Pony Vs. Turtle• The Plaintiff, seeks an interim injunction against the Defendant restraining it fromimporting and selling a product (Roll papers for packaging – ‘Defendant’s product’) similar
to that of the Plaintiff’s product in India.
• “Ad interim” injunctive relief is claimed in terms of Order XXXIX Rule 1 of the Civil
Procedure Code, 1908
• THE BASIC POSTULATES:
Identical Statutory Structure in Country A (India) and in Country B (Japan);Placement of the Plaintiff’s patented product (roll paper) in the market in Japan;
There is no dispute that the Defendant’s product is manufactured by using the used-up
core tubes of the Plaintiff’s product. The said product falls within the technical scopeof the patent both in India and Japan.

The Relevant Statutory Scheme• PATENTS ACT, 1970
“S.48 - Rights of patentees - Subject to the other provisions contained in this Act and theconditions specified in Section 47, a patent granted under this Act shall confer upon thepatentee—(a)where the subject-matter of the patent is a product, the exclusive right to prevent
third parties, who do not have his consent, from the act of making, using, offering
for sale, selling or importing for those purposes that product in India;(b) where the subject-matter of the patent is a process, the exclusive right to prevent third
parties, who do not have his consent, from the act of using that process, and from the actof using, offering for sale, selling or importing for those purposes the product obtained
directly by that process in India.”S.107A [ which speaks of acts not to be considered as infringement] wasintroduced vide the Patents Amendment Act, 2002 and encapsulates the principleof exhaustion of patent rights in S.107A(b).
THE STATUTORY INTENT:“Statement of Objects and Reasons Amendment Act 38 of 2002:
xxxx

xxxx

xxxx

4. Some of the salient features of the Bill are as under—
xxxx

xxxx

(g) to provide provisions relating to parallel importof patented products;”xxxx

S.107A(b) was further amended in 2005, doing away
the requirement of an express authorization from the patentee

withStanding Committee Report (227th Report) on the
Copyright (Amendment) Bill, 2010“7.12 Committee was also given to understand by the representatives of the
publishing industry that Scheme of the Copyright Law was entirely different fromthe Trade Marks Act, 1999 and the Patent Act, 1970. The application of thestandards and principles of these two laws through the proposed amendment ofsection 2(m) would completely dismantle the business model currently employed,
rendering several industries unviable. On a specific query in this regard theDepartment informed that the concept of international exhaustion
provided in section 107 A of the Patent Act, 1971 and in section 30 (3) of
the Trademarks Act, 1999 and in section 2 (m) of the copyright
law were similar. This provision was in tune with the national policy on
exhaustion of rights.”

• TRADEMARKS ACT:S.30(3) [Exhaustion of rights of a registered trademark holder]“30. Limits on effect of registered trade mark.—
xxxx

xxxx

xxxx

(3) Where the goods bearing a registered trade mark are lawfully acquired bya person, the sale of the goods in the market or otherwise dealing in those
goods by that person or by a person claiming under or through him is not
infringement of a trade by reason only of —(a)the registered trade mark having been assigned by the registered proprietor tosome other person, after the acquisition of those goods; or(b) the goods having been put on the market under the registered trade
mark by the proprietor or with his consent.”Analysis of the Court
Issue – 1 [Applicability of international exhaustionof patent rights]• Section 48(a)& (b) of the Patents Act vests upon the patentee the right toprevent third parties from importing the patented product into
India.
• On the other hand, S.107A(b) allows the import of patented products
by any person from one who is duly authorised under the law to
produce and sell or distribute the product, and such an act shall not be
considered as an infringement of patent rights.
• Thus, S.107A(b) creates an exception to what would otherwise fall within
the contours of infringement under S.48.

THE SCOPE OF THE EXHAUSTIONDOCTRINE• Kapil Wadhwa v. Samsung Electronics Ltd [2012 SCC Online Del 5172]“lawfully acquired”, as appearing in S.30(3) does not mean goods imported into India
with consent of the registered proprietor of the trademark or its assignee, but would rather
mean acquisition of goods as per the laws of sale and purchase of that country (exporting
country).
• Philip Morris Products v. Anil Kumar Singh & Ors 2014 SCC Online Del 1051
Once the products were lawfully acquired as per the laws of that country (exporting
country), sale of such products in India would not constitute an infringement of a
trademark.

THE INTERNATIONAL PERSPECTIVE• Impression Products Inc. v. Lexmark International Inc., (2017) 137 S Ct.
1523:“..The right to use, sell, or import an item exists independently of the PatentAct. What a patent adds—and grants exclusively to the patentee—is a limited
right to prevent others from engaging in those practices. See Crown Die & Tool
Co. v. Nye Tool & Machine Works, 261 U. S. 24, 35 (1923). Exhaustion
extinguishes that exclusionary power……As a result, the sale transfers the rightto use, sell, or import because those are the rights that come along withownership, and the buyer is free and clear of an infringement lawsuit because
there is no exclusionary right left to enforce.”“This question about international exhaustion of intellectual property rights has also
arisen in the context of copyright law. Under the “first sale doctrine,” which is
codified at 17 U. S. C. §109(a), when a copyrightsells a lawfully made copy of its work, it loses the power to restrict
the purchaser’s freedom “to sell or otherwise dispose of . . . that
copy.”
Applying patent exhaustion to foreign sales is just as straightforward. Patent
exhaustion, too, has its roots in the antipathy toward restraints onalienation, see supra, at 6–8, and nothing in the text or history of the Patent
Act shows that Congress intended to confine that borderless common law
principle to domestic sales. In fact, Congress has not altered patent exhaustionat all; it remains an unwritten limit on the scope of the patentee’s monopoly.
…And differentiating the patent exhaustion and copyright firstsale doctrines would make little theoretical or practical sense: The
two share a “strong similarity . . . and identity of purpose,” Bauer &Cie v. O’Donnell, 229 U. S. 1, 13 (1913)…

• Calidad Pty Ltd. & Ors v. Seiko Epson Corporation & Anr, [2020]
HCA 41:“5. It is not disputed that on the sale or resale of a patented product thepurchaser becomes the owner of that item of property. It is aprinciple of the law of personal property that the owner ofchattels has an absolute right to use or dispose of them as they
think fit.
This principle was applied by a majority of this Court in 1908 in
Menck (High Court), where it held that conditions on resale could
only be imposed as a matter of binding agreement. The Court
applied a doctrine that a patentee's monopoly rights of use andsale with respect to a product arising from statute are exhausted
on sale (the "exhaustion doctrine").

•“20. Roberts CJ explained that the "exhaustion doctrine" is not a presumptionthat arises on sale, rather it recognises a limit on the scope of the patentee’s
statutory rights. His Honour said that a patentee is free to set the price and negotiate
contracts with purchasers but they may not, "'by virtue of his patent, control the use ordisposition' of the product after ownership passes". Acknowledging that the effect of apatent is to grant to a patentee a right to prevent others from using or selling
their product, his Honour explained that the exhaustion doctrine regards that
exclusionary power as extinguished when the product is sold. His Honour
reiterated what had been said in the earlier cases – that when a patentee chooses
to sell a patented product it "is no longer within the limits of the monopoly".
Instead it becomes the "private, individual property" of the purchaser with all
the rights and benefits of ownership.

EXHAUSTION NOTWITHSTANDING• United Wire [Lord Hoffman]:“Where however it is alleged that the defendant has infringed by making the patented product,
the concepts of an implied licence or exhaustion of rights can have no part to play. The sale of apatented article cannot confer an implied licence to make another or exhaust the right of thepatentee to prevent others from being made……”• Australian High Court in Calidad“45. Regardless of whether the exhaustion doctrine or the implied licence doctrine is to bepreferred, neither doctrine has any part to play in determining whether there has been an
infringement of a patent by reason that a new product embodying the claimed invention has beenmade. The sale of a patented product cannot confer an implied licence to make another and it
cannot exhaust the right of a patentee to prevent others from being made. The right to make aproduct is a separate and distinct right from the right to use or to sell. The definition of "exploit" in
the Patents Act 1990 makes this plain.

• 76. The exhaustion doctrine has the virtues of logic, simplicity andcoherence with legal principle. It is comprehensible and consistent with thefundamental principle of the common law respecting chattels and an owner's
rights respecting their use. At the same time, it does not prevent a patentee
from imposing restrictions and conditions as to the use of a patented productafter its sale but simply requires that they be obtained by negotiation in theusual way and enforced according to the law of contract or in equity.”

SOTEFIN- THE DISCORDANT NOTE
A. Holds that consent of the patentee is still required notwithstanding theamendments to Section 107A(b)B.

Laws mean the Indian statutory regime• NOTE OF SCEPTICISM:
FAILS TO NOTICE PREVIOUS BINDING PRECEDENTS [Kapil
Wadhwa (Bench of larger coram) and Philip Morris (Coordinate
Bench).
RENDERED AT THE INTERIM STAGE- MERE PRIMAFACIE VIEWADDITIONAL POINTS OF RESERVATION :Contrary to plain textual reading of S.107A(b)Sotefin’s finding that the ‘patented product’ should refer to a productpatented in India under the Patents Act is erroneous;
Reading a requirement of specific authorization of the patentee
amounts to resurrecting Section 107A(b) as it stood pre 2005
Observations in paras 67 and 68 that the term ‘law’ appearing in
S.107A(b) must refer to the Indian law encroaches upon the field oflegislative policy and is contrary to the letter and intent of S.107A(b).
In light of the same, the Court would defer to the exposition of theexhaustion doctrine as set out in Kapil Wadhwa and Philip Morris, as
opposed to Sotefin.

The Debate between ‘Repair’ and ‘Making’• House of Lords in United Wire Ltd v. Screen Repair Services:
Lord Bingham:
Repair may include no more than remedial action to solve issues relating tonormal wear and tear or even substantial reconstruction entailing extensive
replacement of parts
Lord Hoffman
While repair may “share a boundary” with making, it cannot encroach upon
its territory
While notions of repair and making may overlap, they are for the purposesof the statute mutually exclusive
Repair is a residual right of the owner to do all but which would notamount to making.

• The UK Supreme Court in Schutz v. Werit:“26. The word “makes” must, of course, be interpreted contextually…. First,
the word “makes” must be given a meaning which, as a matter of ordinary
language, it can reasonably bear. Secondly, it is not a term of art: like many
English words, it does not have a precise meaning. Thirdly, it will inevitably
be a matter of fact and degree in many cases whether an activity
involves “making” an article, or whether it falls short of that.”“58. However, as mentioned above, it is a matter of degree, to be assessed ineach case, whether replacing a worn or damaged part of a patented
article amounts to “making” the patented article….”

A NOTE OF CAUTION
A. Courts should avoid considering whether an article had been
repaired and emphasis should be laid on whether the activity
amounted to a ‘making’ of the patented product;
B. The decisions rendered on the question of making must be
appreciated remembering that the issue is always one of fact anddegree. They must be understood in the factual backdrop ofeach case.

Tests to distinguish between the ‘Repair’ and ‘Making’ of
a product• The discussion in Schutz on “(permissible) repair” and “(prohibited) remaking” :“42. In Impeller Flow Meter, the BGH referred to “the distinction between a(permissible) repair and a (prohibited) remaking” and observed that this could“only be determined in the light of the particular nature of the subject matter ofthe invention and a balancing of the conflicting interests.”“… . But what is also relevant is the extent to which the technical effects of theinvention are reflected by the replaced parts. Therefore, the replacement of apart subject to wear and tear that is usually replaced during the expected
service life of the machine - sometimes repeatedly - does not usually constitutea new manufacture. The situation can be different, however, if this part in fact
embodies essential elements of the inventive concept.”

“50. The mere fact that an activity involves replacing a constituent part of an article
does not mean that the activity involves “making” of a new article rather thanconstituting a repair of the original article. Repair of an item frequently involves
replacement of one or some of its constituents. If there are broken tiles on a roof,
the replacement of those tiles is properly described as repairing the roof, andsuch replacements could not be said to involve rebuilding, or “making”, the roof.
Indeed, replacing the whole of a deteriorated roof of a building could be regarded
as repairing the building, taken as a whole, rather than reconstructing the building…”“66. ….. In principle, a purchaser of a patented article, as I see it, should be taken as entitled tomake such an assumption, subject to section 60(1)(a). Accordingly, for that reason also,
where the article includes a component which is physically easily replaceable andin practice relatively perishable, those features must constitute a factor (whichmay, of course, be outweighed by other factors) in favour of concluding that the
replacement of that component does not fall foul of section 60(1)(a).

• The Australian view in Calidad:“55. It has consistently been held that for an infringement to be established there must
be a true reconstruction so as to in fact make a new article. The replacement of
individual unpatented parts may involve a right to repair where what is done bears on
the usefulness of the old combination of the product. Modifications of this kind tend to be
characterized on the spectrum closer to repair than to reconstruction or making.”“60. The wide scope given to alterations to a purchased product which improve theusefulness of it is evident from a decision of the Supreme Court of the United States
which was discussed in Hewlett-Packard. In that case the purchaser resized or
relocated six of the 35 elements of a patented fish-canning machine so that the machine
could pack fish into smaller cans. The Supreme Court held that the purchaser had
merely adapted the old machine to a related use. Whilst that was more than "repair" inthe ordinary sense, it was akin to repair for it "bore on the useful capacity of the old
combination" for which the royalty had been paid.”

Principles to distinguish between‘Repair’ and ‘Making’• The issue of repair and making would be best considered by applying theprinciples of ‘permissible repair’ and ‘impermissible reconstruction’.
• The said test has been formulated by the Courts in United States and BGH, and which
has been followed by the Court in Schutz and Calidad.
• Only a true reconstruction or reproduction would amount to a ‘making’ of
the product.
• Wide meaning is sought to be ascribed to the term ‘repair’, in so far as alterations,which improve the usefulness of a product.
• Mere replacement of a constituent part of a product would not constitute‘making’.
• The above activities could validly constitute the “safe harbour” for repair

裁判所の見解
争点１：国際消尽の原則の適用• 特許権の消尽の原則は、動産の所有者が完全な処分権利及び使用権を有するとする動産法が主たる根拠となっている。
• 購入者は、いったん製品を適法に取得すると、これを処分し、使用する絶対的権利を有する。
• 特許権者による同意や許諾を得ることを要するなど、購入者が特許権者による拘束を課されるとすれば、それは特許権者自身が製品を市場に流通させることによって意図的に放棄したはずの独占的権利を拡張するに等しい。
• 消尽の理論は、いったん製品が公開の市場に置かれると、特許権者が主張できる独占的な権利は消滅することを前提としている。消尽の理論は、このように、特許権者が行使する独占権と、購入者が行使し得る財産権とのバランスをとろうとするものである。

• インドの立法府は、特許法に１０７Ａ条を加えることにより、国際消尽の原則を意識的に採用した。議会の議論、委員会（著作権法に関 す る 常 設 委 員 会 ） の 報 告 書 、 及 び デ リ ー 高 等 裁 判 所 の Kapli
Wadhwa and Ors. vs. Samsung Electronics Co. Ltd. And Ors. 判
決は、インドが特許権の国際消尽を採用したことを明確に示している。
• 特許法１０７Ａ条(b)は特許製品を国内の市場で取得した場合に限って適用されるとの解釈は、条項の文言に反し、インドにおける並行輸入を推進しようとの方針にも反する。そのような解釈を採る
ことは、１０７Ａ条(b)において「輸入」(importation)という用語を明示的に用いていることに反している。
• 消尽の理論に対する明示的な制限は以下のとおり。
購入者は、消尽を口実として、特許製品を「生産」(make)する
ことや、発明品を複製することはできない。
当該製品に関し、特許権者によって、明示的に反対の趣旨の契約締結や合意がされた場合。

• 本件では、原告の特許製品が日本の市場において入手可能となり、この製品に対する原告の独占権は消尽の理論により消滅した。
• したがって、その後の当該製品の購入者又は転得者は、これを使用・処する絶対的権利を有する。しかし、その権利は特許製品を「生産」することには及ばない。この観点から、「修理」と「生産」の問題が重要となる。
争点２：タートル社／被告は特許製品を「生産」したか• 芯管は被告によって手を加えられていない• 芯管は、手を加えられることなく、分包用シートを消費し尽くされた後に、消費者から回収された。
• 分包用シートを消費し尽くした後の芯管はほとんど価値がない。
• 被告は芯管の使用期間を伸ばすための手段を講じたにすぎない。

• 芯管に分包用シートを巻き付けることは、発明の重要な又は本質的な部分を複製することにはならない。
• このように、被告は、芯管を改修し、再び使用可能としたにすぎないといえる。
• ロールペーパの分包用シートには本件の発明の要素はない。
• 本件において、被告は、芯管に分包用シートを巻き付け、その再利用を可能としただけである。
• 芯管を再利用することを妨げる内容の契約や制限がされてはいない。

• 分包装置及び分包用シートは従来技術として知られていた。
• 原告の特許製品は、たるみと過剰なブレーキ力という従来の課題を解決するために、芯管に磁石を取り付けるという発明要素が組み込まれているが、被告はその部分に踏み込んでいない。
• 原告の特許製品に対して被告がした行為は、明らかに、改修の範囲内にあり、修理という許される行為の範囲内にあるといえる。
• 以上の検討により、裁判所は、侵害は認められず、仮差止めの請求は退けられるべきものと判断する。