No Relief for Razer Pending Decision on "Licence to Infringe"

Law v Razer Industries Pty Limited [2010] FCA 1058 (29 September 2010)

Infringement – infringement commenced during period when patent had ceased – whether there is a causal relationship between temporary ceasing of the patent and respondent's allegedly infringing activities – whether respondent can obtain a licence from Commissioner of Patents pursuant to s 223(9) of the Patents Act 1990 – whether respondent entitled to a stay of orders for infringement pending determination of licence application – whether patentee entitled to restraining order preventing respondent from infringement pending determination of licence application

Cause-and-effect necessary for
grant of a license under s223(9)

BACKGROUND

Back in August we reported on a dispute between Razer Industries Pty Ltd ("Razer") and Robert R. Law ("Law") over Law's patent relating to a scraper blade arrangement for a conveyor belt cleaner ("the patent").  In particular, we reviewed a Patent Office decision in which the Commissioner's Delegate denied Razer's request to dismiss an opposition by Law to an application by Razer for what we dubbed a "licence to infringe".

We noted at the time that we expected to hear more of this dispute, since there are related infringement proceedings ongoing, and apparently various other parties involved.

This decision, issued by Justice Bennett in the Federal Court of Australia, relates to the infringement proceedings, which were commenced by Law on 5 March 2010.  Razer sought a stay of the proceedings, pending the outcome of the Patent Office decision on its application for a licence, on the basis that the infringement question will be moot if a licence is granted, while Law sought an order restraining Razer from infringing the patent during the same period.

DECISION

The court refused to stay the infringement proceedings, after considering the various relevant factors (at [11]):

1. Mr Law’s rights under the Patent, which is valid and existing;
2. the licence application, which is yet to be heard and determined by the Commissioner;
3. the effect of a stay on each party;
4. the fact that the parties are competitors in the marketplace; and
5. the fact that a hearing before the Commissioner may not occur for over two years.

The court also granted Law his request for an order restraining Razer from infringing the patent (at [28]).

NEED FOR A CAUSAL CONNECTION TO CEASING OF PATENT

As we reported previously, a substantive issue in the opposition before the Patent Office is whether or not Razer qualifies for the grant of a licence under subsection 223(9) of the Patents Act 1990 on the basis that it commenced the allegedly infringing activities because of the failure by Law to pay renewal fees in time, and the subsequent (though temporary) ceasing of the patent.

The facts establish that Razer conducted a patent search in September 2008 in an effort to establish whether Law's company,  ESS Engineering Services and Supplies Pty Ltd ("ESS"), held any relevant patent rights.  ESS had been manufacturing and selling scraper blades and conveyor belt cleaners as claimed in the patent since the 2001/2002 financial year.  However, the parameters of the search (which did not include the invention title, or Law's name) were not appropriate to find the patent, regardless of its status (at [19]-[20]).

Thus Razer did not commence the allegedly infringing activities because it knew of Law's patent, but genuinely believed it to have ceased.  Rather, Razer never knew that the patent existed, and proceeded on the belief (false, as it turned out) that there were no relevant patent rights in existence, and never had been.

The court had this to say about the operation of subsection 223(9) (at [27]):

Section 223(9) of the Act is not designed to protect a person who by happenstance takes steps to exploit a patent during a period in which it is ceased. It cannot be that a person who manufactures and sells products within the scope of the claims of a patent can be protected simply because that person is lucky enough to have commenced those steps while that patent was not in force through an error or omission of the patentee. There 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. Regulation 22.21 of the Regulations does not specifically refer to that necessary link but the regulation can rise no higher than the subsection to which it refers and for which it is prescribed.  (Emphasis added.)

COMMENT

While the court based its decision upon agreed facts that may be disputed in the opposition before the Patent Office, this statement of the scope of subsection 223(9) would appear to be potentially fatal to Razer's hopes of being granted a licence.

The Patent Office will not apply a different interpretation to a statutory provision that has previously been the subject of judicial consideration.  The court has quite clearly stated a requirement for a causal connection between the temporary ceasing of a patent, and the actions of a subsequent infringer.

If Razer did not know that the Law patent existed, and that it had ceased, at the relevant time, then it will not be eligible for the protection afforded by subsection 223(9).

Tags: Australia, Interlocutory injunction, Intervening rights, Stay of proceedings