the name DELPHINE was unlikely to be perceived by consumers as distinguishing Triangl’s goods from the goods of other traders.

The Issue 

For a trade mark registration in Australia to be infringed, the infringing use needs to be use “as a trade mark”. Consequently, determining whether a name or other sign is used “as a trade mark” is an issue of key importance in any such proceedings.

The present case concerned a fundamental clash over whether and when a name is being used as a trade mark. At the heart of this issue is the view of the Court that there will only be use as a trade mark when that use is intended to distinguish the user’s goods from those of other traders.

Further to this, the Court accepted evidence that various names are used not to distinguish one trader’s goods from those of another, but to distinguish only the different products within a range sold by a particular trader.

The Evidence

Pinnacle presented evidence from a marketing consultant and lecturer in marketing concerning brand architecture and perceptions. It claimed that sub-brands function as trade marks and referenced the typical brand architecture hierarchy of:

(a) corporate or company brand, which is the overall or head brand;

(b) family brand, which is a brand that is used in more than one product category but is not necessarily the name of the company or corporation;

(c) individual brand, which is a brand that is restricted essentially to one product category, although it may be used for several product types; and

(d) modifier, which describes a specific size, flavour, configuration or function of the product.

Triangl presented evidence from a public relations and marketing consultant with experience in the fashion industry. His evidence was that there is common use of ‘style’ names simply to distinguish the different collections sold by traders, rather than to indicate origin.

It was claimed that typically the business’ principal brand, in this case TRIANGL, performed the role of distinguishing the trader’s goods from the goods of others, not the style names used.

The Use

DELPHINE was used on Trangl’s website, with varying degrees of prominence, in contexts such as:

Triangl image 1
triangl image 2
Triangl image 3

The Decision 

The Court was persuaded by the industry evidence. In concluding that DELPHINE was not being used by Triangl as a trade mark, it took into account factors such as:

  • Evidence from Triangl that it did not intend to use the name to distinguish its goods from those of other traders but only to distinguish a particular style of bikini from those within its broader range;
  • Whenever DELHINE was used, there was generally more prominent use of TRIANGL;
  • Typically, DELPHINE was used in a similar font size as the names given to the different colours and floral patterns, which is inconsistent with use as distinguishing commercial origin;
  • DELPHINE products were generally displayed as part of a wider range of styles with various different names. For example, on the website if the consumer clicked “View All” they would see images of approximately 35 Triangl bikini styles (all having different names) and if they clicked “New Arrivals” they would see 4 new styles

As a consequence, the Court was convinced that consumers would understand that TRIANGL was the trade mark being used to identify the source of the bikinis and that DELPHINE, like other style names, was not being used as a badge of origin or as a ‘sub-brand”.

The Court emphasised that the context of use is “all important“ in assessing such issues and found that use in the present case was not use “as a trade mark”.

Additional Evidentiary Issue  – Wayback Machine

The case also included an interesting observation on the admissibility of evidence from the Wayback Machine. While this is generally considered hearsay, it has been admitted on occasions as a matter of discretion.

In the present case, Justice Murphy accepted evidence that Wayback screenshots are ordinarily produced automatically. As a consequence, in the absence of evidence to the contrary, it was accepted on the basis of being a document produced without human intervention.

Comment 

The case breaks new ground and challenges perceptions of what a trade mark is, and when a name is functioning as a trade mark.

The case creates additional uncertainty for parties seeking to enforce trade mark rights and provides a new characterisation of the defence that a name is not being used as a trade mark, when there is also use of principal or ‘house’ brand.

Whether a name is being used as a style name (or something akin to a style name) rather than being used as a trade mark, will depend upon the circumstances of each case, and it is an issue that will likely give rise to considerable debate.

The case is presently the subject of an appeal, and assuming it proceeds to a decision, the result will be closely watched.

Authored by Sean McManis

It’s time to talk of mice and McCaw. While that Richie won’t be playing in 2019 edition of the Rugby World Cup soon to be held in Japan, it is time to wonder which ball the new Richie (Mo’unga) will be kicking off with in the final on November 2.

This will be the seventh rugby world cup for which Gilbert have supplied the official match ball, and they continue to make changes to improve handling and aerodynamics. Gilbert have been producing footballs since 1823, and it is said that the ball picked up by William Webb Ellis all those years ago was a Gilbert.

While Adidas have sought to improve their world cup soccer balls by reducing the number of seams, getting down now to a six-piece ball, rugby balls have been settled in their four-piece configuration for many decades. It’s even defined as such within the Laws of Rugby.

So, where then have the changes been made?

After problems with the aerodynamics of the ball used in the 2003 tournament, the shape of the ‘pimples’ on the surface of the ball were changed from round to star shaped to improve handling and kickability for the 2007 tournament. Remarkably, Gilbert (and their new owners, Grays International) don’t seek protection for very much of their innovation, but in this case they did, which was published as WO2006/061608.

The next development was for the 2011 tournament where a new valve was produced, which distributed weight along the seams of the ball to improve rotational stability and accuracy.

Both these features were retained for the 2015 world cup ball, and most of the improvement appears to have been in the polymers and laminations of the synthetic cover material.

Moving forward to the latest ball to be used in 2019, Gilbert have made further improvements to the pimples, making them ‘dual height’, and altering their distribution across the surface. This needed to be done without increasing the actual height of the pimples as it would have affected the aerodynamics, but as there doesn’t appear to be any patent protection and hence publication of the details, all I can say is they claim to have produced a ball with the largest total surface area of any international match ball.

These changes seem to be getting more and more infinitesimal and highly technical, which someone has suggested is creating a rugby ball that is close to perfection, so it will be interesting what Gilbert come up with as we approach 2023.

Authored by Frazer McLennan and Charles Tansey, PhD

This important decision by the Full Court of the Federal Court in Calidad Pty Ltd v Seiko Epson Corporation [2019] FCAFC 115 clarifies the position on an area of law that, surprisingly, is still developing in Australia, namely the scope of the implied licence issuing from the sale of a patented product.

Re-manufacturers that refurbish and repurpose used patented products should take heed of this decision, as work that goes beyond mere repair of damaged or broken parts, or that replaces or refurbishes parts that extend the useful life of the product, may be considered an infringement of the patentee’s exclusive right to make the product.

Calidad has foreshadowed a request for special leave to appeal to the High Court on the anterior question of whether the “implied licence” or the “patent exhaustion” doctrine is the correct approach in Australia. Calidad has until 2 August 2019 to apply to the High Court for that leave to appeal.

Background

Seiko Epson sells Epson printer cartridges worldwide. The Epson cartridges embody the invention claimed in the two Australian patents in suit. The cartridges are designed as a consumable product, and are intended to be discarded and replaced when the ink runs out. This is achieved by memory chips programmed to recognise when a cartridge is spent, thereby preventing the cartridges from being refilled. Each cartridge is also configured to be compatible with only certain Epson printers.

After initial sale of the original Epson cartridges, a third party modified the used cartridges to enable them to be re-used. Calidad then imported and sold the cartridges in Australia, in competition with the original Epson cartridges.

Calidad asserted an implied licence to treat the cartridges as an ordinary chattel deriving from Seiko’s unconditional sale of the original Epson cartridges. In the alternative, it asserted that a patentees’ right to exploit the patented product under the Patents Act 1990 (the Act) did not include the right to prevent a subsequent owner of the product from repairing or refurbishing the product and dealing with the refurbished product.

The Modifications Made

The process of refurbishment carried out by the third party, first, involved cartridges being emptied and cleaned in preparation for refilling. Replacement ink was then injected into the cartridge through a new entry port created in the cartridge, which was subsequently sealed.

Next, for some cartridges, the memory chip was reprogrammed so that the cartridge would not read as spent (referred to as the “current products”). For other cartridges a new memory chip was inserted and the modified circuit boards refitted to the cartridges. Some cartridges were further modified by changing their interface pattern to allow them to be used with a wider range of Epson printers than originally intended. These latter categories were referred to as the “past range of products”.

There was no dispute that all the modified cartridges supplied by Calidad fell within the scope of claim 1 of each of the patents in suit.

Opposing Doctrines: Implied Licence vs Patent Exhaustion

The right of a patentee to control what may be done with a patented product, once sold, gives rise to competing rights: the patentee’s exclusive right to “exploit” the patented product under the Act, which includes the right to make, use, sell and import the product inter alia, and the personal proprietary rights of ownership in a chattel at common law.

Two opposing doctrines have developed to address this tension.

  • The doctrine of patent exhaustion was endorsed by the United States Supreme Court in Impression Products v Lexmark (2017) 581 U.S. 1523. Under this doctrine, upon the first authorised sale of a patented product by or with the consent of a patentee, all patent rights in that article are exhausted. The Full Court in the present case confirmed unequivocally that under Australia’s current law there is no doctrine of exhaustion.
  • The implied licence doctrine provides that the sale of a product embodying a patented invention with the authority of the patentee carries with it an implied licence permitting the purchaser to use, maintain, re-sell and import the product without infringing the patent. Such implied licences are subject to any conditions of sale the patentee imposes and “brings home” to the purchaser at the time of sale. This approach was adopted in the United Kingdom and Australia following the Privy Council’s decision in National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 (Menck).

At first instance Justice Burley found that Menck applied in Australia. Both parties advanced the appeal and cross-appeal on this basis. However Calidad has reserved the right to challenge the approach taken in Menck in any subsequent appeal to the High Court, including raising at that stage its contention that the doctrine of exhaustion should apply in Australia, as it does in the United States.

The First Instance Decision

Material modifications?

Justice Burley held that Calidad infringed the Seiko patents in relation to the past range of products (where memory chips were replaced or the interface pattern was changed), but not the current products. Burley J’s analysis turned on whether the implied licence, which was taken to have arisen validly, was terminated by the modifications carried out by the third party. This was to be determined by whether the product was “materially altered” by the modifications.

The Full Court

Scope of the Implied Licence

The Full Court (Greenwood, Jagot and Yates JJ), each in separate judgments, found entirely in favour of Seiko. The Full Court concurred in finding that the primary judge erred by asking the wrong question – that is, was the implied licence brought to an end by the materiality of the modifications. Instead, the question to be addressed was whether the modifications constituted conduct outside the scope of any implied licence arising from an unrestricted sale. Each of the Full Court judges held that the modifications brought into existence a new article, which could only be properly characterised as an impermissible making of the patented product, and unequivocally outside any possible licence recognised by Menck. The licence did not come to an end by reason of the materiality of the modifications – it never authorised the relevant conduct of Calidad and the third party from whom it procured the cartridges.

Yates and Jagot JJ, in their separate reasons, pointed to the fact that none of the modifications amounted to repair on any reasonable view. The cartridges were not damaged – they had instead been consumed in the manner intended by Seiko upon their manufacturer and sale. An implied licence did not authorise modifications or refurbishment after the useful life of a patented article. Jagot J also observed that the refurbishment process involved “unmaking” the patented cartridges by effectively removing one integer of the patent claims (by creating a hole in the ink container) and then making a new patented article when adding that integer back in (by sealing the newly-made hole to re-establish a functional ink container). Yates J considered that Calidad’s assertion of a right of refurbishment was an unsupported embellishment of the subject matter dealt with in the United Kingdom cases, as the cases themselves refer only to repair.

Licence to repair?

The question of whether Australian patent law recognises an implied licence to repair did not arise on the facts of the present case, leaving this question, ostensibly, to be resolved on another occasion.

However the exclusive right to “exploit” the invention granted to a patentee under s 13 and Schedule 1 of the Act does not include (at least expressly) the exclusive right to repair a patented product. Under the current legislative regime, arguably, an implied licence to repair is not required, provided the work performed does not cross over into an impermissible making of the invention. Consistent with this view, the United Kingdom courts have long recognised a right to repair (essentially as an implied contractual term associated with the purchase of a product), but more recently have characterised this as a residual right to do whatever does not amount to making the invention (Lord Hoffman in United Wire Ltd v Screen Repair Services (Scotland) Ltd [2001] RPC 24).

Patent Exhaustion – would the outcome be any different?

Even if the patent exhaustion doctrine were found to apply in Australia, the outcome of this case may be unchanged. As Jagot J persuasively states in obiter, neither an implied licence nor the doctrine of exhaustion would “result in the loss of the right to prevent the making of new embodiments of the invention, whether or not the new embodiment involved starting from scratch or re-using and modifying parts of the patented product as sold”. Patent exhaustion applies to the particular product as sold, and not to the making of a new embodiment of the invention.

Implications for Re-manufacturers 

Re-manufacturers will need to carefully consider whether their activities may infringe the patent rights of original product manufacturers, particularly where work goes beyond mere repair of damaged or broken parts, or where parts are replaced or refurbished thereby extending the useful life of the patented article.

Each case will, however, turn on its facts – both with respect to the nature of the patented invention and the article that embodies it. As observed by Jagot J, “…all the cases, in one way or another, are about the scope of the implied licence which necessarily arises on the sale of every patented article, the scope of which will depend upon all relevant circumstances including but not limited to the nature of the patented article, the circumstances of the sale, and the imposition at the time of sale of any express restrictions on the use which the purchaser may make of the article after sale”.

We await with interest any further developments in the law should the High Court choose to address this question.

Authored by Duncan Longstaff and Dr Roshan Evans

It’s that time of the year again: it’s National Ride2Work Day (Wednesday 17 October 2018). With this in mind, I thought I’d take the opportunity to show my appreciation for my favourite way to travel to work: the Brompton folding bicycle. I take a brief look at the bike and the role of intellectual property in its success.

What is a Brompton bike?

The Brompton folding bicycle was invented by Cambridge University graduate Andrew Ritchie in 1975 and named after the Brompton Oratory in South Kensington, London, which his flat overlooked. It folds conveniently into a compact package and, despite its small wheel size, displays surprising acceleration and nimble handling. Designed for commuters, this iconic bike is popular the world over.

Intellectual property protection

Patents

Patents provide protection for inventions which are new, inventive and useful. The original Brompton patent (EP 0 026 800 B1) was filed in 1979. This patent has long expired, so how is intellectual property contributing the continuing success of the Brompton?

Know how

These days, whilst the manufacturing of certain parts or processes is outsourced, the core production work is still carried out at Brompton’s UK factory. The manufacturing is complex and the company designs all of its own tooling. Keeping this know how within the company makes the bike difficult to copy and helps to keep the company a step ahead of potential competitors.

Designs

Brompton Bicycle Limited has a collection of registered designs for various bike parts, such as brakes and grips, registered in the UK and Europe. These registered designs protect how the parts look.

Trade marks

The company also owns several internationally registered trade marks, including the word mark “Brompton” and an instantly recognizable picture mark consisting of 3 bikes, stylized, in unfolded, partially folded and fully folded configurations.

Each trade mark acts as a “badge of origin”, identifying the source of Brompton bikes, parts and accessories and related services.

Marketing

Interestingly, Brompton Bicycle Limited does not advertise. Its marketing philosophy is to produce a great product that its customers love and to let its happy customers spread the word. And it works … arguably this article is one example!

Authored by Serena White, DPhil and Charles Tansey, PhD