Australia: A year in the Australian IP courts
First published on 25 September 2015, Managing Intellectual Property
The High Court considers patentability issues and distinctiveness of foreign words, while the Federal Court considers unique preliminary discovery applications. Chris Jordan and Jessica Sapountsis of Davies Collison Cave offer an overview.
There have been a number of significant IP developments in Australia over the last 12 months, many of which have been of international interest.
D’Arcy v Myriad Genetics Inc.  FCAFC 115
An expanded panel of five judges of the Full Federal Court has unanimously upheld a previous single judge federal court decision, which held that isolated genetic material sequences are patentable.
Interestingly, in corresponding proceedings in the United States, the US Supreme Court in Association for Molecular Pathology v USPTO and Myriad Genetics 2012 689 F.3d 1903 has held that isolated genetic material is not patentable subject matter.
Myriad Genetics owns a patent directed at an isolated but naturally occurring genetic sequence called the BRCA1 gene, which is used in diagnostic testing for breast and ovarian cancer in women. In 2010, Yvonne D’Arcy, a cancer survivor and Cancer Voices Australia (a network of cancer advocacy groups) took action against Myriad seeking to invalidate certain claims of the patent. D’Arcy argued that mere isolation of genetic material which occurs in nature could not properly be considered an artificially created state of affairs and therefore was not patentable subject manner.
Myriad argued that it had not merely isolated the DNA that naturally existed in human cells but had extracted DNA from cells obtained from the human body and purged it of other biological materials with which it was associated.
The Full Court agreed with Myriad and held that:
What is being claimed is not the nucleic acid as it exists in the human body, but the nucleic acid as isolated from the cell. The claimed product is not the same as the naturally occurring product. There are structural differences but, more importantly, there are functional differences because of isolation…. [and that] Myriad did not merely ‘separate that gene from its surrounding genetic material’.
The isolation of the necleic acid also leads to an economically useful result – in this case, the treatment of breast and ovarian cancers. This is surely what was contemplated by [the test for] a manner of new manufacture.
The Full Court considered the arguments made before the US Supreme Court, which rejected the claim over isolated nucleic acids for much the same reasons as those pressed by D’Arcy. The Full Court held that:
The Supreme Court’ emphasis on the similarity of ‘the location and order of the nucleotides’ existing with the nucleic acid in nature before Myriad found them is misplaced. It is the chemical changes in the isolated nucleic acid which are of critical importance, as this is what distinguishes the product as artificial and economically useful.
Accordingly, the Court held that the invention was patentable given that the isolation of the nucleic acid had resulted in an artificially created state of affairs for economic benefit.
D’Arcy was granted special leave to appeal the High Court. The High Court heard the matter in June 2015 and has reserved its decision.
AstraZeneca v Apotex  FCAFC 99
A specially constituted bench of five judges in the Full Federal Court has clarified the test for inventive step under the Patents Act 1990 (Cth). Though the Full Court considered issues other that inventive step, this case summary focuses only on the novelty issue and the inventive step issue, which is the subject of a special leave application to the High Court.
AstraZeneca markets a pharmaceutical product called Crestor, which is used for the treatment of high cholesterol (hypercholesterolemia) and contains the active ingredient rosuvastatin. AstraZeneca relevantly owns two Australian patents which relate to rosuvastatin – one for a method of treating patients with hypercholesterolemia comprising administration of a low dosage of the pharmaceutical compound rosuvastatin (low dose patent) and the other for a pharmaceutical compound comprising rosuvastatin with an inorganic salt (cation patent).
At trial, the patents were found to be invalid for lack of novelty, inventive step and entitlement.
On appeal to the Full federal Court, AstraZeneca argued that the starting-point approach to inventive step adopted by the Full Federal Court in Apotex v Sanofi-Aventis 2009 [FCAFC] 134, and applied by the trial judge, was wrong.
One of the requirements for patentability under the Patents Act is that the invention must involve an inventive step. An invention is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art in the light of the common general knowledge, either separately or together with any prior art information, as it existed as at the priority date. The court in Apotex v Sanofi-Aventis held that a starting point, when determining inventive step, should be include the description in a patent specification of a particular problem to be solved, even if the problem is not part of the common general knowledge or prior art information.
The Full Court in AstraZeneca disagreed with this approach and held that when determining inventive step, material contained in the specification could not be general to be part of the starting point unless it could, separately, be considered to be part of the common general knowledge or prior art. In other words, statements made in a patent specification (for instance, about a problem that the invention is said to solve) cannot be relied upon as a substitute for information which did not otherwise form part of the common general knowledge or was not disclosed in the prior art. The Full Court held that it was not permissible to enlarge the body of knowledge and information that make up common general knowledge ‘by reference to the inventor’s (or patent applicant’s) description in the complete specification of the invention, including, in particular, any problem that the invention is explicitly or implicitly directed at solving’. According to the majority, ‘the notion that the question of inventive step can be answered by reference to knowledge or information that has not been made publicly available is antithetical to patent law’
Whilst the Full Court also overturned the primary judge’s findings on novelty. The primary judge had supplemented disclosures in a prior art document with information that was part of the common general knowledge. The Full Court held this approach was impermissible, and that despite a skilled addressee being able to construe prior art documents by reference to the common general knowledge, it was not permissible to use common general knowledge to add an integer that is otherwise not disclosed in the prior art document.
Despite clarifying that the starting-point test, and holding that the low dose patent was novel, the Full Court nevertheless held that AstraZeneca’s low dose patent would have been obvious to a person skilled in the art, when taking into consideration the common general knowledge at the priority date and the prior art information relating to rosuvastatin and its properties. The full Court also held that the claims of the cation patent were invalid for lack of fair basis and novelty, and ultimately did not have to decide on whether the patent lacked inventive step. AstraZeneca’s appeal was therefore dismissed, despite aspects of the primary judge’s decision being overturned.
In March 2015, AstraZeneca was granted special leave to appeal to the High Court. The High Court heard the appeal in May 2015 and has reserved its decision.
Dallas Buyers Club v iiNet (No 3)  FCA 422
Dallas Buyers Club (DBC), the owner of the copyright in the 2012 film Dallas Buyers Club, sought preliminary discovery in the Federal Court to obtain details from certain internet service providers (ISPs) including iiNet, of users who it alleges have infringed its copyright in the film by illegally uploading it to file sharing site BitTorrent.
Preliminary discovery is a process whereby a prospective defendant or to obtain further information to enable the prospective plaintiff to decide whether it has a case against a prospective defendant. In the context of a preliminary discovery application, the applicant must merely show the court that the contemplated suit has some prospect of succeeding (that it is a real case which is not fanciful). An applicant is not required to prove its case at the preliminary discovery stage or even to show the court that there is a prima facie case of infringement.
Following the release of the film, DBC became aware that that high numbers of internet users were uploading and downloading the film, without DBC’s permission, through the peer-to-peer file sharing network, BitTorrent. Through this network, users were uploading slivers of the film and those slivers could then be downloaded as a whole film by other users of the network. DBC engaged Maverickeye UG to undertake worldwide investigations into the way the BitTorrent system worked and to ascertain details of those who were participating in the unauthorised uploading and distribution of the film using the network. Maverickeye UG was able to obtain the Internet Protocol (IP) addresses of a large number of Australian users who were making available and distributing the film without DBC’s permission.
DBC applied to the court for an order for preliminary discovery against the ISPs, on the basis that the ISPs had supplied the IP addresses to the Australian BitTorrent users, and would be in possession of the personal details of the prospective respondents that DBC wished to sue for copyright infringement.
The ISPs resisted DBC’s application for preliminary discovery on the following grounds:
- It was only shown that a single sliver of the film was shared from each IP address and any copyright infringement was therefore minor.
- Given the trivial nature of the demonstrated infringements, it was unlikely that any real case would be brought against the infringers.
- There were no realistic chances of DBC obtaining injunctive relief (either because all that was shown was the sharing of a sliver of the film or because there was no demonstrated risk of repetition).
- DBC had failed to do adequate monitoring which could have identified serious infringers (ie persons who were involved in multiple downloads of multiple films).
- There was evidence which suggested that DBC was going to engage in the practice of speculative invoicing, if it was given the information sought.
- The ISPs were subject to privacy obligations in respect of their customers which should be respected.
- The Federal Government had required the industry to form a code dealing with internet privacy and the Court should wait until the code was in place rather than granting the relief sought.
- The process for preliminary discovery under the Federal Court Rules was being used as a tool of investigation rather identification, which was not a permitted purpose of the process.
- Justice Perram held that none of the above matters justified the Court refusing relief to DBC, although some of the matters did impact on the terms upon which discovery was granted.
Perram ordered the ISPs to divulge the names and physical addresses of their customers associated in their records with each of the IP addresses put forward by DBC, but imposed upon DBC a condition that the information only be used for the purposes of recovering compensation for infringements and could not otherwise be disclosed without leave of the Court. Perram therefore stayed in the preliminary discovery order pending DBC providing to the court a copy of the correspondence it proposed to send to account holders associated with each IP address. The purpose of the stay and the Court’s review of the correspondence was to ensure DBC did not engage in “speculative working”.
DBC submitted a draft letter and telephone script to the Court as well as its proposed methodology underlying its approach to the amounts it was going to claim from prospective respondents. DBC’s methodology outlined four bases upon which DBC proposed to demand monetary relief from prospective respondents:
- a claim for the cost of an actual purchase of a single copy of the film;
- a claim for an amount relating to each infringer’s uploading activities (based on a one-off licence fee from each uploader);
- a claim for additional damages depending on how many copies of other copyrighted works had been downloaded by each infringer; and
- a claim for damages arising from DBC’s costs of obtaining each infringer’s name
Having provided this information, DBC then sought to lift the stay on the preliminary discovery order. On 14 August 2015, Justice Perram handed down his decision as to whether or not the stay should be lifted. According to his Honour, DBC had a legitimate basis for claiming the sums set out in claims 1 and 4 above, but not those in claims 2 and 3 (as the sums claimed lacked legal substance). As a result, his Honour declined to lift the stay unless DBC provided the Court with a written undertaking that it would only use the information obtained under the preliminary discovery order for the purposes of requesting the sums in claims 1 and 4. In addition, recognising that DBC has no presence in Australia (meaning that the Court would be unable to punish DBC for contempt if it failed to honour the undertaking), Justice Perram ordered that DBC lodge a bond of $600,000 with the Court in order to secure the undertaking.
It is unclear whether or not DBC will provide the undertaking and pay the $600,000 bond in order to obtain account holders’ information.
Cantarella Bros v Modena Trading  HCA 48
The High Court has confirmed that when considering whether foreign word marks are distinctive in Australia, it is necessary to consider the ordinary signification of the word or words to persons in Australia that are concerned with the goods to which the trade mark is applied. The term ‘concerned persons’ refers to those who ‘purchase, consume and trade in the goods’.
Cantarella owns registered trade marks for the Italian words Oro (meaning “gold” in English) and Cinque Stelle (meaning “five stars” in English), both registered in relation to coffee and other class 30 goods. It uses those marks on its coffee products which are marketed and sold under the Vittoria house mark.
In 2009, Modena commenced importing and distributing Caffè Molinari coffee products from Italy labelled with the marks Caffè Molinari together with Cinque Stelle and “Caffè Molinari” together with Oro (rebranded as “QualitÀ Oro” in 2011).
Cantarella sued Modena for trade mark infringement, misleading or deceptive conduct, misrepresentation and passing off in 2013. Modena cross-claimed, seeking orders that Cantarella’s trade marks be struck from the register on the basis that the marks were not inherently adapted to distinguish the goods for which they were registered as they are commonly used by other traders to designate the quality or characteristics of Italian coffee.
The trial judge held that Cantarella’s trade marks were inherently adapted to distinguish, however this finding was overturned on appeal to the Full Federal Court. Cantarella was granted special leave to appeal to the High Court, although leave was only granted in respect of a consideration by the High Court of the relevant test to be applied when determining whether trade marks are inherently adapted to distinguish.
In a majority decision, the High Court held that:
The principles settled by this Court (and the United Kingdom authorities found in this Court to be persuasive) require that a foreign word be examined from the point of view of the possible impairment of the rights of honest traders and from the point of view of the public. It is the ‘ordinary signification’ of the word, in Australia, to persons who will purchase, consume or trade in the goods which permits a conclusion to be drawn as to whether the word contains a ‘direct reference’ to the relevant goods (prima facie not registrable) or makes a ‘covert and skilful allusion’ to the relevant goods (prima facie registrable).
Therefore, traders using foreign words that are indirectly relevant to the particular goods or services being sold may be granted a monopoly over that word. However foreign words that are understood by the target audience as being descriptive of the goods or services being sold will not, prima facie, be registrable.
The High Court concluded that the marks Oro and Cinque Stelle were merely allusive to the goods being sold by Cantarella and were not used to describe any attribute of the coffee being sold. The marks were therefore inherently adapted to distinguish.
This case provides clarity regarding the test for inherently adaptability to distinguish and confirms that whether or not a foreign word is distinctive will depend on whether that word conveys a tangible meaning to those in Australia concerned with the relevant commodity.
Awaiting High Court Decisions
Australian, and international, audiences will be awaiting with interest the High Court’s decisions in the Myriad and AstraZeneca cases, which should hopefully be handed down before the end of the year. In addition, the Federal Court’s decision in Dallas Buyers Club, and recent amendments to Australia’s copyright legislation, which allow copyright owners to apply to the Court for an injunction to force ISPs to block access to piracy websites, may see a decline in online piracy in Australia.