27 March 2013

High Court Declines (Again) to Weigh In on Innovative Step

Judge - gavel The High Court of Australia has turned down an opportunity to review the standard of ‘innovative step’ under the Patents Act 1990, effectively confirming once again that the Full Bench of the Federal Court in Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd [2009] FCAFC 81 correctly decided the matter back in 2009.

This latest opportunity arose in relation to a dispute over mining processes, between SNF (Australia) Pty Ltd (‘SNF’) and Ciba Specialty Chemicals Water Treatments Limited (‘Ciba’).  Ciba is the owner of a number of innovation patents covering methods for processing waste products from mining, i.e. the so-called 'tailings', which generally comprise a slurry of particles (clay, sand, dirt, etc) suspended in water.  Ciba accused SNF of infringing its patents, and SNF in fact conceded that it had been using a process which fell within the scope of Ciba's claims, and thus would be liable for infringement, if the claims were valid.

Naturally, SNF contended that Ciba's patents claims were invalid for (among other grounds) lack of novelty, and lack.of innovative step.

I wrote about another aspect of the original decision in this case (the application of the indirect infringement provisions in section 117 of the Patents Act) back in July 2011.  The issues of novelty and innovative step, which appeared to have been decided in accordance with the established legal principles, did not seem very interesting at the time.

The Story In Brief

The primary judge found in favour of Ciba, i.e. that its claims were novel, and involved an innovative step.  SNF appealed this ruling to a Full Bench of the Federal Court, which handed down its decision upholding the original judgment in June last year (SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2012] FCAFC 95).  I did not report on that largely unremarkable decision at the time, however it has taken on new interest in view of the fact that SNF sought Special Leave to appeal to the High Court of Australia.

The Special Leave application was heard – and denied – on 15 March 2013.  SNF presented the High Court panel (comprising Chief Justice French and Justice Gageler) with an interesting proposition in relation to innovative step.  Specifically, counsel for SNF contended that if a point of difference between a claim of an innovation patent and the prior art could, in at least some circumstances, have a negative or disadvantageous effect, then this should mean that the claimed feature makes 'no substantial contribution to the working of the invention', and thus does not comprise an innovative step.

The High Court was profoundly uninterested in taking up this point.  Nor did it consider the other ground of appeal raised by SNF – regarding interpretation of the term ‘improved rigidification’ – to involve any legal principle worthy of its attention.  Indeed, the Court did not even need to hear from counsel for Ciba before refusing the application for Special Leave, with costs awarded against SNF.

Background: the Invention

As most people would be aware, mining produces waste products, in the form of all the stuff dug out of the ground that is not the desired substance!  Mostly this is particulate matter ranging from the very fine, e.g. clay, up to the relatively course, such as sand and gravel.  Generally these waste products are mixed with water to form a slurry, and then pumped away and dumped somewhere suitable – typically either back into a mine shaft, or into a dam or other repository.

It is desirable that this process be conducted such that the water can be recovered, recycled, and reused.  It is also desirable that the remaining waste products solidify to form a stable structure such that, for example, land onto which it is deposited may be reclaimed.  However, in the absence of additional processing, it may take a long time for the water to drain away from the slurry, and/or for the particulate matter to settle so that the water may be removed.  Even then, very fine particles remain in the water, which must be subjected to further processing before it can be reused.  Additionally, heavier particles settle faster than smaller, lighter, particles, creating an inhomogeneous structure which lacks strength and stability.

To address these issues, substances known as flocculants are used.  These are compounds – typically polymers – which cause particles in the slurry to bind into larger clumps (or, as some wags might say, to 'floc together'), so that they settle more quickly, leave fewer fine particles in the waste water, and form a more stable homogeneous structure.

Ciba's claimed invention (or innovation, as might more accurately be stated) was a process which resulted, at least in various embodiments described in its patent specifications, in a supposedly superior result: faster formation of a more stable structure, with cleaner recovered water, than the prior art.  The specifications and claims referred to this result as 'improved rigidificaton'.

SNF relied on a number of prior art patents, as well as prior use of flocculants at various mining sites, for its attack on Ciba's claims.  Ciba argued – and the primary judge accepted – that its patent claims were distinguishable from each of the items of prior art information by one or more of the following features:
  1. that prior art methods involved settling or sedimentation of waste products, which is different from 'rigidification', as that term should be properly understood in relation to the invention;
  2. that the polymer (flocculant) is applied in the form of an aqueous solution, according to the invention, rather than in the form of solid particles, or an oil-based suspension as in the prior art; and
  3. that the point in the Ciba process at which the polymer solution is added – while the slurry is still in the pipes prior to reaching the deposition area – differs from the prior art.
It was said by Ciba that, in addition to providing points of novelty, any one of these distinctions makes a substantial contribution to the way in which the process works, and thus satisfies the innovative step requirement.

The primary judge agreed with all of this, which led to SNF's appeal to the Full Federal Court.

The Construction Issue: 'Improved Rigidification'

A major issue in the original trial, and on appeal, was how the term ‘improved rigidification’ should be interpreted.  This term crucially appears as a feature of Ciba’s claims, but is not expressly defined anywhere in its specifications.

This was important because, according to Ciba, ‘rigidification’ and ‘improved rigidification’ are results that are qualitatively different from mere ‘sedimentation and settling’.  These processes are, of course, well-known in the prior art, as is admitted in the discussion of the background to the inventions claimed in Ciba’s patent specifications.

It is well-established that the task of ‘construction’, i.e. interpreting a patent specification and its claims, falls to the court as a matter of law.  (This is true also in other jurisdictions, including the US, where separate ‘claim construction’ hearings – known as ‘Markman hearings’ – are commonly held before the judge only, prior to a main trial in front of a jury.)  In performing this role, however, the judge must be mindful that the addressee of the specification is the person skilled in the relevant art, who brings to the task all of their relevant understanding, experience and background knowledge.

The primary judge (at [43] of the trial judgment) found that:

…the relevant art is “the art of dealing with tailings in mines”. In this case, the skilled addressee is a practical person working in the mining industry, with practical knowledge of and experience in the treatment and disposal of mining wastes. Such skilled addressees would include SNF’s technical sales representatives who gave evidence at trial. The gist of their evidence in this regard was that in the course of their ordinary employment they gave technical advice to SNF’s customers with respect to processes for treating mining waste. Other skilled addressees might be mines engineers familiar with waste disposal processes (including the plant and equipment used in such processes).

Notably, this person would not necessarily have any expertise in the physical and/or chemical processes that take place during waste disposal, although they would be very familiar with the qualitative results of any particular treatment of the tailings.  They would notice, for example, how rapidly the waste products solidified (or rigidified), the qualities (i.e. strength and stability) of the resulting deposits, and how clear the waste water was after being reclaimed.

Ciba’s Case at Trial

In the original trial, Ciba called expert evidence from a CSIRO chemist with extensive experience in solid-liquid separation for the mining industry.  It does not seem to have been disputed at any stage that this expert was far too highly qualified to be the ‘person skilled in the art’ described above, though he would certainly be well-placed to know something of the roles, knowledge and experience of such persons.  SNF also called on an ‘overqualified’ expert.

A major aspect of the evidence provided by Ciba’s scientific expert was to explain how and why the ‘rigidification’ process was different from conventional ‘sedimentation and settling’.  This had something to do with chemical bonding, and the formation of ‘networks’ after the polymer flocculant was added, in aqueous solution, to the slurry.  SNF’s expert disagreed with Ciba’s expert in a number of respects.  However, it is the judge’s job to resolve such factual disputes (note that this would be a jury task in the US system), which she duly did, in Ciba’s favour.

The finding that ‘rigidification’ is different from prior art ‘settling and sedimentation’ meant that Ciba’s claims were novel over the documents and examples cited by SNF.

Furthermore, one or more of the three key differentiating features (listed above) of the Ciba process must have been responsible for the different outcome, and thus could not be said to have no substantial effect on the working of the invention, i.e. satisfying the requirement for innovative step set out in section 7(4) of the Patents Act 1990.

SNF’s Case on Appeal to the Full Court

On appeal, SNF argued (among other things) that the primary judge had erred in favouring the view of Ciba’s scientific expert, when it was clear that he was not the relevant ‘person skilled in the art’ whose knowledge should be brought to bear in interpreting the specification.

The majority opinion on this issue (written by Australia’s own celebrity judge, Justice Annabelle Bennett, with whom Justice Finn concurred) dismissed SNF’s objections.  In essence, Ciba’s expert had done something that Ciba’s patent specification had not, which was to explain the physical and chemical mechanisms by which the invention actually works.  Though some may be surprised to hear it, a patent specification is not actually required to do this – it is only required to teach the skilled person how to put the invention into effect.  The (non-chemist) skilled person does not need to understand the chemical reactions which subsequently take place in order to apply a specified polymer flocculant, in a specified aqueous form, at a specified point in the waste disposal system, as taught by the Ciba patent specifications.

As Justice Bennett put it (at [276] of the appeal decision), the expert’s

…explanation of a networked structure formed the basis of Ciba’s approach to the effect of improved rigidification, in part to explain its meaning, in that he explained the way in which the claimed process worked. However, there is no requirement for the patentee to provide an explanation of how the invention works. In any event, as noted by Ciba, there is nothing in the specification inconsistent with that explanation, nor is networking a requirement of the claims. Ciba emphasises that the non-chemist skilled addressee does not need to know networking to work the invention.

The majority on the Full Bench consequently found no identifiable error in the approach taken by the primary judge to the questions of construction, novelty and innovative step, and dismissed the appeal.

Dissenting Opinion

It is worth noting that the third judge on the panel, Justice Dowsett, penned an extensive dissenting opinion, in which he effectively concluded that the skilled person, lacking the specialist knowledge of the scientific experts, would understand the term ‘rigidification’ to include (even if not limited to) the conventional processes of settling and sedimentation.

This alternative construction would have resulted in an opposite finding on novelty of a number of Ciba’s claims, raising new questions of novelty and innovative step in relation to other claims, which were not considered in the original judgment.  Justice Dowsett would therefore have remitted these questions back to the primary judge for further consideration.

This view has some merit, however to my mind the main objection to it is that it creates a contradiction internal to the patent specifications.  It makes no sense for the patentee to admit that certain processes are known in the prior art, and then to describe and claim an invention, using different words (albeit ones that do not have an established technical meaning), and yet for this new choice of language to be taken to include the admitted prior art.  The skilled person in this case may not be a scientific expert, however nor should they be taken for an idiot!

The Question of Innovative Step at the High Court

The transcript of the High Court hearing on SNF’s Special Leave application makes interesting reading.

It appears from the exchange between the bench and SNF’s counsel that SNF did not challenge the correctness of the appeal court’s interpretation of the statutory provisions regarding innovative step, which faithfully followed the formula set out in Dura-Post.

Rather, SNF’s argument seems to have been that Dura-Post was correctly decided, as far as it went, i.e. that it is a requirement, for an innovative step to be present, for a novel aspect of a claim to have some material effect on the way the invention works.  However, as argued by counsel for SNF, for there to be any ‘innovation’ at all, this cannot be just any effect, but should be a beneficial effect.  In particular, it was put to the High Court panel on behalf of SNF that an effect which is either ‘neutral’ or ‘negative’ could not constitute and innovation.

In other words, SNF was urging the High Court to accept its application for leave to appeal in order to consider whether the Dura-Post test for innovative step requires extension to include not only assessment of the presence of an effect, but also consideration of the character of the effect.

The reason this might have improved SNF’s position was because there was evidence that Ciba’s claims might encompass not only an improved waste treatment process, but also processes that would not work successfully.  For example, if the wrong quantity of flocculant is added, or if it is added too far back from the deposition outlet of the disposal system, then the tailings might ‘rigidify’ in the pipe, causing a blockage.

In rejecting SNF’s application, on this issue and the related construction issue, the High Court stated:

The primary judge’s finding, reflected in the majority in the Court of Appeal, that a person skilled in the art would consider the form in which the flocculant was added to have “an important effect” on the process was, in our opinion, a statement of an evaluative kind which, taken in context, did not disclose an approach by her Honour which was inconsistent with the statutory test.

The other special leave point is said to arise out of the trial judge’s approach to the construction of the term “improved rigidification” involving the use of a water soluble polymer as flocculant and excluding existing processes of settlement and sedimentation. That construction informed the trial judge’s conclusions adverse to the applicant on issues of novelty and want of innovative step. The applicant complained that the primary judge relied upon the evidence of an expert rather than that of a skilled addressee in construing the patent. However, the trial judge formulated the correct principles.

The complaint is really one of application. No error of principle warranting the grant of special leave is disclosed in her Honour’s approach to construction or in that of the Full Court.


The High Court also rejected an application back in 2009 for Special Leave to appeal the decision in the Dura-Post case.  Similarly to this case, it was argued then that the evaluation of innovative step should involve some assessment of the substance of the advance in the art provided by the innovation, rather than being a purely ‘mechanical’ comparison.

Speaking for the High Court at the time, Justice Gummow stated simply that ‘[w]e are of [the] opinion that an appeal to this Court based upon that proposition would fail.’

It remains the case that the evaluation of innovative step involves no assessment of the nature or quality of the new effect achieved by the claimed innovation.  It need not represent an advance in the art, and indeed may even involved some disadvantage, so long as there is some ‘substantial contribution’ or ‘important effect’ which may be appreciated by the skilled person.

I note in closing that the issue of ‘negative’ effects, or inventions that do not ‘work’, is traditionally addressed under the ground of inutility.  Most patent specifications make some assertion of advantage, and if the claims encompass something that does not satisfy this ‘promise’, they can be attacked on the ground that the invention is not ‘useful’, i.e. for its stated purpose.  This has, at least, been the position under the Australian law up until now – which takes its lead from earlier British law on the utility requirement.  Whether this will change under the new provisions of the Raising the Bar Act remains to be seen.

In this case, SNF did argue the ground of inutility at trial, but failed due to a lack of suitable evidence that Ciba’s claims encompassed processes which failed to fulfil the promise of providing ‘improved rigidification’.  This ground was not taken up on appeal to the Full Court.

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