23 November 2014

Research Affiliates: A ‘Hard’ Case Making Bad Law

Chaos and OrderIt is sometimes said that ‘hard cases make bad law’.  This is not actually generally true, and good and bad law emerges from a wide variety of different cases.  Perhaps, in fact, the quality of judges, or the quality of argument presented at trial, are more important factors than the difficulty of the case.

That being said, ‘hard’ cases do present judges with special challenges.  In this context, a hard case is one in which the most literal or straightforward application of the law – i.e. the binding precedents and relevant statutory provisions – is liable to produce a result that may strike the judge as illogical, unfair, absurd, unjust, or just plain wrong.

The temptation in such cases must be very great to try to find a ‘creative’ approach to applying the law in order to make the legal outcome match the subjectively ‘right’ decision.

Patent law is not immune from such ‘hard’ decisions.  Sometimes, for example, an alleged infringer’s efforts to ‘work around’ a patent, and escape infringement on a technicality, are so flagrant that judges are inclined to find ways to broaden the interpretation of patent claims in order to capture the infringer’s variation.

So what would happen if a judge (or, indeed, three judges) were to look at an invention and think ‘surely that cannot be eligible for a patent?’  And what if they then looked at the current state of law and found that, in fact, a literal and straightforward application of the law could well lead to the conclusion that the suspect invention is patent-eligible?  The answer might be that you end up with a decision like that of the Full Court of the Federal Court of Australia in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150.

16 November 2014

‘Patent Box’ Tax Break Prospects Plummet at G20 Meeting

Box and figureThe Australian Government looks set to abandon the sole IP-related initiative it took into last year’s federal election, with treasurer Joe Hockey reportedly all but ruling out the prospect of a ‘patent box’ tax concession being introduced in this country.

Indeed, according to coverage of this weekend’s G20 Summit taking place in Brisbane, Hockey is also pushing for other countries that currently have patent box schemes to amend their own rules to ‘ensure that they are not inappropriately used for tax avoidance’.

I think this is all very unfortunate, particularly because much of the anti-patent-box sentiment appears to be based upon gross misunderstandings (or, possibly, wilful disingenuousness) about what patent box schemes are about, and how they work.  Even the economics editor at The Age newspaper, Peter Martin, seems to be spreading the misinformation, writing that ‘patent boxes allow companies that have developed new technology overseas to register the patent in the host country in order to avoid tax in the country in which the technology was developed.’ 

However, as I explained in an earlier article, patent box schemes are designed to encourage investment in R&D within the jurisdiction where patented technology is developed, by offering a reduced tax rate on profits that can be specifically attributed to that technology.  This is not tax ‘avoidance’.  It is a tax concession that is offered on income that might not have been generated at all – or that might have been generated in another country – were it not for the incentive provided by the scheme.  Pharmaceuticals giant GlaxoSmithKline credited the introduction of a patent box concession in the UK for its decision to build its first new factory there in 40 years, and to follow up with a further 200 million pound investment in 2013.

10 November 2014

Australia’s ‘Alice’: Appeals Court Denies Business Method Patent

No computerIn a unanimous decision, a Full Bench of the Federal Court of Australia has ruled that the ‘substance’ of an invention trumps the form in which it is claimed, dismissing Research Affiliates’ appeal against a decision of a single judge of the court, which found its invention, relating to the construction and use of passive portfolios and indexes for securities trading, ineligible for patent protection: Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150.

The decision canvasses many of the same issues tackled by the US Supreme Court in its recent Alice Corporation v CLS Bank ruling.

In essence, the Australian court addressed the question of whether an invention that would otherwise be ineligible for patent protection – in this case, a scheme for generating a financial index which can be used, for example, to measure the rise and fall in value of an investment portfolio – becomes patentable when implemented in software.  This has been an open question in Australia since the court’s 2006 decision in Grant v Commissioner of Patents [2006] FCAFC 120, in which it found that an asset protection method was ineligible for patenting.  In that case, however, the court was not required to consider whether the outcome may have been different had all or part of the method been performed using a computer.

In the Grant case the court stated that, for a claimed invention to be patent-eligible, a ‘physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required’.  Where a computer is involved there is always, of necessity, some physical effect or change of state, at least within the electronics of the machine.  The question that the court has not previously addressed is whether or not this is sufficient to confer patent-eligibility? 

In Research Affiliates, the court has answered this question in the negative, finding that describing a scheme – no matter how ingenious it may be – that is not itself eligible for patenting, and merely giving directions to implement it on a standard computer is not sufficiently transformative.

However, while – subject to any appeal to the High Court – this decision would seem to spell an end to ‘do it on a computer’ patent claims in Australia, the Full Court has been cautious (certainly more so that the US Supreme Court in its recent Alice v CLS Bank decision) to ensure that most computer-implemented inventions remain patent-eligible in Australia.

08 November 2014

High Court Majority Upholds LEXAPRO Patent Time Extension

On 5 November 2014, the High Court of Australia handed down its decision confirming (by a three-to-two majority) that it is possible to obtain an extension of time within which to apply for an extension of the term of a patent relating to a pharmaceutical substance, so long as the extension application is filed prior to expiry of the patent: Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42.

This decision is an important milestone in a long-running saga relating to the antidepressant drug escitalopram, originally marketed in Australia as LEXAPRO, and covered (at least until 13 June 2009) by Australian patent no. 623,144.  The patent is owned by H Lundbeck A/S, which had applied to extend the term of the patent to 9 December 2012, as compensation for delays in obtaining regulatory approval to market LEXAPRO in Australia.  But, for reasons that I explained in an earlier article on the case, Lundbeck required an extension of time to allow its application for an extension of term to be considered, because it was filed about ten years too late!

The issue before the High Court was whether, under the relevant provisions of the Patents Act 1990 and the Patents Regulations 1991, the Commissioner of Patents has the power to extend the time for filing an application for an extension of term in any circumstances.  The Court’s answer to this is, in essence, ‘yes’ – if the application to extend the term of the patent, and the associated request for an extension of time, are filed prior to the patent’s expiry.

This does not, however, bring an end to the matter.  There is a separate question of whether it was appropriate, in the particular circumstances of this case, for the extension of term to be granted, which is still making its way through the appeals process.  Hot on the heels of the High Court’s ruling, a single judge of the Federal Court of Australia has handed the latest round in this part of the dispute to Lundbeck, dismissing an appeal from the Commissioner’s decision to allow the extension:
Alphapharm Pty Ltd v H Lundbeck A/S [2014] FCA 1185.

A great deal of money is at stake in all of this.  A number of generic pharmaceutical companies released their own escitalopram products following the original expiry date of the Lundbeck patent (a risky strategy, given that they were certainly aware of Lundbeck’s extension application by that time).  The patent itself has already been found valid and infringed by a Full Bench of the Federal Court of Australia (in H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70), and all avenues of appeal from that decision have been exhausted.  Thus if the term extension is ultimately upheld (as it has been at every turn so far), damages will be due to Lundbeck for infringement of the patent between 13 June 2009 and 9 December 2012.

02 November 2014

WIPO Director General Under Official Investigation for Misconduct

Francis GurryWorld Intellectual Property Review (WIPR) reported last week that the World Intellectual Property Organisation (WIPO) is now under formal investigation over allegations dating back to 2008 that Director General, Francis Gurry, ‘ordered a series of burglaries of workers’ offices in order to obtain samples of their DNA.’

I have written about these allegations on two previous occasions.  The first was back in December 2013, in response to articles written by Gene Quinn, on his estimable IP Watchdog blog (which is currently celebrating an incredible – in Internet terms – 15 years of continuous operation).  The second was in April of this year, following revelations that then Deputy Director General James Pooley had filed a ‘Report of Misconduct’ with WIPO, and with the US Mission in Geneva. 

On both occasions I expressed my suspicion that the resurfacing of the accusations against Gurry was at least partly motivated by US anger at WIPO’s involvement, under his direction, in UN assistance programs to North Korea and Iran, and building of closer ties with China and Russia.  At the time, Gurry was seeking reappointment as Director General for a second six-year term.  His reappointment was confirmed by the General Assembly on 8 May 2014.

Not that this was the first time Gurry had been the target of an effort to undermine his candidacy for the top job at WIPO.  His first term began controversially, with Brazil threatening at one stage to challenge his election on the basis that it was not legitimate.  What was allegedly behind this challenge was a concern that Gurry would be too ‘pro-developed-world’ – a fear that turned out to be unfounded – though the fact that it was Brazil’s own candidate who lost out by a single vote was no doubt a factor!  Ironically, it is Gurry’s pro-developing-world agenda that appears to have made him so unpopular with US politicians.