NZ High Court Clears Patent Attorneys of Negligence

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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Tags: New Zealand, Patent attorney profession, Professional conduct

US Appeals Court Rules Isolated Genes Patentable

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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Tags: Australia, Genetic technology, Law reform, Patentable subject matter, US

Re-examination Limits Rights to Flexible Roadside Posts

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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Tags: Australia, Obviousness, Reexamination, Revocation

Inventor’s Disclosure Bars Market Research Patent Rights

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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Tags: Australia, Entitlement, Inventorship, Novelty

Infringement By Supply of Products – Still Clear as Mud?

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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Tags: Australia, Indirect infringement, Infringement, Legislation, Patent law