Many years ago, the great philosopher Plutarch raised the following scenario:
The ship wherein Theseus and the youth of Athens returned from Crete had thirty oars, and was preserved by the Athenians down even to the time of Demetrius Phalereus, for they took away the old planks as they decayed, putting in new and stronger timber in their places, insomuch that this ship became a standing example among the philosophers, for the logical question of things that grow; one side holding that the ship remained the same, and the other contending that it was not the same. (Plutarch, Theseus, 75AD)
In simple words, does an object that has had all of its components replaced remain fundamentally the same object? Or is it a new object? If it is a new object, what is the threshold or requirement for the object to change from the original to a new object?
The High Court of Australia has had a hand in deciding whether modifications made to an original patented product to enable its re-use have amounted to the making of a new infringing product, as we explain below.
Fast forward to 2020, and we have judges staring at printer ink cartridges. Not exactly a traditional ship of Theseus moment, but no doubt the recent High Court decision of Calidad Pty Ltd v Seiko Epson Corporation  HCA 41 gives us a rare glimpse into the ship of Theseus dilemma, during which the High Court decided by slim majority, that the patent “exhaustion doctrine” should be applied instead of the “implied licence doctrine”, and that repair and modification do not create a new product.
The “exhaustion doctrine” decrees that the patentee’s exclusive rights with respect to the whole or part of a product covered by that patent are exhausted upon first sale; whereas the “implied licence doctrine” finds that an implied licence to use the product with certain implied conditions arises upon the sale of patented goods to purchaser (examples of implied conditions might be that the product cannot be sold “second hand” or that the product cannot be modified in any way for re-sale), and that the implied license continues after the first sale.
The High Court’s decision is an important one and has long-term ramifications, unless of course the Australian Parliament decides to amend the Patent Act. It is expected that the decision will set a precedent for a long time to come.
A bit on the background: Epson sells printer ink cartridges. After the ink has been used, the cartridges are discarded and replaced by a new one. Ninestar collects used cartridges and modifies them to be re-filled for re-use, and thereafter, Calidad sells the re-filled and modified cartridges. Generally, the modifications involve creating a hole in a side of a cartridge, injecting ink through the hole, sealing the hole, and modifying or replacing the memory chip of the cartridge. There are a few different versions of re-filled and modified cartridges.
In the first instance, the Primary Court found some cartridges infringed, some did not. The Court of Appeal then held that the modifications that were made were not authorised by any implied licence, and the making of the modifications amounted to a “making” of a new product or a re-making of the original. As such, all of the re-filled cartridges were held to infringe the patentee’s rights.
On further appeal to the High Court, the findings of infringement by both of the lower courts were overturned and in so doing, has changed what was previously and widely understood as the law in Australia, by creating a precedent that the “exhaustion doctrine” should apply in such circumstances.
For the time being, the question as to whether the ship of Theseus is new or not will remain a philosophical one, but that in a patent infringement case, there is a very real answer. The key take away for this High Court decision is that the “exhaustion doctrine” now applies in Australia and the repair and refurbishment industry will likely benefit, and in turn, the public will benefit as well.
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China presents some unique difficulties for foreign trade mark owners. The subtle differences between the IP systems applicable in many western countries and Chinese law have caused much consternation and frustration.
China practises a “first-to-file” trade mark system. This means that the person who first applies for registration of a trade mark in China will prevail over a person who is first to use the same trade mark in China regardless of the fame or reputation of that mark outside of China.
This “first-to-file” system has created, and continues to create, distress for those who are unaware of the Chinese system. This is especially the case for companies located in a country which practises a “first-to-use” trade mark system, where, as the name suggests, the first person who actually uses a trade mark would be the owner of the trade mark. For example, when a company has invested significant time and energy to arrange for the sale of a certain branded product in China, they may then discover that someone has already registered that brand as a trade mark in China. The “first-to-file” system means that instead of being the owner of that brand in China, the company may face a potential infringement issue.
The trade mark system in China does have a provision to prevent “famous” trade marks from being “grabbed” by unrelated parties, such as trade mark squatters. However, recent cases show that it is very difficult to establish sufficient “fame” to an examiner. It is a subjective assessment and the bar seems to be very high.
Three recent decisions involving Facebook, iPhone and Weixin illustrate these points and the challenges faced by trade mark owners in China:
- iPhone: A third party filed for “iphone” in relation to “leather goods”. This would cover accessories such as tablet covers. In this case, the court considered that iPhone was not well known in China before the filing date, thus the registration stands. In other words, Apple cannot use “iPhone” to sell leather goods in China.
- Weixin (“Wechat”): Weixin is an instant messaging service developed by Tencent (a major Chinese company) and enjoys active users of 650 million per month. A third party filed for “Weixin” in relation to “communication services” and Tencent opposed registration. At first court instance, the Court decided that public interest trumps the interest of the Applicant. On appeal, the High Court chose a different reason, ruled that “Weixin” was descriptive in that “Wei” means “small” or “little”, and “Xin” means “letter”, “message” or “communication”. Thus, the third party’s application was rejected. While not spelt out, it can be construed that Tencent now owns the mark through sufficiently wide use.
- Facebook: A third party filed for “face book” in relation to “fruit juice beverages”. While the use of Facebook is banned in China, the court considered that Facebook had sufficient prior reputation in China to be considered “famous”, thus the first filed “face book” in relation to “fruit juice beverages” by the third party was rejected.
It is not easy for us to reconcile these decisions. There does not appear to be a consistent application of legal principles that would lead to a predictable outcome. As said above, we must remember that China is not a common law country and thus earlier court decisions, while being able to assist one in understanding laws and regulations in China, would not set precedence that is always required to be followed by subsequent courts.
It is our strong recommendation to always file as soon as possible and to seek strategic legal advice for trade mark planning in China. Under a “first-to-file” system, it is necessary to get in early. If someone has already registered your mark, it is most important to discuss your options with a legal advisor to assess risk and consider available strategies.
Madderns has a specialised Chinese team to provide strategic legal advice to clients for trade mark planning in China. Most team members speak fluent Chinese and travel to China regularly to keep up with the latest developments.
By Kin Seong Leong and Craig Vinall
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