Not “hired to invent” so no entitlement – Merial v Intervet

In Australia, we are often told our US clients get title through the “work made for hire” or the “hired to invent” doctrines under US law. Intervet has failed in its attempt to rely on the latter doctrine in its unsuccessful attempt to patent a “soft chew” medicament for pets. Moshinsky J also accepted Merial’s opposition on grounds of lack of inventive step. This post will deal with the entitlement issue. Lack of inventive step case, based on the 2001 amendments, will be the subject of a later post.

Some background

In 2002, Intervet was part of the Akzo group. Most of its R & D activities were carried out at its plant in Delaware. However, a Ms Cady was based in New Jersey and had responsibility for developing formulations for commercialisation. She did not, however, have a laboratory. She had worked with a Mr Pieloch of Pharma Chemie to develop products before. Ms Cady engaged Pharma Chemie to develop a palatable “soft chew” dosage form for companion animals such as horses and dogs.

A formulation was developed. Intervet made a provisional application in the USA, naming a Mr Huron, Ms Cady and Mr Pieloch as inventors.[1] Like Ms Cady, Mr Huron was an employee of Intervet. When the PCT came to be filed on 13 August 2003, Mr Huron, Mr Pieloch and Ms Cady were named as the inventors.

Intervet’s in-house patent attorney sent a copy of the PCT specification to Mr Pieloch was a request to sign a declaration acknowledging that Intervet owned all the rights. Pharma Chemie and Mr Pieloch rejected the request, asserting through their lawyers:[2]

It is our client’s position that Pharma Chemie invented the soft chew technology as described in the above-referenced patent application in 1992, and continued its work on the technology through the 1990’s and into the new millenium [sic]. All of the work on this technology was completed prior to Pharma Chemie’s entry into the Manufacturing and Supply Agreement with Intervet in 2002. Pharma Chemie also invented the manufacturing procedure described in the patent application cited above, and provided Formax with this information well prior to its entry into the development agreement with Intervet in 2002.

Pharma Chemie is therefore the owner of the technology described in the above-referenced patent application, not Intervet. For this reason, Mr. Pieloch will not agree to sign the Declaration and Power of Attorney for this application. ….

Intervet made various attempts to prosecute the US application without Mr Pieloch’s signature. These did not progress, however, and the application in the USA ultimately lapsed. The Australian application, the subject of Merial’s opposition, was at least a divisional from the original PCT application.

Claim 1 of the patent application was for:

A soft chew formulation for oral administration comprising a pharmaceutical for control of a parasite of Equidae, Canidae, Felidae, Bovidae, Ovidae Capridae, or Suidae organisms in a soft chew formulation, a flavouring component, a starch component, a sugar component, an oil component and an emulsifying agent that acts as a forming agent, wherein the moisture content of the composition is between 5.0 and 7.5 percent wt, the soft chew formulation is formed by knockout and the soft chew formulation is not an extrudate.

Merial has lost its opposition to the application before the Commissioner and appealed to the Court. Both Mr Huron and Ms Cady had left Intervet by this time, and Ms Cady was one of the witnesses for Merial.

Entitlement

Section 15 requires that the grantee of a patent derive its title ultimately from all of the inventors. Although Intervet had identified Mr Pieloch as one of the three inventors, Merial’s opposition succeeded because Intervet could not claim title from Mr Pieloch whom Moshinsky J found was the sole inventor.

Moshinsky J accepted Mr Pieloch’s evidence that he had developed the technology used for Intervet’s product through his company, Pharma Chemie, before Ms Cady engaged Pharma Chemie to develop Intervet’s product. Pharma Chemie had used its own technology to make a “soft chew” which used Intervet’s additive. So, at least as claimed in Intervet’s application, Pharma Chemie was the inventor of the relevant technology.[3] Mr Pieloch was careful to eschew any claim to the specific product which embodied Intervet’s additive, but the claims were very much broader than that.

Intervet argued it was nonetheless entitled to the invention through an assignment in a Manufacturing and Supply Agreement under which Pharma Chemie developed the product. Alternatively, Intervet argued the assignment was implied under the US “hired to invent” doctrine.

Manufacturing and Supply Agreement

Intervet’s main problem with this argument was that it could not produce the agreement. Instead, it relied on evidence of other agreements with Pharma Chemie (after the event and relating to other projects) which did include express assignments and the importance to companies like Intervet of ensuring they had the rights to their products locked down.

Moshinsky J was not persuaded:

a) Mr Pieloch was adamant that Pharma Chemie had already developed the technology the subject of the application before the projects with Intervet and had even applied for a patent over it.

b) In re-examination, Mr Pieloch expressly denied that he had ever signed an assignment in the terms claimed by Intervet over the relevant technology (as opposed to the specific product using Intervet’s additives).

c) In 2003 in correspondence about the PCT application, Pharma Chemie’s lawyers had explicitly denied there was any such term and Intervet had not challenged that denial then or until the present proceedings.

d) If there had been such an express assignment, Intervet would have taken steps to keep it safe and secure and would have asserted it aginst Pharma Chemie when Pharma Chemie’s lawyers denied the assignment as long ago as 2003.

Hired to invent

Intervet next argued that US law implied a term to assign into the agreement by which Pharma Chemie developed the products for Intervet.

As foreign law, whether or not US law would in fact imply such a term was a question of fact to be determined on the evidence. Both Intervet and Merial advanced lawyers’ opinions on this question.

Both parties’ witnesses agreed that, under US law, a court could imply a term requiring an assignment. Intervet’s independent expert’s, a Mr Blackburn’s, evidence was that:

US law generally permits a court to imply a contract term in appropriate circumstances to handle developments and contractual gaps; one application of this principle is the “employed to invent” or “hired to invent” doctrine, which requires or obligates an inventor to assign an invention resulting from the development of a product that it was engaged to perform where the inventor was hired specifically to make the invention; while there is no binding precedent directly on point holding that a non-employee or independent contractor can be employed to invent or hired to invent, the reasoning of Standard Peeks and Dubilier suggest that the substance of the relationship between the parties and how the invention is made is the controlling factor.[4]

Merial’s expert, Mr Kowalski, contended that the case law relied on by Mr Blackburn applied only to the employer-employee relationship and did not extend to agreements with independent contractors.

Moshinsky J accepted that the cases relied on by Intervet dealt only with situations involving the employer-employee relationship, but his Honour was not satisfied that they were necessarily so limited. Moshinsky J had earlier noted that Mr Kowalski was Merial’s lawyer and had been involved in the preparation of Mr Pieloch’s affidavits for Merial. At [48(e)], his Honour considered that Mr Kowalski’s evidence at times appeared to be an exercise in advocacy and therefore generally preferred the evidence of Mr Blackburn where there were differences between them.

Having decided to proceed on the basis “that the “hired to invent” doctrine is capable of application notwithstanding that Pharma Chemie is a corporate entity and independent contractor rather than an employee”, Moshinsky J nonetheless held at [127] that no term to assign should be implied:

…. Mr Blackburn emphasised that what “controls” is the nature of the contractual relationship between the parties and how the invention was made; and that the critical fact is whether the contract specifically required the invention to be made. In the present case, I have found that Pharma Chemie was not engaged by Intervet Inc to develop a soft chew dosage form; it was engaged, rather, to incorporate Intervet Inc’s active ingredients into a formulation, using Pharma Chemie’s soft chew technology (see [89] above). Further, I have found that the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter dated 16 September 2003 related to the development projects referred to in these reasons as the Horse Project and the Dog Project (see [75] above). It appears from the 16 September 2003 letter that the agreement contained (in paragraphs 1.4 and 9.3) express provisions relating to the assignment of intellectual property rights to Intervet Inc subject to prescribed conditions. In light of these express provisions, there is no room to imply a term (in this or any other agreement relating to the Horse Project or the Dog Project) requiring Pharma Chemie to assign to Intervet Inc any invention resulting from the projects. I have also found above that there was no response to the 16 September 2003 letter (see [80] above). If Intervet Inc had had a basis to contend that, contrary to the propositions set out in the letter, it acquired rights to an invention under the Manufacturing and Supply Agreement (or any other agreement) it is likely that it would have responded. This provides further support for the proposition that a term is not to be implied in the Manufacturing and Supply Agreement or any other agreement to the effect that Pharma Chemie was required to assign to Intervet Inc any invention resulting from the projects.

Accordingly, although the “hired to invent” doctrine could apply in principle, it did not apply on the facts.

It is worth contrasting the approach taken by Moshinsky J based on the application of US law to the arrangements between Intervet and Pharma Chemie with that applied in copyright by the Full Court in Enzed Holdings. In Enzed Holdings, the Full Court held that ownership of copyright in an artistic work in Australia fell to be determined according to Australian law. So, even though the artistic work in question was created in New Zealand, it was irrelevant that under New Zealand law ownership vested in the commissioning party not the author.[5] This approach would not have saved Intervet in this case, however, as the reasons Moshinshky J found to reject the “hired to invent” argument should lead to the same conclusion under Australian law.

Merial, Inc. v Intervet International B.V. (No 3) [2017] FCA 21


  1. By the time of the trial, both Mr Huron and Ms Cady worked for competitors of Intervet and gave evidence for Merial.  ?
  2. 16 September 2003 letter from Pharma Chemie’s lawyer to Intervet’s inhouse patent attorney.  ?
  3. Patents Act 1990 s 15.  ?
  4. Referring to Standard Parts Co v Peck, 264 US 52 (1924) and United States v Dubilier Condenser Corp, 289 US 178, 187 (1933).  ?
  5. In contrast to Enzed Holdings, the US 2nd Circuit Court of Appeals applied the law of the place where the work was made to determine entitlement to copyright in the USA in *Itar-Tass v Russian Kurier Inc (1998) 43 IPR 565.  ?

Of flat nosed syringes or if at first you don’t succeed

Having had the interlocutory injunction he granted overturned on appeal, Rares J has now determined at the substantive trial that both of Glaxo’s syringe variants infringed Reckitt Benkiser’s “flat-nosed syringe” patent.

You will recall that Reckitt has patented a bottle and syringe combination to simplify “feeding” medicines to babies and toddlers in particular. Claim 1 in part provides:

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 claim goes on at some length to elaborate in further detail the features of the various elements.

Glaxo had two variants of its competing product:

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

For present purposes, I found two points of interest: the finding that the second variant infringed and the failure of Glaxo’s entitlement attack.

Infringement

After dealing with construction issues at some length, Rares J found the first version infringed claim 1, but Glaxo’s second version did not. This was because, at [126], the indented “tip” at the distal (bottom) end of the syringe meant the end was not substantially the same diameter as the barrel itself.

Notwithstanding this, Rares J found the second version did infringe claim 9, the omnibus claim:

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

Rares J considered that the second variant functioned the same as the preferred embodiment described in the specification and drawing. While the indented tip was a difference, claim 9 required only substantial compliance and there was no difference in substance between the second variant and the patent description. At [149], his Honour explained:

…. 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 ….

Earlier, his Honour had pointed out that the bottle liner of Glaxo’s second variant was shaped to complement the configuration of the indented tip of the syringe to sealingly engage as required by the patent. Although liquid was drawn into the indented tip from the bottle, it was essentially “dead space” as the tip of the syringe’s plunger had a correspondingly indented end so that the barrel measured volumes in the same as as the patented description. Accordingly at [150]:

The alternate syringe takes the substance of the flat-nosed syringe described in the patent and drawings as stated in claim 9.

Entitlement

In coming up with the claimed apparatus, Reckitt[1] had engaged a contractor. Glaxo argued that it was the contractor’s operative, a Mr Pearce, who was actually the inventor. Even though Reckitt’s posited inventors did not give evidence, Rares J rejected this attack without needing to resort to s 22A or s 138(4).

Glaxo’s challenge essentially ran into two problems. First, when the contractor discovered the early version of the patent application leading to the patent, it did challenge Reckitt about it. It’s concern, however, was to ensure its continued ability to use the “liner” element, only one integer of the claimed invention as a whole. Arising from this, Reckitt did make some modifications to its application and the contractor reached agreement with Reckitt preserving the contractor’s ability to use features of the liner for other projects freely.

Secondly, although Mr Pearce did give evidence, it was limited to claiming inventive contribution only to the liner element and it was not suggested to him that he, rather than Reckitt’s employees, came up with the idea for the features of the other elements comprising the invention.

Glaxo’s claim based on false suggestion similarly failed:

the documentary evidence suggests that the idea that conceived of a combination of a flat-nosed syringe co-operating with a bottle neck liner and a bottle in the form of the apparatus had nothing to do with Mr Pearce or HDB and was Ms Dallison’s inspiration. She also had envisaged the features of that combination, being the way in which the flat-nosed syringe would co-operate with the liner, and, with Mr Harrison, the need for the liner to be adapted suitably to pour, without mess, the liquid contents from the bottle ….

Reckitt Benckiser Healthcare (UK) Ltd v Glaxosmithkline Australia Pty Ltd (No 5) [2015] FCA 486


  1. The named inventors were actually employees of Boots, the pharmacy chain, and Reckitt’s predecessor in title.  ?

Another designs case

Well, a patents and designs case, but really it’s a case about entitlement: Kenny J has upheld the validity of patents and registered designs for “beer taps” which one company in the Fosters group – Foster’s Group Ltd – applied for “most likely [by] mistake”[1] as one of its subsidiaries, Fosters Australia, was the owner.

Fosters Australia commissioned another party to design some new beer taps for it, on terms that it would own the resulting IP.

When the applicatins for the patents and designs were filed, however, they were filed in the name of Fosters Group Ltd, Fosters Australia’s parent and the holding company of the group.

When the mistake was discovered, Fosters Group assigned everything to Fosters Australia. By then, however, the designs had been registered in Fosters Group’s name, although innovation patent applications were still pending.

Fosters Australia has sued Cash’s for infringing its patents and designs. Cash’s defences asserted invalidity on the basis, amongst other things, that Fosters Group was not an entitled person or the grant was obtained by fraud, false suggestion or misrepresentation.[2]

Kenny J rejected the attack on the patents on the basis that s 29 did not require an applicant for the patent to be the entitled person or someone claiming through him or her; it was necessary only that the patent was granted to someone who qualified under s 15. Kenny J further held that Fosters Group could assign the benefit of its applications to Fosters Australia.

Similar reasoning would apply to the designs s 21 and s 13, but the designs were already registered before Fosters Group assigned its rights to Fosters Australia. However, Kenny J found in circumstances that Fosters Group held the applications and registrations on constructive trust for Fosters Australia.

Patentology makes the point that, while all’s well that ends well, care needs to be taken in deciding who should make the application before it is filed.

Foster’s Australia Limited v Cash’s (Australia) Pty Ltd [2013] FCA 527


  1. [2013] FCA 527 at [127].  ?
  2. Patents Act 1990 s 138(3) and Designs Act 2003 s 93(3).  ?

You can arbitrate disputes under an IP licence agreement

Hamerschlag J, in the New South Wales Supreme Court, has ruled that disputes between a licensor and licensee under a technology licence agreement fall within the arbitration clause in the agreement and, consequently, the arbitrator’s determination that he has jurisdication is valid and binding on the parties.

The disputes between the parties related to (1) the application of the “improvements” clause and (2) whether licence fees would be payable if the licensee embarked on different strategies in the future. Hamerschlag J rejected the licensor’s, Lardken’s, argument that neither of the matters were disputes within the scope of the arbitration clause, cl. 19(b):

(b) All disputes arising in connection with this Licence, which are not adjusted by Licensing Agreement between the parties concerned, shall be finally settled by arbitration. The arbitration shall be held before a single arbitrator appointed by the parties or in the absence of agreement by the Chair of the Law Society of New South Wales, and conducted in accordance with and under the Commercial Arbitration Act 1984 of New South Wales. Judgment upon the award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award, or an order of enforcement as the case may be.

The improvements clause

Lardken licensed Lloyd to use Lardken’s technology relating to methods of collecting energy, converting it to heat, transferring the heat energy to a storage medium based on graphite and extracting and releasing the heat energy into useable form.

The licence agreement had one of those “Improvements” clauses, cl. 5.4(a), by which Lloyd agreed to transfer ownership of any improvements in the technology it developed to Lardken and would receive a non-exclusive licence back.

A third party, Ausra, applied for patents in the USA and Australia. Lloyd had notified Lardken about these applications, but had settled a dispute with Ausra on terms that Ausra assigned its rights in the patent applications to Lloyd. Lardken claimed that “Ausra’s” patent applications had been developed from confidential information about Lardken’s technology which, it was alleged, Ausra accessed at Lloyd’s facility. Lardken also claimed it was entitled to ownership of patent applications filed by one of Lloyd’s subsidiaries, Solfast.

Lloyd denied that any of this technology were improvements within the meaning of the licence agreement and, when Lardken refused to agree, referred the matter to arbitration.

Lardken argued that these disputes were not capable of determination by the arbitrator as a matter of public policy as only the Commissioner of Patents had authority under the Patents Act to grant patents or, subject to appeal to the Court, determine who was an entitled person under s 15 and s 32 and s 36.

Hammerschlag J held that the issue between the parties was a dispute about whether the Ausra or the Solfast technology fell within the terms of cl. 5.4(a). That was a dispute falling within the scope of the arbitration clause. The arbitrator’s decision would not, and could not, affect the Commissioner’s determination whether to grant the patent applications or not. The Commissioner’s powers under ss 15, 32 and 36, to determine entitlement, were not exclusive: questions of assignment for example were regularly determined in other fora. All the arbitrator’s decision would do would be to decide rights and obligations as between Lardken and Lloyd.

The liability to pay licence fees

Lloyd also sought the arbitrator’s ruling that it would not have to pay additional licence fees if:

  1. it itself constructed something using Lardken’s technology; or
  2. it sub-licensed one of its subsidiaries to construct something using Lardken’s technology.

Lardken argued the dispute about Lloyd’s potential liability to pay royalties in the future was not a ‘dispute’ capable of arbitration. There was, as yet, no “live issue” between the parties, it was really an attempt to seek an advisory opinion about a hypothetical eventuality.

Hammerschlag J also found that this was a dispute covered by the arbitration clause.

When Lloyd had written to Lardken stating its interpretation of the licence agreement, Lardken had responded disagreeing. Thus, at [101]:

There is thus clear disagreement between the parties on matters arising in connection with the Licensing Agreement. Each has claimed that the Licensing Agreement operates in a way which the other disputes; see Halki Shipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726 at 757. See also the incisive discussion as to what constitutes a dispute in Tjong Very Sumito v Antig Investments at 747 and following, and Sutton et al, Russell on Arbitration , 23rd ed (2007) at [5-003].

Further, that fact that there was an element of futurity about the liability to pay did not render it purely abstract or hypothetical. Hammerschlag J accepted that purely hypothetical matters may not qualify as ‘disputes’, At [104]:

Although both of these disputes involve an element of futurity they are not purely abstract or hypothetical in the sense which makes them incapable of being the subject of determination. They concern whether certain prospective conduct will result in liability to pay fees under the Licensing Agreement (or put another way whether in the event of that conduct occurring the failure to pay would be a breach of contract). It was not suggested that the prospect that that conduct would occur was fanciful.

In reaching this conclusion, his Honour noted that declarations could be granted by the Court in similar situations:

98. In The Commonwealth v Sterling Nicholas Duty Free [1972] HCA 19; (1972) 126 CLR 297 at 305 Barwick CJ said:

The jurisdiction to make a declaratory order without consequential relief is a large and most useful jurisdiction. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law. Indeed, it is that capacity which contributes enormously to the utility of the jurisdiction.

Hammerschlag J did note, however, it was a matter for the arbitrator’s discretion whether or not to make a determination on the issue.

The judgment doesn’t say how much it would cost to build one of these plant, but one might well think it makes sense for a party to be able to find out in advance what, if any, licence fee would be payable before it had committed to, or incurred, the expense of building the plant.

Larkden Pty Limited -v- Lloyd Energy Systems Pty Limited [2011] NSWSC 268

Lid dip: Steve White

Upholding a patent opposition on appeal

Adrian Crooks, at IPnow, provides his summary of Besanko J’s ruling in Aspirating IP v Vision Systems [2010] FCA 1061.

Entitlement to a design

The Federal Court, Spender J, has allowed Courier Pete’s appeal from the Registrar’s ruling that, while Courier Pete owned ARD 310528, ARD 312217 and 312218 were owned by Metroll.

Section 13 of the Designs Act 2003 prescribes who is entitled to a design.

Collymore was employed by Metroll as its factory foreman making water tanks and the like. The Registrar found that it was no part of his duties to be creating new designs for rainwater tanks and Collymore had in fact made the first design on his own time at home. Hence, following an assignment to Collymore’s own company, Courier Pete, Courier Pete was the owner. However, the Registrar found that Collymore made the two later designs pursuant to an order from his boss at Metroll, Mr Harland. Thus, the Registrar found that Metroll was the owner.

Spender J upheld the Registrar’s finding in relation to the first design. (A significant factor in this was Metroll’s failure to call the other members of the tank making team to back up Mr Harland’s claim that the team was working on the design before the application to register the first design was lodged.)

Spender J considered that Mr Harland’s direction to Mr Collymore to make up what became the second and third designs had to be considered in all the circumstances. On the evidence, his Honour found that Mr Collymore had made it clear before he agreed to carry out Mr Harland’s direction that he, Collymore, would do so only on condition that he retained ownership in the designs and Mr Harland accepted that a royalty would be payable on use of the design. Thus, he retained ownership.

Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2010] FCA 735

IPRIA Seminars

Prof. Ann Monotti and other experts will be talking about what University of Western Australia v Gray means for Universities in

  1. Melbourne on 17 November
  2. Brisbane on 23 November; and
  3. Perth on 20 November.

Details and registration here.

Judge Hiroki Morishita will be providing an Introduction to the High Court of Intellectual Property in Japan on 9 November in Melbourne. Details and registration here.

And, if you’ve recovered from Oaks Day, you could find out what difference a patent makes in Melbourne on 6 November.