When a business supplying streetlights in Australia that infringed a patent, then modified them so that they did not infringe, the patentee applied to the Federal Court for a springboard injunction to stop the subsequent supply of the non-infringing products to two councils. The springboard injunction application failed but the supplier must now undertake to pay the gross margin in respect of the future supply of its streetlights to the councils into a trust account as security for any award of damages or account of profits.
In order to succeed in an application for a springboard injunction it will be necessary to adduce evidence which demonstrates that a strong causal link existed between the presence of the infringing integers and the unwarranted advantage obtained by the infringer. Further, a springboard injunction should not be used as a 'back door' means for a patentee to restrain otherwise lawful competitive activity. A patentee may be perceived to be doing so where the quality of the advantage obtained by the infringer is low. In addition, an applicant for an order for delivery up will find it difficult to succeed where the infringing product can be modified so that it is no longer infringing.
Last year, Justice Beach found Streetworx' patent claims for lighting assemblies known as 'luminaires' (or as non-patent attorney folk refer to them 'streetlights') to be valid. Justice Beach also found Artcraft Urban Group's luminaires to be infringing.
To avoid infringement, AUG modified its luminaires so that they omitted an essential feature. It disassembled its infringing products, and applied an opaque coating to part of the visor (which removed any visibility into a termination chamber), and reassembled the luminaires. AUG then sought to fulfil pre existing contracts with two Victorian councils.
Streetworx sought a 'springboard' injunction permanently restraining AUG from fulfilling the contracts by supplying the modified luminaires. Streetworx also sought orders for delivery up of all infringing luminaires and any modified luminaires. More on that later.
Is a springboard injunction appropriate?
Streetworx argued that AUG had obtained the council contracts through the use of an infringing product and should not be allowed to retain such an advantage from that infringement, even though AUG's now modified products did not and never would have infringed Streetworx' patent. Streetworx claimed that it suffered loss because if AUG had not been in the running to secure the contacts, it had good prospects of winning the council contracts over its only remaining competitor.
Justice Beach said there was no doubt that springboard injunctions can be granted in patent infringement cases.
Streetworx argued that the relevant test for establishing whether unwarranted advantage has been obtained is a 'but for' test, so that even if the party awarding the contract was not aware of the presence of the infringing elements in the product, an unwarranted advantage has been obtained nonetheless. Justice Beach accepted this formulation, however his Honour said that the causal link between the relevant infringing integers and the award of the contract was relevant to the assessment of the quality of the unwarranted advantage allegedly obtained by AUG. It follows that the nature and quality of any unwarranted advantage is diminished the less it is causally tied to the significance of the presence of the relevant infringing elements. Justice Beach found that a springboard injunction was not justified for three reasons:
- Damages or an account of profits was an adequate remedy. Justice Beach required, as the price for refusing the injunction, an undertaking from AUG to hold on trust its profits in respect of the future supply of its streetlights to the councils. Justice Beach considered that this form of undertaking would remove any 'forensic problem' of Streetworx in proving its relevant damage or obtaining a suitable account of profits, thereby reinforcing his Honour's view that injunctive relief was not necessary.
- The significance of the unwarranted advantage obtained by AUG was reduced because the infringing integers had been of little or no significance to the councils.
- The effect of the springboard injunction would have adversely affected the councils, who were innocent third parties.
Is an order for delivery up appropriate?
As the justification for seeking orders for delivery up, Streetworx argued that AUG's use of the infringing luminaires as a starting point in the process of modification to make the non-infringing products meant that AUG was 'exploiting' Streetworx' invention.
However, Justice Beach said that there is no principle that says an infringing product cannot be modified to make it not so. Justice Beach said that such a proposition would be 'self-contradictory', as the modification of an infringing product to make it non-infringing cannot be said to be a relevant 'use' within the meaning of 'exploit', which ought to be prevented by a delivery up order.
Justice Beach distinguished the facts of this case with those in other cases where orders for delivery up had been granted, because in this instance, the infringing product was capable of being made non infringing. In those other cases, the patented product was a component in a broader machine or product which was either extricable from the broader product (and the delivery up order was restricted to the infringing component) or inextricable (and therefore it was appropriate to order delivery up of the broader product).