Product Management Group Pty Ltd v Blue Gentian LLC
[2015] FCAFC 179

Patents – construction – whether literal interpretation warranted – indirect infringement – innovative step – appropriateness of orders “in aid of delivery up

At first instance, PMG’s “Pocket Hose” product was held to have directly infringed various claims of two innovation patents held by Blue Gentian relating to “Expandable and Contractible Hoses” and indirectly infringed within the meaning of section 117 of the Patents Act 1990 (Cth) by the supply of a product with instructions for use, as that use would itself infringe the patents. PMG’s cross-claim for revocation (on the grounds of lack of an innovative step, among other things) was unsuccessful. PMG appealed, on the ground that the learned trial judge had misconstrued the relevant claims, and had applied the incorrect test for assessing innovative step.

Blue Gentian’s hoses expand and contract through the combination of an elastic inner tube contained within and connected at both ends to, an inelastic outer tube (but one that is made of relatively soft fabric). In a “relaxed” state, the outer tube is compressed and folded like a concertina and the inner tube has a relatively thick wall. When connected to the tap and water introduced, a build up of pressure within the hose causes the inner tube to stretch, making it expand (and thus increasing its internal diameter) while also increasing its length. The connected outer tube is dragged along and unfolded and also serves as a casing that limits the expansion of the inner tube, to prevent the latter from bursting. The patents in suit also specify that the hose is to have a “fluid flow restrictor” (like a nozzle) either attached to, or contained within, a second coupler at the business end of the hose (the first coupler being the means of attaching the hose to a tap).

The majority (Kenny and Beach JJ) noted that in construing the relevant claims, the trial judge had parsed the paragraphs of each claim into discrete integers (not an uncommon approach). Their Honours observed that “There is nothing inherently wrong with such divisions, provided that such divisions do not distract from reading each particular claim as a whole. Moreover, reading each claim as a whole, as the hypothetical skilled addressee is expected to do, is more likely to give such an addressee an appreciation of what is really meant by the words used rather than some literal and grammatically parsed construction devoid of practicality and context.

On the construction point, the debate was the function of the “fluid flow restrictor” (claim 1.7) and what was intended by a reference to the “said increase in water pressure” (claim 1.8) arising from its inclusion at the end of the hose. That increase in pressure is what causes the hose the subject of the patent to expand, but does it include the pressure introduced caused by the fluid slow restrictor alone or also that caused by the frictional effects of water flowing through the hose after turning on the tap?

Under PMG’s construction, it did not. That construction involved, however, a very literal and limiting interpretation of the word “said”, that would make “little, if any, scientific or technical sense” to the skilled addressee. It also ignored the context of the integer within the wider claim and specification as a whole. As their Honour’s noted, “the present case is one of those exceptional cases where a skilled addressee would not construe the integer… in such a literal way” (see Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9 at [34]). Justice Nicholas dissented on this point, and held that the language of claim 1.8 was limited in the manner alleged by PMG, and would have upheld the appeal in part on that basis.

All three members of the Full Court agreed, however, that the trial judge’s finding of indirect infringement was correct. This was because PMG’s instructions advised the user to attach a nozzle in the off position and turn on the tap to allow full expansion of the hose before opening the nozzle. Under such a condition, it is the flow restrictor (nozzle) alone that is responsible for the pressure that expands the hose given there is no expansion caused by the frictional effects of water flowing through the hose, fulfilling the requirements of claim 1.8 even on PMG’s construction.

PMG’s invalidity argument was founded on prior art that related to a “self-elongating gas hose assembly”, designed primarily to deliver oxygen to aircraft crew in an emergency (McDonald Patent). Like Blue Gentian’s hoses, the McDonald Patent relies on pressurisation to cause a elastic inner tube to expand and stretch an inner tube that is restricted in its expansion by a folded fabric outer tube. The McDonald Patent does not disclose an integer consistent with PMG’s construction of claim 1.8, however, so PMG’s cross-claim had been put in the alternative.

There was some debate as the correct test when assessing the existence of an innovative step within the meaning of section 7(4) of the Act (also bearing in mind the priority date of the patents in suit preceded the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 expansion of the scope of common general knowledge from “in the patent area” to “whether in or out of the patent area”). The majority (Nicholas J agreeing) rejected PMG’s suggestion that the relevant test can be reworded to ask whether two things “work in substantially the same way“; adapting a prior art invention to a new purpose can be a “substantial contribution to the working of the invention” even if the inventions work in the same way. The majority also rejected, however, Blue Gentian’s submission that for a party claiming a lack of innovative step to succeed, the prior art must demonstrate a similar level of disclosure as will destroy novelty (that is, a “clear and unmistakeable disclosure”).

None of PMG’s submissions as to lack of innovative step succeeded. The majority (Nicholas J agreeing) upheld the trial judge’s findings that the fact that the patents of suit were limited to “garden hoses” was of itself an innovative step, as it involved using a hose for a different purpose and function than the McDonald Patent invention and on the evidence had a significantly different construction and properties. That limitation also meant that key integers made a substantial contribution to the working of the invention, as the overall invention needed to be suitable for use as a garden hose. Further, their Honours noted that “the differences…although each separately amounting to a substantial contribution also cumulatively make such a contribution“.

Finally, in written submissions PMG challenged one of the trial judge’s orders to the effect that PMG “request” the return of infringing products and promotional material from any wholesale or retail customers to whom they had been supplied. The Full Court accepted that such an order might be characterised as “in aid of delivery up of products that had been found to infringe“, although plainly it was not a delivery up order per se. That challenge was not developed at the hearing, and the Full Court was not persuaded that the trial judge had been in error. The majority noted, however, that “our rejection of this ground should not be taken as any endorsement of this form of order for the future. We doubt that such an order would ordinarily be appropriate.” Justice Nicholas dissented on this matter as well.

An application for special leave to appeal to the High Court has been lodged by PMG and will likely be heard in the second half of 2016.