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Joanna Jones and Mathew Lucas provide a breakdown of the most important patent cases of the last 12 months. This article first appeared in Managing Intellectual Property and is reproduced here with permission.

Recent Australian Federal Court decisions have dealt with issues of contributory infringement, the novelty grace period provisions and the meaning of innovative step as it relates to innovation patents. The courts have also considered the rarely-invoked provisions dealing with non-infringement declarations and have commented on the weight to be given to expert testimony when considering patent claim validity. Brief summaries of these decisions are provided below.

Grace period clarified

Section 24 of the Australian Patents Act 1990 (Cth) provides that, for the purposes of assessing novelty and inventive step for standard patents and innovative step for innovation patents, information publicly disclosed or prior use by or with the consent of the complete applicant is to be disregarded if a patent application is filed within 12 months of the disclosure (pursuant to reg 2.2 (1A) of the Patents Regulations 1991 (Cth). These are referred to as the novelty grace period provisions.

In the case at first instance Justice Stone considered the meaning of “the filing date of the complete application” in reg 2.2 (1A) in the context of a divisional application. Justice Stone held that the “filing date of the complete application” is the filing date of the divisional application, and that a divisional application is not entitled to the benefit of the grace period associated with its parent application unless the divisional was filed within 12 months of the public disclosure.

The Court’s reasoning was influenced by regulation 2.3(4) which deems that (for the purposes of determining the prescribed period for Section 24) the filing date of a divisional is taken to be the filing date of the parent application. According to Justice Stone, if the reference to “a filing date of a complete application” in regulation 2.2 (1A) was reference to the filing date of the parent application there would be no need for regulation 2.3(4) (Mont Adventure Equipment Pty Limited v Phoenix Leisure Group Pty Limited [2008] FCA 1476).

The decision was appealed to the Full Federal Court and The Institute of Patent and Trade Mark Attorneys of Australia (IPTA) sought, and was granted, leave to intervene in the appeal by making written and oral submissions as an amicus curiae.

The judgment at first instance was overturned by the Full Federal Court (Mont Adventure Equipment Pty Ltd v Phoenix Leisure Group Pty Ltd (2009) FCAFC 84). In a unanimous decision it was held that reference to “the complete application” in reg 2.2(1A) refers to the parent application and not the divisional application (in line with the construction put forward by Mont Adventure and IPTA), and that therefore a divisional application should receive the benefit of the grace period provisions that applied to the parent.

The approach adopted by the Full Court is consistent with the apparent intention of the provisions. As stated by Justice Bennett: “I see no reason why a divisional fairly based on a parent and entitled to a priority date and term of the patent should be deprived of the benefit of the grace period”.

Innovative step defined

The Full Federal Court has upheld the 2008 decision of Justice Gyles (Delnorth Pty Ltd v Dura-Post (Aust) Pty Ltd (2008) FCA 1225) which provided guidance as to the meaning of an innovative step when considering the patentability of inventions the subject of an innovation patent.

The case at first instance involved three related divisional innovation patents of which Delnorth is the patentee. The claims of the three patents are directed to different aspects of a roadside post made of spring steel that is capable of bending elastically through 90 degrees upon impact by a vehicle.

Delnorth issued proceedings against Dura-Post for patent infringement and Dura-Post cross-claimed for revocation of the patents as lacking novelty and innovative step.

On appeal, Dura-Post challenged the findings of Justice Gyles that the claims of the patents involved an innovative step, were novel and a new manner of manufacture.

The Full Court confirmed (Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd (2009) FCAFC 81) that when considering innovative step the Court must determine whether the invention varies from the prior art in ways that make a substantial contribution to the working of the invention. It was also upheld that a substantial contribution means real or of substance and that obviousness is not a relevant consideration when making an assessment in relation to the question of innovative step.

This decision clarifies that an innovation patent can validly be granted in respect of a claimed invention which may be obvious, provided that it makes a contribution that is real or of substance to the working of the invention.

The High Court considers contributory infringement

In Northern Territory v Collins ([2008] HCA 49), the High Court considered issues associated with the section 117 contributory infringement provisions of the Patents Act. Subject to meeting specific criteria, section 117 provides an exemption from contributory infringement if the product is a “staple commercial product”.

Vincent Collins is the owner of a patent directed to a process for producing blue cypress oil from a mixture of the bark and wood of a specific species of cypress tree (Callitris Intratopica). He alleged contributory infringement of the patent by the Northern Territory Government resulting from its grant of a licence to Australian Cypress Oil Company Pty Ltd (ACOC) to take the cypress trees from Crown land. ACOC allegedly extracted the oil from the trees they were licensed to take.

In the earlier Full Federal Court decision (Collins v Northern Territory (2007) FCAFC 152) the majority found that the product in question was unmilled trees of the specific cypress species. Evidence showed that the species of cypress is not readily available for purchase, and it was held that the unmilled trees could not be considered a staple commercial product. The resulting finding was that the grant of the licence to ACOC to take the trees from Crown land amounted to contributory infringement of Collins’ patent.

The issue for consideration by the High Court was whether the Northern Territory Government was liable under section 117 for infringement of the Collins patent by its supply of timber to ACOC. For the purposes of the appeal it was accepted that ACOC extracted blue cypress oil from the trees using the patented process and that ACOC was therefore a direct infringer of the patent.

Justice Crennan held (and the majority agreed) that “The phrase “staple commercial product” means a product supplied commercially for various uses…t[T]he relevant enquiry is into whether the supply of the product is commercial and whether the product has various uses”. The High Court held that because the timber had been supplied commercially and had several uses, it was a staple commercial product. If the product supplied is a staple commercial product liability cannot arise under section 117.

While the High Court allowed the appeal on this ground, it is disappointing that the Court did not thoroughly consider the issue as to whether section 117 applies in a situation where the patented invention is directed to a process or method that does not result in production of a physical product. In Rescare Ltd v Anaesthetic Supplies Pty Ltd ((1992) 25 IPR 119) it was decided that supply of the alleged infringer’s positive pressure device for treatment of sleep apnoea (which included instructions to use the device) did not fall within the operation of section 117 in respect of the patentee’s claims to a method of medical treatment directed to that use. In that decision the Court stated that there must be an act done “in respect of a product resulting from such use”.

Non-infringement declarations restricted

In Occupational and Medical Innovations Ltd v Retractable Technologies Inc ((2008) (FCA 1102)) the Federal Court judicially considered the scope of the provisions of section 125 and section 126 of the Act for the first time. Section 125 provides that a person wishing to exploit an invention “may apply to a prescribed court for a declaration that the exploitation of the invention would not infringe a claim of a particular complete specification” whilst section 126 specifies that the prescribed court “must not make a non-infringement declaration unless a patent has been granted in respect of the relevant invention”.

Justice Dowsett held that these provisions are only available to a party which has a granted patent for the activity which it alleges is non-infringing. This decision severely limits the scope for the grant of non-infringement declarations in Australia.

Amending a patent request after grant

In Weatherford Australia Pty Ltd v Screenex Pty Ltd ((2009) FCA 331), the applicants (Weatherford) applied to the Court pursuant to Section 105(1) to amend the patent request in respect of a granted patent. Section 105(1) of the Act reads:

In any relevant proceedings in relation to a patent, the court may, on the application of the patentee, by order direct the amendment of the patent, the patent request or the complete specification in the manner specified in the order.

The patent request erroneously claimed divisional status from a grandparent case instead of from the parent application. The grandparent case had proceeded to grant prior to filing the application in suit and was therefore not available as a basis for claiming divisional status. Weatherford sought an order from the Court to amend the patent request so that the patent could claim divisional status from the parent application.

The error went unnoticed by the patentee, the Patent Office and the attorneys for the original applicant for many years but was raised by the respondent (Screenex) during separate infringement/revocation proceedings.

Screenex opposed Weatherford’s application under section 105, arguing that the amendment of the patent request would entitle Weatherford to a priority date earlier than that which it would be otherwise entitled. Allowing the amendment would, according to Screenex, substantially alter the balance of the parties’ rights and obligations with respect to the issues in the revocation proceeding.

Justice Jessup clarified that section 105 includes within its ambit the ability of a court to direct an amendment which could remove a potential ground of invalidity. The Court was mindful that the granting of the amendment may give the applicant a range of rights that they did not have, or may serve to deny Screenex a defence presently available. The Court did, however, consider that the more important question was whether the granting of the amendment would allow the applicant to take unfair advantage of the error which it now sought to correct, or whether the amendment would unfairly prejudice Screenex in the sense of leaving it in a less favourable position than it would have occupied if the correct details had been included in the patent request when originally made.

In the Court’s view, the amendment was to merely give formal expression to a situation which, in a practical sense, corresponded with that which would have appeared to anyone searching the register at the time. As such, the Court found it difficult to see how Screenex would be prejudiced by the grant of the present motion. In relation to this doctrine, the Court referred to SmithKline and French Laboratories Ltd v Evans Medical Limited ((1989) (1 FSR 561, 569)), which stated (in part) “a patentee who seeks to obtain an unfair advantage from a patent, which he knows or should have known should be amended” would not be allowed to amend. Justice Jessup commented that it was important that the amendment was sought promptly once the error had been recognised and that a patentee who knowingly defers action to amend, thereby taking opportunistic advantage of the existence of the error, is unlikely to be in the strong position to call for the favourable exercise of the Court’s discretion under Section 105.

In allowing the amendment, Justice Jessup exercised the Court’s discretion further by making the amendment retrospective, thus denying Screenex the defence of invalidity based on lack of novelty.

Weatherford also filed a motion under section 192(1) for the amendment to be consequently made to the register. Section 192(1) allows rectification of the register under certain circumstances by a “person aggrieved”. As Weatherford’s predecessor made the error, Screenex argued that Weatherford did not have the quality of innocence which the word “aggrieved” implies. The Court did not accept this submission. In reply, Justice Jessup clarified that the term “person aggrieved” was “commonly used in legislation to refer to a person who is disadvantage by an event or state of affairs and who has a legitimate interest in the achievement of the correction, compensation or other remedial outcome for which the statute in question provides”. As such, the Court held that the error was an error envisaged by Section 192(1)(d) (an “error or defect” in an entry in the register) and hence allowed Weatherford’s motion to rectify the register.

While it appears to be advantageous to seek amendment under section 105 as soon as an error is recognised, it is unclear whether the Courts would follow the dicta of Justice Jessup in situations where the nature of the error would not have been apparent or obvious from a search of the register.

Assessing evidence from inventors

In PAC Mining Pty Ltd v Esco Corporation ((2009) FCAFC 18 (4 March 2009)) the Full Federal Court yet again emphasised the importance of expert evidence in the assessment of inventive step (non-obviousness). In particular, the Court expressed its criticism of expert testimony where the expert is well aware of the solution at the time they are asked to express an opinion about the obviousness of a claimed invention (i.e. they are tainted by hindsight). The Court also clarified that the expert testimony of an inventor is to be treated just as the testimony of any other expert and is not to be provided any special weight.

The respondent (Esco) asserted patent infringement by PAC. In a cross-claim, PAC challenged the validity of the patent, asserting (among other things) that the claims lacked an inventive step. This decision arose from an appeal of the judgement at first instance by a single judge of the Federal Court, in which it was decided that the patent claims were valid and involved an inventive step.

In the primary ruling the judge preferred the evidence provided by Esco’s expert, Robert McClanahan over that of PAC’s expert, professor Wightley. McClanahan was an inventor in respect of the patents in suit. The primary judge gave “considerable weight” to McClanahan’s testimony at trial, referring to a passage from the academic text “The Law of Patents” (by Terrell, 3rd edition, 1994) stating: “when deciding whether there has been an inventive step, the Courts have attached considerable weight to the evidence of the inventor”. The appeal by PAC was partly based on the submission that the primary judge had erred in providing the inventor’s testimony greater weight than that of professor Wightley.

In the appeal, the Full Federal Court accepted PAC’s submission that the primary judge’s reasoning was inconsistent with the authority in Wellcome Foundation v VR Laboratories (Aust) Pty Ltd (1981) (148 CLR 262) in which it was found that there is no general proposition of law that, when questions of obviousness are an issue, considerable weight should be given to the evidence of the inventor. As such, the Court held that the mere fact that McClanahan was an inventor did not justify the primary judge giving any special weight to McClanahan’s evidence.

With that said, the Full Court considered that the primary judge did not err in his final determination on the question of obviousness. In the context of the evidence provided, the Full Court agreed with the primary judge’s view that the value of professor Wightley’s evidence was compromised because, from the outset, he had been exposed to the problem as well as the solution presented in the patents in suit. In this regard, the Court considered that the primary judge was justified in treating professor Wightley’s evidence with caution, with the result that PAC failed to establish that the invention lacked an inventive step.