The application of the contributory infringement provisions (section 117) of the Patents Act 1990 (Cth) (Act) were recently considered by the High Court in Northern Territory v Collins. These provisions deal with situations where a party is held to infringe a patent by supplying a product to another party who directly infringes the patent. Since another party is directly infringing the patent, such types of infringing activity by the party supplying the product are often called “indirect”, “contributory” or “secondary” infringement.
Pursuant to section 117 of the Act, it is an infringement of a patent if a person who supplies a “product” to another party such that the use of that product would infringe that patent. Section 117(2) provides greater clarity as to when the use of a product will infringe a patent:
- if the product has only one reasonable use (having regard to its nature or design), it will be an infringement if the product is used in that way
- if the product is a “staple commercial product”, any use of the product will be an infringement if the person supplying the material believed that it would be put to that use
- in any case, if the product is used in accordance with instructions or any inducement given by the person supplying the product.
This case involved a patented method for producing essential oils from a specific species of the cypress pine. The patent had been owned by Mr and Mrs Collins since 1999. The essential oils derived from the cypress pine are used in perfumery, aromatherapy, flavouring and pharmaceuticals. The Northern Territory Government (Government) had planted a plantation of cypress pines in the 1960’s. The NT granted a license to the Australian Cypress Oil Company (ACOC) to access the plantation and take the timber. Mr and Mrs Collins brought proceedings against the NT Government claiming that the NT Government was liable for contributory infringement on the basis that the NT Government had supplied ACOC with a “product” (cypress pine timber) which the ACOC used to produce oils in infringement infringe the patented method.
The legal issues
In assessing whether or not the NT Government had contravened section 117 of the Act, the High Court considered three questions posed by the NT Government in its appeal:
- was the supply of an ‘input’ method, process or final product capable of attracting the operation of section 117(1) of the Act?
- did the statutory license granted from the NT to ACOC constitute a “supply” of a “product” within the meaning of section 117(1) of the Act?
- was the timber taken under the statutory licence a “staple commercial product” within the meaning of section 117(2)(b) of the Act?
Ultimately, the NT Government was successful in its appeal against a finding of contributory infringement on the basis that the cypress pine timber supplied by the NT Government to ACOC was a “staple commercial product”, the supply of which was not relevantly within the scope of section 117 of the Act. The Court considered that the term “staple commercial product” should be given a wide meaning and regard should be given to the actual uses of the product when commercially supplied. The Court noted in this case that the cypress pine timber was, in fact, supplied to a number of persons for variety of different (including non-infringing) uses. Such supply was not so infrequent so as to suggest that there was not a market for such timber generally.
Meaning of the terms “product” and “supply”
In considering the other questions, the Court made some useful observations otherwise about the scope of section 117 and, in particular, how the terms “product” and “supply” should be construed under section 117 of the Act.
The Court considered that the term “product” should be considered in light of the broad scope of the definition of “exploit” under the Act and the overall structure and purpose of section 117 of the Act. The Court held that the term “product” under section 117 of the Act should not confined to a patented product or a product that is itself the result of applying a patented method or process. That is, the term “product” may also include unpatented products or products not derived from applying a patented method or process.
The Court considered that the term “supply” should be given its ordinary meaning and that the Act showed the legislature’s intention that the word should be generally given a wide operation. In this case, the Court considered that the statutory licence granted from the NT Government to ACOC would constitute the “supply” of a product within the meaning of section 117. The Court did not consider that section 117 required one to classify the type of supply between those involving land or personal property, whether or not there was a sale of a chattel or whether there was a licence which could only be enforced by forfeiting the rights under the licence. Such an approach was held to be inappropriate and likely to mislead.