26 June, 2017
Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54 (3 April 2017)
What you need to know
The Full Federal Court has held that the earliest date from which a patentee may claim relief for infringement of an innovation patent is the date of grant (overruling Britax Childcare Pty Ltd v Infa-Secure Pty Ltd (No 3) [2012] FCA 1019 (Britax).
It is now less appealing for patentees awaiting the grant of standard patents to target their competitors by strategically filing divisional innovation patent applications which will proceed to grant more quickly than their standard patent parents, as a patentee cannot be compensated for acts occurring before an innovation patent is granted.
The Full Federal Court also confirmed that in the case of a divisional standard patent, the earliest date from which a patentee may claim relief for infringement is the date the divisional patent application became open to the public, and not from the date of the parent patent application.
What you need to do
When considering whether to commence a claim for patent infringement of a divisional innovation patent, patentees should be aware that they can only claim damages from the date of grant of the innovation patent (and not from the date of publication of the parent patent).
Inventors should carefully consider whether an innovation patent or a standard patent is more appropriate for a particular
invention. Consider whether the speed and ease of obtaining protection via an innovation patent is a worthwhile exchange for the shorter patent term and potentially reduced availability of damages for infringement.
Background
Australian Mud Company Pty Ltd (AMC) owns two innovation patents for core sample orientation (the Patents). The Patents are for a system (System Patent) and method (Method Patent) for orienting core samples extracted from the ground. The System Patent was filed on 2 December 2010 and granted on 16 December 2010, and the Method Patent was filed on 16 August 2011 and granted on 15 September 2011.
The Patents claimed priority from an earlier "grandparent" patent, with a filing date of 5 September 2005.
AMC and its exclusive licensee initially sued the appellants in this case for infringement of the Patents. One of the appellants, Coretell Pty Ltd (Coretell), filed a cross-claim alleging invalidity. The primary judge found infringement and dismissed the cross-claim for invalidity, and implicitly found that the relevant date for assessing infringement was 5 September 2005.
The appellants did not challenge the finding of infringement, but appealed on other grounds, including that the primary judge erred in determining that a cause of action for infringement accrues on the date of the patent, rather than the date of grant.
The applicable versions of the Patents Act 1990 (Cth) (the Act) and Patents Regulations 1991 (Cth) were those immediately prior to the passing of the Raising the Bar legislation.
Submissions
The primary judge implicitly followed the Britax case in finding that the correct date for the purposes of determining infringement, and thus calculating damages, was the date of the Patents, being 5 September 2005.
Coretell submitted that the decision in Britax was incorrect, and that the reasoning applied resulted in a "surprising and incorrect outcome", as they were found to have infringed the Patents from a time before they even existed or were made available for public inspection. The appellants thus contended that the correct date should be the dates of grant of the Patents, and that they could only be liable for infringing acts after those dates.
AMC argued that a cause of action for infringement accrues upon the commencement of the term of the Patents – in this case, they said, their cause of action accrued between five and six years before the filing and grant of the Patents.
Decision
The Full Court reached its decision by analysing the language of the Act, and having regard to its context and legislative history.
The Court overruled Britax, and concluded that the patentee's ability to claim relief for infringement is only enlivened after grant, as the infringement provisions of the Act refer to a granted patent.
While section 57 of the Act expressly provides for compensation prior to the grant of a standard patent application, this is only after the complete specification becomes open to public inspection (and after a comprehensive pre-acceptance examination process). In the case of an innovation patent, publication only occurs after grant.
Justice Burley (with whom Justices Jagot and Nicholas agreed) found that Britax led to "unattractive" and "anomalous" results.
Under Britax, where a patentee filed a divisional patent based upon an older standard patent, their competitor could be liable for infringement well before the invention is properly drafted or defined in the divisional specification. Justice Burley noted: "The construction that I prefer leads to the conclusion that the right of a patentee for relief for an act of infringement will be preceded by the grant of the patent and the publication of the specification and claims, regardless of whether the patent is based on a divisional application."
Given that publication is the consideration that a patentee gives in exchange for their monopoly, and also given that competitors are unable to understand the scope of the patentee's monopoly until publication occurs, the Court's conclusion aligned with the relevant policy considerations. On this basis, the Court also observed that a claim for infringement based on a divisional standard patent could not seek relief from a date before the publication of the divisional standard patent application, that is, could not seek relief from the date of publication of the parent or grandparent patent application.
Accordingly, Coretell was only liable for infringing acts occurring after the System Patent and Method Patent were granted, ie after 6 December 2010 and 15 December 2011, respectively (not 5 September 2005). This will result in a substantial reduction in the amount of compensation that can be awarded to AMC for infringement of the Patents, which remains to be determined by the primary judge.
Implications
This decision significantly reduces the amount of compensation available to patentees of divisional innovation patents for acts of infringement.
As a result of the Court's overruling of Britax, patentees might now be discouraged from strategically using the innovation patent as a tool to directly target their competitors for patent infringements occurring during the earlier prosecution of parent patent applications.
For further information, please contact:
Kellech Smith, Partner, Ashurst
kellech.smith@ashurst.com
