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—
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(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.—
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xxxx

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(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

View of the Court
Issue 1: Application of the principles of international exhaustion• The principle of exhaustion of patent rights draws sustenance mainly from the law of
personal property and that the owner of a chattel has the absolute right of disposal anduse.
• Once a product has been lawfully acquired, the purchaser has the absolute rights ofdisposal and use.
• Any fetters imposed by the patentee, such as obtaining its consent or authorization,
would amount to an extension of the monopoly rights, which the patentee himself
wilfully chose to give up by placing the product on the market.
• The doctrine of exhaustion seeks to postulate that the monopoly right that may beclaimed by a patentee extinguishes once the product has been placed in the open
market. The exhaustion doctrine thus seeks to balance between the monopoly right
exercised by the patentee and the individual property rights, exercisable by a purchaser.

• The Legislature in India has consciously adopted the principles of international
exhaustion by inserting S.107A in the Patents Act. The Parliamentary Debates,
Committee Reports and the detailed exposition of the doctrine in Kapil Wadhwa
clearly indicate that India has adopted international exhaustion of patent rights.
• Any interpretation that S.107A(b) would apply only if the patented product isacquired in the domestic market would go against the plain text and intent of
encouraging parallel imports in India. According such a meaning would go against
the express usage of the term ‘importation’, as set out in S.107A(b).
• The express limitations to the doctrine of exhaustion are:
The purchaser cannot ‘make’ the patented product or replicate the invention,
under the guise of exhaustion.
Express negative covenant or stipulation imposed by the patentee with respect
to the product.

• In the present case, once the Plaintiff’s patented product was available in the open market
in Japan, the Plaintiff extinguished its monopoly right on the product, by virtue of thedoctrine of exhaustion.
• Thus, any subsequent purchaser or acquirer has the absolute right of use and disposal of the
product. However, the said right does not extend to ‘making’ the patented product. It is in
the aforesaid light that the issue of ‘repair’ and ‘making’ becomes critical.
Issue 2: Did Turtle Corp./the Defendant ‘make’ the patented product• The core tube not worked upon by the Defendant• The core tube remained untouched and was procured from genuine customers after the
packaging sheet had been used up.
• The core tube has very little utility once the packaging sheet is used up or finished.
• The Defendant has merely taken steps to extend the useful life of the core tube.

• Winding of the packaging sheet around the core tube does not entail
replication of any core or essential element of the invention.
• The Defendant thus appears to have merely refurbished the core tube andmade it capable of being used again.
• No inventive element claimed on the packaging sheet of the roll paper.
• The Defendant in the present case has merely wound the packaging sheet
around the core tube, thereby enabling its re-use.
• No negative covenant or restriction to bring the core tube into re-use
stipulated• The Packaging Device and the packaging sheets were known in theprior art.
• Inventive element of magnets on the core tube, in order to solve theearlier problems of sagging and excessive braking force has not been
trenched upon by the Defendant in its product.
• Activity undertaken by the Defendant upon the Plaintiff’s patented
product prima facie falls within the scope of refurbishment, thereby
falling within the safe harbour of repair.
• In view of the aforesaid, the Court holds that there is no case forinfringement, and the prayer for grant of interim injunction is liable tobe refused.