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Repair or remake? Australia’s position on patent rights after sale

Malcolm Campbell, ||

Most people think that when they buy a good, they wholly own that good and are free to do what they want to it or with it. That’s not always correct in Australia.

We all know that after a purchase, we have an ongoing relationship with the manufacturer or seller of the goods who must repair or replace a good that is not fit for purpose or breaks within a certain period of time. But other than fixing our goods by using authorised replacement parts, we tend to think everyone else’s claim to that good is exhausted. Not so in Australia, but maybe that is about to change.

Since at least 2017, the position in the United States has been very clear: “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale’ (meaning it doesn’t matter if the first sale is in the US or overseas, the US rights are exhausted on sale). It takes the same position with goods in which copyright is protected.

In Australia, the answer to the question, can I repair my tractor or vehicle by replacing a part with a new version of the same part without infringing someone’s potential IP rights is typically yes (note manufacturer’s warranties are different and may require authorised parts).

But the answer to the question, can I take an engine and make a barbecue out of it, is ‘not necessarily’ yes because the IP owner’s rights in Australia are not exhausted on sale. Instead you are granted an ‘implied’ licence to use the goods within any restrictions the manufacturer, owner or seller places upon it.

That’s why there has been years of litigation about patented printer cartridges, where an entity that did not initially manufacture the cartridge, drilled a hole in the side, refilled it with ink, filled the hole and then resold the printer cartridge with either the same chip or a reworked chip that controls the cartridge’s work in the printing process.

In Australia, the current law is that when you purchase a good or service in which any intellectual property rights are vested, you are granted an ‘implied licence’ to use the good and related intellectual property. A licence is different to the US exhaustion of rights. The implied licence gives the IP owner a continued connection with the goods that may enable that person to limit the way they use the good or service purchased. However, a long running Australian case may change that – we are hoping the Australian High Court will take the opportunity to give a clear position, as has the US Supreme Court (it would not be too much of a stretch to suggest our High Court decided to take on the appeal in order to have the opportunity to tell us what the law on exhaustion of rights should be).

So, if you intend to ‘power up’ your tractor, you might need to think twice.

If you have any questions relating to any of the information in this blog or you require assistance, please do not hesitate to get in touch with a member of Coleman Greig’s Intellectual Property team, who would be more than happy to assist you.


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