‘Springboard Injunctions’ Considered by Federal Court of Australia

You may have read the title of this article and wondered, ‘what, exactly, is a “springboard injunction”?’  If so, I am sure you are not alone.  I encountered the term for the first time myself this past week, when I read a recent decision of the Federal Court of Australia, Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd (No 2) [2015] FCA 140.

The background to this decision, very broadly speaking, is as follows.  Streetworx is the proprietor of two innovation patents relating to street lighting assemblies (also known as ‘luminaires’).  In a judgment handed down on 18 December 2014 (Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd [2014] FCA 1366), Justice Beach found that Artcraft had infringed the Streetworx patents by the supply of its own luminaires, which it had manufactured in China, and imported for sale in Australia. 

Artcraft has pre-existing contracts to provide luminaires to the Monash City Council and Moonee Valley City Council (which cover significant areas of Melbourne’s South East and North West, respectively).

After the December judgment was handed down, Artcraft determined that it was able to modify its existing stocks of luminaires such that they would no longer infringe the Streetworx patents, and could therefore be used to meet its obligations to supply luminaires under the council contracts.

Not surprisingly – considering its success in establishing the validity and infringement of its patents – Streetworx was not impressed by Artcraft’s ‘solution’ to its infringement problem.  Among other relief, Streetworx therefore sought an injunction restraining Artcraft from supplying its modified, non-infringing, luminaires to the Monash and Moonee Valley Councils.  It also sought orders requiring Artcraft to hand over all infringing luminaires in its possession for destruction by Streetworx.  The court has now denied both of these requests.

The so-called ‘springboard injunction’ is the requested order restraining Artcraft from supplying non-infringing products, on the basis that they have been produced by way of the importation and use of infringing products.  Acquisition of the infringing products may thus be regarded as a ‘springboard’ from which the non-infringing products are made and supplied.

Streetworx Request for a Springboard Injunction

As explained by the court (at [19]), Streetworx’ argument was that although Artcraft was not intending to supply an infringing product to the Councils it had nonetheless obtained the Council contracts through the use of an infringing product, and should not be permitted to benefit from that infringement.

For its part, Artcraft argued that there was no proper foundation for the grant of a springboard injunction, because the supply of the opaque luminaires did not involve any unwarranted advantage.  In particular, Artcraft submitted that the features of its luminaires that are protected by the Streetworx patents played no part in its securing the council contracts.

Springboard Injunctions – The UK Position

The grant of a springboard injunction in patent cases is not unprecedented.  The Australian decision refers (at [69]ff) to a recent judgment of Mr Justice Birss in the England and Wales High Court, Smith & Nephew Plc v Convatec Technologies Inc & Anor [2013] EWHC 3955 (Pat).  In that case, a requested springboard injunction was also denied, however the court reviewed earlier UK and European authorities in which such injunctions have been granted.

For example, one set of circumstances in which a springboard injunction has been considered appropriate arises in the field of pharmaceuticals, where a manufacturer of generic products might commence the process of preparing and submitting data to obtain regulatory approval prior to expiry of a patent.  In this way, it will be ready to launch the generic product onto the market as soon as the patent expires.  There is, of course, no way to prepare and submit the relevant data without infringing the patent.  In Australia, section 119A provides that it is not an infringement to exploit a pharmaceutical patent solely for the purpose of obtaining regulatory approval, i.e. this type of pre-expiry ‘infringement’ is sanctioned.  However, in many other jurisdictions this is still regarded as impermissible ‘springboarding’.

Availability of Springboard Injunctions in Australia

Although the Smith & Nephew case, and the earlier authorities that it discusses, were not decided under Australian law, Justice Beach was satisfied that the Australian courts have a similar – indeed possibly wider – discretion to award less conventional forms of relief, such as springboard injunctions:

… I do not doubt that a springboard injunction can be granted in a patent infringement case. Section 122(1) of the Patents Act 1990 (Cth) provides that “relief which a court may grant for infringement of a patent includes an injunction...”. The word “for” does not confine the circumstance to only enjoining an act of infringement. The concept of “for” can embrace enjoining an act where it is not the infringing act, but has its foundation in an earlier act in the causal chain that was infringing. Moreover, s 23 of the Federal Court of Australia Act 1976 (Cth) would also provide adequate power; s 122 is not an exhaustive codification for injunctive relief in the present context. (At [71].)

Justice Beach thus mined Mr Justice Birss’ decision to uncover the following principles in relation to the grant of springboard injunctions:

1. the basis for the grant of a springboard injunction is to ‘deprive an infringer of an unwarranted advantage gained from their act of infringement’;
2. the nature and quality of any unwarranted advantage needs to be identified, particularly and precisely ‘the relationship between the past unlawful activity and the threatened otherwise lawful conduct but unwarranted advantage’;
3. the terms (e.g. form and duration) of the injunction must be proportionate to and linked with the unwarranted advantage, i.e. should not exceed the advantage gained by the prior infringing conduct;
4. ‘the injunction must not put the applicant [i.e. patentee] in a better position than the applicant would have been in absent the prior unlawful activity’;
5. a springboard injunction usually should not be granted if other available remedies, such as damages or an account of profits, would be adequate;
6. restraint should be exercised where the springboard injunction would adversely affect innocent third parties, such as (in the Streetworx case) the councils that will then be precluded from receiving supply of an otherwise lawful product under an existing contract; and
7. generally, ‘great care should be exercised in granting a final injunction restraining otherwise lawful activity’.

Outcome: Springboard Injunction Refused

Taking all of the above factors into account, the court determined that it would not be appropriate to grant a springboard injunction against Artcraft.  The main considerations in this case were:

1. damages or an account of profits would be an adequate remedy;
2. the patented features of the infringing luminaires seem to have been of little, if any, significance to the councils; and
3. the effect of an injunction would be adverse to the councils, which are innocent third parties that had not been involved in the court proceedings.

Interestingly, however, the court did make it a condition of refusal of the injunction that Artcraft pay its gross margin in respect of the future supply of luminaires under the council contracts into a trust account, as security for any award of damages or account of profits in respect of those supplies.

Conclusion – More Requests for ‘Unconventional’ Relief?

While Streetworx was unsuccessful in its application for a springboard injunction in this particular case, it appears that such injunctions are available in Australia in appropriate circumstances.

In practice, however, it seems likely that a springboard injunction would only rarely be warranted.  In particular, a springboard injunction would typically restrain some otherwise lawful activity (as Mr Justice Birss pointed out in the Smith & Nephew case ‘if the acts restrained would be unlawful anyway then no conceptual difficulty arises’).  In my view, any judge of the Federal Court of Australia is likely to think very long and very hard before issuing an injunction restraining legal activities.  In the absence of some especially egregious conduct on the part of the infringer, or a clear case in which pecuniary relief would plainly be inadequate, I would not expect to see springboard injunctions granted.

This case might, however, result in an increase in the frequency of applicants requesting more ‘unconventional’ forms of relief, such as springboard injunctions.

Tags: Australia, Injunctions, Litigation, Penalties for Infringement, UK