The Limitations of Patents in a Globalised Economy

Advances in information technology, transport and communications, along with the implementation of multinational trade agreements, have resulted in a great acceleration in cross-border movement of goods, services, technologies and capital over the past few decades.  Patents, on the other hand, continue to exist as rights having only national scope.  Even within the European Union, which has established a highly-integrated single internal market, and where the European Patent Organisation provides a mechanism for central examination and grant of European patents, ongoing maintenance and enforcement of granted rights remains a matter for the national patent offices and courts.  (This will change once the Unitary Patent and Unified Patent Court come into effect, however since the ‘Brexit’ vote the timetable for their implementation is uncertain.)

The potential difficulties with the limited national scope of patents are illustrated by a recent Australian Federal Court decision, Load and Move Pty Ltd v Container Rotation Systems Pty Ltd [2016] FCA 843. 

In broad terms, Load and Move is an Australian company that owns Australian patents, and which found itself in competition with other Australian companies (including Container Rotation Systems) to supply products to overseas customers (specifically, in Eritrea) that Load and Move believed may be covered by its patents.  Container Rotation Systems (CRS) promotes and sells its products via its website, www.containerrotationsystems.com, which can, of course, be accessed from anywhere in the world with an internet connection.

The potentially infringing products, as it turns out, are manufactured at the same Chinese factory that makes the products for Load and Move.  Profits from the supply of the products no doubt accrue to the Australian competitors, however the products themselves are shipped directly from China to Eritrea, and thus never enter or leave Australian territory.

In these circumstances, it is understandable that Load and Move might feel, at least on some moral level, that its rights are being infringed, and that there ought to be something it could do to prevent competitors operating out of its own home market of Australia from ‘stealing’ business through the expedient of conducting all material (though not operational or financial) activities overseas.

However, ‘feeling’ wronged, and actually being legally wronged, may be two entirely different things.  In this case, the court found that it was not ‘objectively reasonable’ for Load and Move to believe that it had any right to relief in respect of the activities of CRS and other competitors in directing the overseas manufacture and supply, notwithstanding that they were operating out of Australia.

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Tags: Australia, Discovery, Infringement

Can an Early-Stage Embryo Without a Father Be Considered ‘Human’?

Under subsection 18(2) of the Australian Patents Act 1990, ‘human beings, and the biological processes for their generation, are not patentable inventions’.  An account of the legislative history of this exclusion may be found in the Patent Office decision Fertilitescentrum AB and Luminis Pty Ltd [2004] APO 19 at [13]-[25], which demonstrates that it was essentially the result of a political compromise between a push to exclude all genetic material and life forms from patentability, and the status quo of having no express exclusions in the Act. 

The government of the day rejected a broad exclusion on the basis that ‘it is impossible to foresee what inventions there will be in the future’ and that ‘a Patents Act which is not flexible enough to deal with the unforeseen would not serve the inventors, the public or the Government.’ 

Included with ‘the unforeseen’, however, are scientific developments that challenge the very category of ‘human’.  A Delegate of the Commissioner of Patents has recently had to deal with the question of whether the creation of a blastocyst via parthenogenetic activation of a human oocyte falls within the exclusion of subsection 18(2): International Stem Cell Corporation [2016] APO 52

No need to worry if you did not understand that last sentence.  I have done the background reading, and here is what it means in plain English.  What the inventors at International Stem Cell Corporation (ISSCO) did was to:

1. extract an immature human egg cell (an ‘oocyte’) from the ovary;
2. employ a technique to artificially activate the oocyte without requiring fertilisation (a process known as ‘parthenogenesis’); and
3. allow the activated oocyte to develop to an early stage of cell division called a ‘blastocyst’.

The point of all this is to enable the production of human stem cells matched to the woman from whom the oocyte was taken.  Therapies based on the use of stem cells are considered extremely promising for the treatment of various forms of degenerative disease, diabetes, heart disease and numerous other conditions. 

As ISSCO stated in its 2007 press release announcing the breakthrough, ‘parthenogenetic stem cell lines that are genetically related to the recipient may overcome rejection problems and thus may have the potential to give significant therapeutic benefit to patients.’  Furthermore, ‘parthenogenetically-derived stem cells provide an alternative to embryonic stem cells derived from fertilized embryos or from somatic cell nuclear transfer (SCNT) technology.’  These latter techniques are highly controversial, because they involve the use of potentially viable human embryos.

What, then, is the status of a parthenogenetic blastocyst?  If it qualifies as ‘human’, then it, and the processes by which it is created, fall within subsection 18(2), and are therefore unpatentable in Australia.  Fortunately for ISSCO, and for the many patients who may ultimately benefit from continued substantial investment in these types of biotechnology, the Australian Delegate found that this is not the case.

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Tags: Australia, Biotechnology, Europe, Patentable subject matter

After US Loss, Sequenom Takes Its Patent Battle With Ariosa Down-Under

One of the many benefits of genetic testing is the ability to carry out prenatal diagnosis of genetic disorders, most notably including (but certainly not limited to) Downs Syndrome.  This can be particularly valuable when one or both parents are known to be carriers of a genetic mutation such that the baby may be at significant risk of developing a serious condition or abnormality.  The conventional method of obtaining foetal DNA in order to conduct such tests is via amniocentesis, which is an invasive procedure in which a small amount of amniotic fluid is sampled from the amniotic sac surrounding the developing foetus using a needle.  Unfortunately, amniocentesis presents a risk to both foetus and mother.

A test that would enable screening of foetal DNA in a noninvasive manner would therefore be an important breakthrough.  Fortunately, just such a breakthrough was made in 1997 at Oxford University, when researchers Stephen Wainscoat and Dennis Lo discovered the presence of cell-free foetal DNA (cffDNA) in maternal blood serum, and developed techniques to isolate this DNA for testing.  Their discovery led to the grant of patents in a number of countries, including US patent no. 6,258,540 and Australian patent no. 727,919.  Oxford University, through its commercialisation arm Isis Innovation (now renamed as Oxford Innovation, for sadly obvious reasons), licensed the technology exclusively to US company Sequenom, Inc.

Last year, the US Court of Appeals for the Federal Circuit (CAFC) found the US patent to be invalid on the basis that the claimed invention was essentially the discovery of the pre-existing, but hitherto unknown, natural phenomenon of cffDNA being present in maternal blood: Ariosa Diagnostics, Inc.v. Sequenom, Inc. (Fed. Cir. 2015).  The claims were therefore considered to be directed to ineligible subject matter under the standards established by the US Supreme Court in its Myriad and Mayo decisions.  The CAFC subsequently declined to rehear the case en banc.  However a number of the Federal Circuit judges, including Judge Linn on the original panel, and Judges Lourie and Dyk in the decision refusing en banc rehearing, indicated that they felt bound by the Supreme Court precedents, but did not agree with the result in this case.  Judge Newman went further, stating her view that the case had been wrongly decided, and was distinguishable from the facts in Myriad and Mayo.

Many observers therefore felt that the Sequenom case was ripe for review by the Supreme Court, which would then have an opportunity to further develop and clarify its Myriad and Mayo guidance.  However, on 27 June 2016 the Supreme Court denied Sequenom’s petition, sealing the US patent’s demise once and for all.

However, in the meantime (on 7 June 2016) Sequenom has commenced proceedings in the Federal Court of Australia, also against Ariosa Diagnostics, Inc, for infringement of the equivalent Australian patent.  This raises the question of whether the invention that was found ineligible for patent protection in the US may nonetheless be upheld under Australian law.  This will be the second time in recent history (the other being the Myriad BRCA breast cancer gene case) that subject-matter eligibility has been considered for corresponding patents in the US and Australia.

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Tags: Australia, Biotechnology, Diagnostic methods, Litigation, Patentable subject matter, US

Another Australian Patentee Bitten By ‘Unjustified Threats’ Provisions

Under section 128 of the Australian Patents Act 1990, a person or company that feels they have been unjustifiably threatened with patent infringement proceedings can take legal action seeking an injunction to prevent the threats from continuing, and the recovery of any damages sustained as a result of the threats.  The law particularly contemplates circumstances in which a patent holder seeks to inhibit competition by making vague or dubious claims, such as ‘by means of circulars, advertisements or otherwise’ as well as by more conventional means, such as cease-and-desist letters.
 
I am not a fan of the current unjustified threats provisions, at least not as they have been repeatedly interpreted by the Australian courts.  They can be successfully invoked in any case in which it ultimately turns out that a patent is invalid or not infringed, regardless of how objectively reasonable the patentee’s original belief may have been.  The law therefore does not particularly target bad actors such as ‘patent trolls’.  There is a very limited ‘safe harbour’ in section 131, according to which ‘the mere notification of the existence of a patent, or an application for a patent, does not constitute a threat of proceedings for the purposes of section 128.’
 
As a result, the unjustified threats provisions provide an accused infringer with an effective trigger for invoking full-blown, time-consuming and expensive proceedings in the Federal Court of Australia on infringement and validity of a patent at the merest hint of an allegation of infringement by the patentee.
 
A recent judgment in CQMS Pty Ltd v Bradken Resources Pty Limited [2016] FCA 847 reconfirms the position that any allegation of infringement which eventually turns out to have been incorrect (no matter how reasonably and sincerely believed) will be treated as an unjustified threat under the Australian law.  The case particularly highlights the difficulties inherent in drafting initial letters to potential infringers without risking exposure to subsequent proceedings for making unjustified threats. 
 
Patent attorneys and IP lawyers, who are commonly called upon to prepare such letters, should therefore take particular note, as should patentees who might otherwise feel inclined to make initial allegations without obtaining appropriate legal advice.

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Tags: Australia, Law reform, UK, Unjustified threats

Patent Litigation Insurance – What Is It, and Should You Have It?

The basic principle of insurance is simple.  You are at risk of some adverse event which probably – hopefully – will not happen.  But if it does happen, the consequences could be devastating.  So, to mitigate this risk you pay an insurer a known recurring amount (the premium) in exchange for a guarantee of compensation to help cover you in the event that the adverse event occurs. 

In your personal life you may have health insurance, life insurance, income protection insurance, vehicle insurance, and home and contents insurance.  The premiums for these types of insurance are typically on the order of a few hundred to a couple of thousand dollars per year, and they provide protection against events that, if they were to occur, might cost you tens or hundreds of thousands of dollars, or even more.

If you run a business, you may well have professional and/or product liability insurance, property insurance, worker’s compensation insurance, vehicle insurance, and business interruption insurance, among others.  Again, for a moderate and, importantly, known and predictable annual premium, you are hopefully protected against events beyond your control that might otherwise, in the worst case, put you out of business altogether.

But what about patent litigation insurance?  Have you ever heard of it?  Do you need it?  What does it do, and how much does it cost?

There are, in fact, two types of patent litigation insurance, neither of which is very widely available or, as I shall explain, particularly cost-effective for most businesses.  Patent enforcement insurance is intended for patent owners, and assists in covering legal costs in the event that it becomes necessary to take action against an infringer.  Patent infringement liability insurance may be relevant to any manufacturer, seller or user of goods and services that may result in an accusation of infringement of a patent owner’s rights, and assists in covering the costs of defending an infringement claim and/or the costs of compensating the patent owner if infringement is established.

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Tags: Insurance, Patent litigation, Public policy