16 February 2012

Bass at the End of the Line, as High Court Denies Stunning Appeal

Richard Bass Pty Ltd & Anor v Seafood Innovations Pty Ltd [2012] HCATrans 24 (10 February 2012)

HookLineSinkerIn a special leave hearing last Friday, before Chief Justice French and Justice Bell in the High Court of Australia, lawyers for Richard Bass Pty Ltd sought unsuccessfully to persuade the court to hear an appeal from a decision of the Full Federal Court handed down last July.

BACKGROUND

Regular readers of this blog may recall the previous episodes in this saga, which we first reported following the first instance decision of Justice Spender in Seafood Innovations Pty Ltd v Richard Bass Pty Ltd [2010] FCA 723 (see Innovation Patents Flop Like Stunned Mullet).

Seafood Innovations Pty Ltd is the owner of two innovation patents, nos. 2006100980 and 2008100126, which have the same descriptions but different claims, relating to to a fish stunning apparatus including a fish stunning device, a fish guide and/or a fish delivery table.

Seafood Innovations alleged that Bass infringed both patents, and that both were valid.  Bass accepted that the earlier innovation patent was valid, but argued that it was not infringed, and accepted that the second patent would be infringed if valid, but argued that it was not.

Justice Spender found in favour of Bass, agreeing that the earlier patent was not infringed, because the Bass stunning device operated according to a different principle from the claimed Seafood Innovations invention, and further that the later patent was invalid because the claims did not ‘define the invention’.

On appeal before the Full Federal Court in Seafood Innovations Pty Ltd v Richard Bass Pty Ltd [2011] FCAFC 83, the court reversed Justice Spender (see Fishy Business — Bass Baked by ‘Stunning’ Appeal).  The appeals court found that the primary judge had adopted an incorrect approach to assessing infringement, by comparing the principles of operation of the two devices, rather than focussing on the elements of the claims, and whether or not these were present (with or without additional elements) in the accused device.  It also found the claims of the second innovation patent to be valid, that the primary judge had incorrectly interpreted the claims in light of those in the first patent, and that a claim need not include ‘instructions’ for use of the invention as the judge had seemingly required.

SPECIAL LEAVE APPLICATION

In seeking special leave to appeal the Full Court’s decision to the High Court, Bass argued in relation to the infringement issues that the question to be considered on appeal was the level of abstraction at which the infringement analysis is to be conducted.  Clearly Bass preferred the approach of the primary judge, who compared the principle of operation of the allegedly infringing device with the principle embodied in the Seafood Innovations claims, while the patentee favoured the more literal approach of the Full Court.

With regard to the invalidity issues, Bass accepted that patent claims are not required to provide full instructions for use of the invention, but argued that the description disclosed a particular method of operation and that this particular method was an essential part of the invention which should be reflected in the claims if they are to ‘define the invention’ and be fairly based on the description.

Chief Justice French was not persuaded that either of these arguments had a sufficient prospect of success to warrant the attention of the High Court, and refused the application for special leave.

COMMENT

With the High Court refusing to hear an appeal by Richard Bass, it now seems to be settled law that the principles to be applied for the interpretation of innovation patent claims, and for assessing infringement and validity of those claims, is exactly the same as for standard patents.

In reporting the first instance decision we wrote:

This decision suggests that courts may be disposed to apply narrow claim construction to innovation patents, and to find them invalid on grounds other than lack of innovative step. However, the relevant law is the same as that applied to standard patents, and there must therefore be some doubt about the viability of treating innovation patents differently (if that is indeed what has happened in this case).

The underlying implied issue of whether innovation patents are somehow to be treated differently from standard patents in these respects was not quite dead at the special leave hearing, although since it had never been specifically addressed in the original trial or on appeal to the Full Court it was not open for consideration by the High Court.  However Bass suggested that if the special leave application were allowed, it might be that a ‘proper construction would require reading the Act as a whole and there may well be features of [the correct treatment of innovation patents] that emerge’.  It does not seem that the High Court had any interest in hearing such an argument.

REVIEW OF THE INNOVATION PATENT SYSTEM

The innovation patent system is currently under review by the Advisory Council on Intellectual Property (ACIP).  The terms of the review state that:

The innovation patent system was established in 2001 to stimulate innovation in Australian small to medium business enterprises. It protects incremental or low level inventions that do not meet the inventive threshold required for standard patent protection and are not covered by design legislation.

In recent years a variety of concerns have been raised about the innovation patent system and whether it is meeting its original objectives. A key concern is that an innovation patent is overly difficult to invalidate and the remedies for infringement are overly generous. Another concern is that innovation patents are being used to obtain a form of quick protection for higher level inventions while a standard patent is being pursued.

The Seafood Innovations patents illustrate theses concerns well.  Both were divided from a pending standard patent application, and the second innovation patent was specifically crafted to capture the Bass device.

Furthermore, as we noted in a comment on our recent post Apple’s Strategic Plans for Australian Litigation, since 2007 Apple has become the single biggest user of the innovation patent system, owning nearly 10% of all certified (i.e. enforceable) innovation patents which have been filed during this period.  It goes without saying that Apple hardly qualifies as an ‘Australian small to medium business enterprise’ engaging in ‘incremental or low level’ innovation!

CONCLUSION

Innovation patents were created to provide a second tier of protection for incremental innovations, primarily as a tool to assist small to medium enterprises.

However it is clear that, at least in cases where innovation patents have been enforced in the courts, they are being used to a significant degree as strategic weapons for enforcing rights to inventions that would qualify for standard patent protection.  This was also the case in the long-running litigation between Delnorth and Dura-Post (see Well-Known Innovation Patent Takes the Next Step... Just!), and Apple has asserted a number of innovation patents in its infringement case against Samsung.

Depending upon what the ACIP Review concludes about the use of innovation patents which do not end up in court, we would not be at all surprised to see recommendations that the innovation patent system be modified to reduce the power of the rights available, or even that the innovation patent be abandoned altogether!

ACIP is due to release an Options Paper shortly, which will ‘seek further public input on a number of possible options for reforming the innovation patent system.’

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