A Basket Is Still Not A Cylinder

Glaxo has lost its appeal against Beach J’s ruling that Apotex and Generic Partners did not infringe its sustained release paracetamol patent. In a battle between what the skilled addressee would understand and the plain, literal wording of the claim, the lawyers won out.

Interpreting the claim

Claim 1 of the patent is for a pharmaceutical composition with a bilayer tablet having both an immediate release phase of paracetamol and a sustained release phase wherein:

said composition has an in vitro paracetamol dissolution profile (as determined by the USP type III apparatus, reciprocating basket, with 250ml of 0.1M HCl at 37C set at a cycle speed of 15 strokes/min) with the following constraints:

(a) 30 – 48% released after 15 minutes,

(b) 56 to 75% after 60 minutes and

(c) more than 85% after 180 minutes.

The problem was in that reference to a “reciprocating basket”, as a USP type III apparatus had a reciprocating cylinder, not a basket.

At the relevant time, there were four types of apparatus for testing dissolution – a USP type I apparatus, a USP type II apparatus, a USP type III apparatus and a USP type IV apparatus. The four types of machines provided different hydrodynamics which, in turn, meant the user would obtain different dissolution results. If one used a different apparatus, therefore, one might get a different dissolution profile.[1]

As already noted, the USP type III apparatus did not have a reciprocating basket. “Pharmaceutical scientists” generally referred to the USP type 1 apparatus as a “basket”, the type II apparatus as a “paddle”, the type III apparatus as a “reciprocating cylinder” and the type IV apparatus as a “flow through cell”.

This reflected the different construction and working of the machines. To test dissolution using a type I apparatus, the composition was placed in a cylindrical mesh basket which was then placed inside a cylindrical vessel containg the dissolution medium. The basket then rotated around inside the cylindrical vessel.

In a type III apparatus, the composition is placed inside a glass reciprocating cylinder which is then moved up and down in a glass vessel containing the dissolution medium.

Apparently, it would be possible to modify a type III apparatus to use a “basket”, but there was no evidence anyone had ever done so.

Against this background, the evidence established that the skilled addressee would recognise that the reference to “basket” in the claim was a mistake.

The question is then how is the claim to be interpreted. GSK argued that the skilled addressee would simply read the reference to a “reciprocating basket” as a reference to the reciprocating cylinder that type III apparatus used. The Full Court considered that this went beyond a purposive construction and would involve impermissibly rewriting the claim.

After referring to Catnic[2] and Kirin-Amgen, the Full Court said at [109]:

It is important to note that Lord Hoffman [in Kirin-Amgen at [34]] was referring here to the meaning conveyed to the skilled addressee by the language used and was not directing himself to a situation in which the skilled addressee deduced that the language of the claim, although conveying to him or her a particular meaning, could never have been intended to mean what it conveyed.

Here, the skilled addressee knew what the term “basket” meant, but “deduced” it couldn’t be intended to mean that.

The Full Court then emphasised a point made in many cases: a patent is a document prepared by the patentee “in words of the patentee’s own choosing” and “the words will usually have been chosen upon skilled advice.”

First, if a mistake had been made, there was a procedure for amendment – which GSK had not invoked in this case. The availability of that procedure had the further significance that [s 115][s115] provided alleged infringers with some protection from damages before the amendments were allowed.

Secondly, in describing the device used for dissolution testing, GSK (at least on its case) was not trying to identify something new. So, the difficulties of describing something which had not existed before would not arise.[3]

Thirdly, the words had to have been put there to mean something. At [138]:

GSK’s infringement case can only succeed if the words “reciprocating basket” are either interpreted to mean “reciprocating cylinder” or simply ignored. Either approach involves an impermissible re-writing of the relevant claims.

And, really, that is the Full Court’s point. Athough one is supposed to interpet the claim through the eyes of the skilled addressee, reading claim 1 the way the skilled addressee apparently would have done did not make proper allowance for the function of the claims. At [139]:

This is a case in which the skilled addressee’s understanding of the claims, as found by the primary judge, does not make proper allowance for the function of the claims in defining the invention. Ultimately, it is for the court to decide the meaning of the claims. This is a case in which we think the language of the claim must be understood to mean what it actually says.

So, although the patent specification is addressed to, and to be understood through the eyes of the person skilled in the art, the Full Court qualified that approach in light of other policies gleaned fron the Act.

Fair basis

Apotex and Generic Partners also lost their appeals against the trial judge’s ruling that GSK’s patent was fairly based and there had been no failure to disclose the best method.

On fair basis, the claims were consistent with the consistory clauses, but Apotex argued the body of the specification showed that the invention was narrower than the broad consistory clauses. This appears to have been an attempt to read the claims down to two specific formulations discussed in the specification, Formulations C and D.

A key point was whether the trial judge had impermissibly taken into account information in an FDA report to ascertain if the claims travelled beyond the disclosure in the specification. Apotex argued this was excluded by the High Court’s decision in the first Lockwood decision, where it had said at [48]:

If all that is essential in assessing a fair basing objection is recourse to the contents of the specification, there is no call, for example, for an examination (except on construction questions) of common general knowledge (which is essential when considering an objection based on want of an inventive step), or of prior art (which is essential when considering novelty (s 7(1))) …

The Full Court, however, rejected this attack; concluding that the information in the FDA Report (which was common general knowledge) informed how the skilled addressee would understand the claims. At [166], the Full Court said:

What is critical to the pharmacokinetic behaviour of the many formulations within the claims is the dissolution profile (or release rate) of the formulation. The primary judge accepted that the FDA Report recognised that a variation of ±10% percentage points in the release rate was acceptable to the FDA even where no IVIVC had been established. This provides evidentiary support for the finding that the skilled addressee would know that various formulations within the claims apart from Formulations C and D were likely to have similar pharmacokinetic properties. This also provides a complete answer to Apotex’s argument that the skilled addressee (equipped with the common general knowledge) would approach the Patent with an understanding that there would be no reason to think that other formulations within the claims would have a similar pharmacokinetic profile to Formulations C and D in the absence of any established IVIVC.

The Full Court also rejected Apotex’ argument that a claim could not be fairly based unless the specification explained why the claims worked. Making it clear that they were dealing only with the position before the Raising the Bar Act reforms, the Full Court said at [170]:

Of course, it is important to note that s 40(2)(a) requires that the complete specification “describe the invention fully”. A complete specification may still “describe the invention fully” without explaining why the invention works. After all, the inventor, who presumably believes that the invention described works, may not understand why it works. But this does not prevent him or her from obtaining patent protection for the invention.

Best method

For best method, the argument built on the Servier ruling to argue there had been a failute to disclose the best method because the specification did not disclose the particular grade or viscosity of the high viscosity HPMC or the granulation end points used to make Formulations C and D.

At [192], the Full Court accepted that there could be a failure of best method if information was withheld even though it could be ascertained by routine experiment. The Full Court rejected the best method attack, however, finding that the informatin omitted was inessential manufacturing and production information. According to the Full Court at [201]:

It does not follow merely because the patent applicant uses a particular manufacturing process or a particular excipient in formulating its commercial embodiment that it will form part of the best method. The patent applicant may have adopted a particular process, or used a particular excipient, for reasons that are associated with its own particular circumstances rather than because it believes that they reflect the best method. The best method known to the patent applicant may be one that allows for the optimisation of a formulation by the skilled addressee rather than one that adheres to one specific formulation that the patent applicant seeks to commercialise.

Those preparing specifications might want, first, to note the reservation that the Full Court was not dealing with the “new” post-Raising the Bar regime. Secondly, [192] appears to carry with it the warning that, if one leaves something out, one does so at one’s own peril.

GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v
Generic Partners Pty Limited
[2018] FCAFC 71 (Middleton, Nicholas and Burley JJ)


  1. At [50], the Full Court explained, “There is no established correlation between dissolution results measured using the different USP apparatus. Sometimes small differences are measured, other times the measured differences are large. Differences in measured dissolution profiles as between each of USP type I, II and III apparatus may not be predictable.”  ?
  2. Catnic Components Limited & Anor v Hill & Smith Limited [1982] RPC 183 (HL).  ?
  3. Referring to another aspect of the construction problem adverted to by Lord Hoffmann at [34] in Kirin-Amgen. Leading of course to the irony that GSK did in fact describe something new!  ?

Staying arbitration: Kraft, Bega, Warner Bros and Mad Max

In the face of misleading and deceptive conduct litigation in Australia, O’Callaghan J has granted injunctions restraining Kraft from pursuing its arbitration claims in New York against Bega’s sale and promotion of Bega Peanut Butter in what Kraft alleges is misleading or deceptive get-up.

Kraft had been selling peanut butter in Australia under the Kraft brand for over 50 years. It had about 65% of the peanut butter market in Australia valued at over Australian $110 million per year.

In 2012, however, Kraft restructured its operations globally into a grocery business and a snack food business. The snack food business was operated by Mondelez.

Mondelez was given a licence to use the Kraft brand on, amongst other things, peanut butter which included the right to use the get-up Kraft had been using. The licence was due to expire at the end of December 2017.

Before the licence expired, Mondelez sold its Australian and NZ business to Bega. Bega began marketing its peanut butter in the get-up shown below:

 

Kraft peanut butter
Bega peanut butter

 

 

 

 

 

 

 

 

Kraft’s licence to Mondelez included a dispute resolution clause that all disputes arising under, or in relation to, the licence should go through the familiar three-tiered resolution process of consultation, mediation and, if not resolved, binding arbitration in New York:

Step Process: Any controversy or claim arising out of or relating to this Agreement, or the breach thereof (a “Dispute”), shall be resolved: (a) first, by negotiation and then by mediation as provided in Section 7.2; and (b) then, if negotiation and mediation fail, by binding arbitration as provided in Section 7.3. Each party agrees on behalf of itself and each member of its prospective Group that the procedures set forth in this Article VII shall be the exclusive means for resolution of any Dispute. The initiation of mediation or arbitration hereunder will toll the applicable statute of limitations for the duration of any such proceedings.

Kraft sought to initiate the dispute resolution process with Bega. Amongst other things, Kraft contends in the arbitration that Bega’s use of the Bega Trade Dress is in breach of the licence from Kraft to use the Kraft Peanut Butter Trade Dress. Kraft goes on to allege:

  1. Bega’s use of virtually identical trade dress on its peanut butter is likely to cause and is causing confusion, mistake or deception as to Kraft’s sponsorship and/or endorsement of Bega’s peanut butter product.

Considering that Bega was not complying with the process, Kraft launched proceedings in the Federal Court for the Southern District of New York to compel Bega to mediation. Bega, while reserving the right to claim it was not subject to the arbitration agreement, told the New York court it would participate in the mediation process.

In parallel with these developments, however, Kraft also commenced proceedings in Australia against Bega alleging that the promotion of the Bega peanut butter in the Bega get-up in Australia contravened the prohibitions on misleading or deceptive conduct in the Australian Consumer Law. According to Kraft, Bega’s advertisements and use of the Bega get-up misrepresented that Kraft peanut butter is now Bega peanut butter or is being replaced by Bega peanut butter and the Kraft brand has changed to Bega.

In the Australian proceedings, Bega cross-claimed and also sought injunctions ordering Kraft not to prosecute the arbitration proceedings. After careful consideration of the principles for ordering a party not to engage in arbitration, O’Callaghan J has granted that anti-arbitration injunction.

O’Callaghan J considered that the question of the ownership of the packaging and get-up was the central issue raised in both Kraft’s notice of arbitration and the proceeding under s 18 of the Australian Consumer Law.

If the question in the arbitration proceeding had simply been that the licence had expired and Bega had no right to use the get-up, there may not have been an overlap. As noted above, however, Kraft’s notice of arbitration went much further with allegations of false representations.

Kraft argued that its claims under s 18 of the ACL do not arise under or in relation to the contract, but are independent statutory causes of action. O’Callaghan J pointed out at [91] that whether the statutory cause of action was independent of, or in relation to, the contract depended on whether there was a nexus or connection between the contract and the contraventions which gave rise to the misleading or deceptive conduct claim.

In this case, there was such a connection as whether or not Bega’s conduct was misleading turned on the operation of the licence agreement. At [95], his Honour pointed out the alleged misrepresentations could only be false or misleading by virtue of the operation and effect of the terms of the licence agreement. Accordingly at [96]:

Kraft’s pleaded case in this proceeding is one in which it seeks to agitate a dispute which is properly to be characterised as being “in relation to” the master agreement. For that reason, in my view, Kraft should have invoked the dispute resolution provisions of the master agreement with respect to the claims made in this proceeding. It was not, as it contended, bound to bring the proceeding in this court.

Having found that the court proceeding and the arbitration addressed the same or at least overlapping subject matter, his Honour went on to find that it was appropriate to grant an injunction against pursuing the arbitration while the consumer law proceeding was on foot.

First, O’Callaghan J rejected any argument that it was necessary to show, in cases where parties had set up an arbitration process, an exceptional case or that the power to grant an injunction should be viewed through a “different prism”.

Secondly, his Honour acknowledged the tension between courts’ desire to hold parties to their bargains (i.e. respect the arbitration clause) and “deep and strong antipathy” to situations which could give rise to inconsistent verdicts.

Here, Kraft was the author of its own predicament. It could have (and should have) included its misleading and deceptive conduct claims in its arbitration notice, but instead had chosen to bring separate and additional proceedings in Australia. At [109]:

Kraft ought to have included the claims made in this proceeding under the Australian Consumer Law in its notice of arbitration because those claims, contrary to Kraft’s submission, do fall within the ambit of the arbitration clause in the master agreement. Instead, Kraft chose to initiate this proceeding, and then to prosecute it, including by filing a statement of claim and a reply to Bega’s defence, participating in procedural directions, seeking discovery, filing a notice to produce, consenting to the filing by Bega of a counterclaim (in which the issue of ownership of the trade dress issue is squarely raised) and then filing a defence to that counterclaim. As Bega submitted, Kraft is the party responsible for the bringing of both proceedings. It alone is the author of the possibility or probability of duplicated litigation and inconsistent findings. Each of those considerations also weighs significantly in favour of restraining the arbitration, at least until this proceeding is determined.

O’Callaghan J then went on to consider whether there were any equitable considerations that weighed against granting an injunction.

Finally, O’Callaghan J rejected Kraft’s argument that, instead of seeking an injunction against the arbitration proceedings, Bega should have applied under s 7(2) of the International Arbitration Act 1974 (Cth) for orders to stay the Australian proceeding. At [166]:

I reject that submission. First, Bega had no obligation to seek a stay under s 7 of the International Arbitration Act 1974 (Cth) or otherwise. Secondly, if the stay application was bound to have succeeded on those grounds, one would have thought it rather suggests that Kraft should not have brought the proceeding in this court in the first place.

After a subsequent hearing, O’Callaghan J rejected Kraft’s contention that the injunction against progressing the arbitration proceeding should only apply so long as Kraft’s application in the Australian proceeding was on foot. Kraft argued that Bega’s cross-claim was “a matter for Bega” and should not bear on the injunction. As his Honour noted, Kraft openly admitted the point here was that it may well discontinue its claim in Australia.

O’Callaghan J pointed out that the assessment of inconsistency was not made just on Kraft’s claim, but the pleadings as a whole. At [69], O’Callaghan J explained:

In assessing whether, and if so, to what extent, the issues in the two proceedings overlap, the scope of the relevant issues necessarily includes all the issues raised by the parties, including by Bega in its defence and counterclaim, and by Kraft in its statement of claim, reply and defence to counterclaim. That is so because when a foreign party brings a proceeding in an Australian court, it submits not only to its jurisdiction in respect of its own action, but also in respect of any cross-claim that a respondent brings: ….

Bega’s cross-claim and Kraft’s defence to it raised essentially the same central question as raised in Kraft’s claim and the arbitration proceeding: the ownership and rights to use the get-up in dispute.

A more conventional outcome is illustrated by Warner Bros Feature Productions Pty Ltd v Kennedy Miller Mitchell Films Pty Ltd, in which the NSW Court of Appeal ordered a stay of the court proceedings in favour of arbitration.

In Warner, George Miller and Doug Mitchell are in dispute with the Warner group over payments for their roles in producing and directing Mad Max: Fury Road. The Court of Appeal dealt with a construction fight whether the arbitration clause formed part of the contract or not. Finding it did, on Warner’s application the Court ordered a stay of the NSW proceedings.

In this case, unlike Kraft v Bega, the party seeking to enforce the arbitration clause, Warner, had not brought the potentially inconsistent proceedings – Miller and Mitchell did.

Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549

Kraft Foods Group Brands LLC v Bega Cheese Limited (No 2) [2018] FCA 615

ESCO’s patent did not make a composite promise and so is not invalid afterall

ESCO has won its appeal from the ruling that its patent lacked utility because the claims did not fulfill all promised advantages.

The Patent

ESCO’s patent relates to a wear assembly for securing a wear member to excavating equipment. Think of it as a way of attaching “teeth” to an excavating bucket and for a design of the “teeth” themselves.

There are 26 claims.

Claim 1 (and its dependent claims)[1] are for a wear member:[2]

a wear member for attachment to excavating equipment. The wear member comprises:
(a) a front end (to contact materials being excavated and to protect the excavating equipment);
(b) a rear end;
(c) a socket that opens in the rear end of the wear member (to receive a base fixed to excavating equipment);
(d) a “throughhole” in communication with the socket;
(e) a lock “integrally connected” in the throughhole and movable without a hammer;
(f) between a “hold position” and a “release position”;
(g) the lock and the throughhole being cooperatively structured to retain the lock in the throughhole in each of the hold and release positions;
(h) irrespective of the receipt of the base into the socket of the wear member or the orientation of the wear member;
(i) a “hold position” (where the lock can secure the wear member to the base); and
(j) a “release position” (where the wear member can be released from the base).

Claim 13 (and its dependent claims)[3] are for the wear assembly:[4] essentially, a wear assembly designed to enable the attachment of the wear member of claim 1 to the bucket.

You may get some idea of what is claimed from these figures. The wear member is 28, shown fitted to the base 15 of the wear assembly.

Utility

The trial Judge

Paragraph 6 of the Specification was the first paragraph under the heading “Summary of the Invention”:

The present invention pertains to an improved wear assembly for securing wear members to excavating equipment for enhanced stability, strength, durability, penetration, safety and ease of replacement. (Full Court’s emphasis)

As to which the expert evidence was:

In relation to enhanced strength, none of the claims would achieve this advantage.

In relation to enhanced stability, claims 3 and 5 may provide a minor stability advantage as set out in paragraphs 14–21 of my first affidavit. ….

In relation to enhanced durability, none of the claims would achieve this advantage.

In relation to enhanced penetration, none of the claims would achieve this advantage.

In relation to enhanced safety, claims 1, 11, 13, 21, and 22 would achieve this advantage.

In relation to enhanced ease of replacement, claims 1, 4, 6, 8, 9, 12, 13, 16, 19, 22, and 25 would achieve this advantage.

In light of this evidence, the trial Judge had found ESCO’s patent invalid because the claims did not achieve all six of benefits promised by paragraph 6 of the Specification.

The Full Court

On appeal, the Full Court accepted the basic premise applied by the trial Judge: a claim is bad for inutility if following the teaching in the Specification does not lead to the promised result. There has been a failure of consideration. So, the Full Court explained at [208]:[5]

first, provided the results promised by the specification can, on the evidence, be achieved and, second, provided that those results can be applied to at least one useful purpose, the patent for the claimed invention does not fail for inutility. If, however, the promised results are unfulfilled or unrealised, the patent for the claimed invention will be bad for inutility

Further, if the Specification properly understood contained a “composite” promise, any claim which failed to achieve any one of the elements of that composite promise would be bad for inutility. At [239]:

We therefore accept that if para 6 of the Patent Application, properly understood having regard to the whole of the Specification including the claims, contains a “composite” promise for the described invention, a failure to attain any one of the elements of the composite promise in any claim defining the invention renders the invention so far as claimed in any claim, inutile.

The question then is – what is the promise of the invention?

It followed from the requirements of s 40, which required the specification to describe the invention fully and claims to define the invention,[6] that identification of the “promise” of the invention required consideration both of the body of the specification and the claims.

That consideration led the Full Court to conclude either that paragraph 6 of the Specification was not the “promise” of the invention. Or, alternatively, if it were, the several elements in paragraph 6 were to be read disjunctively rather than, as the trial Judge had done, conjunctively. In either case, ESCO’s patent was not bad for inutility.

The central consideration here was that the claims were directed to two related, but different entities: claims 1 to 12 being directed to the “wear member” only; claims 13 to 22 being directed to the “wear assembly”. Correspondingly, paragraphs 7 to 20 of the specification dealt with various “aspects” of the invention and, in doing so, paragraphs 15 and 16 identified the “promises” of the invention.

The Full Court considered paragraph 5 of the specification as reciting historical attempts “to enhance the strength, stability, durability, penetration, safety and/or ease of replacement of “such wear members” … with varying degrees of success.” The Full Court then characterised paragraph 6 as continuing that discussion to open the summary of the invention.

Paragraphs 15 and 16 of the specification said:

In one other aspect of the invention, the lock is integrally secured to the wear member for shipping and storage as a single integral component. The lock is maintained within the lock opening irrespective of the insertion of the nose into the cavity, which results in less shipping costs, reduced storage needs, and less inventory concerns.

In another aspect of the invention, the lock is releasably securable in the lock opening in the wear member in both hold and release positions to reduce the risk of dropping or losing the lock during installation. Such an assembly involves fewer independent components and an easier installation procedure. (Full Court’s emphasis)

So, at [291], the Full Court explained:

It seems to us that the language of para 6 consisting of a single sentence under the heading “Summary of the Invention” is not, properly construed, the language of “promises” (as Ronneby would have it) for the invention described in the Specification as a whole, including the 22[7] claims, some of which are concerned only with the wear member and others with the wear assembly. Rather, the language of para 6 is seeking to do something less than that. The language of para 6 resonates with para 5 and seems to be used in the sense of reciting those things to which the invention relates having regard to the design efforts that went before, and thus the relationship between “the invention” and those things recited in para 6 is one of identifying the topics or subject matter to which the invention relates (rather than “promises” for the invention), which, having regard to paras 7 to 20 “describing” the invention (including the best method in conformity with s 40(2)(a)), may or may not find expression in the claims “defining” the invention for the purposes of s 40(2)(b). In that sense, the fully described invention may go beyond the scope of that which is actually claimed. Thus, it is necessary to identify the “teaching” of the Specification and the relationship between the teaching and the claims. Rather, the promises for the invention so far as claimed in, at least, Claim 1 and the dependent claims, are to be found in paras 15 and 16 of the Specification as we explain later in these reasons.

The two different targets of the two sets of claims were also significant for the alternative conclusion that the list of achievements in paragraph 6 should be read disjunctively. The Full Court accepted that the language of paragraph 6 of the specification was appropriate for the claimed wear assemblies achieving all 6 listed benefits. However, the Full Court considered that the language of paragraph 6 was incompatible with the idea that each claim for the wear member must satisfy all 6 promises.

Accordingly, paragraph 6 of the specification should be read disjunctively and the claims were not bad for inutility.

In the course of its lengthy historical review, the Full Court did note that s 7A now required the Specification to disclose a specific, substantial and credible use for the claimed invention for it to be useful. Section 7A had been introduced into the Act by the Raising the Bar Act[8] and so was not relevant to ESCO’s patent. The Full Court noted, however, that s 7A was intended to add additional requirements to the test of utility, not displace the old requirements. Thus, at [231], the Full Court commented:

Rather, the invention [subject to the Raising the Bar Act amendments] must meet the new test and meet the requirements of the existing law: EM p. 44.

I am guessing we shall see significantly more patent specifications in the future which claim that it is “an object of the invention to …” or, perhaps, the invention achieves “one of more of ….” Might be a bit tricky to amend assertions in a patent first filed overseas.

Novelty

ESCO’s novelty appeal was also successful. It was essentially an exercise in construction, turning on whether the locking mechanism in the prior citation was “integral” and moved between two defined points- a “hold position“ and a ”release position”.

ESCO Corporation v Ronneby Road Pty Ltd [2018] FCAFC 46 (Greenwood, Rares and Moshinsky JJ)


  1. Strictly speaking, claims 5, 6 and 9 are independent claims, but nonetheless are for “wear members”.  ?
  2. The explanatory interpolations are the Full Court’s.  ?
  3. Claim 19 is also an independent claim for a wear assembly.  ?
  4. A wear assembly for attachment to excavating equipment comprising: (1) a base fixed to the excavating equipment; (2) a wear member including a front end to contact materials being excavated and protect the excavating equipment, and a rear end to mount to the base fixed to the excavating equipment; and (3) a lock integrally connected to the wear member and movable without a hammer between a hold position where the lock contacts the base and the wear member to secure the wear member to the base and a release position where the wear member can be released from the base, wherein the lock remains secured to the wear member in the release position. (My numbering to deal with formatting limitations)  ?
  5. Citing amongst others LaneFox v Kensington and Knightsbridge Electric Lighting Co (1892) 9 RPC 413.  ?
  6. ESCO’s patent being a pre-Raising the Bar patent, s 40 in it earlier form applied.  ?
  7. Presumably, a typo.  ?
  8. By which I of course mean schedule 1 of the Intellectual Property Laws Amendment (Raising the Bar) Act 2012.  ?

Broadcast does not include internet streaming

The (NSW) Court of Appeal has rejected WIN’s argument that its exclusive licence to broadcast Nine Network’s content extended to “live streaming” over the internet.

Those of you who have emulated Burke and Wills and wandered out of the CBD of your state’s capital city may have discovered that free-to-air television is (a little bit) different. There are regional broadcasters who arrange at least some local news and advertising, but also carry a lot of the programming of the “big” broadcasters.

WIN Corporation is one such regional broadcaster. For many years, it had a “programming supply agreement” through which it took much of the Nine Network’s programming. Thereby bringing the joys of A Current Affair and the Block to those lucky enough to live in a place where WIN was a broadcaster.

The relevant clause (clause 2.1) said:

“Nine grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as ‘Nine’, ‘NineHD’, ‘9Go’, ‘9Gem’, ‘Extra’ and ‘9Life’ (the ‘Nine Channels’), to be picked up by WIN at Nine’s NPC.”

The Court and the parties all agred that “exclusive” in this context meant that Nine could not license anyone else to broadcast its content in WIN’s territory. Nor could it “broadcast” its content in WIN’S territory itself.[1]

WIN’s case was that this clause also meant Nine could not allow people in WIN’s territory to access the content through Nine’s website too. (You may already be perceiving some practical difficulties with WIN’s argument, if right.)

The evidence showed that the scope of the grant had been the subject of some negotiation, with Nine contending for a narrow definition and WIN arguing for a broader definition. The trial judge had found this evidence of pre-contactual negotiations did not assist the interpretation exercise. Apart from anything else, it was inconclusive and incomplete.[2]

Barrett AJA pointed out that a playwright could grant an exclusive licence to perform his or her play at a particular time or place, but that did not prevent the playwright from granting someone else a licence to show the play as a film or to perform the play some other place or time. This was important because it meant (you will be surprised to read) that the scope of exclusivity depended on the terms of the grant. His Honour explained at [34]:

The important point is that a person who has a collection of rights and grants an exclusive licence in respect of only some of those rights does not, through the exclusivity undertaking, promise the grantee not to exercise (or allow others to exercise) the remainder of the rights that is not the subject of the grant. The exclusivity undertaking restricts the grantor only as regards the rights granted. Preclusion of the grantor in relation to the whole or any part of the remainder of the grantor’s rights could come only from some contractual stipulation over and above that which is implied by the exclusive quality of the grant.

Applying this, his Honour considered that WIN’s licence to broadcast was limited to the kinds of broadcasting it was licensed to engage in under the Broadcasting Services Act and only within the territories it held a commercial broadcasting licence for. So this meant its exclusivity related only to free-to-air broadcasting in its territory. In the judgment under appeal, Hammerschlag J had explained at [82]:

Where clause 2.1 refers to broadcasting on and in the licence areas covered by the WIN Stations this is, and can only be, a reference to free-to-air. The licence areas are the geographical delimitations imposed on WIN by its licences under the BSA. These licences cover only free-to-air. Unsurprisingly, it is common cause that the WIN Stations have only ever broadcasted free-to-air and under such licences. They are traditional television stations. They do not deliver by internet. Internet delivery is not geographically based in the same way as is free-to-air.

Barrett AJA also rejected WIN’s argument that exclusivity over internet streaming followed from the implied term not to do anything that would deprive the other party of the benefit of the contract. WIN argued it was necessary for the exclusivity to extend to internet streaming as the promise of exclusivity meant it was to be free from competition.

Judging from the number of people watching TV on the train, tram and buses these days, you might think WIN had something of a point.

Barrett AJA, however, considered the benefit for which WIN had contracted was exclusivity from competition in free-to-air broadcasting. Nine was not under a duty to maximise WIN’s return under the contract, but to ensure that WIN had exclusive rights to broadcast Nine’s programming by free-to-air transmissions. His Honour said at [73]:

In the present case, the PSA, according to its correct construction, required Nine to desist from engaging in free-to-air transmission of Nine programs in the WIN licence areas and from enabling persons other than WIN to undertake free-to-air transmission of those programs in those areas. The “benefit” of the contract, from WIN’s perspective, was the right to transmit the Nine programs free-to-air in the WIN areas without free-to-air competition by Nine or anyone to whom Nine had given transmission rights. Extension of the negative stipulation binding on Nine so as to forbid live-streaming would entail a restriction on Nine and a corresponding “benefit” to WIN over and above those created by the contract and, in that way, enlarge rather than support and underwrite WIN’s contracted benefit. The value of the benefit of the contract to WIN was, as in the Queensland case, dependent on many contingencies, some of which were in Nine’s control. But Nine was not obliged to maximise WIN’s return from the contract.

At one level, the result is not too surprising. “We” have been generally aware at least from the Optus Now here and here controversies several years back that the major sporting organisations were generating very substantial revenues from internet streaming in addition to the broadcast (pay and/or free-to-air) rights. If you are drafting an exclusive licence relating to the right to communicate to the public, therefore, you will need to pay careful attention to what exactly is intended to be included: the whole right to communicate to the public, broadcasting (in some one or many of its multifarious forms), internet streaming etc.

WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297 (McColl JA, Sackville and Barrett AJJA)


  1. Barrett AJA conveniently collected the well-established propositions at footnote 15: “15. As a matter of general principle, an “exclusive” licence confers relevant rights upon the licensee to the exclusion of the whole world, including the licensor: Carr v Benson (1868) 3 Ch. App. 524 at 532; Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1; [1946] HCA 48 at 5 (Latham CJ) and 15 (McTiernan J applying Heap v Hartley (1889) 42 Ch. D. 461). A “sole” licence resembles an “exclusive” licence but does not operate to exclude the grantor: see, for example, Black & Decker Inc v GMCA Pty Ltd (No 2) [2008] FCA 504; (2008) 76 IPR 99 at [131] (Heerey J).”  ?
  2. WIN Corporation Pty Ltd -v- Nine Network Australia Pty Limited [2016] NSWSC 523 at [71] – [80].  ?

Omnibus claims: substantially the same

In partly allowing Glaxo’s appeal, the Full Court (Allsop CJ, Yates and Robertson JJ) has ruled against an expansive interpretation of omnibus claims.

You may recall (here and here) that Reckitt Benckiser has a patent protecting its bottle / syringe combination for dispensing Panadol to children aged between 1 – 5 years old.[1]

Claim 1 claimed:

A liquid dispensing apparatus comprising a bottle, a bottle neck liner and a flat-nosed syringe having a plunger and a barrel, the barrel terminating at its distal end in a generally flat face having a diameter corresponding to the diameter of the syringe barrel and being perpendicular to the longitudinal axis of the barrel, the bottle having a bottle neck in which is located the bottle neck liner having a cylindrical body sealingly engaged inside the bottle neck such that liquid cannot flow between the bottle neck liner and the bottle neck, the bottle neck liner comprising a sleeve comprising at its lower end an inward step located within the bottle neck, an aperture being defined inwardly of the inward step, wherein the cylindrical body and the sleeve are connected together with a web of material only at the upper end of the cylindrical body and of the sleeve, wherein the sleeve is formed with a flared portion at its upper end into which the distal end of the syringe barrel passes; wherein when the syringe barrel is inserted into the sleeve the inward step prevents the syringe barrel from protruding past the step and liquid cannot flow between the sleeve and the barrel, but can leave the bottle only via the aperture and thence the syringe. (emphasis supplied)

and claim 9 was an omnibus claim:

A liquid dispensing apparatus, substantially as described with reference to the drawings and/or examples.

Glaxo marketed two different versions of its competing product:

Glaxo Version 1
Glaxo Version 1
Glaxo Version 2
Glaxo Version 2

The trial Judge held that Version 1 infringed claim 1 but, because it had a narrower nozzle section at the spout[2] and so the barrel was not uniform along its length, Version 2 did not. The barrel of Version 2 did not terminate “at its distal end in a generally flat face having a diameter corresponding to the diameter of the syringe barrel”. The trial Judge, however, then went on to find that Version 2 infringed the omnibus claim because it functioned substantially in the same way as described in the patent:

The alternate syringe has exactly the same function as that described in the patent and the drawings. The alternate syringe is a flat-nosed syringe that has a distal end that fits into the liner and achieves a good seal with it so that it can draw up liquid without leaking from the bottle or the syringe. The mere fact that there is a corresponding tip on both the barrel and the reciprocating plunger used in the alternate syringe in the second product complained of should not be allowed to disguise that that product has taken the substantial configuration resulting from the patentee’s invention and its character for the dispensing of liquids from bottles without mess using an apparatus with a flat-nosed syringe: Radiation 60 CLR at 52; Raleigh 65 RPC at 160. The alternate syringe, as incorporated into the second product complained of, is not a substantially new or different combination

The Full Court dismissed the appeal from the trial Judge’s finding that Version 1 did infringe claim 1 and Version 2 did not. Importantly for present purposes, it allowed Glaxo’s appeal from the finding that Version 2 nonetheless infringed claim 9, the omnibus claim:

[79] … contrary to the conclusion of the primary judge, the use of the word “substantially” in claim 9 in the expression “substantially as described with reference to the drawings and/or examples” does not extend the definition of the invention to “the substantial idea” disclosed by the specification and shown in the drawings.

[80] The word “substantially” provides no warrant for departing from what the specification itself mandates to be the essential features of the invention. A flat-nosed syringe dimensioned as described in the consistory statement is one of the essential features of the invention. Thus, whatever work the word “substantially” is to perform in claim 9, it cannot transform a feature made essential by the description of the invention into one that is now inessential. Put another way, an embodiment that does not possess the essential features of the invention as described, cannot be one that is “substantially as described”. Thus, the word “substantially” in claim 9 does not do the work which the primary judge held that it did.

The Full Court pointed out that the description and drawings were a particular form of the first embodiment in the patent. It was plain from the consistory clause describing the embodiment and claim 1 that a barrel of uniform diameter throughout its length was an essential feature of the invention. All claims apart from the omnibus claim were dependent from claim 1. Claim 1 was the widest form of the claimed invention. Accordingly, the omnibus claim, which is a more narrowly defined claim, could not be wider than claim 1.[3]

Perhaps continuing the swing of the interpretation pendulum back towards the ‘literal meaning’ approach, their Honours also warned against too ready an assumption that some wording in a claim was just “a slip of the pen” rather than a carefully chosen limitation.

ps As Dr Patentology points out, s 40(3A) bans (or tries to ban) the use of omnibus claims in patents the subject of the new rules under the Raising the Bar regime; i.e., in broad terms, patents the subject of an application filed on or after 13 April 2013 or, if filed earlier, which had not been the subject of a request for examination before 13 April 2013.[4]

If you have a comment or a question, please feel free to post it in the comments section or, if you would prefer, email me.

GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Ltd [2016] FCAFC 90

[lewis]:


  1. Australian Patent No. 2003283537 (the patent) entitled “Improvements in and relating to liquid dispensing”.  ?
  2. In expert witness legalese, “the indented section at the distal end”.  ?
  3. As the High Court explained in [Radiation]: “But it is said that the words in the claim. “ substantially as described,” tie the claim to the particidar form of construction illustrated in the drawings. The effect of the words depends upon the construc­ tion of the claim as a whole, but “ in general the words exercise a limiting effect by tying ” the claim “ more closely to the preceding description ” (See Fletcher Moulton on Patents (1913), p. 128). They do not, however, limit the claim to the precise construction shown in the drawings but rather to the kind of apparatus mentioned and the method described in the specifications and illustrated in the drawings.”.  ?
  4. Someone made a more detailed attempt to explain the transition provisions in Lahore, Patents, Trade Marks & Related Rights at [12,000].  ?

A cylinder by any other name (except basket)

Beach J has ruled that there is no warrant for interpreting “basket” in GSK’s patent to mean “cylinder”, with the consequence that the patent was neither infringed, nor invalid.

GSK’s patent is “for a sustained release paracetamol bilayer tablet with a specified in vitro dissolution profile”. Claim 1 is as follows:

A pharmaceutical composition comprising:

a bilayer tablet having an immediate release phase of paracetamol and a sustained release phase of paracetamol,

the immediate release phase being in one layer and comprising from about 10 to 45% by weight of the total paracetamol; and

the sustained release phase being in the other layer and comprising from about 55% to 90% by weight of the total paracetamol in admixture with a matrix forming polymer or a mixture thereof;

said composition comprising from 600 to 700mg of paracetamol per unit dose and a pharmaceutically acceptable carrier,

wherein said composition has an in vitro paracetamol dissolution profile (as determined by the USP type III apparatus, reciprocating basket, with 250ml of 0.1M HCl at 37C set at a cycle speed of 15 strokes/min) with the following constraints:

Ÿ 30 to 48% released after 15 minutes

Ÿ 56 to 75% released after 60 minutes

Ÿ >85% released after 180 minutes.

I have emphasised the word “basket” above because it is a mistake. It should read “cylinder”. It was also a mistake repeated in the body of the specification. Beach J rejected Apotex’ argument that “basket” was a reasonable option for use in a USP type III apparatus at the priority date. However, none of the expert witnesses had heard of such a thing and Beach J held that the skilled addressee[1] would have recognised it was a mistake and should have read “cylinder”.

Now, the High Court has told us that a patent specification is a document directed to the public, but it is to be read through the eyes of the skilled addressee. So, for example, Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ said in Kimberly-Clark at [24]:

It is well settled that the complete specification is not to be read in the abstract; here it is to be construed in the light of the common general knowledge and the art before 2 July 1984, the priority date; the court is to place itself “in the position of some person acquainted with the surrounding circumstances as to the state of [the] art and manufacture at the time”.[2]

The courts have developed lengthy lists of propositions to implement that directive.[3] One of the propositions that repeatedly gets cited is the rule that you cannot expand or narrow the meaning of a claim by reference to the body of the specification. So, for example, the High Court in Kimberly-Clark itself helpfully said at [15]:

Where the question concerns infringement of a claim or the sufficiency of a claim to “define” the invention, it has been held in this Court under the 1952 Act that the plain and unambiguous meaning of a claim cannot be varied or qualified by reference to the body of the specification. However, terms in the claim which are unclear may be defined or clarified by reference to the body of the specification.[4]

How to reconcile the two?

Well, Beach J held that, notwithstanding the mistake, the words of the claim were clear and unambiguous and there was no warrant to substitute “cylinder” for “basket”. Warned by Apotex’ counsel, Ms Goddard, that the patent was a public instrument the amendment of which was addressed in the Act by a different mechanism,[5] his Honour summarised his conclusion at [14]:

No case expressly binds me to accept the result contended for by GSK. The hypothetical construct of the skilled addressee cannot be taken so far as to re-write or amend a claim of the specification. That conceptual tool has its limits. After all, the boundary constraint is that I am obliged to construe the claim as it is, rather than what it should have been. I accept Apotex’s contention. Accordingly, GSK must fail on infringement as claim 1 is the only independent claim. But Apotex and Generic Partners fail on invalidity.

His Honour elaborated on these conclusions at much greater length at [368] – [401].

Beach J’s rejection of the attacks on invalidity did not turn on whether “basket” meant “basket” or “cylinder”. Having found that “basket” did mean “basket”, the attacks on fair basis, sufficiency and lack of clarity necessarily failed. However, his Honour would also have rejected them even if “he had found ”some polytropic fairy dust“ could transform ”basket“ into ”cylinder”.

 

If you have a comment or a question, please feel free to post it in the comments section. Or, if you would prefer, email me.

GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No. 2) Limited v Apotex Pty Ltd [2016] FCA 608


  1. or “person skilled in the art” to use the language of the Act in s 7. Section 40 wants the person to be skilled in the relevant art, but that shouldn’t be much, if at all, different.  ?
  2. The citations have been omitted, but they included Samuel Taylor Pty Ltd v SA Brush Co Ltd (1950) 83 CLR 617 at 624?625; Welch Perrin & Co Pty Ltd v Worrel (1961) 106 CLR 588 at 610; Sunbeam Corporation v Morphy-Richards (Aust) Pty Ltd (1961) 180 CLR 98 at 102; Populin v HB Nominees Pty Ltd (1982) 41 ALR 471 at 476.  ?
  3. Sheppard J referred to 10 in Decor v Dart. Hely J identified a raft in Beltreco starting at [70]. The Full Court was rather more succinct at [67] in Jupiters.  ?
  4. The citations I have omitted again include reference to Welch Perrin at 610. This rule is Sheppard J’s second proposition, referred to by Hely J at [74] and elaborated at [76] to [78]and the 4th proposition in Jupiter’s.  ?
  5. Presumably, s 104 and, in the court proceeding context, s 105.  ?

Another Infringed Innovation Patent And A Delivery Up Question

Product Management Group (PMG) has lost its appeal from Middleton J’s finding that it infringed Blue Gentian’s innovation patents for a self extending/collapsing garden hose.

The appeal seems like a fairly straightforward application of construction principles and demonstrates, yet again, how slender an innovation need be to secure a monopoly for eight years.

There may, however, be a question for the future whether or not the “substantial contribution” to the working of the “invention” required by s 7(4) must be a positive contribution to the working of the invention.[1]

An interesting point is the Order Middleton J made for delivery up. His Honour did not just require delivery up of PMG’s unsold stock and componentry. In addition, by paragraph 3(c), his Honour ordered that PMG should contact the customers to which it hold sold the infringing products, offer them a refund and request that they return the products to PMG.

Nicholas J considered this travelled well beyond the purpose of an order for delivery up. His Honour considered that purpose was to relieve the infringer from the “temptation” of further infringing and so, in that sense, was in aid of the injunction. Nicholas J considered that an order requiring a party to try and retrieve property to which it no longer had any legal title could not fairly be described as in aid of delivery up and so would have set aside that part of the Order.

In circumstances where the Court had not been favoured with any oral submissions and only brief mention in written submissions, however, Kenny and Beach JJ were not persuaded that his Honour’s discretion miscarried and their Honours would let it stand in this case. However, they warned:

But 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. We do not need to comment further.

This may pose an interesting dilemma for “convicted” infringers: object to such an order or, as the purchasers’ use of an infringing product would itself be an infringement, risk having the successful plaintiff require discovery and then suing the individual customers for infringement too.[2]

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


  1. Compare Kenny and Beach JJ at [178] to Nicholas J at [284].  ?
  2. On the approach taken vy Yates J in Winnebago (No 4). Of course, the plaintiff might not be willing to pursue individual purchasers of garden hoses, but what about Bunnings and the other hardware chains?  ?

How long do you have to pay royalties for?

Vickery J in the Supreme Court of Victoria has had to construe how long an obligation to pay royalties under a sale of patents and technology and associated consultancy agreement lasts: ruling it is as long as the purchaser is using the “invention”.

Roberts came up with the “Roberts Differential Lock”. It enables the driver of a vehicle, such as a 4-wheel drive vehicle, to lock the “dif” from the cabin without having to get out and manually adjust the wheels. The invention could be retrofitted to existing vehicles. Roberts made a provisional patent application for his invention in 1983 and a standard application followed in 1984. Corresponding applications were made in the USA, the UK and Japan in 1985. Roberts and his wife marketed the Roberts Differential Lock though their company, Altair.

In 1987, the Roberts and Altair sold all their rights in the invention to ARB. There was a lump sum payment and royalties to be paid on products made using the invention. Roberts also entered into a Consultancy Agreement for an initial period of 6 months and thereafter until terminated on 30 days’ written notice.

There were two questions before Vickery J:

(1) did ARB have to keep paying roylaties after (presumably) the (1984/1984) patents expired; and

(2) if so, to whom – the Roberts or also Altair?

The terms of the sale agreement

 2. In consideration of the consideration set out in clause 7 of this Sale Agreement and subject to clause 20 hereof, the Vendors hereby jointly and severally sell transfer and assign absolutely to [ARB] all the right title and interest in and to the Roberts Differential Lock including (without limiting the generality of the foregoing) all patent applications, patent rights and proprietary rights relating thereto, and the business name ‘Roberts Diff-Lock’.

11(a). In further consideration of the rights granted hereunder the Company shall pay to the Roberts the following royalties calculated on the net invoice value arising from the sale, lease, hire and use (hereinafter referred collectively as a ‘sale’ or ‘sold’ as the case may be) of the Products by the company and its licensees:-

[a specified dollar amount for each unit sold]. (Those amounts were subject to increase according to increases in the CPI – All Groups Index – Melbourne.)

For this purpose, “Products” were defined to mean:

‘Products’ means the differentials as manufactured pursuant to the patents as specified in the First Schedule

and the First Schedule listed the 1984 Australian patent application and the pending applications in the USA, the UK and Japan – none of which had been granted at that time.

How long?

You will have noticed that clause 11(a) does not say anything about how long the obligation to pay royalties lasted. Vickery J held as a matter of construction the obligation did not end when the “patents”[1] expired. A number of factors led to his Honour’s conclusion.

First, when the sale agreement was executed, the patent terms in the different countries where applications were pending were different. Moreover, as is typical in such agreements, the definition of “patents” extended to divisonals, re-issues, continuations, continuations in part and the like. So, his Honour concluded, the parties contemplated that there would be potentially be different expiry dates in different countries.

Secondly, although the obligation to pay royalties was imposed on sales of Products, what was sold by clause 2 were “all rights in and to the Roberts Differential Lock including … the patents and the proprietary rights relating thereto”. Then “proprietary rights” were defined not just as rights in patents, but also included copyright, confidential information, trade secrets, data, formulae and so on. So ARB was not just buying rights to the patents it was buying all rights to all the technology. Moreover, under the Consultancy Agreement, “all inventions, techniques and improvements developed in the course of the consultancy agreement ‘shall become the sole and exclusive property of ARB …’”

Together, these arrangements indicated the “ambulatory nature” of the proprietary rights ARB obtained.

Thirdly, if ARB was right and its obligations extended only to the “patents”, it had no obligation to pay royalties until at least one of the pending applications was actually registered. However, Vickery J considered it quite clear the obligation to pay was intended to apply to all products ARB sold as soon as the sale took effect whether an application had proceeded to grant or not.

Finally:

109 Further, the object and purpose of the Sale Agreement may be said to be the allocation of the risks and rewards of the patent rights and the proprietary rights to be assigned to ARB by the Vendors. The risk allocation was achieved by means of the mechanism selected for determination of the price to be paid for that assignment.

110 I accept that the Vendors’ construction is commercially sensible in that it provides for an arrangement whereby each party managed its risk as to the proper price to pay (from ARB’s perspective) and to charge (from the Vendors’ perspective) in relation to the bundle of rights sold under the Sale Agreement, which at the time of entry into the contract had a value which was difficult to calculate or even estimate. Accordingly, the Sale Agreement provided for an ambulatory consideration through the royalties regime. If the rights proved to be valuable so that commercialisation of them resulted in a higher number of total sales than anticipated, then ARB would pay a higher total purchase price to the Vendors. On the other hand, if the rights proved to be valuable so that commercialisation of them resulted in a higher number of total sales than initially expected, then ARB would pay a higher total purchase price to the Vendors.

111 I also accept that such a risk-sharing arrangement is not one that had any obvious connection to the life of the patents that might be granted on the assigned patent applications, or to whether any patents became registered at all. In this regard the following is to be noted:

(a) ARB received an immediate and continuing benefit from the sales that it made using the assigned patent rights. In other words, the benefits that ARB received were not contingent upon any patent application listed in the First Schedule of the Sale Agreement proceeding to grant; and

(b) the assigned rights included proprietary rights which did not depend upon a patent proceeding to grant or remaining registered.

Vickery J then rejected ARB’s argument that it would be faced with a perpetual obligation to pay royalties: its obligation was to pay only on products that embodied the invention described in the patents. If it didn’t use that invention, it had no obligation to pay.

Pay the royalty to whom

This is one of those odd arguments where ARB was trying to contend Altair, the Roberts’ company, had no standing to sue. While cl. 11 did say that ARB had to pay “the Roberts”, Vickery J noted that the Roberts and Altair were the “Vendors” as defined and so cl. 11 should be understood as requiring payment to all three.

The conclusions reached by Vickery J, assuming there is no successful appeal, may immediately be contrasted with Maggbury Pty Ltd v Hafele Australia Pty Ltd.[2] One obvious point of difference, is that it appears that patents did actually issue in this case. Moreover, it appears that there was, or may have been, further technology of value apart from the patents – such as copyright, confidential information and further improvements.

The conclusion may also seem at odds with the policy in s 145 of the Patents Act. Even at its strongest, however, that only gives a right to terminate and does not automatically terminate the contract. As we have recently seen, however, the operation of the provision, particularly in a multi-jurisdictional context involving many faceted technologies, is less than clear.[3] In any event, ARB did not invoke the provision and it is not clear from the judgment whether there are other patent, or for that matter other “proprietary”, rights still on foot.

Nonetheless, if ARB could terminate the contract, it is an interesting question how Vickery J’s approach would sit with Maggbury if ARB used only technology now in the public domain.

Finally, as I am sure you have already concluded, if you are acting for the payor in this type of situation this case illustrates the importance of considering very carefully and providing specifically in the agreement for the duration of the obligation to pay royalties and what it is payable on if you are drawing a clause providing for a royalty – especially when the technology comes into the public domain and others may use it royalty free.

ARB Corporation v Roberts & Ors [2014] VSC 495

Lid dip: James McDougall


  1. That is, the patent applications that were pending when the sale agreement was executed.  ?
  2. (2001) 210 CLR 181.  ?
  3. MPEG LA, L.L.C. v Regency Media Pty Ltd [2014] FCA 180  ?

Fraudulent imitation

The Full Court has dismissed both Bluescope’s appeal and Gram’s cross-appeal from the ruling that Bluescope infringed Gram’s registered design for the Smartascreen fencing panel.

This is an “old Act” case.[1] At first instance, Jacobson J held that Bluescope’s product was an obvious imitation of Gram’s registered design. However, his Honour rejected the allegation that it was also a fraudulent imitation.

Bluescope (then Lysaghts, part of BHP) had long been the market leader for fencing made from metal sheeting. There was a problem, however: one side of the fence was less desirable because the posts and rails supporting the cladding were visible. Gram came up with its Gramline solution which was symmetrical, looking the same from both sides. It quickly usurped Bluescope’s position as the market leader. Bluescope then spent (roughly) 6 years trying to come up with a competing design. In the course of doing so, it rejected a number of alternatives in favour of one that so closely resembled Gram’s product that the two could be stacked one on top of the other.

AU 121344
AU 121344
Smartascreen
Smartascreen

Construction of the design

Besanko and Middleton JJ endorsed the trial judge’s principles for construing the design, summarising them at [28]:

(a) a design is the mental picture of a shape, configuration, pattern or ornamentation of the article to which it is to be applied;

(b) construction is a question of fact for the Court to determine by the eye alone;

(c) expert evidence may be led to assist the Court;

(d) the Court is to apply an ‘instructed eye’ to the design – that is the Court must be made aware of the characteristics of the article to which the design is applied, and the manner in which such articles would normally be found in trade, commerce and in use; and

(e) however, considerations of utility have no relevance to the proper construction of a design.

In applying those principles, the trial judge found

“the primary feature was the sawtooth pattern consisting of six identical repeating pans, oriented vertically. The sawtooth pattern was the product of the unique proportions of the wavelength, amplitude and angles of each sawtooth module”.

It was this combination of features, which contributed to the symmetricality of the product, that ultimately conferred the design with novelty[2] and which were taken by Bluescope, leading to the finding of obvious imitation.[3] Three points of note on these parts of the case.

First, at [51] Besanko and Middleton JJ rejected Bluescope’s challenge to the trial judge’s reliance on Gram’s design being viewed vertically as an in-fill sheet between posts so that the saw-tooth ran top to bottom:

While considerations of utility are not relevant, designs cannot be construed without context. It is often the case that features of the article to which the design applies, will serve both visual and functional purposes. Where this is the case, the implication of BlueScope’s submission is that the feature’s appearance and utility must be divorced. However, a design without context is a meaningless drawing. As Lockhart J observed in Dart Industries 15 IPR 403 at 408, the design is ‘the mental picture of the shape, configuration, pattern, or ornament of the article to which it has been applied’ (emphasis added). It is inescapable that the Design is for sheet metal fencing and the construction of the Design must reflect this.[4]

That is, because the design was for a sheet metal fencing panel which “worked” in one way, it should be interpreted in the way (presumably) those who would use it for that would understand it.

Secondly, the trial judge had not impermissibly referred to the fact that the Bluescope product could be “nested” with the Gram product (embodying the design). But, it was not the fact of “nestability” as such that was important. Rather, it was relevant because it was helpful in forming a view about the similarity of the sawtooth profile. Besanko and Middleton JJ explained at [89]:

the nesting qualities are instructive. As has been discussed at length, the combination of amplitudes, wavelengths and angles create the sawtooth profile. For the GramLine and Smartascreen sheets to nest, albeit imperfectly, they must by logical extension, have similar amplitudes, wavelengths and angles. This is clearly helpful in deciding if Smartascreen is an obvious imitation of GramLine, and it was entirely open for the primary judge to be assisted by the nesting properties of the two articles. It is further relevant because as noted above, an obvious imitation is not one which is the same as the design, but one that is an imitation apparent to the eye notwithstanding slight differences.

Care definitely needs to be taken with this as the physical embodiment of the registered design is not always the same as the design and the comparison must be between the accused product and the registered design. It is important to note, therefore, that the Full Court treated this as confirming or reinforcing the view based on comparison of the appearance of the infringing article to the registered design.

Thirdly, the Full Court considered the trial judge had impermissibly taken into account Bluescope’s commercial objectives – to introduce a product to compete with the Gramline product – in deciding whether or not the Smartascreen was an obvious imitation. With respect that must be right as the test of obvious imitation is an objective test based on visual resemblance. Yates J, however, was prepared to accept at [198] to [201] evidence such as that Bluescope was attracted to the design because “it had a similar appearance to the GramLine sawtooth profile and would gain ready market acceptance” as a kind of expert evidence about the similarity of Bluescope’s product to Gram’s design.

Fraudulent imitation

In Polyaire, the High Court rejected the interpretation of fraudulent imitation which had required the alleged infringer to have attempted to disguise its copying. Instead, the High Court had said at [17]:

the application of a “fraudulent imitation” requires that the application of the design be with knowledge of the existence of the registration and of the absence of consent to its use, or with reason to suspect those matters, and that the use of the design produces what is an “imitation” within the meaning of par (a). This, to apply the general principle recently exemplified in Macleod v The Queen, is the knowledge, belief or intent which renders the conduct fraudulent.

At [36], the High Court approved Lehane J’s formulation of the test for fraudulent imitation in the following terms:

[T]he essential questions are, first, whether the allegedly infringing design is based on or derived from the registered design and, then, whether the differences are so substantial that the result is not to be described as an imitation. ….

In this case, the trial judge considered that fraudulent imitation required a finding that the infringing product was deliberately based on the registered design. The Besanko and Middleton JJ endorsed that test at [115]:

In our opinion, it must be shown that there was deliberate, in the sense of conscious, copying for there to be fraudulent imitation. If imitation imports the notion of making use of the registered design, there must be at least a conscious use of the registered design before it could be concluded there was fraudulent imitation.

The trial judge had found that:

  • Bluescope knew the Gramline design was registered;
  • Bluescope knew that Gram had achieved runaway commercial success with its product;
  • Bluescope was trying to design a “Gram lookalike”;
  • Bluescope had come up with a number of different symmetrical designs to Gram’s design, but rejected those in favour of the Smartascreen design; and
  • Bluescope had adopted a panel size of 762mm which was the same as Gram’s but different to the standard 820mm panel prevailing in the industry at the time.

His Honour was also “sceptical” of Bluescope’s claim that the resemblance to Gram’s design was coincidental. Gram argued that, given these findings, what other conclusion could there be but deliberate copying.

The Full Court upheld the trial judge’s refusal to find the Smartascreen was deliberately based on the Gramline design. Two factors seem to have played an important role here.

First, the Full Court accepted at [118] that an allegation of fraudulent imitation was a serious matter and the level of proofs needed to reflect the gravity of that.

Secondly, the evidence showed that the Bluescope employees who came up with the final design from 2000 onwards were influenced by, or at least referred to, design work done by a Mr Field in 1996.

Mr Field did not give evidence so it was not clear on the evidence what influences or references he made use of. Now, in many cases, the unexplained failure of a key player in the design process to give evidence (especially when there are inferences (at least) suggestive of copying available) might be sufficient to give rise to a Jones v Dunkel that the witness could not say anything helpful to the defendant’s case. Here, however, Mr Field’s absence was explained: he was old and in very poor health. His design work had taken place in 1996 very early in the picture. Moreover, Bluescope’s product had been introduced in 2002. Gram had of course known about it pretty much straightaway, but had delayed until 2010 before taking action. One may speculate, therefore, that the Court was not willing to allow Gram the benefit of negative inferences when its own delay had contributed to the witness being unavailable.

BlueScope Steel Limited v Gram Engineering Pty Ltd [2014] FCAFC 107


  1. Given the transitional provisions, there are potentially almost 6 more years for designs for designs under the old Act to still be in force. Design applications that were pending on 17 June 2004, when the 2003 Act came into force, continue to be governed by the old Act’s provisions for validity and infringement unless they were “converted” to “new” Act designs.  ?
  2. Full Court at [63], [71] – [72] (Besanko and Middleton JJ), [163] – [181] (Yates J).  ?
  3. Full Court at [89] – [93], with a useful summary of the key principles at [82] (Besanko and Middleton JJ). There were differences between the Smartascreen’s appearance and the registered design, but these were treated as insubstantial: [] (Besanko and Middleton JJ) and [188]ff (Yates J).  ?
  4. Yates J to similar effect at e.g. [166], [174].  ?

Patenting racemates and enantiomers

Lundbeck had a patent for citalopram for the treatment of depression, which it marketed in Australia under the name Cipramil

Citalopram is a chiral molecule: it can exist in two isomeric forms; a (+)-enantiomer and a (-)-enantiomer. The two forms have the same chemical structure, but they are mirror images. At its priority date, the relevant skilled addressees would have understood that the compound was a racemate or racemic mix consisting of both the (+)-enantiomer and the (-)-enantiomer.

Subsequently, Lundbeck discovered a way to make the (+)-enantiomer in isolated or pure form and, even better, it was this enantiomer that contributed the therapeutic effect of citalopram. It obtained a further patent, claim 1 of which was for:

1. (+)-1-(3-dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile and non-toxic acid addition salts thereof.

The Full Federal Court by 2-1 (Bennett and Middleton JJ; Emmett J dissenting) has upheld the validity of this claim in the face of the prior patent for citalopram.

If resort could be made to the body of the specification, it was clear that the skilled addressees would have understood that claim was a claim to the enantiomer in its pure, isolated form and not to the product as part of a racemic mix.

Emmett J considered the claim was clear and unambiguous. Accordingly, there was no warrant to resort to the body of the specification.  Bennett and Middleton JJ, on the other hand, accepted that the trial judge was entitled to accept evidence about how the skilled addressee would have read the claim.  Bennett J approved the approach taken by Dr Barker, as delegate for the Commissioner, in Emory University v Biochem Pharma:

[152] …. He drew a distinction between a reading of the claim in the context of the specification to understand what the claim is talking about (as did Burchett J in International Business Machines Corporation v Commissioner of Patents [1991] FCA 625; (1991) 33 FCR 218), where the whole thrust of the specification makes a limitation clear, and impermissibly importing a limitation from “mere comments” in the description. ….

Her Honour further explained that the citalopram patent didn’t anticipate the claim:

193 The prior citalopram patent described the racemate. It did not describe the pure or isolated (+)-enantiomer. There is no anticipation unless the disclosure of the racemate was, to the skilled addressee, a disclosure of the (+)-enantiomer. As the primary judge pointed out at [171], the skilled but non-inventive addressee would have understood that (+/-)-citalopram consisted of the (+)-enantiomer and the (–)-enantiomer and would have been able to identify the formulae for the S and R enantiomers but would not have known in the absence of experimentation which was the (+)-enantiomer and which the (–)-enantiomer. As his Honour said, these facts would not point specifically to the independent existence of the enantiomers. They did not disclose an invention which, if performed, would necessarily infringe the Patent.
194 It is the case that the skilled addressee knew that the racemate could be resolved into the enantiomers but there was nothing to tell him or her to do so. Further, the prior citalopram patent was silent as to the means of obtaining the enantiomers and there were different methods available to try to do so. There were no clear and unmistakable directions to obtain the enantiomers. Some of the available methodology may have been successful, other methods may not.

193 The prior citalopram patent described the racemate. It did not describe the pure or isolated (+)-enantiomer. There is no anticipation unless the disclosure of the racemate was, to the skilled addressee, a disclosure of the (+)-enantiomer. As the primary judge pointed out at [171], the skilled but non-inventive addressee would have understood that (+/-)-citalopram consisted of the (+)-enantiomer and the (–)-enantiomer and would have been able to identify the formulae for the S and R enantiomers but would not have known in the absence of experimentation which was the (+)-enantiomer and which the (–)-enantiomer. As his Honour said, these facts would not point specifically to the independent existence of the enantiomers. They did not disclose an invention which, if performed, would necessarily infringe the Patent.

194 It is the case that the skilled addressee knew that the racemate could be resolved into the enantiomers but there was nothing to tell him or her to do so. Further, the prior citalopram patent was silent as to the means of obtaining the enantiomers and there were different methods available to try to do so. There were no clear and unmistakable directions to obtain the enantiomers. Some of the available methodology may have been successful, other methods may not.

That seems rather to qualify the force of the earlier point. One might even think, with respect, that it limits the patentable subject matter to some particular method of making the purified, isolated (+)-enantiomer, rather than the substance per se.

In contrast to this approach, however, Lundbeck lost its attempt to get the term of the second, escitalopram patent extended pursuant to s 70 of the Patents Act.

The problem for Lundbeck here was that s 70(2) referred to a patent for a pharmaceutical substance per se, but s 70(3) and (5) and s 71 did not. The Full Court found that s 70(2) operated to identify the subject matter of the extension application – the substance per se here being escitalopram.

Because the later sub-sections did not refer to the substance per se, when it came to working out the timing for making the application for an extension of term, the question was (in this case) the date when goods containing the substance (not the substance per se) were first included in the Australian Register of Therapeutic Goods.

Citalopram, of course, contained the (+)-enantiomer and it had been registered in the ARTG. It was first included in the ARTG on 29 December 1997. The application to extend the term of the escitalopram patent was made almost 6 years later – on 22 December 2003.

Section 71(2), however, required the extension application to be made within 6 months of the patent being granted or “the date of commencement of the first inclusion in the [ARTG] of goods that contain … the pharmaceutical substance referred to in s 70(3)” (i.e., within 6 months of the inclusion in the ARTG of citalopram).

The majority also found that claim 5 was invalid for insufficiency. However, Lundbeck did succeed insofar as Alphapharm was found to have infringed claims 1 and 3 of the escitalopram patent, presumably up to the date of expiry of the patent on 13 June 2009.