Patents – innovation patents – divisional application – infringement – date from which a patentee is entitled to relief – whether from date of parent patent or date of grant of divisional patent

Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54

Australian Mud Company (AMC) is the owner of two innovation patents (the System Patent and the Method Patent) relating to “core sample orientation”, a technique used in geological surveying and drilling. The System Patent and Method Patent were filed on 2 December 2010 and 16 August 2011, respectively, and proceeded to grant on 16 December 2010 and 15 September 2011 (the “grant dates”). Those patents were filed as divisional applications under a standard patent with a filing date of 15 January 2010; that patent was itself a divisional application of a standard patent filed 5 September 2005. It was not in dispute that, for the purposes of s 65 of the Patents Act 1990 (Cth) (the Act) and relevant regulations thereunder, 5 September 2005 is the “date” of the patents in suit and hence the date from which their eight year term is to be calculated (the “commencement date”).

AMC sued the respondents, including the first respondent (Coretell) for infringement of the patents in suit, and was successful. The respondents’ cross-claim for invalidity failed, and AMC was awarded costs on an indemnity basis in respect of part of the cross-claim. On appeal, Coretell and the other appellants did not contest the findings of infringement, but rather challenged certain of the trial judge’s conclusions relevant to the relief to which AMC was entitled, his rejection of the cross-claim and award of indemnity costs.

The first set of grounds of appeal focused on the date in respect of which AMC was entitled to relief for infringement. The trial judge concluded that that date commenced on the commencement date, namely the filing date of the “grandparent” standard patent on 5 September 2005. The appellants argued – successfully – that the correct date should be the grant dates. The appellants argued that the trial judge’s finding led to a “surprising and incorrect outcome” whereby the appellants had infringed the patents in suit by conduct going back to 5 September 2005, even though the patents did not then exist nor had been open for public inspection.

The Full Court (Burley J, Jagot J and Nicholas J agreeing) noted that the “date of a patent” (from which its term is calculated, under ss 67 and 68 of the Act) and the date of grant of the patent may differ. The exclusive right to exploit the patent commences on the former. The key question on the appeal was whether this means that the right to relief for infringement also commences on that date. The Full Court rejected that proposition for a number of reasons. In doing so, the Full Court expressly rejected the reasoning of Justice Middleton in Britax Childcare Pty Ltd v Infa-Secure Pty Ltd (No 3) [2012] FCA 1019, a case in which relief for infringement had been held to be available from the commencement date of a divisional patent, rather than its grant (or certification) date.

First, “infringement proceedings” are defined in the Act by reference to “a patent”, meaning a patent as granted under s 61 or s 62. In the case of innovation patents, the commencement of proceedings is further limited by the requirement that the patent also be certified: s 120(1A). Similarly, s 122 identifies the relief a court may grant “for” infringement of a “patent”, words that the Court observed signify that relief is available in respect of an act of infringement of a patent that “has had the benefit of a grant within sections 61 or 62”.

Secondly, infringement relates to the claims that define the extent of the monopoly in respect of an invention, not the patent at large. As the Court noted, “The rights to relief can arise only when claims have been brought into existence”. In the case of the claims in a divisional patent, however, these may differ from the claims of the parent (or grandparent) patent. If the conclusion in Britax were correct, an act of infringement might arise before any claims defining the infringement had been brought into existence – an anomalous result.

Thirdly, the Court accepted the appellants’ argument that the opening words of the conferral of exclusive rights under s 13, “Subject to this Act”, means that it is open for other parts of the Act to limit the window of time within which those exclusive rights may be enforced or relief for infringement obtained. In this case, the Court accepted that the more specific language of s 122 noted above subordinated the more general language of s 13.

Fourthly, the construction favoured by the Court avoids the “surprising” outcome raised by the appellants, whereby a party might be liable for infringement of claims of which it has had no notice. The Court noted, “Disclosure of the invention to the public by the patentee is the consideration that the patentee gives for the grant by the crown of the monopoly”. As such, limiting relief to a period of time after grant and publication of the specification and claims – in other words, once competitors have been informed of the “territory which is forbidden” – is consistent with policy.

Fifthly, those same policy considerations are reflected in s 57, which gives the holder of a standard patent a retrospective right to relief for infringement for acts done after the complete specification is published, assuming the patent proceeds to grant and subject to certain protections for potential infringers. In other words, once a standard patent is published it is open for competitors to work around the claims in the specification, or make an assessment that the patent will not be granted.

The Court accepted that s 57 might result in an anomalous (and presumably unintended) result whereby a standard patent based on a divisional application could obtain relief for conduct occurring prior to publication of that application. But s 57 does not apply to innovation patents at all; the reference, prior to 2000, to petty patents was not carried forward with innovation patents. In the Court’s view, the reason for this is evident from the Revised Explanatory Memorandum to the Patents Amendment (Innovation Patents) Bill 2000 (Cth): “This provision will not apply to innovation patents because innovation patents will only be published after grant”. In other words, publication has always been intended by the legislature to be the trigger for the availability of relief, the potential anomaly under s 57 aside.

Finally, the Court also accepted the appellants’ contention that s 129A gives rise to anomalies if the reasoning in Britax was correct. Section 129A provides that threats of infringement proceedings in respect of an innovation patent are unjustifiable if made before the application has been determined or the patent has been certified. But if Britax is correct, the patentee is entitled to recovery in respect of pre-certification acts, even though threatening to sue for such acts would be unjustifiable.

Accordingly, for the reasons set out above the Full Court held that the relevant date for determining infringement of an innovation patent under the Act is the date of grant for the patent in suit.

The appellants also had some success in challenging findings of accessorial liability on the part of the fourth appellant (Kleyn Investments). They otherwise were unsuccessful in challenging the trial judge’s rejection of their arguments on the cross-claim that the patents in suit lacked novelty due to the application of the test for external fair basis, and certain pre-priority date use and disclosure to third parties by the inventor’s employer, (held at first instance to have been saved by the “grace period” provisions).