17 August 2014

What is the Starting Point for Inventive Step?

AstraZeneca AB v Apotex Pty Ltd [2014] FCAFC 99 (12 August 2014)

Running raceAn expanded panel of five judges of the Federal Court of Australia has held that two patents owned by AstraZeneca relating to the cholesterol-lowering drug marketed as CRESTOR (active ingredient rosuvastatin) are invalid.  Subject to the possibility of a High Court appeal, the decision opens the way for generic competition to CRESTOR in Australia, which has been prevented by interlocutory injunctions since 2011.

A particular point of interest in this case lies in the reason for the rare expansion of the Full Court panel from the usual three judges to five.  The judge at first instance (in Apotex Pty Ltd v AstraZeneca AB (No 4) [2013] FCA 162) had found that the AstraZeneca inventions claimed in the patents at issue lacked an inventive step based, in part, on the reasoning of an earlier Full Court panel in Apotex Pty Ltd v Sanofi-Aventis [2009] FCAFC 134.  AstraZeneca contended that the approach taken by the primary judge was wrong, and requested a panel of five judges to enable the earlier Full Court decision to be overruled, if necessary.

So, five judges is better than three, and this decision is inherently important because anything it stands for has precedence over any ‘normal’ judgment issued by a three-judge Full Court panel.  In the event, the appeal court did overrule the reasoning of the primary judge on the approach to the inventive step question at issue.  However, it also found a way to avoid actually overruling the earlier Full Court decision in Sanofi-Aventis.

The key question addressed by the court in this regard is: what is the appropriate ‘starting point’ for assessing whether or not a claimed invention involves an inventive step or, conversely, is obvious? 

The answer to this question is that inventiveness must be assessed by reference to the relevant prior art information, in light of the ‘common general knowledge’ of the person skilled in the art.  The assessment should not be influenced by the description of the invention provided in the patent specification, or by consideration of any problem that the invention is explicitly or implicitly directed at solving, except to the extent that these are, in fact, part of the prior art or common knowledge in the field.

10 August 2014

Rainbow Loom Patents Under Attack in Australia

Rainbow LoomUnless you have been living under a rock, or you literally know no tween-age children (or their parents), you have probably encountered the loom band craze in some form or another.  The brightly coloured rubber bands, which are woven into wearable items such as bracelets using a small plastic loom, have reportedly become one of the top ten toys of all time, and earned their Malaysian-born and US-based inventor, Cheong Choon Ng, well in excess of $100 million.

The original loom band products are marketed by Ng's company under the brand name RAINBOW LOOM.  However, there is no shortage of imitators hoping to cash in on the loom band craze.  Late last year Ng sued Zenacon LLC, makers of FUNLOOM, LaRose Industries LLC, makers of CRA-Z-LOOM and Toys 'R' Us, distributors of CRA-Z-LOOM, alleging (among other things) that the rival products infringe his US Patent No. 8,485,565, which was granted on 16 July 2013.

In Australia, however, it appears that Ng may have a battle on his hands even to secure enforceable patent rights.  Ng's primary patent application is no. 2011324026, which is derived from international PCT application no. PCT/US2011/041553 originally filed on 23 June 2011.  And while this application is encountering some resistance from the Australian patent examiner, Ng has (so far) filed no fewer than five associated divisional innovation patents!

However, all of the innovation patents are currently under attack by various parties who have filed prior art information and corresponding submissions under the provisions of section 28 of the Patents Act 1990.  One of the five (no. 2014100245) has already even been the subject of an application to the Federal Court of Australia, following what appears to have been a rather unfortunate error on the part of the Patent Office (more on that later).

Certainly, there is big money in small coloured rubber bands, and it is unlikely that either Ng, or any of the copycat competitors, are going to give in without a fight.

07 August 2014

Apple v Samsung Ends, Not With a Bang But a Whimper

Duelling TabletsAs is being widely reported this morning, Apple and Samsung have agreed to settle all of their ongoing patent disputes outside of the US. This means that the Australian proceedings, which have occupied, by my estimate, over 150 days of court time, and the attention of two Federal Court judges, will now be terminated, presumably without judgment.

The only thing that is surprising about this is just how freakin' long it took!

I hate to say I told you so (actually, I don't), but I kind of did tell you so, way back at the beginning of August 2011, when Apple first commenced its Australian litigation against Samsung. I made four predictions on day one, and was more right than wrong in everything but the time frame. In my defence, the duration and scope of the case was completely unprecedented, and the assumption that Apple and Samsung would reach a rational commercial resolution failed to take into account the intransigence and emotional investment of the late Steve Jobs.

Here, briefly, are those four predictions, and an assessment of how they stack up against the outcome.

03 August 2014

CSIRO Scores US$16m Wi-Fi Win Over Cisco

CSIRO Wi-FiIn the most recent decision relating to the CSIRO Wi-Fi patent, a US Federal Court Judge in the Eastern District of Texas has ordered networking equipment manufacturer Cisco Systems, Inc, to pay the Australian research organisation US$16,243,069 (plus interest) in damages for infringements dating back to 2005. 

The bulk of the award relates to 18,073,797 consumer-grade products sold under the Linksys brand (Cisco acquired Linksys in 2003), with the remainder being for 1,471,319 Cisco enterprise products.

The case, Commonwealth Scientific and Industrial Research Organisation v Cisco Systems, Inc, Case No. 6:11-cv-343 [PDF, 303kB], is interesting for a number of reasons. 

The judgment is entirely devoted to a determination of damages, based on an assessment of a ‘reasonable royalty rate’, since the parties agreed that liability for infringement, and validity of the patent, were not in dispute.  And although both CSIRO and Cisco had originally demanded a jury trial, in the end they consented to a bench trial (i.e. where the case is heard and decided by a single judge).

Additionally, the dispute has a historical context lacking in CSIRO’s other Wi-Fi litigation.  In 2001, Cisco acquired the Australian start-up, Radiata Communications Pty Ltd, originally established in 1997 by Macquarie University Professor David Skellern and his colleague Neil Weste.  Radiata took a nonexclusive licence to the CSIRO wireless LAN patent with the intention of developing chips implementing the technology (see ‘The Story behind CSIRO’s Wi-Fi Patent “Windfall”’.)

The judgment also addresses issues around CSIRO’s obligations (or not) to licence the patent on ‘reasonable and non-discriminatory’ (RAND) terms, the basis for calculation of royalties (i.e. final product prices, or the value of individual lower-cost components) as well as the usefulness of expert evidence in these kinds of cases.

In the end, CSIRO was largely successful.  Although the final damages award is around half of what it had asked for, it is about fifteen times the amount Cisco argued it should have to pay.  And the court found in favour of CSIRO on almost every other issue that was in dispute.

31 July 2014

Cutting Red Tape in the Patent System

Cutting Red TapeThe Australian government is on a crusade to eliminate as much red tape as it can.  Or, at least, to be seen to be doing so.  It even has a web site dedicated to the goal of generating ‘deregulatory savings’ of A$1 billion every year, complete with a bold, red progress bar, currently hovering around the $700,000,000 mark.

Aside from taking feedback directly from the public, one way in which the government is pursuing its goal is to task various departments with finding ways to cut their own red tape (thus creating an additional administrative burden on those staff to whom this responsibility falls).  Hence the recent announcement by IP Australia that it ‘is looking for ways to reduce regulatory burden within the intellectual property (IP) system.’

IP Australia explains that it:

…is reviewing its regulations to find areas where we can cut red tape without compromising the integrity of the IP system. We will consult on our ideas as they are developed. However, we need your help to find more ways to cut red tape.

Businesses and individuals deal with IP regulation every day. IP Australia wants to hear from you on ways to help reduce red tape in the IP system.

This is everybody's big opportunity to tell IP Australia what it can do to save its clients time and/or money in dealing with the agency, and with the Australian IP system generally!  We are assured that '[s]uggestions for cutting IP red tape don't need to be long and detailed. Just identify the regulation or rule, tell us what it costs you (Time? Money?), and why you think we don't need it.'

27 July 2014

Podcasting Patents and Tesla’s ‘Open Source’ Strategy

Studio 3CROn Friday, 18 July 2014, I appeared on the Beyond Zero – Science and Solutions program on Melbourne community radio station 3CR, to talk about the role of patents in innovation, and more particularly about the recent announcement by Tesla Motors of its intention to ‘open source’ its considerable patent portfolio.

The broadcast interview, which runs for about 27 minutes, in now available as a podcast, or as streaming audio, from both the Beyond Zero Emissions web site, and the 3CR web site.

The discussion, with hosts Matt Grantham and Anthony Danielle, was fairly wide ranging, taking in the origins and objectives of patent law, the rise of patent trolls, the role of patents in the setting and implementation of technology standards, Google’s IP strategy around the Android operating system and, of course, the meaning and implications of Tesla’s announcement.

About Beyond Zero Emissions (BZE)
Beyond Zero Emissions Inc. is a not-for-profit research and education organisation known for its work designing and implementing a zero emissions economy for Australia. It's goal is to transform Australia from a 19th century fossil fuel based, emissions intensive, economy to a 21st-century renewable-energy-powered clean-tech economy.
About Radio 3CR
Radio 3CR was established in 1976.  Broadcasters on the station present over 120 radio programs every week and listeners can tune in on 855AM, stream live through the web or download podcasts of the shows.

The station was created to provide a voice for those denied access to the mass media, particularly the working class, women, indigenous people and the many community groups and community issues that the mass media tends to ignore.  Sadly, this is an all-too-apt description of the place of climate science and action in the Australian media, particularly in view of the government’s recent abolition of the country’s carbon pricing scheme.
Comments
I realise this post could attract comments relating to climate science, rather than patents and innovation.  Although such comments would arguably be off-topic, polite and thoughtful comments on the subject are welcome.  But please note that inflammatory comments will be summarily removed.

Is Australian Court Looking to Uncle Sam on Patent-Eligibility?

Uncle SamThe question of what kinds of things should be eligible for patent protection is one that has been running in parallel in Australia and the US in recent years. 

Methods of medical treatment came under scrutiny of the US Supreme Court in Mayo Collaborative Services v Prometheus Laboratories, Inc and the Australian High Court in Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (see High Court Rules Methods of Medical Treatment Patent-Eligible). 

The Supreme Court considered gene patents in Association for Molecular Pathology v. Myriad Genetics, Inc, while a corresponding Australian patent came before the Australian Federal Court in Cancer Voices Australia v Myriad Genetics Inc (see Australian Federal Court Declares Isolated Human Genes Patentable). 

And the recent Supreme Court decision on computer-implemented business processes, in Alice Corporation Pty Ltd v CLS Bank International addresses similar issues to those tackled by the Australian Federal Court in Research Affiliates, LLC v Commissioner of Patents (see Research Affiliates Loses Appeal Against Business Method Rejection).

The Australian Myriad and Research Affiliates cases are currently both on appeal to full benches of the Federal Court.  The Myriad appeal was heard on 8 August 2013, less than two months after the US Supreme Court handed down its corresponding decision.  The Research Affiliates case was heard on 18 November 2013, and in the intervening period the Supreme Court has managed to hear and decide the Alice case.  We continue to await decisions from the Australian court in both the Myriad and the Research Affiliates cases.

While the delays in deciding these cases are not inconsiderable, they do not appear to be particularly unusual by current standards of the Full Court – another recently-decided patents appeal, Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft [2014] FCAFC 73, was heard on 26-27 August 2013, with judgment handed down on 19 May 2014.

20 July 2014

Do You Have a Licence to Sue?

Patent PoliceIt is very common to establish a corporate structure including two or more entities, in which one entity holds the assets of the business, while another entity acts as the operating or trading company.  I am not a corporate lawyer or a financial advisor, so I do not propose to go into the pros and cons of such arrangements in general.  The only important point to make for the purpose of this article is that ‘assets’ generally include intangible assets, and that intangible assets include patents.

This raises the issue of authorisation: if one entity owns a patent, and a different entity exploits the patented technology, then the operating entity must be licensed by the holding entity.  It may be that the two entities are companies with common ownership and/or directorship, in which case the terms of the licence may not be set out fully (or perhaps even at all) in writing.  It is not uncommon for an operating company to carry on business without any formal written licence agreement with its related holding company, with the effect that an ongoing royalty-free licence to exploit the patent rights would usually be implied from the circumstances.

There are all sorts of reasons why this is an undesirable situation.  For example, a formal licence agreement can set out in detail what happens to the licence in the event that the operating company is sold or becomes insolvent.  An implied licence, or verbal agreement, will never be sufficiently clear to address such situations without ambiguity.

However, I am concerned here with one very specific issue that arises under the Australian Patents Act 1990Section 120 of the Act provides that ‘infringement proceedings may be started … by the patentee or an exclusive licensee.’  Thus, if the operating company is not an exclusive licensee it will not have standing to sue for infringement.  An exclusive licence is one which grants to the licensee a right to exploit the patented invention to the exclusion of all others, including the patentee.  By comparison, a licence limited to a single licensee where at least some rights are retained by the patentee is known as a sole licence, while a non-exclusive licence leaves the patentee free to grant further licences to other parties.

In the case of the holding/operating company structure, the operating company is likely to be the entity suffering damage as a result of infringing activities, and with the funds to take action.  Thus an inability to do so on its own behalf may place it at a disadvantage.

This issue arose recently in a series of decisions issued by Justice Middleton in the Federal Court of Australia, Damorgold Pty Ltd v JAI Products Pty Ltd [2014] FCA 150, Damorgold Pty Ltd v JAI Products Pty Ltd (No 2) [2014] FCA 377 and Damorgold Pty Ltd v JAI Products Pty Ltd (No 3) [2014] FCA 651.  It is the third of these judgments that relates specifically to the issue of standing.  Despite what might be described as some degree of informality in past licensing arrangements, Justice Middleton was prepared to find that Damorgold’s operating company, Vertilux Corporation Pty Ltd, had been, at all relevant times, an exclusive licensee of the patent at issue.

10 July 2014

Nominations Open for the 2014 ABA Journal Blawg 100

MedalIt is that time of year again, when the ABA Journal (‘Law News Now’) sets about building its annual list of the 100 best legal blogs (or ‘blawgs’).  This will be the eighth time the 'Blawg 100' has been compiled.

The final list is determined by ABA Journal staff and, while it is not a ‘popularity contest’, nominations are accepted in the form of ‘friend-of-the-blawg briefs’, a.k.a. the Blawg 100 Amici.

Nominations are open now, and close at 5pm US Eastern Time on 8 August 2014.

The decision to nominate a blawg is, of course, entirely personal.  But if you are a regular Patentology reader, and you find the blog interesting and useful, then I would really appreciate you putting in a good word!  Nominations can be made via the Blawg 100 Amici submission page.

Of course, if you do not want to nominate Patentology, there are many other worthy legal blogs out there.  You might, for example, want to check out last year's finalists in the IP law category:
  1. Gene Quinn's IP Watchdog (Twitter: @IPWatchdog);
  2. Kevin Noonan and Donald Zuhn's Patent Docs (Twitter: @PatentDocs);
  3. Rebecca Tushnet's 43(B)log (Twitter: @rtushnet);
  4. The Hollywood Reporter's Hollywood, Esq (Twitter: @thresq); and
  5. The Biederman Blog, written by Students at Southwestern Law School's Biederman Entertainment and Media Law Institute (Twitter: @Biedermanblog)
In 2013 IP Watchdog was inducted into the Blawg 100 Hall Of Fame while, in a shock development (to me, at least), Dennis Crouch's enormously popular and well-regarded Patently-O blog failed to make the list altogether!

You can read about all of the successful candidates in the 2013 Blawg 100 on the ABA Journal web site.



06 July 2014

Will US Alice Decision Influence the Australian Federal Court?

Alice in Oz - A Musical Comedy in Two ActsA Full Bench of the Australian Federal Court heard oral arguments in the Research Affiliates appeal (on patent-eligibility of a computer-implemented business method) all the way back on 18 November 2013.  More than seven months later, we are still waiting for a decision.

It is possible that the court was waiting for the US Supreme Court to rule in Alice v CLS Bank before finalising its opinion(s) in Research Affiliates.  Whether or not that is the reason for this long delay, the fact is that Alice has been decided, and it is therefore almost inconceivable that the judges in the Australian case would not review the US decision and assess whether there is any aspect of the reasoning that may be applicable in Australia.

So, is there?

I am sure that some will disagree with me, but I think that maybe there is – despite significant differences between the US law on patent-eligibility (based on 35 USC §101) and that of Australia (based upon the venerable test of ‘manner of manufacture’).  While the legal criteria may be different, you would have to postulate that the purpose of the patent systems in the two countries was manifestly dissimilar for the actual outcomes of applying the criteria to produce significantly different results.

The Full Court has itself said as much, in Grant v Commissioner of Patents [2006] FCAFC 120, at [24]:

While the development of US patent law is derived from the Constitution of the United States rather than the Statute of Monopolies … the policy behind the two provisions is the same. In both jurisdictions, the courts have confirmed that a broad approach to subject matter should be taken in order to adapt to new technologies and inventions but that does not mean that there are no restrictions on what is properly patentable.

So what might the Full Court take from Alice, and how might it apply the US reasoning under the Australian ‘manner of manufacture’ test?