31 July 2011

NZ High Court Clears Patent Attorneys of Negligence

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The Baby Hammock Co Limited v AJ Park Law [2011] NZHC 686 (13 July 2011)

The Baby Hammock Co Limited (‘BHC’) first sought advice from New Zealand’s largest intellectual property law firm, AJ Park, after one of its principals, Mrs Sarah Hannah, got to chatting with her neighbour on a flight from Wellington to Auckland, who happened to be an employee of the firm.

This was back in August of 2004. 

That chance meeting led, in the end, to a number of days in the New Zealand High Court in February and March this year, with BHC accusing AJ Park of negligence and breach of fiduciary duty, and claiming damages for loss of profits in the astonishing amount of $53,105,743, as well as additional exemplary damages.

On 13 July 2011, Justice Rodney Hansen in the Auckland Registry of the High Court issued his judgment, finding that:
  1. AJ Park was not negligent in any advice that they provided to BHC;
  2. even if they had been negligent, any such negligence would not have been causative of the lack of success in business of BHC;
  3. while AJ Park owed a fiduciary duty both to BHC, and to another client, Hushamok, which was a competitor to BHC, it was at no time in breach of its duty to BHC;
  4. the fact that there may be a potential for future conflict between clients is not, in itself, sufficient to establish a breach of fiduciary duty;
  5. even if there had been a breach of fiduciary duty, BHC could not have demonstrated any loss that had occurred as a result of the breach;
  6. BHC’s calculations of lost profits were fanciful, being based on flawed assumptions, inconsistent with the historical performance of the market for BHC’s products, and in any event BHC had no capacity to access the market because, at the relevant time, the company was chronically under-capitalised and technically insolvent; and
  7. exemplary damages would not have been awarded because, even if AJ Park had been in breach of its fiduciary duty to BHC, its conduct would have, at worst, involved an error of judgment, whereas exemplary damages are only appropriate in cases of outrageous conduct.
We suggest that this decision should be compulsory reading, in its entirety, for all Australian and New Zealand patent attorneys.  The following is intended only as a general discussion of various issues raised by the decision, which will hopefully be of some value to attorneys, clients and others alike.
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30 July 2011

US Appeals Court Rules Isolated Genes Patentable

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The Association for Molecular Pathology & ors. v Myriad Genetics & ors. (No. 10-1406, 29 July 2011)

In a decision that may have a significant impact on the ‘gene patent’ debate in Australia, the US Court of Appeals for the Federal Circuit (CAFC) has ruled that patent claims directed to ‘isolated’ DNA molecules cover patent-eligible subject matter under 35 USC §101, because ‘the molecules as claimed do not exist in nature.’

As we reported back in June 2010, Myriad Genetics Inc, along with its co-patentees, had appealed a decision by the District Court for the Southern District of New York finding its US patents relating to BRCA1 and BRCA2 human genes – applicable to screening for breast cancer – to be partially invalid.

The CAFC also ruled that claims to methods for screening for potential cancer therapeutics via changes in cell growth rates are, likewise, patent eligible subject matter.  However, the three Federal Circuit Judges found that claims directed to ‘comparing’ and ‘analysing’ DNA sequences to be ineligible for patent protection because they ‘include no transformative steps and cover only patent-ineligible abstract, mental steps.’

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29 July 2011

Re-examination Limits Rights to Flexible Roadside Posts

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Delnorth Pty Ltd [2011] APO 55 (27 July 2011)

Re-examination – initiated by Commissioner following withdrawal of opponent – whether prior art documents would have been ascertained, understood and regarded as relevant by a person skilled in the art – whether claims involve an inventive step – partial revocation of patent

In what may be the final chapter in a long-running saga – which has, incidentally, provided essential guidance regarding the ‘innovative step’ standard applicable to innovation patents – Hearing Officer Xavier Gisz has issued a decision revoking 26 out of 36 claims of Australian patent no. 2004249786, in the name of Delnorth Pty Ltd.

The patent relates to a flexible roadside post made of spring steel.  Such posts are generally of the type having reflective strips, and installed alongside a road to provide guidance to motorists, particularly at night, as to the varying contours and directions of approaching sections of road.  Wayward vehicles occasionally impact with these posts, and it is therefore beneficial that they be resilient, as well as robust in the presence of harsh environmental conditions.  It is also advantageous that roadside posts should be installable with a minimum of manual labour, particularly in a country the size of Australia.

The Delnorth posts are designed to satisfy these requirements.  This design was presumably effective, because it was imitated by a competitor, Dura-Post (Aust) Pty Ltd, resulting in an extended dispute regarding the infringement and validity of various patent applications, and innovation patents, which seemingly ended only when Dura-Post was placed into receivership – an event no doubt due in no small part to Delnorth’s successful enforcement of its patent rights. 

Ultimately, Delnorth has been largely successful in excluding the Dura-Post competitor and in defending its patent rights, although with some reduction in scope as a result of this decision.  Whether this has been worth the time, energy and expense involved is a question that only Delnorth could answer.  We can only assume that the market for flexible and durable roadside posts in Australia is extremely lucrative!
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24 July 2011

Inventor’s Disclosure Bars Market Research Patent Rights

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Robert Dommett v Zebra Research Pty Ltd [2011] APO 53 (12 July 2011)

Inventorship – request under section 32 of the Patents Act 1990 – entitlement – request under section 36 of the Patents Act 1990 – identification of ‘inventive concept’ – whether inventor’s prior disclosure of inventive concept precludes claiming inventorship and/or entitlement in a subsequent patent application

This Australian Patent Office decision, by Hearing Officer Owen Haggar, concerns issues of inventorship and entitlement.  In particular, Robert Dommett, who through his business RDA Research provides market research services, contended that he was in inventor, and was entitled to be a ‘nominated person’ (i.e. applicant), in respect of Australian patent application no. 2010201111, filed in the name of Zebra Research Pty Ltd (‘Zebra’), and naming Katie Harris as an inventor.

Two provisions of  the Australian Patents Act were relied upon by Dommett.  Section 32 provides for the Commissioner to make decisions regarding disputes between parties over patent applications.  In this case, Dommett requested that he be declared as the inventor on the application, and not Katie Harris.  Section 36 provides for the Commissioner to make determinations regarding the correct ‘eligible persons’ on a patent application, i.e. the persons (natural or corporate) entitled by invention, assignment or other transfer of title, to be the owner of any patent ultimately granted.  Dommett requested such a determination, with the intention of showing that he (or perhaps his company) is the correct eligible person.

To cut a long story short, the Hearing Officer determined that Dommett was indeed the originator of the broad ‘inventive concept’ underlying the patent application.  However, since he had made non-confidential disclosures and commercial use of the concept prior to the priority date of the patent application, this subject matter was not novel or inventive, and could not be the basis for the grant of a valid patent.  Therefore Dommett could not be an inventor, and could not be eligible for the grant of a patent on the application.

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22 July 2011

Infringement By Supply of Products – Still Clear as Mud?

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The principle behind the concept of ‘indirect infringement’ that may result from supplying (potentially unpatented) products is straightforward.

Suppose party ‘A’ supplies a product ‘X’ to party ‘B’, who uses ‘X’ in a process ‘Y’ to make product ‘Z’…

OK, so maybe it is not entirely straightforward, considering all of the parties, products and processes potentially involved, but bear with us for just another couple of paragraphs.

Clearly if the process ‘Y’ and/or the product ‘Z’ is/are covered by a patent, then ‘B’ is an infringer.  But what about ‘A’?  If ‘X’ is not patented, then ‘A’ is not an infringer.  So should ‘A’ get off scot-free?

The answer, typically, is that it all depends.  For example, ‘X’ may be a common staple product, such as sugar, oil or ball-bearings, and ‘A’ may have no idea of ‘B’s purpose with ‘X’.  In this case, it is hardly fair for ‘A’ to bear any liability for ‘B’s infringement.  Alternatively, ‘X’ may have only one known application, i.e. the infringing use, or ‘A’ may may otherwise be fully aware that ‘B’ intends to use the product in an infringing manner.  In such cases, ‘A’ is knowingly profiting from ‘B’s infringement, and should probably not be permitted to escape liability just because the actual infringement occurs at arm’s length.

In Australia, section 117 of the Patents Act 1990 is supposed to address ‘infringement by supply of products’, and in particular to distinguish those cases in which the supplier bears liability for subsequent infringement, from those in which they do not.

However, this provision has had a chequered history in the courts.  Many practitioners seem to have thought that the troubles with section 117 had been finally laid to rest with the High Court’s decision in Northern Territory v Collins [2008] HCA 49.  But the recent decision of Justice Kenny in SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Limited [2011] FCA 452 suggests that uncertainty remains about the correct application of section 117.
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19 July 2011

Australian Scientists Threatened, as Quality of Debate Slumps

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It is not hard, sometimes, to be ashamed of one’s country.  We have no doubt that this is a common experience the world over for all but the most blinkered and jingoistic of citizens.  Of course this is grossly unfair to the many individuals who are thoughtful, intelligent, and engaged in the important issues facing the nation and the world.  But often these are not the people who garner the attention of an increasingly populist and simple-minded media.

Today we received an email which engenders feelings only of disgust and despair.  In the 18 July 2011 issue of the Cooperative Research Centre Association (CRCA) newsletter, CEO Tony Peacock writes:

Climate change scientists at the ANU [Australian National University] have had to be given a higher level of security following email threats that are apparently extraordinarily vicious. Colleagues of mine have been receiving wishes from animal welfarists that they die a long and painful death - presumably because we are involved in restoring some native animals to a sanctuary which involves culling other animals.

And now Greenpeace Australia have decided it is OK to attack CSIRO experimental sites because they don't agree with what CSIRO is doing. Last week in Canberra, Greenpeace "activists" decided to break into a CSIRO site and whipper-snipper a crop of genetically-modified wheat.

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16 July 2011

Why the Gene Patents Bill Will Not Work

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We have written on a number of previous occasions about the ongoing Senate Committee inquiry into the Patent Amendment (Human Genes and Biological Materials) Bill 2010 (see Senate Submissions Overwhelmingly Oppose ‘Gene Patent’ Ban, ‘Late’ Submissions to Senate Inquiry on ‘Gene Patent’ Ban, Why IP Professionals Must Take ‘Gene Patent’ Opponents Seriously and Update on the Australian Senate Gene Patent Inquiry).

It is no secret that we are opposed to the Bill, or that in this regard we are amongst the majority of those who have made submissions to the inquiry.

However, it seems to us that even if the proponents of this Bill are successful in getting it passed into law, it will not – and, indeed, cannot – achieve its stated objectives.

The problem, as we see it, is that the Bill includes no commencement or transitional provisions.  In other words, it does not state how, or if, it is to apply to existing granted patents, and pending applications, at the time upon it becomes effective.
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14 July 2011

Still A Wrap! Kimberly-Clark Fails to Show Infringement on Appeal

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Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd [2011] FCAFC 86 (12 July 2011)
Appeal from: Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd [2010] FCA 1318

Claim construction – function of consistory clauses – whether claims limited to two separate sheets which have been joined together – effect of statement of ‘spirit and scope’ of invention

Infringement – whether product made from single sheet that is folded over infringes patent

A full bench of the Federal Court of Australia, comprising Justice Emmett, Justice Greenwood and Justice Nicholas, has unanimously upheld the first-instance decision of Justice Stone.

In two sets of concurring reasons, one by Justice Emmett, and one jointly authored by Justices Greenwood and Nicholas, the Full Court has confirmed that Kimberly-Clark’s claims (in three patents related as ‘grandparent’, ‘parent’ and ‘child’), which all recited, in some form, both ‘an inner wrap sheet’ and ‘an outer wrap sheet’, are limited to products comprising two separate sheets.  A single sheet which has been folded over to provide two ‘layers’ is therefore not within the scope of the claims.  This being the configuration of Multigate’s product, there was no infringement found.

We find the reasons of Greenwood and Nicholas JJ most interesting, largely due to their discussion of the role of consistory clauses in the specification.  Also of some interest is their Honours’ brief discussion of a ‘spirit and scope’ passage appearing in the Kimberly-Clark patent specifications.
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12 July 2011

Computer-Implemented Invention Found Unpatentable

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Myall Australia Pty Ltd v RPL Central Pty Ltd [2011] APO 48 (12 July 2011)

Opposition – ground raised by Patent Office – patentable subject matter – whether computer-implemented information system and process a ‘manner of manufacture’

In a decision on which we would like to provide extensive commentary – but cannot because of our own involvement in the case – Hearing Officer Sushil Aggarwal has found the following claim unpatentable on the ground that it does not define a ‘manner of manufacture’, i.e. is not statutory subject matter:

1. A method of gathering evidence relevant to an assessment of an individual’s competency relative to a recognised qualification standard, including the steps of:
    1. a computer retrieving via the Internet from a remotely-located server a plurality of assessable criteria associated with the recognised qualification standard, said criteria including one or more elements of competency, each of which is associated with one or more performance criteria;
    2. the computer processing the plurality of assessable criteria to generate automatically a corresponding plurality of questions relating to the competency of an individual to satisfy each of the elements of competency and performance criteria associated with the recognised qualification standard;
    3. an assessment server presenting the automatically-generated questions via the Internet to a computer of an individual requiring assessment; and
    4. receiving from the individual via said individual’s computer a series of responses to the automatically generated questions, the responses including evidence of the individual’s skills, knowledge and/or experience in relation to each of the elements of competency and performance criteria,
    5. wherein at least one said response includes the individual specifying one or more files stored on the individual’s computer, which are transferred to the assessment server.

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11 July 2011

IP Australia Director General 'Talks Up' Economic Recovery

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According to a story posted on ABC News Online, entitled Business confidence boosts patent applications, new filings 'for patents on inventions ... for Australian businesses have increased for the first time since the global financial crisis', going on to claim that 'patent applications protecting intellectual property are creeping back to levels recorded three years ago, reaching 26,473 in 2010-11.'

We are not sure that there is a great deal of evidence for this, although it is only natural for IP Australia, as the national IP rights-granting authority, to wish to put a positive spin on the numbers as we move into a new financial year.

IP Australia Director General Philip Noonan is quoted as saying:

"It's a very welcome sign that patent applications are coming back on line, ... [b]ecause intellectual property is really the cornerstone of new industries in the future, and the sustainable source of jobs in the future."

...

"When the global financial crisis hit, and funding is withdrawn, but it is a little while before that flows through to effect the number of patents," he said.

"So the pattern for patents has been that applications were down more slowly and are only just starting back up."

We wish that all of this positivity was entirely convincing, and that we could believe that everything is looking up.  But, as we have noted before (most recently in The Fate of Australian Industries for 2011-12), there are plenty of signs that the current relative strength of the Australian economy (and currency) continues to be based more on the exploitation of natural resources than it is upon investment in innovation.
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09 July 2011

Korea Adopts ‘European-Style’ Background Art Disclosure Rules

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Revisions to the (South) Korean Patent Act, effective from 1 July 2011, now require an applicant for a patent to disclose information on prior art related to the invention in the specification.

As we understand it, this is a requirement similar to that which exists in Europe, whereby the description should ‘indicate the background art which, as far as is known to the applicant, can be regarded as useful to understand the invention, draw up the European search report and examine the European patent application, and, preferably, cite the documents reflecting such art’ (Implementing Regulations to the Convention on the Grant of European Patents, Rule 42(1)(b)).

As reported here by YOU ME Patent & Law Firm, revised Article 42, paragraph 3 of the Korean Patent Act requires, for any application filed on or after 1 July 2011, that ‘the specification must describe background technology of the invention.’

While failure to describe background art will provide a ground for rejection during examination, it is not a ground for invalidation of a granted patent.

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08 July 2011

New Cooperative Research Centre Bids - 26 Applications Filed!

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Applications for the 14th round of the Australian Government's Cooperative Research Centre (CRC) program closed on 1 July 2011, and the list of applicants is now available on the CRC website of the Department of Innovation, Industry, Science and Research.

In the previous selection round, 30 applications were received, 13 were shortlisted, and only four were ultimately funded (see Successful Cooperative Research Centre Bids Announced).

According to the CRC Association, eight of the 26 'new' applications appear to be applications from existing CRC's for continuing funding.  In an email bulletin, the Association's Professor Tony Peacock is quoted as saying:

"Interest in the CRC Program continues to be extremely high from industry and researchers. I have only seen a small number of the applications but each of them has been of exceptional quality and the pity of this Round, like last, is that it is simply too competitive for the funding available. Last year's success rate of 13% meant that proposals that are important to the country simply can't be funded."

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No Summary Judgment on Question of ‘Best Method’

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Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd (No 2) [2011] FCA 710 (23 June 2011)

Validity – best method – criteria for assessing whether patent specification describes ‘the best method known to the applicant of performing the invention’

Procedure – summary judgment – whether patentee has ‘no reasonable prospects of success’ in defending an allegation of failure to describe best method

In this decision of the Federal Court, Justice Bennett was required to consider the criteria for assessing whether a patent specification describes the best method known to the applicant for performing the claimed invention, and whether it would be appropriate to grant summary judgment revoking a patent on the ground that the best method is not described.

Her Honour found that, in this case at least, determining whether the best method was described is a complex question that requires careful consideration of a range of relevant facts and conflicting evidence of the parties.  As such, it could not be said that the patentee had no reasonable prospect of success in defending the allegation that the best method known was not described, and summary judgment was not appropriate.

We find this decision interesting firstly for its discussion of the criteria for assessing whether the best method has been disclosed in a patent specification, and also for its demonstration of the difficulties inherent in obtaining summary judgment in patent cases, which almost invariably involve complex questions of fact and law.
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07 July 2011

The Fate of Australian Industries for 2011-12

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The Australian white ibis in its
natural habitat: the Sydney CBD. 
To mark the start of the new financial year in Australia, market research company IBISWorld has released its annual report listing the Australian industries predicted to be the best and worst performers for 2011-12.

The list of the ten industries expected to show the greatest growth hardly paints a picture of Australia as an advanced and innovative information economy!  Dominated by primary production, the only service industries are financial asset investment, automotive fuel retailing, domestic airlines and online shopping.

The brightest light in the top ten may be the renewable energy sector, which at least is likely to be driven by investment in new clean energy technologies, and bolstered by regulatory changes (and the increasingly-likely carbon tax) driving reductions in carbon emissions.

On the other hand, the two industries expected to perform worst are both information technology-based: gaming and vending machines manufacturing and wired telecommunications carriers.  IBISWorld predicts that the vending machines market will face increasing competition from imports, while gaming will be affected by regional restrictions on gaming machine numbers (intended to combat problem gambling), and competition from sports betting, which is increasingly conducted online and via mobile devices.
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05 July 2011

Trans-Tasman Patents Implementation Plan Announced

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We have reported previously on the ongoing Trans Tasman Single Economic Market (SEM) program between the governments of Australia and New Zealand (see Australia and New Zealand – Two Laws, One Patent Examination?)

The program includes a project to reduce the duplication of work in the Australian and New Zealand patent offices in the case of patent applications filed in both countries.  Under the so-called ‘Integrated Patent Examination’ process, applications filed in both countries would be reviewed by a single examiner from either IP Australia or the New Zealand Intellectual Property Office (IPONZ).

In an announcement today by Australia’s Innovation Minister, Senator Kim Carr, and the New Zealand Commerce Minister, Simon Power, it has been revealed that the implementation plan will deliver a single application process for both countries by early 2013, and a single patent examination by June 2014.

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01 July 2011

Fishy Business — Bass Baked by ‘Stunning’ Appeal

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Seafood Innovations Pty Ltd v Richard Bass Pty Ltd [2011] FCAFC 83 (30 June 2011)
Appeal from: Seafood Innovations Pty Ltd v Richard Bass Pty Ltd [2010] FCA 723
See also: Innovation Patents Flop Like Stunned Mullet

Infringement – claim construction – functional claim – whether ‘includes a pivotally moveable floor’ encompasses a mechanism in which this element is insufficient to perform a claimed function – meaning of ‘to allow’

Validity – fair basis – whether a single description of an apparatus comprising several integers can provide basis for claims to multiple inventions comprising different subsets of integers – whether claims including only a subset of integers required for a working embodiment ‘define the invention’


A full bench of the Federal Court of Australia, comprising (in the sense of ‘consists of’ – more on this definition later) Justice Dowsett, Justice Bennett and Justice Greenwood, has unanimously reversed the first-instance decision of Justice Spender (retired).

The Full Court has found:
  1. claims 1 and 5 of Australian Innovation Patent No 2006100980, in the name of Seafood Innovations Pty Ltd (‘SI’) (the ‘first innovation patent’) to be infringed by Richard Bass Pty Ltd (‘Bass’); and
  2. all claims of Australian Innovation Patent No 2008100126 to be valid (and also infringed by Bass).
As we reported last July, the innovation patents (which have the same descriptions, but different claims) relate to to a fish stunning apparatus including a fish stunning device, a fish guide and/or a fish delivery table.  Justice Spender found that:
  1. claims 1 and 5 of the first innovation patent were not infringed by Bass, because the lowering of a chin plate or floor of the accused apparatus does not, in itself, allow or permit a fish to pass from the front to the exit of the device, as defined in the claims, but rather that, because additional components are involved, the mechanism in the Bass devices for achieving a unidirectional flow of fish is a substantially new or different mechanism to that of the first innovation patent (at [87]); and
  2. the claims of the second innovation patent are invalid, and do not ‘define the invention’, because they omit elements that are necessary to make the invention work, i.e. how a striker operates to stop, hold, stun and release a fish, which His Honour stated ‘is the critical point which the [second innovation patent] must address, but is silent on this point’ (at [116]).
We commented in our original report that the finding on infringement appeared to be based on a particularly narrow construction of the claims in question, and that the finding of invalidity seemed more akin to inutility, or lack of fair basis, and that it would be interesting to see what would happen on appeal.  As indeed it is!
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Update on the Australian Senate Gene Patent Inquiry

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As we have previously reported, the Australian Senate Legal and Constitutional Committee, which is currently conducting the inquiry on the Patent Amendment (Human Genes and Biological Materials) Bill 2010, was due to report by 16 June 2011.

As a reminder, the Bill (as originally introduced) seeks to outlaw the patenting of human genes, and other biological materials that are ‘substantially identical to such materials as they exist in nature’.

Anybody who has been waiting with bated breath for the results of the inquiry (and how the Committee manages to address the concerns expressed in over 100 submissions) will just have to be patient and wait a little longer.  On 15 June 2011, the Senate granted the Committee an extension of time for reporting, until 25 August 2011.

Nonetheless, this provides us with an opportunity to review what has been happening with the inquiry since we last reported (see ‘Late’ Submissions to Senate Inquiry on ‘Gene Patent’ Ban, and our more recent ‘opinion’ piece Why IP Professionals Must Take ‘Gene Patent’ Opponents Seriously).

In summary:
  1. four further late submissions have been received;
  2. public hearings were held on 28-29 April 2011; and
  3. Senator Heffernan introduced a further amended version of the Bill during the hearing sessions on 28 April 2011.
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