Razer exploits patent, but is restrained by law
Law v Razer Industries Pty Limited  FCA 1058
Where a person exploits (or takes definite steps to exploit) an invention that is the subject of a lapsed/ceased patent, and that patent is subsequently restored, the Commissioner of Patents may, on request, grant the person a licence to exploit the invention. In the present case the federal Court considered the circumstances under which a person is eligible to be granted such a licence. although Razer Industries Pty Limited (the respondent – “Razer”) had commenced exploitation of an invention claimed in a patent after it had ceased, the Court did not consider Razer to be eligible for the grant of a licence. The Court consequently ruled in favour of Mr. Law (the applicant) and granted an order against Razer restraining future infringement.
Facts of the case
Mr Law is the owner and inventor of Australian Patent No. 784051 entitled “Conveyor Belt Cleaner” that was granted on 4 May, 2006. Through failure to pay renewal fees in 2007/2008, the patent ceased during the period from 27 September, 2007 to 26 October, 2009 (the “ceased period”). Mr Law made a successful application for an extension of time within which to pay the outstanding renewal fees, and the patent was restored on 27 October, 2009.
While the patent was in a ceased state, Razer entered into an agreement with a third party which required it to manufacture and sell belt cleaning systems falling within the scope of the claims of the patent. Before entering into the agreement as part of its due diligence Razer endeavoured to ascertain if its products would infringe any third party intellectual property rights. No relevant in force or ceased patents were identified at that time. Razer commenced selling products that fell within the scope of the claims of the patent during the ceased period, and continued to sell these products after the patent was restored without a licence or authority from Mr Law.
After becoming aware of the patent Razer filed with the Australian Patent Office a request for a licence under the patent. However, soon after filing this application Mr Law commenced proceedings against Razer for infringement of the patent as of the date it was restored.
The Notices of Motion
Razer’s position was that the Court should issue a stay of the infringement proceedings because if their request for a licence was granted, and granted retrospectively, there would be no infringement case to answer.
Mr Law’s position was that Razer had no statutory right under the circumstances to be granted the licence in the first place, and as such there should be no stay of the proceedings. Furthermore, Razer should be immediately restrained from selling its products.
In reaching its decision, the Court considered a number of discretionary factors relevant to the motions filed by each party, including:
- Mr Law’s rights under the patent, which was considered to be valid;
- the licence application by Razer, which was yet to be heard and determined by the Commissioner;
- the effect of a stay on each of the parties;
- the fact that the parties were competitors in the market place; and
- the fact that a hearing before the Commissioner in relation to the licence might not occur for over 2 years.
However, the Court was particularly interested in whether or not under the circumstances Razer was an eligible person to be granted a licence.
There was no dispute that it is for the Commissioner of Patents and not the Court to evaluate and rule upon Razer’s application for a licence. Nevertheless, her Honour (Bennett J) considered the question of eligibility fundamental to the proceedings.
It was common ground that the relevant statutory provisions to consider under the circumstances were section 223 of the Act and regulation 22.21 of the Regulations.
Her Honour specifically noted that section 223(9) can operate to afford protection or compensation to a person who exploited (or took definite steps to exploit) an invention that is the subject of a lapsed/ceased patent, and that patent is subsequently restored. Furthermore, such protection or compensation will operate only if that person exploited (or took definite steps to exploit) the invention “because of” (a) the failure to do a relevant act within the time allowed, (b) the lapsing of the relevant patent application, and/or (c) the ceasing of the relevant patent.
Translating this position to the subject patent, her Honour explained that the provisions of section 223(9) could only operate to afford protection or compensation, such as a licence, to a person who exploited (or took definite steps to exploit) the invention “because of” Mr Law’s failure to pay the renewal fees and the ceasing of the patent.
In other words, “[t]here must be a link between the fact that the particular patent has ceased and reliance upon that fact by the person seeking to obtain the protection”.
It was not in dispute that during the ceased period Razer was completely unaware of the patent, let alone that the patent had ceased.
Her Honour subsequently concluded that Razer was not a person to whom section 223(9) of the Act and regulation 22.21 of the Regulations applied. In reaching this conclusion her Honour pointed out that section 223(9) of the Act was not designed to protect a person who by happenstance took steps to exploit a patent during a period in which it was ceased.
Whilst being careful not to assert authority over the Commissioner of Patents’ power to grant Razer’s application for the licence, her Honour nevertheless suggested that the application is unlikely to succeed and consequently ruled in favour of Mr Law by refusing the motion to stay the infringement proceedings and granting the restraining order.
This case provides the first judicial interpretation of section 223(9) of the Patents Act 1990 and related regulation 22.21 of the Regulations. It is now clear that where a person exploits (or takes definite steps to exploit) an invention that is the subject of a lapsed/ceased patent, and that patent is subsequently restored, the provisions under section 223(9) will not operate unless the exploitation is undertaken as a direct consequence of knowing that the patent had lapsed/ceased.
This case serves to highlight the benefits of conducting a comprehensive freedom to operate search prior to launching a new product. Had Razer identified the ceased patent as part of its due diligence and then decided to proceed with selling its product on the basis that the patent had ceased, according to the principles set out in this case it would have been deemed a person eligible to be granted a licence.