20 April 2013

Research Affiliates Will Have Its Day Before the Full Court

BalanceLast month, I reported on the application by Research Affiliates, LLC (‘RA’) for leave to appeal the decision of the Federal Court of Australia upholding the Patent Office’s rejection of its patent application directed to the computer-aided construction and use of passive portfolios and indexes for securities trading.

On 12 March 2013, RA appeared before Justice Flick to argue its case for the appeal to be heard by a Full Bench (three judges) of the Federal Court.  A decision was handed down on 12 April 2013 (Research Affiliates LLC v Commissioner of Patents [2013] FCA 329), according to which RA has been granted the opportunity to appear before the Full Court.  And while it has not yet actually been decided that the court will hear the appeal, that now appears to be the most likely outcome.

Justice Flick could have heard RA’s full arguments in favour of allowing it to appeal the initial decision, and then made orders that the appeal should either proceed, or be denied.  In the event, however, RA’s application for leave to appeal has yet to be decided.  That question has itself been passed to a Full Bench of the Federal Court, which will have the option of hearing the application for leave either separately from, or concurrently with, the substantive arguments on appeal.

Keen followers of Australian patent litigation may recall that this same approach was taken in the case of Samsung’s application for leave to appeal the decision of Justice Bennett awarding Apple a preliminary injunction blocking sale of the Galaxy Tab 10.1 in Australia.  On that occasion, the court elected to hear the application for leave, and the substantive case, concurrently, resulting in a judgment which both granted leave and overturned the original decision.

Application for Leave to Appeal

In most cases, a party to proceedings at first instance in the Federal Court has an automatic right of appeal to a Full Bench of the Court.  However, there are some circumstances in which leave must be specifically granted.  One example is where the first instance decision is of a preliminary nature, such as the refusal or grant of an interlocutory injunction.  In such cases, an appeal has the effect of prolonging the delay until a final judgment is issued in the main proceedings, and therefore should be permitted only in circumstances in which a judge determines that it is justified.

Another circumstance in which permission to appeal must specifically be granted is when the original decision is itself the result of an appeal from a Patent Office decision.  This is required by subsection 158(2) of the Patents Act 1990, which states that ‘except with the leave of the Federal Court, an appeal does not lie to the Full Court of the Federal Court against a judgment or order of a single judge of the Federal Court in the exercise of its jurisdiction to hear and determine appeals from decisions or directions of the Commissioner.’

Significantly, the requirement for ‘leave of the Federal Court’ implies that the decision is to be made by a single judge of the court.  Sometimes, this may be the most efficient approach.  For example, if the appeal is clearly bound to fail, or the grant of leave is plainly justified, a judge may be able to reach a quick decision without requiring extensive submissions.

However, where the application for leave to appeal is based on complex legal arguments as to whether the judge has applied the law correctly – rather than, for example, a contention that some manifest injustice has been committed – it will often be the case that the basis for the grant of leave will substantially overlap with the arguments to be made in the appeal hearing itself.  If so, then it would be inefficient for the case to be presented firstly before a single judge of the court, and then again before the Full Bench.

This is, presumably, one reason why subsection 25(2) of the Federal Court of Australia Act 1976 provides for a single judge of the court to direct that an application for leave to appeal be heard instead by a Full Court.

Referring an Application to a Full Court

Research Affiliates applied to the court for a direction that its application for leave to appeal be referred to a Full Court.  The Commissioner of Patents consented to the order being made.

Nonetheless, Justice Flick considered it ‘prudent’ to provide brief reasons for giving the requested order.  In summary, he considered (at [20]) that the application should be referred to a Full Court in view of:
  1. the ‘obvious convenience’ to the parties in advancing their competing arguments once rather than twice;
  2. the fact that the arguments to be advanced in seeking leave to appeal would be much the same as those to be advanced on the hearing of any appeal, and could be completed within a single day;
  3. the fact that the questions to be resolved on appeal require reference only to RA’s patent specifications and would be confined to the issue of whether the specifications satisfy the statutory requirement for the claims to define a ‘manner of manufacture’; and
  4. the significance of the questions to be resolved extending beyond the private interests of the parties, and bearing on the public interest in clarifying the scope of patent-eligible subject matter under the ‘manner of manufacture’ test.

The Grant of Leave to Appeal

Although Justice Flick was not required to decide whether leave to appeal should be granted – this now being a matter for a Full Court – he nonetheless discussed some of the principles involved.

The broad general principles to be considered in exercising the discretion to grant or refuse leave to appeal are summarised (at [8]) as:
  1. whether in all the circumstances the judgment of the primary judge is attended by sufficient doubt to warrant it being reconsidered by the Full Court; and
  2. whether substantial injustice would result if leave were refused supposing the decision would be wrong.
The application of the second of these principles, in particular, might result in different outcomes depending upon the nature of the proceedings originating in the Patent Office.

For example, if an unsuccessful opponent appeals a Patent Office decision, and is again unsuccessful before a single judge of the Federal Court, no great injustice is likely to result if leave to appeal to a Full Court is refused.  The opponent has already tried and lost twice.  The consequence of refusing leave to appeal is that a patent will be granted.  The opponent retains the right to challenge the patent again, after grant, by way of an application to the court for revocation under section 138 of the Patents Act (see Pfizer Corporation v Commissioner of Patents [2006] FCAFC 190 at [8]).

However, in a case in which an opponent has been successful, a court ‘should be slow to shut out an applicant for a patent … who has had only one judicial consideration of entitlement to a grant’ (Pfizer at [9]), for once the application has been finally refused, there is no mechanism to restore the applicant’s rights in case of error.

RA’s position is very much analogous to that of the patent applicant who has lost an opposition on appeal to the Federal Court.  Once all of its avenues of appeal are exhausted, RA’s opportunity to secure patent protection for its invention will be lost forever.


While RA has not yet been granted leave to appeal to a Full Court, it has now been guaranteed its day in front of a Full Bench.

The likelihood is that both RA and the Commissioner of Patents will be permitted to present their full arguments before the appeals court, and that a single judgment will subsequently issue which will grant the application for leave, and decide the substantive question of whether to uphold, or overturn, the decision of Justice Emmett at first instance.

A date for the hearing should be set shortly.

Image courtesy of Renjith Krishnan / FreeDigitalPhotos.net


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