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Federal Court finds patents indirectly infringed by supplier

6 minute read

On 17 March 2020, the Federal Court of Australia in Quaker Chemical (Australasia) Pty Ltd v Fuchs Lubricants (Australasia) Pty Ltd (No 2) [2020] FCA 306, decided that a company had indirectly infringed two patents by supplying its customers with a product because the use of the product by the customers would have infringed the methods of the patents.

The patents

The relevant patents were an Australian standard patent (AU 2012304245) and its divisional child, an innovation patent (AU 2013100458). Both patents were owned by Quaker Chemical (Australasia) Pty Ltd.

The patents related to methods of detecting high-pressure fluid injection (HPFI) injuries that can occur when operating large hydraulic machinery, typically employed in mining environments. A leak in the machine can cause a thin jet of hydraulic fluid to shoot out and puncture skin, although it is difficult to establish whether the fluid injects itself into the body.

The solution presented in Quaker’s patents was a method in which the hydraulic fluid was supplemented with a fluorescent dye so that fluid that entered the body could be more readily detected under ultraviolet light.

In its broadest form, the invention was a method for detecting fluid injection in a patient including the steps of:

  • providing a fluid storage tank;
  • providing fluid for use in machinery and adding said fluid to the fluid storage tank;
  • providing a fluorescent dye and adding the fluorescent dye to the fluid such that the fluid fluoresces in the presence of ultraviolet light; and
  • a possible fluid injection occurring in a patient.

Background facts

The respondent, Fuchs Lubricants (Australasia) Pty Ltd, was a supplier of various fluids for use in hydraulic machinery, including hydraulic fluid mixed with a fluorescent dye.

Fuchs’s dyed fluid was suitable for use in Quaker’s patented methods, but Quaker was not opposed to its supply because Fuchs had been acquiring the fluorescent dye from Quaker.

Between 2015 and 2016, however, Fuchs started supplying hydraulic fluid mixed with a fluorescent dye that was not Quaker’s dye. Quaker consequently sued Fuchs for indirect patent infringement.

Indirect infringement

Fuchs was only the supplier of the fluorescent hydraulic fluid; there was no evidence that Fuchs itself had directly infringed the patents by performing the patented methods. In light of this, Quaker’s main charge was that Fuchs had indirectly infringed the patents by supplying fluorescent dye to various mine operators whose use of the dye would have infringed the patents.

A patentee is protected from indirect infringement under ss. 117(1) of the Patents Act 1990:

If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.

There are, however, a number of conditions that must be met in order for the supply of a product to be considered an indirect infringement. In this instance, Quaker asserted that the requisite conditions had been met because:

  1. Fuchs had reason to believe that the product it sold would be used by its customers in the patented methods (as required under ss. 117(2)(b)); and/or
  2. Fuchs had induced its customers to use the supplied product in the patented methods (as required under ss. 117(2)(c)).

Fuchs had reason to believe the patents would be infringed

Robertson J. found that Fuchs had indirectly infringed the patents but only in its dealings with one of its customers because only in that particular case did Fuchs have reason to believe that the supplied product would be used to infringe the patents, as required under s 117(2)(b).

While Fuchs had supplied its product to multiple customers, in most cases the supplied product was a fluid containing a low concentration of fluorescent dye intended for use in leak detection rather than injury detection. Such use fell outside the purview of the patents. Moreover, Fuchs had taken steps to communicate to its customers that the product being bought was not to be used for injury detection.

The exception was a mine in Broadmeadow, Queensland, operated by the BHP Billiton Mitsubishi Alliance, where Fuchs had been informed by the mine operator that the fluorescein-hydraulic fluid mixture would be used to detect injuries. Fuchs even increased the concentration of fluorescent dye in the mixture so as to improve the product’s suitability for injury detection.

One of the defences raised by Fuchs was that, given the rarity of HPFI injuries, there was no reason to believe that the Broadmeadow mine operator would actually put the product to an infringing use. His Honour rejected this argument as being inconsistent with his interpretation of the law, whereby the supplier would need to have reason to believe that the product would be used in an infringing manner when the occasion to do so actually arises.

The supplied product was not a staple commercial product

A prerequisite for ss. 117(2)(b) to apply is that the supplied product not be a “staple commercial product”, which has been taken to mean a product supplied commercially for various uses, such as a commodity or raw material.

Fuchs had tried to persuade the Court that the luminescent dye contained in the supplied fluid was in fact a staple commercial product. However, Fuchs had never supplied the luminescent dye on its own, and instead supplied it mixed into hydraulic fluid. Robertson J. held that it was the product as supplied that was under scrutiny.

His Honour thus found that Fuchs’s product, being a hydraulic fluid containing a fluorescent dye, was not a staple commercial product because it was a special-purpose fluid designed for particular uses in hydraulic machinery.

Fuchs induced its customer to infringe the patents

Robertson J also found that Fuchs had indirectly infringed the patents because it had induced one of its customers (the Broadmeadow mine operator) to use the product in a way that would have infringed the patents, as required under ss. 117(2)(c).

The presence of an inducement, in his Honour’s view, followed from the consideration of several factors. First, Fuchs had known that the Broadmeadow operator had wanted to use the fluorescent hydraulic fluid to aid in HPFI detection. Second, Fuchs had presented to the Broadmeadow operator a comparison between the qualities of its product and those of Quaker’s. Third was that Fuchs, which sold both Quaker’s fluorescent dye and its own fluorescent dye, had offered the latter for a lower price.

Take home points

The protection accorded by a patent extends to the supply of products that could be used to infringe the patent, regardless of whether the products are actually put to an infringing use. A patent owner therefore may choose to enforce his or her patent against suppliers who, while not making unauthorised use of the invention themselves, indirectly infringe the patent by facilitating or inducing such unauthorised use.