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Thaler: the robots have arrived DownUnder

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In what may well be a world first,[1] Beach J has upheld Thaler’s appeal from the Commissioner, ruling that an AI can be an inventor (or at least that someone who derives title to the invention from an AI can be an entitled person).

Stephen L. Thaler applied for a patent, AU 2019363177, entitled “Food container and devices and methods for attracting enhanced attention”.[2] The application named the inventor as:

DABUS, The invention was autonomously generated by an artificial intelligence

The application was made through the PCT so, as a result, reg. 3.2C(2)(aa) required the applicant to provide the name of the inventor. The Commissioner had used the identification provided to reject the application on the basis that an “inventor” must be a natural person, which an AI obviously was not.

Beach J rejected this approach. At [10], his Honour summarised his conclusions:

in my view an artificial intelligence system can be an inventor for the purposes of the Act. First, an inventor is an agent noun; an agent can be a person or thing that invents. Second, so to hold reflects the reality in terms of many otherwise patentable inventions where it cannot sensibly be said that a human is the inventor. Third, nothing in the Act dictates the contrary conclusion.

There are a number of strands to his Honour’s reasoning. Perhaps, the most striking feature of his Honour’s reasoning is his Honour’s emphasis the role of patents in encouraging technological development and the importance of not impeding progress by shutting out new developments.

DABUS

Dr Thaler was the owner of the copyright in DABUS’ source code. He was also responsible for and the operator of the computer on which DABUS operated. He did not, however, produce the claimed invention.

As the description of the “inventor” indicates, the claimed invention was an output from the operation of DABUS.

Beach J did not propose to offer a definition of “artificial intelligence”. His Honour considered that DABUS, at least as described in Dr Thaler’s evidence, was not just a “brute force computational tool”. Instead, it was appropriate to describe DABUS as semi-autonomous.[3]

DABUS itself consisted of multiple neural networks. At first, the connections between these networks was trained with human assistance by presentation of fundamental concepts. As the system accumulated knowledge, the networks connected themselves into increasingly longer chains. And then DABUS became capable of generating notions itself – the unsupervised (by humans) generative learning phase. Once in this phase, DABUS was capable of randomn generation of concepts and identifying those which were novel. In addition, it was trained or programmed to identify significant concepts which continued operation further reinforced. At [41], Beach J summarised:

The upshot of all of this, which I accept for present purposes, is that DABUS could be described as self-organising as a cumulative result of algorithms collaboratively generating complexity. DABUS generates novel patterns of information rather than simply associating patterns. Further, it is capable of adapting to new scenarios without additional human input. Further, the artificial intelligence’s software is self-assembling. So, it is not just a human generated software program that then generates a spectrum of possible solutions to a problem combined with a filtering algorithm to optimise the outcome.

Beach J accepted at [42] Dr Thaler’s evidence that:

DABUS, and its underlying neural paradigm, represents a paradigm shift in machine learning since it is based upon the transient chaining topologies formed among associative memories, rather than activation patterns of individual neurons appearing within static architectures ….

Beach J’s reasons

At [118], Beach J pointed out that no specific provision in the Act precluded an artificial intelligence from being an “inventor”.

Secondly, Beach J considered that patent law is different to copyright law which specifically requires human authors and recognition of moral rights.

Thirdly, as it was not defined in the Act, the term “inventor” should be given its ordinary meaning. Dictionary definitions did not help with this as more was required “than mere resort to old millennium usages of that world.”[4] Instead, at [120]:

the word “inventor” is an agent noun. In agent nouns, the suffix “or” or “er” indicates that the noun describes the agent that does the act referred to by the verb to which the suffix is attached. “Computer”, “controller”, “regulator”, “distributor”, “collector”, “lawnmower” and “dishwasher” are all agent nouns. As each example demonstrates, the agent can be a person or a thing. Accordingly, if an artificial intelligence system is the agent which invents, it can be described as an “inventor”.

Importantly, Beach J took into account the purpose of the patents system. At [121], his Honour explained:

in considering the scheme of the Act, it has been said that a widening conception of “manner of manufacture” is a necessary feature of the development of patent law in the twentieth and twenty-first centuries as scientific discoveries inspire new technologies”.[5]

Accordingly, it made little sense to apply a flexible conception of subject matter – “manner of (new) manufacture under s 18(1)(a) – but a restrictive interpretation of ”inventor“. This would mean an otherwise patentable invention could not be patented because there was no ”inventor”.

Beach J’s purposive approach was reinforced by reference to the newly enacted objects clause:

The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.

It was not necessary to identify an ambiguity before resorting to the objects clause. The objects clause should always be considered when construing legislation.

It was consistent with the object of the Act to interpret “inventor” in a way which promoted technological innovation. Allowing “computer inventorship” would incentivise computer scientists to develop creative machines. Moreover, the object of the Act would not be advanced if the owners of creative computers resorted to trade secret protection instead of the patent system.

At least, with respect, his Honour’s approach shows that s 2A can operate in favour of technological development by encouraging patenting rather than, as many feared, a cat’s paw justifying resort to an ex post analysis[6] in favour of ‘user rights’.

In a further bold development, Beach J considered ([135] – [145]) that the Act is “really concerned” with inventive step. Under s 7(2), the issue was whether or not the patent claimed a sufficient technological advance over what had gone before to warrant the grant of a monopoly. How that advance was made was not relevant.

Descending to the detail of s 15, Beach J first pointed out at [157] that s 15 is directed to who may be granted a patent and does not define who is an inventor. Beach J accepted that DABUS was not a person and so under s15 could not be a person entitled to the grant of a patent. Even though s 15(1)(a) identified “a person who is the inventor” as the first person entitled to the patent, this was not determinative. It was directed to a different issue than definition of “an inventor”.

Although DABUS could not be an entitled person, Beach J found that Dr Thaler qualified as an entitled person at least on the basis of s 15(1)(b). At [167], his Honour explained:

Dr Thaler is the owner, programmer and operator of DABUS, the artificial intelligence system that made the invention; in that sense the invention was made for him. On established principles of property law, he is the owner of the invention. In that respect, the ownership of the work of the artificial intelligence system is analogous to ownership of the progeny of animals or the treatment of fruit or crops produced by the labour and expense of the occupier of the land (fructus industrialis), which are treated as chattels with separate existence to the land.

By this means, his Honour neatly side-stepped philosophical questions, some of which he had adverted to earlier. For example, at [131] Beach J asked:

If the output of an artificial intelligence system is said to be the invention, who is the inventor? And if a human is required, who? The programmer? The owner? The operator? The trainer? The person who provided input data? All of the above? None of the above? ….

Beach J returned to this aspect of the problem at [194]:

more generally there are various possibilities for patent ownership of the output of an artificial intelligence system. First, one might have the software programmer or developer of the artificial intelligence system, who no doubt may directly or via an employer own copyright in the program in any event. Second, one might have the person who selected and provided the input data or training data for and trained the artificial intelligence system. Indeed, the person who provided the input data may be different from the trainer. Third, one might have the owner of the artificial intelligence system who invested, and potentially may have lost, their capital to produce the output. Fourth, one might have the operator of the artificial intelligence system. But in the present case it would seem that Dr Thaler is the owner.

As Dr Thaler combined in the one person the roles of owner, programmer and operator, he was entitled to the fruits of its operation. Would different problems arise if, instead of being embodied in the one person, each of the functions identified lay in a different person?

Returning to [131], Beach J continued immediately following the extract quoted above, saying:

…. In my view, in some cases it may be none of the above. In some cases, the better analysis, which is consistent with the s 2A object, is to say that the system itself is the inventor. That would reflect the reality. And you would avoid otherwise uncertainty. And indeed that may be the case if the unit embodying the artificial intelligence has its own autonomy. What if it is free to trawl the internet to obtain its own input or training data? What about a robot operating independently in a public space, having its own senses, learning from the environment, and making its own decisions? ….

If one can start with the AI as the inventor, that arguably simplifies the analysis in terms of entitlement as the person claiming to be the entitled person will need to show some claim over the results of the operation of the machine.

One final point. It is not clear from the reasons the extent to which Beach J was referred to the controversies around the world arising from Dr Thaler’s applications. It didn’t matter.

At [220], his Honour pointed out that they were irrelevant to the task before him: the interpretation of the words of the Australian Act.

I am not at all sure that “the world” has reached a settled position about the question whether AIs can be inventors. One would hope, however, Australian law does not head down yet another path where “we” are granting patents for things which are not patentable in their ‘home’ countries. It will, for example, be another 12 years or so before we are finally in something like parity on inventive step with the “rest” of the world and have escaped the constraints of the pre-Raising the Bar tests of inventive step.

Two questions

This short summary cannot do justice to the detailed arguments developed over 228 paragraphs.

As discussed above, Beach J accepted that DABUS could not be granted a patent as it was not a person and s 15 specifies that the grantee of a patent must be a person. The Commissioner had proceeded on the basis that the terms of s 15 were predicated on the “old millennium” understanding that title to an invention flowed from the person who was the inventor just as subsistence and ownership of copyright flows from the person who is the author of the work. Beach J has sidestepped that on the basis that s 15 is concerned only with entitlement, not definition of who is an inventor. Nonetheless, one might think s 15 was drafted in this way on the basis that entitledment flowed from the inventor. It does also seem somewhat curious that an AI can be an inventor but not entitled to a patent because it is not a person.

Secondly, much of the controversy overseas has been about whether Dr Thaler’s creation acts autonomously or semi-autonomously or is just an exercise in brute computing. See for example Rose Hughes’ report on IPKat. Beach J appears to have had some evidence from Dr Thaler about how DABUS was designed and worked. Thus at [43], his Honour accepted Dr Thaler’s “assertion” that:

DABUS, and its underlying neural paradigm, represents a paradigm shift in machine learning since it is based upon the transient chaining topologies formed among associative memories, rather than activation patterns of individual neurons appearing within static architectures. From an engineering perspective, the use of network resonances to drive the formation of chaining topologies, spares programmers the ordeal of matching the output nodes of one [artificial neural network] with the input nodes of others, as in deep learning schemes. In effect, complex neural architectures autonomously wire themselves together using only scalar resonances.

Reinforcement or weakening of such chains takes place when they appropriate special hot button nets containing memories of salient consequences. Therefore, instead of following error gradients, as in traditional artificial neural net training, conceptual chains are reinforced in proportion to the numbers and significances of advantages offered. Classification is not in terms of human defined categories, but via the consequence chains branching organically from any given concept, effectively providing functional definitions of it. Ideas form as islands of neural modules aggregate through simple learning rules, the semantic portions thereof, being human readable as pidgin language.

Later his Honour asked at [127] – [128]:

Who sets the goal for the system? The human programmer or operator? Or does the system set and define its own goal? Let the latter be assumed. Further, even if the human programmer or operator sets the goal, does the system have free choice in choosing between various options and pathways in order to achieve the goal? Let that freedom also be assumed. Further, who provides or selects the input data? Let it be assumed that the system can trawl for and select its own data. Further, the larger the choice for the system in terms of the algorithms and iterations developed for the artificial neural networks and their interaction, the more autonomous the system. Let it be assumed that one is dealing with a choice of the type that DABUS has in the sense that I have previously described.

Making all of these assumptions, can it seriously be said that the system is just a brute force computational tool? Can it seriously be said that the system just manifests automation rather than autonomy? ….

If by “assumptions” his Honour is referring to the evidence from Dr Thaler at [42] and [43] which his Honour accepted, that is one thing. It may be quite another thing if they were in fact assumptions.

Where to now?

At the time of writing, the Commissioner is understood to be considering whether or not to appeal.

Thaler v Commissioner of Patents [2021] FCA 879

  1. The EPO refused the corresponding patent application with the oral hearing of the appeal to be heard on 21 December 2021. Apparently, the corresponding patent has been granted in South Africa which, I am given to understand, effectively does not operate a substantive examination system.  ?
  2. For an interesting discussion, see “The first AI inventor – IPKat searches for the facts behind the hype” and the later report on the USPTO’s consultations “Is it time to move on from the AI inventor debate?”  ?
  3. At [19] – [29], Beach J provides an overview of how his Honour understands artificial neural networks work.  ?
  4. At [15]. For the lawyers, [148] – [154] set out the technical arguments for the limitations of dictionaries in some detail.  ?
  5. Diplomatically (and consistently with precedent) citing D’Arcy v Myriad Genetics Inc (2015) 258 CLR 334 at [18] perhaps the single biggest retreat from the teleological approach declared in NRDC.  ?
  6. For example, Mark A Lemley, ‘Ex Ante versus Ex Post Justifications for Intellectual Property’  ?

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Artificial intelligences and inventions Down Under

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The Commissioner of Patents has rejected the DABUS application Down Under.

Stephen L. Thaler applied for a patent, AU 2019363177, entitled “Food container and devices and methods for attracting enhanced attention”. The application named the inventor as:

DABUS, The invention was autonomously generated by an artificial intelligence

The application being made under the PCT, there was a formalities check, which, in reg. 3.2C(2)(aa), requires the Commissioner to check whether the named inventor has been identified.[1]

When the Delegate objected that an inventor had not been identified. Thaler explained why he considered DABUS was the inventor (in part):

The sole contributor to the invention is DABUS, an artificial intelligence machine that includes artificial intelligence programs written by the applicant. DABUS is capable of devising inventions without the involvement of a natural person who traditionally qualifies as an inventor. For the present invention, the machine only received training in general knowledge and proceeded to independently conceive of the invention and to identify it as novel and salient. How DABUS functions is described in detail in US Patent 10,423,875 and other patent specifications.

The Delegate understood from this response that DABUS is not a person as understood in law – an individual, a corporation or a body politic.[2]

There is no definition of “inventor” in the Act. Thus, Wilcox and Lindgren JJ had declared that the word bears its ordinary English meaning.[3]

At [12], the Delegate said:

…. Any standard dictionary shows that the traditional meaning of inventor is a person who invents. At the time that the Act came into operation (in 1991) there would have been no doubt that inventors were natural persons, and machines were tools that could be used by inventors. However, it is now well known that machines can do far more than this, and it is reasonable to argue that artificial intelligence machines might be capable of being inventors. I have no evidence whether the ordinary meaning of “inventor”, assessed at the present day, can include a machine. But if this were the ordinary meaning, would this be consistent with the other provisions of the Act?

So far as the other provisions and context provided any (limited) assistance, the Delegate considered at [20] that it was clear a patentee must be a person. This implied that an inventor also needed to be a person and, in any event, an inventor who was not a person could not be a patentee.

Although it was not part of the decision, it may also be noted that an author for the purposes of copyright must be a natural person. A computer-generated work is not an original work for the purposes of copyright as there is no author.[4] Of course, a patent can protect ideas or function while copyright protects the “expression” of ideas. At least to the extent that the rationale for granting protection in either system is the natural rights of a person to the fruits of their mental labour,[4] one would think the same considerations should apply.

Thaler has enlisted the services of Allen’s pro bono and appealed, No. VID 108/2021.

Stephen L. Thaler [2021] APO 5]

  1. Correct identification of the inventor(s) is important as a patent can be revoked if it is not granted to an “entitled person” (or all the “entitled persons” (see s 138(3)(a)) and a person can be an “entitled person” only if they can trace their chain of title back to the inventor(s): s 15(1)(a).  ?
  2. Citing Acts Interpretation Act 1901 (Cth) s 2C.  ?
  3. Atlantis Corporation Pty Ltd v Schindler [1997] FCA 1105; 39 IPR 29 at 54.  ?
  4. Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCAFC 149 at [90] (Keane CJ) and [117] – [119] (Perram J).  ?

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Patents get exhausted in Australia

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The High Court has handed down its decision in Calidad: by a 4:3 split decision, 150 years of precedent has disappeared into history.[1] Given some time constraints, this is going to be a high level summary only. There are two main areas of significance.

First, the High Court (by majority) has ruled that the sale of a patented product exhausts the patentee’s right to control further exploitation of the product. The right of a purchaser to use and deal with the product does not turn on an implied licence which, being implied, could be excluded by appropriate contractual terms.

Secondly, the High Court has given what is probably its first detailed consideration of what constitutes making a new product (infringing) versus merely repairing it (non-infringing).

Calidad was importing and selling reconditioned Seiko (Epsonm) printer cartridges – that is, used Epsonm cartridges which Calidad’s supplier, Ninestar, had refilled. Seiko sued for patent infringement.

On appeal from Burley J, the Full Federal Court had ruled that the reconditioning amounted to making a new product and so the patent infringed.

In allowing the appeal, the High Court unanimously held that refilling 4 categories of the printer cartridges did not infringe. In these categories, what was involved was simply drilling one or two holes in the cartridge case, injecting replacement ink and sealing the holes again. Thus, they had merely been repaired and did not involve making new products.

All judges also held that a fifth category, which involved the replacement of an unpatented component, a memory chip, with another, was not infringing because it too did not involve making a new product.

By a majority of 4 to 3, the High Court held that the reconditioning of four other categories was also not infringing. Nettle, Gordon and Edelman JJ explained why their Honours dissented on this point at [266]:

Category 5, 6 and 7 cartridges involved the making of new, different cartridges: because the processes used to modify those cartridges[440] included cutting off the interface pattern to make them fit a different printer from that for which they were designed. Relative to each cartridge in its totality, that was such a significant change to the form and function of the cartridges as properly to be viewed as changing each cartridge from the cartridge it had been into a new and different cartridge adapted to a new and different task. When that significant change was combined with the other modifications, there was a making of the patented invention thereby infringing Seiko’s patents.

In contrast, Kiefel CJ, Bell and Keane JJ held:[2]

68 The reprogramming of the memory chip in the original Epson cartridges and the removal of the interface patterns did not constitute the making of a new embodiment of the patented product. It may be accepted that the substitution of an “integrated circuit assembly” was a substantive modification which included the layout of the electrical terminals, but it did not constitute a making. The particular layout of the electrical terminals as defined by integers [5] to [11] was not affected by this action. Moreover, as Calidad submits, it was an action undertaken to enable the data in the memory chip to be replaced and the cartridge to be re-used, not to change the layout of the terminals in any way.

69 When all of Ninestar’s modifications to each of the categories of cartridges were completed what remained were the original Epson cartridges with some modifications which enabled their re-use. The modifications did not involve the replication of parts and features of the invention claimed. There was no true manufacture or construction of a cartridge which embodied the features of the patent claim.

70 The modifications to the original Epson cartridges were consistent with the exercise of the rights of an owner to alter an article to improve its usefulness and enable its re-use. Both English[111] and United States authority accept the prolonging of the life of a product to be within an owner’s rights of use of a patented product. Regardless of whether it is said to be something done which is closer to “repair” than “making”, it clearly does not involve a manufacture or making. And this is so regardless of whether the exhaustion doctrine or the implied licence doctrine is applied.

So, in all judgments whether there was an infringing making of a new product or a merely a non-infringing repair involved a qualitative assessment of fact and degree.

On the “second” point, the High Court adopted the doctrine of exhaustion on sale by a majority of 4 to 3: (Kiefel CJ, Bell and Keane JJ, Gageler J agreeing; Nettle, Gordon and Edelman JJ dissenting).

All the judges agreed that the decision on the appeal did not turn on whether the doctrine of exhaustion or implied licence from purchase applied.[3] Thus, the adoption of the exhaustion theory is strictly speaking obiter dicta. Nonetheless, as “seriously considered” obiter dicta it is pretty much binding on all lesser courts in Australia.

Accordingly, when a patentee sells a product protected by a patent the patentee’s monopoly rights of use and sale with respect to a product arising from statute are exhausted on sale.

If you have clients who sell patented products on terms seeking to control how they are used – for example, a field of use restriction – you should be recommending a review of the arrangements to ensure that they are binding as a matter of contract law. And, if your client also sells the products, or licenses others to sell them, you should be considering whether the arrangements expose your client to breach of the cartel provisions or exclusive dealing arrangements in the Competition and Consumer Act 2010.

Calidad Pty Ltd v Seiko Epson Corporation [2020] HCA 41

ps. Thanks to John McPhail for pointing out that my spring racing fever had confused a horse race in Old Blighty with a brand of printers! What was I thinking?

  1. Betts v Willmott (1871) LR 6 Ch App 239; Société Anonyme des Manufactures de Glaces v Tilghman’s Patent Sand Blast Co (1883) 25 Ch D 1; National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 at 28; [1911] AC 336 (PC). A bit more background here.  ?
  2. Gageler J in separate reasons agreed with their Honours.  ?
  3. Kiefel CJ, Bell and Keane JJ at [45]; Nettle, Gordon and Edelman JJ at [144].  ?

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Meat & Livestock Australia loses its appeal against Branhaven’s selective breeding patent

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The Full Court has refused Meat & Livestock Australia leave to appeal from Beach J’s rulings to grant Branhaven’s[1] patent for the use of genetic information in the selective breeding of cattle. MLA did not seek leave to appeal the ruling that the claims to uses of the genetic information were patentable subject matter.

Image by VIVIANE MONCONDUIT from Pixabay

In its amended form as allowed by Beach J, claim 1 reads:

  1. A method for identifying a trait of a bovine subject from a nucleic acid sample of the bovine subject, comprising identifying in the nucleic acid sample an occurrence of at least three single nucleotide polymorphisms (SNPs) wherein each of the at least three SNPs are significantly associated with the trait, with the degree of statistical significance being p?0.05, and wherein the at least three SNPs occur in more than one gene; and wherein

[and wherein] (a) at least one of the SNPs corresponds to position 300 of any one of SEQ ID NOS: 19473 to 21982, or

(b) the SNP is about 500,000 or less nucleotides from position 300 of any one of SEQ ID NOS: 19473 to 21982 and is in linkage disequilibrium with the SNP at position 300 with an r2 value of ?0.7.

(The [ ] indicates deletions and the italics insertions from the original claim.)

In his Honour’s first ruling, Beach J held that claim 13[2] was invalid as a claim to genetic information, but otherwise rejected MLA’s attacks based on manner of manufacture, novelty and inventive step. His Honour, however, found that the claims lacked clarity. So Branhaven came back with the amended form.

In his Honour’s second ruling, MLA argued there was no power to amend and, in any event, the proposed amendments were not fairly based. In the result, his Honour rejected MLA’s attacks and directed the patent in amended form proceed to grant. MLA sought leave to appeal.

Did the Court have power to permit amendment?

Following the Raising the Bar Act, the power of the Court to deal with amendments was expanded by the addition of s 105(1A):

If an appeal is made to the Federal Court against a decision or direction of the Commissioner in relation to a patent application, the Federal Court may, on the application of the applicant for the patent, by order direct the amendment of the patent request or the complete specification in the manner specified in the order.[3]

At [91] and [93], the Full Court considered the plain meaning of this provision was to confer on the Court power to deal with amendments of patent applications under appeal.

The Full Court considered MLA’s argument that Beach J had decided the appeal in his Honour’s first decision and so was functus officio “untenable”.

When handing down his first reasons for judgment, Beach J had simply ordered:[4]

Within 14 days of the date of these orders, each of the parties file and serve proposed minutes of orders and short submissions (limited to three pages) to give effect to these reasons, including on the question of any steps necessary to deal with any application to amend the claims of patent application no. 2010202253 and on the question of costs.

The Full Court accepted that this order did not dispose of the appeal and so Beach J still had jurisdiction over the patent application in its amended form. At [87]:

The order made by his Honour at the time did not dispose of the appeal but was instead a procedural order requiring the parties to file and serve proposed minutes of order and short submissions to give effect to his Honour’s reasons including in relation to any application to amend the claims of the patent application. There is no substance to the applicant’s submission that either the publication of his Honour’s first set of reasons or the making of that order brought the proceeding to an end.

and [90]:

However, as his Honour correctly observed, the publication of his first set of reasons did not dispose of the appeal since no order to that effect was made. Nor could the publication of his Honour’s first set of reasons amount to an order disposing of the appeal. His Honour made it clear in his reasons that he would refrain from making any such order until any question in relation to amendment had been dealt with.

The Full Court turned then to the substantive argument about whether Beach J erred in allowing the amendments.

Were the amendments permissible?

As already noted, his Honour had found in his first reasons that the relevant claims lacked clarity. The main issue here was that claim 1 did not explicitly state the requirement of “linkage disequilibrium” (LD) for the relevant single nucleotide polymorphisms (SNPs) or what degree of LD was required: see [348] – [362] reproduced at [69] of the Full Court’s reasons.

As the elements were not disclosed in the claim, MLA argued the amendments were impermissible as they introduced new matter into the claims. Beach J, however, allowed the amendments on the grounds that they were limiting amendments and had been in substance disclosed in the specification.

The Full Court essentially accepted this conclusion on the facts. It did note that, generally, a claim which defined an invention more narrowly than the disclosure in the specification would be fairly based, but there may be some situations where that was not the case. The overriding question was whether the claim described an invention different to the disclosure in the specification. At [104] – [105]:

All other things being equal, a claim that defines an invention in terms that are narrower than a more general description in the body of the specification would support is not likely to travel beyond what is more generally described. But there may be some situations in which what is more specifically defined results in a claim that travels beyond what is described in the specification: AstraZeneca at 244 and [285]-286 where reference is made to Sir Robin Jacob’s judgment in Dr Reddy’s Laboratories (UK) Ltd v Eli Lilly and Co Ltd [2010] RPC 9 at [26] and [28]. In these situations a claim may be invalid if the invention more specifically defined is an invention that is different from the invention described in the specification as opposed to some narrower embodiment of the latter.

In circumstances where it can be concluded that there is an implicit disclosure of the relevant feature, it is unnecessary to inquire into whether the feature is truly limiting. But even in the absence of an implicit disclosure, a claim does not necessarily lack fair basis because it includes a matter of detail that is not described in the specification so long as it defines an invention that is not different from the invention described in the specification. The proper characterisation of the invention described in the specification is critical when determining whether the claim is to an invention different from that described in the body of the specification. Each case will depend on its own facts and on the proper characterisation of the invention described in the body of the specification. (emphasis supplied)

If the feature added to the claim was implicitly disclosed in the specification, therefore, the claim could be amended. But, amendment might be permissible even if not implicitly disclosed.

At [110] – [115], the Full Court focused on Beach J’s unchallenged findings including, in particular, that the skilled addressee “would understand that the specification requires that there be high or strong LD between the limb (a) SNP and the limb (b) SNP”, but not necessarily a very high or perfect LD. The proposed amendments gave effect to that understanding by reference to more precise rather than some less precise criteria.

The Full Court accepted MLA’s criticism that the specification (before amendment) made no mention at all of r2 values. Beach J accepted expert evidence, however, that the r2 values were broadly equivalent to LD values that might fairly be regarded as high or strong. As a result, its inclusion was permissible. Noting that high LD or strong LD were “less precise criterion” than the expressed r2 vaues, at [114], the Full Court explained:

…. To hold that it is not open to use the r2 statistic or the 0.7 value for the purpose of ascertaining whether there is a high or strong degree of LD between the limb (a) SNP and the limb (b) SNP would involve, in our view, the very kind of over meticulous verbal analysis that should be eschewed when determining whether a proposed amended claim satisfies the requirements of s 102(1) of the Act. This is particularly so in circumstances where the amendment is propounded for the purpose of clarifying an ambiguity that would otherwise prevent the patent application proceeding to grant. In the present case we do not think the use of the r2 statistic in limb (b) results in a claim that defines an invention different from that which is more generally disclosed in the body of the specification as filed. (emphasis supplied)

As a result, the Full Court came to “the very clear conclusion” that MLA had not made out a clear prima facie case of error where the likely result would be allowing an invalid patent to proceed to grant. Accordingly, leave to appeal was refused.

Since this is a pre-Raising the Bar patent, the old “practically certain” test applies to the opposition. That raises the question whether things would turn out differently in a revocation proceeding on the balance of probabilities. After 949 paragraphs for the first decision and 470 paragraphs for the second, perhaps the “very clear conclusion” language might help discourage that course?

Meat and Livestock Australia Limited v Branhaven LLC [2020] FCAFC 171 (Kenny, Nicholas and Burley JJ)

  1. Cargill Inc. and Branhave were joint applicants but in the course of the hearings before Beach J, Cargill assigned its interest to SelecTraits Genomics LLC.  ?
  2. Claim 13. An isolated polynucleotide identified according to the method of claim 8.  ?
  3. Sch. 3 item 6. Prior to the introduction of this amendment, the appeal to the Court was limited to the form of the specification before the Commissioner in the decision under appeal. If an application to amend was made after the Commissioner’s decision, the application could only be dealt with by the Commissioner: see e.g. Airsense Technology Limited v Vision Systems Limited [2007] FCA 828  ?
  4. Costs were also reserved.  ?

Meat & Livestock Australia loses its appeal against Branhaven’s selective breeding patent Read More »

Aristocrat’s electronic gaming machine is patentable

1 Comment / Patents / / / , , , , , , , , ,

Burley J – one of the judges in the Full Court’s Rokt ruling – has upheld Aristocrat’s appeal and ruled that four of its innovation patents[1] for electronic gaming machines (EGMs) were manners of manufacture and not mere schemes or rules for a game.

[2]

The parties charaterised claim 1 of the 2016101967 patent as having 12 integers:

A gaming machine comprising:

(1.1) a display;

(1.2) a credit input mechanism operable to establish credits on the gaming machine, the credit input mechanism including at least one of a coin input chute, a bill collector, a card reader and a ticket reader;

(1.3) meters configured for monitoring credits established via the credit input mechanism and changes to the established credits due to play of the gaming machine, the meters including a credit meter to which credit input via the credit input mechanism is added and a win meter;

(1.4) a random number generator;

(1.5) a game play mechanism including a plurality of buttons configured for operation by a player to input a wager from the established credits and to initiate a play of a game; and

(1.6) a game controller comprising a processor and memory storing (i) game program code, and (ii) symbol data defining reels, and wherein the game controller is operable to assign prize values to configurable symbols as required during play of the game,

(1.7) the game controller executing the game program code stored in the memory and responsive to initiation of the play of the game with the game play mechanism to:

(1.8) select a plurality of symbols from a first set of reels defined by the symbol data using the random number generator;

(1.9) control the display to display the selected symbols in a plurality of columns of display positions during play of a base game;

(1.10) monitor play of the base game and trigger a feature game comprising free games in response to a trigger event occurring in play of the base game,

(1.11) conduct the free games on the display by, for each free game, (a) retaining configurable symbols on the display, (b) replacing non-configurable symbols by selecting, using the random number generator, symbols from a second set of reels defined by the symbol data for symbol positions not occupied by configurable symbols, and (c) controlling the display to display the symbols selected from the second set of reels, each of the second reels comprising a plurality of non-configurable symbols and a plurality of configurable symbols, and

(1.12) when the free games end, make an award of credits to the win meter or the credit meter based on a total of prize values assigned to collected configurable symbols.

No doubt oversimplifying, it seems the “clever” aspect of the patent was the use of a combination of configurable symbols and non-configurable symbols in which the display of a pre-determined number of configurable symbols on a base reel triggered free or bonus games. The configurable symbols were retained in the “free” game, while the non-configurable symbols were replaced with symbols from a second set of “reels”.

On the appeal, the Commissioner’s primary argument was that the claims were just claims to “a generic computer implementation”, leaving the hardware and software uncharacterised where the only features that distinguished the claimed invention from previous EGMs were the scheme or rules of the game. Thus, at [80] Burley J summarised the Commissioner’s submission:

integers 1.1 to 1.6 reflect the components of an EGM, including hardware (for example a display) and software (for example a random number generator) and some that are a combination of both (for example a game controller comprising a processor and memory). These were all standard components of EGMs.

Integers 1.7 to 1.12 deal with the conduct of the game and amount to a scheme or set of rules for doing so.

Amongst other things, the claim does not define any hardware features of the “game controller comprising a process or a memory” or any technical means by which the necessary processing functions are performed to implement the game. No software application or program code for carrying out the steps is defined by the claims. There is no suggestion of ingenuity in their implementation, which is left entirely to the skilled person reading the claim.

Consideration

In a point which bears emphasising (as it appears so often overlooked or misunderstood), Burley J began by reiterating that the ground of manner of manufacture is a separate and discrete requirement of validity, independent of other grounds like novelty, innovative step, utility and secret use. So, as his Honour pointed out at [84]:

whilst a claim for a ball point pen would fail for anticipation and inventive step, it would still be a claim for a manner of manufacture.

After referencing the “scheme” line of cases,[3] Burley J considered at [91] they mandated a two stage inquiry:

  1. The initial inquiry was whether or not the claim was for a mere scheme or business method of the type that was not the proper subject matter for a grant of a patent.
  2. If so, a second inquiry arose: whether or not the claim involved the creation of an artificial state of affairs where the computer was integral to the invention, rather than a mere tool in which it was performed. That is, was there invention in the computerisation of the claimed method?

Each step was to be undertaken as a matter of substance rather than mere form.

According to his Honour, it was at the second stage that it became necessary to identify whether or not the “contribution” was “technical in nature” or solved a “technical” problem or merely required a “generic” computer implementation.

The present case was different to the “mere scheme” line of cases because what was claimed was a mechanism of a particular construction where the integers interacted to produce a particular product. At [95], his Honour summarised:

the invention described and claimed, when understood as a matter of substance, is to a mere scheme or plan. It is to a mechanism of a particular construction, the operation of which involves a combination of physical parts and software to produce a particular outcome in the form of an EGM that functions in a particular way.[4]

Accordingly, it was unnecessary to embark on the second inquiry required for “mere scheme” cases.

As there was a physical product, therefore, it appears that the instant claims were conceptually different to those in Emcompass and Rokt. Burley J considered the instant claims were conceptually more like those upheld by Nicholas J in Konami and Dowsett J in LTH Consulting where, for example, Nicholas J had explained:

the inventions in suit claimed are not “mere ideas” but “new and useful gaming machines and new and useful methods of operation producing new and improved results”.

In opposing this claim, the Commissioner was labouring under the difficulty of the many, many patents already granted for EGMs and gaming machines generally. Moreover, the Commissioner necessarily conceded (consistently with his Honour’s ball point pen example) that the claim would have been a manner of manufacture if it had been implemented “the old-fashioned way, without using software but instead using cogs, physical reels and motors to create the gameplay”.

Thank goodness for that blow in favour of modernity and technological developement! One might question whether, when putting the elements into a box qualifies as a manner of manufacture, offering exactly the same functionality online accessible through a browser would also qualify as a manner of manufacture. Indeed, the specification refers to the invention being implemented alternatively by a “thick client” architecture or a “thin client” architecture.[5] And, if it did, how would one reconcile that with Rokt?

Aristocrat Technologies Australia Pty Limited v Commissioner of Patents [2020] FCA 778

  1. All four were divisionals from the same parent: AU 2015210489.  ?
  2. In this image from the decision, the vertical, numbered lines represent a portion of 5 “reels” (showing 3 symbols per reel) and the horizontal, lettered lines are rows.  ?
  3. Grant v Commissioner of Patents [2006] FCAFC 120; 154 FCR 62; Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150; 227 FCR 378; Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177; 238 FCR 27; Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161; 372 ALR 646; Watson v The Commissioner of Patents [2020] FCAFC 56 and Commissioner of Patents v Rokt [2020] FCAFC 86.  ?
  4. At [96], Burley J expanded on the physical components claimed and how they interacted through the software to produce an outcome and, at [97], his Honour referred to the tight regulatory supervision imposed on EGMs.  ?
  5. P. 4: “For example, a ”thick client“ architecture may be used wherein part of the game is executed on a player operable gaming machine and part of the game is executed remotely, such as by a gaming server; or a ”thin client“ architecture may be used wherein most of the game is executed remotely such as by a gaming server and a player operable gaming machine is used only to display audible and/or visible gaming information to the player and receive gaming inputs from the player.”  ?

Aristocrat’s electronic gaming machine is patentable Read More »

Rokt take 2

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As noted last week, the Full Court has allowed the Commissioner’s appeal and ruled that Rokt’s patent application for a digital advertising method is in fact an unpatentable scheme. Disagreeing with the trial Judge, the Full Court considered the case was no different to Encompass and just involved a scheme using the well-known and understood functions of computer technology.

Perhaps, the point of general application arising from this decision (barring a successful application to the High Court for special leave) is the very limited role for evidence in assessing whether a claim is a claim to a manner of manufacture for the purposes of s 18(1)(a).

The claim

Claim 1 is involved and was characterised by the Court as involving 12 integers:

(1) A computer implemented method for linking a computer user to an advertising message by way of an intermediate engagement offer which is operable to drive a higher level of engagement with the advertising message than if the advertising message was presented without the offer, the method comprising:

(2) providing computer program code to be delivered with publisher content to a computing device operated by the computer user and which computing device comprises an interface arranged to display the publisher content, the computer program code operable to be implemented by a processor of the computing device to perform the additional steps of:

(3) gathering engagement data associated with the user, the engagement data derived from interactions made by the user with the interface and related to at least one of the following:

an attribute of the publisher content;

an interaction with the publisher content by the computer user; and

an attribute of the user;

(4) communicating the engagement data as it is gathered to a remote advertising system implementing an engagement engine, the engagement engine operable to:

(5) continuously evaluate the engagement data to determine whether a predefined engagement trigger has occurred, the predefined engagement trigger being representative of a user response or action that is contextually relevant for presentation of the engagement offer;

(6) responsive to determining that the predefined engagement trigger has occurred, selecting an engagement offer from a pool of different engagement offers stored by the remote advertising system that is relevant to the evaluated engagement data and wherein,

(7) where multiple engagement offers are deemed to be relevant, the engagement engine implements a ranking algorithm operable to dynamically rank the relevant engagement offers based on at least one of: > >(a) an engagement score determined from one or [more] performance metrics recorded from past user interactions with the corresponding engagement offers; > >(b) a revenue score determined from one or more revenue metrics recorded from past user interactions with the corresponding engagement offers, and

wherein the engagement engine selects which engagement offer to present based [on] the rankings;

(8) causing the interface to insert the selected engagement offer into the publisher content for displaying to the computer user;

(9) implementing the computer program code to determine an acceptance of the engagement offer by the computer user based on a user interaction with the engagement offer; and

(10) following the determined acceptance, presenting an advertising message comprising one or more advertisements selected from a pool of different advertisements on the interface and

(11) wherein user interactions with each of the presented advertisements are gathered by the widget script and communicated to the remote advertising system for use in selecting subsequent advertisements, and

(12) whereby the selection of [sic] engagement offer is additionally made such that there is no direct advertising benefit to the subsequent advertisers of the selected advertisements through presentation of the selected engagement offer to the computer user other than encouraging positive engagement by the user with the advertising system prior to presentation of the advertising message.

According to Rokt, one of the particularly clever, if not the clever, insight in this combination was the “engagement offer”. As the specification explained:

Through extensive testing, it has been found that initiating engagement with the advertisement system 10 by way of an engagement offer results in a more positive and deeper engagement with advertisements subsequently presented to the consumer (i.e. during the engagement journey) than if those advertisements were presented in the traditional search or display based manner, as described in the preamble. In turn, the consumer is more likely to continue to engage with the advertisement system 10, thus creating a sustainable advertising revenue module which is of benefit to each of the advertisement system 10, publishers 12 and advertisers 14.[1]

The Full Court explained that engagement offers could take any of numerous forms “including coupons, discounts, vouchers, scratch and win prizes, surveys and polls, competitions, video images, free games and the like.” Or, as their Honours summed up, “click bait”.

The trial judge

Based on the expert of evidence of Professor Verspoor, the trial judge had allowed Rokt’s appeal from the Commissioner’s rejection of the application on the basis that the claims were not directed to a “manner of manufacture”.

Given the Full Court’s ruling it is worth noting what Professor Verspoor had been asked to do. Professor Verspoor had given evidence directed to four questions:

(1) What is the “substance” of the invention? In other words, what specifically lies at the heart of the invention?

(2) Does the invention solve a technical problem?

(3) Is the use of a computer (or computers) integral to carrying out the invention, or could the invention be carried out in the absence of a computer (or computers)?

(4) Does the invention involves [sic] steps that are foreign to the normal use of computers (as at December 2012)?[2]

Based on Professor Verspoor’s evidence in answer to these questions, the trial judge had found that the introduction of the intermediate “engagement offer” to provide an alternative advertising technique was the key feature of the claimed invention.

The Commissioner argued that the method was merely an unpatentable scheme to solve a business problem. The trial judge held, however, that the claim solved both a business problem and a technical problem. At [205], his Honour said:

The invention solved not only a business problem but also a technical problem. As to the latter, it provided a single platform in which user engagement data could be coupled with transactional data and user context data to provide a personalised ranking of engagement offers to the user. This technical problem of providing this single platform was solved by introducing the tracking database and the objects database and designing the ranking engine and the engagement engine which accessed and manipulated the data in the two databases to rank and select engagement offers. The ranking engine optimised the personalised output for the consumer. Critically, the ranking engine implemented a ranking algorithm which ranked the retrieved object by a combination of an engagement score and revenue score. I also accept the evidence Professor Verspoor gave, which is summarised at [46]-[54], [104]-[107], [134]-[135] and [145] above.

and at [207]:

I find that there was a business problem of attracting the attention of the user and having the user choose to interact with the advertiser, but this problem was translated into the technical problem of how to utilise computer technology to address the business problem. The invention aimed to solve this technical problem through the introduction of the engagement offer and identifying what steps the software needed to execute in order to modify dynamically the website that the user was browsing while they were browsing it to, first, implement in the web browser or device the concept of the engagement offer, second, to implement in the computer system the necessary software for selecting engagement offers and advertisements for the given user based on the previous interactions with the system and the interactions of other similar users and, third, to have that system interact with the widget in the web browser in real time.

Accordingly, his Honour found at [208] that the use of the computers was integral, rather than incidental, to the invention and so qualified as patentable subject matter.

The Full Court

As already noted, the Full Court allowed the Commissioner’s appeal from the trial judge’s decision. Rokt’s invention is not a manner of manufacture and so not a patentable invention.

Before the trial judge, the parties had advanced a substantial body of expert evidence, leading the trial judge to characterise the problem before him “as one that lay in the realm of fact”.

According to the Full Court at [72], that was wrong.

Whether a claim is directed to a manner of manufacture is a question of construction. Construction of a claim is a matter of law, to be determined by the Judge. The role of evidence is limited.

At [71], the Court stated:

it is fundamentally a matter for the Court to determine and characterise the invention having regard to the principles of construction that are now well settled.[3]

At [73], the Court explained:

The role of expert evidence in construing the patent specification and the claims is limited. It is to place the Court in the position of the person acquainted with the surrounding circumstances as to the state of the art and manufacture as at the priority date: Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (2001) 207 CLR 1 at [24]; Myriad Genetics at [12]. Typically, the Court will read the specification with the benefit of expert evidence as to the meaning of words that are terms of art, or with an explanation of technical concepts relevant to the understanding of the invention as described and claimed. The question of construction remains with the Court. However, in his reasons, the primary judge adopted the approach of preferring the expert opinion evidence of Professor Verspoor over that of Mr Ries, and then adopting Professor Verspoor’s view as to the identification of the invention as claimed and characterised in the specification. It is not apparent that his Honour separately gave consideration to these matters. In our respectful view, that is an error in approach.

There is, however, at least this anomaly. If one is engaging in an exercise in legal construction, how does one decide whether the claim is nothing more than the implementation of a scheme by the use of a computer for its “well-known and understood functions”?[4] This is, apparently, not a function of evidence or even common general knowledge. At [91], the Full Court explained:

It is apparent that where the cases refer to “generic software” or to the use of computers for their “well-known” purpose, it is not a finding as to common general knowledge. Rather, it is a reference to computer technology that is utilised for its basic, typical or well-known functions. The means of determining that this is so is primarily by a careful review of the specification in order to ascertain, by construing that document, whether the invention described and claimed is in substance any more than a scheme that utilises computers in such a way. This is a question of characterising the invention as set out in the specification.

What appears to have been decisive in this case, as in Encompass, was that the hardware and the software to be used in implementing the method was “uncharacterised”. All that was identified in the claim was a series of high level instructions, leaving it to the user to write their own program.

Rokt argued that the High Court’s decision in Data Access[5] had differentiated between the realms of copyright and patent by identifying that patents are concerned with function, while copyright is concerned with forms of expression. Rokt submitted therefore, that there was no requirement for a claim to incorporate specific programming code.

At [114], however, the Full Court explained at [114] that Encompass was unpatentable because it was “just” an instruction to use computer technology for its well-known and understood functions”:

In Encompass the Full Court found that where the claims in suit do not secure, as an essential feature of the invention, any particular software or programming that would carry out the method and the method is entirely left to those wishing to use the method to devise and implement a suitable program for that purpose and all the specification teaches is that the processing system may be “suitably programmed” then the method is really an idea for a computer program, it being left to the user to carry out the idea in a computer system …. By the claim and the specification leaving entirely to those wishing to use the method to devise and implement a suitable computer program for purpose, it was apparent that the invention did not rise above the level of being an instruction to use computer technology for its well-known and understood functions to implement the scheme.

So, in Rokt, at [115]:

In the present case, the claim amounts to an instruction to carry out the marketing scheme. The level of abstraction at which it is expressed demonstrates that it does no more than provide a list of steps to be implemented using computer technology for its well-known and understood functions. Nothing in the specification suggests otherwise. This may be seen from the instructions explained as steps S1a to S10a in the specification (see [26] above). They comprise a list of general instructions to write software. Even if the scheme is new and ingenious, it is not made patentable merely because it can or must be implemented using computer technology. Rather, the language of the specification and the broad statements of steps required to be taken in claim 1 do no more than locate the scheme in computer technology, using its well-known and understood functions. The position is not distinguishable from that in Encompass. In our respectful view, the learned primary judge erred in finding otherwise. (emphasis supplied)

Another point to worry at

In addition to rejecting the relevance of the kind of expert evidence led (on both sides) before the trial judge, the Full Court was also critical of what Professor Verspoor’s evidence did address.

For example, having set out [205] of the trial judge’s analysis, the Full Court considered that Professor Verspoor had not even addressed the relevant question of what was actually claimed in claim 1, but had instead based her opinions on what was disclosed in the body of the specification. Their Honours said at [95]:

It is apparent that his Honour was not at this point adverting to the method of the claim, which refers to an engagement engine but contains no integer requiring a ranking engine (only a ranking algorithm). Nor does the claim require that there be a tracking database or an objects database. Those features are present in the system architecture identified in figure 3 in the specification, but not in claim 1. Section 18(1)(a) of the Patents Act draws attention to whether the invention so far as claimed in any claim is a manner of manufacture. That is, while the claims must be read with reference to the body of the specification, the invention is defined by the claims. Professor Verspoor, and the primary judge, relied upon the technical problem and solution identified in the specification, and the primary judge did not address the important question of whether the technical solution was claimed.

This with respect appears potentially difficult. Claim 1 with its concatenation of integers is not exactly straightforward. On what basis, for example, do lawyers or other patent advisers conclude that the reference in the claim to a “ranking algorithm” means *and* is something different to a “ranking engine”. Integer 7 for example refers to the “engagement engine” implementing a ranking algorithm “*operable to dynamically rank the relevant offers based on*” various criteria. [Edit]

These may not be the same things. The point is, understanding the claim may well not be simply an exercise in grammar and syntax which a person skilled in the tools of the lawyer’s trade can carry out.

More generally, one might wonder if the stipulation of those features in the claim, or a dependent claim, would have introduced sufficient detail into the claim to elevate the claim from unpatentable scheme to patentable manner of manufacture.

Some concluding comments

The clarification of the correct approach to determining whether a claim is to a manner of invention should be welcome. On the approach to this issue taken since at least Grant, however, it does mean that there is great scope for the Tribunal’s discretion to decide whether something should be patentable or not. That is of course inherent in the ‘proper question’.[6] For that reason, it could be argued that the NRDC Court sought to confine the inquiry – somewhat ironically undermined by Myriad – to a very limited examination of whether the claim was directed to “a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavour.”[7]

It is difficult with respect to see why, if a claim consisting entirely of a combination of known integers in some new and inventive way can be valid subject matter,[8] the same should not apply equally to a new and ingenious combination of computer technologies. It has long been recognised that there can be invention in the idea or concept or principle even where the means of carrying it into effect are themselves not new or inventive. [9]

The difficult path we are travelling down is evident in the previously unheard of volume of cases we now have about manner of manufacture issues, no doubt exacerbated by the innovation patent. The problems are not confined to Australia. Indeed, matters have reached the state in the United States where a claim to a garage-door-opener, devices which have been patentable subject matter for 150 years (to quote Patently-O) has been held unpatentable as an abstract idea.

The issue becomes even more difficult of resolution where, accepting that Australia is a net importer of intellectual property generally and patent claiming technology, it becomes undesirable to grant patents in Australia for “things” which do not qualify for patent protection overseas, particularly in the patent applicant’s “home” jurisdiction. Given the lack of harmonisation internationally, however, there is no certainty that all, or even many, jurisdictions will reach the same result.

Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86 (Rares, Nicholas and Burley JJ)

  1. The numerals are references to elements illustrated in Figure 1 (shown at paragraph 13 of the Reasons).  ?
  2. The Full Court extracted key parts of the evidence of Professor Verspoor’s and the Commissioner’s expert, Mr Ries, at [36] – [44].  ?
  3. See also [93]. At [71], the Court cited [Jupiters Ltd v Neurizon Pty Ltd][jup] (2005) 222 ALR 155 at [67] as summarising “many” of the principles.  ?
  4. Rokt Full Court at [84] citing Commissioner of Patents v RPL Central Pty Ltd (2015) 238 FCR 27 at [96] and Encompass at [95].  ?
  5. Data Access v Powerflex Services (1999) 202 CLR 1 at [20].  ?
  6. ‘whether the subject matter in issue is “a proper subject of letters patent according to the principles which have been developed for the application of s 6 of the Statute of Monopolies”’. Perhaps borne down under the weight of so-called “innovation patents”, however, one might feel some skepticismto the notion that it is to be answered “consistently with a “widening conception of the notion [which] has been a characteristic of the growth of patent law”.  ?
  7. NRDC]nrdc 102 CLR at 275–277; CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 at 295 and Welcome-Real Time v Catuity. Ironically, since undone by the High Court in Myriad.  ?
  8. For example, AB Hässle v Alphapharm Pty Ltd at [6].  ?
  9. For example, Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) (2007) 235 CLR 173 at [59] – [60].  ?

Rokt take 2 Read More »

Rokt loses the Commissioner’s appeal

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The Full Court (Rares, Nicholas and Burley JJ) has upheld the Commissioner’s appeal against the ruling that Rokt’s digital advertising system was patentable subject matter as a manner of manufacture. So, barring special leave), another computer implemented “invention” isn’t patentable.

More analysis later.

Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86

Rokt loses the Commissioner’s appeal Read More »

The Commonwealth gets nothing on Sanofi’s undertaking as to damages

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Nicholas J has dismissed the Commonwealth’s application for Sanofi to pay it compensation under the undertaking as to damages when Sanofi obtained an interlocutory injunction against Apotex’ plans to launch clopidogrel in Australia, but the patent was ultimately ruled invalid.

The decision is some 698 paragraphs long, so this going to be the briefest overview of some highlights only.

Some litigious background

Clopidogrel is a medication which can be used to inhibit blood clotting. Sanofi (then called Sanofi-Aventis) had patents protecting it around the world and had generated over US$1 billion in revenues. Sales in Australia being under Sanofi’s Plavix trade mark and BMS’ Iscover trade mark.

In August 2007, Apotex commenced proceedings for the revocation of Sanofi’s Australian patent.[1] Shortly after, Apotex also obtained registration of its generic version of clopidogrel on the Australian Register of Therapeutic Goods. In September 2007, it then applied for listing of its generic clopidogrel in the Pharmaceutical Benefits Scheme (PBS), through which the Commonwealth government subsidises the price of drugs in Australia.

As it missed the cut off date for the next round of listings in the PBS, it withdrew that application with the intention of making a further application before the next round closed on 1 December 2007. An application made in the December round would be for listing on the PBS from 1 April 2008.

In September 2007, however, Sanofi obtained an interlocutory injunction restraining Apotex from importing or selling in Australia pharmaceuticals which included clopidogrel as their active ingredient. Sanofi gave the usual undertaking as to damages as the price for that interlocutory injunction.

At the hearing for the interlocutory injunction, Apotex also gave an undertaking not to make an application for listing in the PBS pending the outcome of the trial. Apotex did not obtain from Sanofi an undertaking as to damages for that undertaking.

At the substantive trial, Gyles J dismissed Apotex’ application for revocation and instead found that it had infringed Sanofi’s patent. In September 2009, however, the Full Court upheld Apotex’ appeal and ordered the patent be revoked.[2] Sanofi’s application for special leave was dismissed by the High Court on 12 March 2010.[3]

Sandoz obtained PBS listing for its generic clopidogrel on 1 April 2010. Apotex did not obtain listing of its product until 1 May 2010. So, in addition to whatever sales it lost between 1 April 2008 and the lifting of the injunction in 2010, Apotex also lost whatever advantages may have flowed from being the first generic mover.

Sanofi and Apotex settled Apotex’ claims for compensation on the undertaking as to damages out of court.

The Commonwealth’s claims

The Commonwealth also claimed compensation under the undertaking as to damages.

Its case was that Apotex would have been listed on the PBS from 1 April 2008 if Sanofi had not been granted the interlocutory injunctions and so, as a result of the interlocutory injunction, the price payable for clopidogrel:

(a) was not reduced by the statutory reduction to the Approved Price to Pharmacists of 12.5%[4] (i.e. in very loose terms, the Commonwealth paid a price 12.5% higher than it should have been on all sales of clopidogrel between 1 April 2008 and 1 May 2010);

(b) further statutory reductions of 2% each were not triggered on, respectively, 1 August 2009 and 1 August 2010; and

(c) additional price reductions consequent upon the triggering of a statutory price disclosure regime which should have occurred on 1 April 2008.

(From [653] in his Reasons, Nicholas J discusses various scenarios for the calculation of how much the grant of the interlocutory injunction cost the Commonwealth. The lowest amount his Honour would have found in terms of compensation was in the order of $15 million.)

To succeed in its claim, Nicholas J held (at [196]) that the Commonwealth had to show:

· Would the relevant loss have been sustained but for the grant of interlocutory injunction?

· Did such loss flow directly from the interlocutory injunction?

· Could loss of the kind sustained have been foreseen at the time the interlocutory injunction was granted?

Why the Commonwealth lost

The Commonwealth was able to secure a number of witnesses from Apotex. These included the managing director of Apotex Australia, a Mr Millichamp, whose affidavit evidence was to the effect that Apotex was committed to launch its generic clopidogrel in Australia if, having been notified of Apotex’ plans to launch, Sanofi did not obtain an interlocutory injunction.[5]

The problem for the Commonwealth was that Apotex Australia is part of a corporate group controlled by Apotex Canada and the decision on whether or not to launch the product in Australia was to be made by Apotex Canada – specifically its founder and managing director, Dr Barry Sherman.

The evidence did show that in February 2007, Dr Sherman did plan for Apotex to launch its generic clopidogrel in Australia if Sanofi did not get an interlocutory injunction against it. Over time, however, the situation developed further. For example, the evidence included an email Mr Millichamp sent to one of his offsiders on 27 June 2007 when it appeared that the TGA listing was imminent (emphasis supplied) which stated:

[redacted]

[redacted] If we are successful in avoiding an injunction we will plan to launch subject to Barry’s further advice / approval.

If anything changes I’ll let you know.

“Barry” being Dr Sherman. At [251], Nicholas J considered this email indicated that Apotex had not yet decided whether it would launch its clopidogrel product in Australia if Sanofi did not succeed in getting an interlocutory injunction to restrain it.

Secondly, Apotex appears to have been planning to supply Australia from US stocks, but the shelf life of those products would not extend beyond August 2008 which was not very practical – especially when the earliest launch date would be April 2008.

Thirdly, Apotex’ challenge to Sanofi’s patent in the USA had been rejected by the trial judge.

Fourthly, Apotex’ communications to pharmacies did not definitely commit to a launch of the product.

Fifthly, Apotex had not exposed its legal advice on its prospects so Mr Millichamp’s evidence that “we always believed that all of the claims of the patent were invalid”

are not persuasive in circumstances where any legal advice upon which such a belief was based is not in evidence particularly in circumstances where the validity of the US Patent had already been upheld by the US District Court in a decision that was later affirmed on appeal.

Sixthly, at the time of the hearing for the interlocutory injunction in September 2007, the judge had indicated the final trial of substantive issues would be heard in April 2008 and he would give judgment by August 2008.[6] That is, the trial would take place in the same month as the earliest date that Apotex could be in the market if it re-submitted its PBS application before 1 December 2007.

In these circumstances, Nicholas J considered at [286]:

In the absence of evidence from Dr Sherman, I am not persuaded that he would have authorised a launch at risk in circumstances where an interlocutory injunction had been refused, but a final hearing was fixed to commence on 28 April 2008. ….

Rather, Nicholas J considered there was every reason for Dr Sherman to have deferred Apotex’ decision whether to launch or not until the last possible moment.

At this point, the failure (or inability) of the Commonwealth to call Dr Sherman as a witness became decisive all the more so as the Commonwealth was able to produce for cross-examination other Apotex witnesses who did travel from Canada and India. Nicholas J concluded at [347] – [349]:

I conclude that Dr Sherman was a witness who I would have expected to have been available to the Commonwealth and who would have had a close knowledge of relevant facts. In circumstances where the Commonwealth’s decision not to call Dr Sherman was wholly unexplained, I infer that the Commonwealth chose not to call him because it considered that his evidence would not have assisted its case.

I am not prepared to infer, based on the 20 February 2007 email, or any of the subsequent correspondence in evidence which was said to justify the drawing of such an inference, that Dr Sherman was likely to have instructed Mr Millichamp to procure the listing of Apotex’s clopidogrel products with effect from 1 April 2008.

In my opinion, the Commonwealth’s case suffers from an evidentiary deficiency which cannot be made good by drawing inferences from correspondence written by Dr Sherman in the lead up to the hearing of the interlocutory application. In particular, I do not think it can be inferred that if Dr Sherman had known that the trial of the patent proceeding would commence in the same month that Apotex Australia obtained a PBS listing of its clopidogrel products (triggering a 12.5% statutory price reduction), that he would have, in those circumstances, authorised Apotex Australia to obtain such a listing before judgment was delivered or, at least, until the trial had concluded (by which time he and his colleagues and his legal advisers may have had a clearer view of the strength of Sanofi’s case).

In the result, at [351], Nicholas J held that the Commonwealth’s claim must be dismissed.

Some other matters

Having dismissed the claim, Nicholas J went on to consider a number of other matters, albeit by way of obiter dicta.

Apotex’ undertaking not to seek PBS listing was not direct loss

The fact that Sanofi did not give an undertaking as to damages in return for Apotex’ undertaking not to seek PBS listing if an interlocutory injunction restraining sale was made would have provided a second basis for dismissing the Commonwealth’s claim.

Nicholas J accepted that the losses claimed by the Commonwealth were a foreseeable consequence of the interlocutory injunction, however, they were not a sufficiently direct consequence of it.

Apotex had recognised that, if an interlocutory injunction restraining sale was granted, there was no point seeking PBS listing. It would not be able to give the guarantee of supply required to obtain PBS listing and so any listing would fail or be revoked. In addition, it might expose it to increased damages having to compensate Sanofi for the profits lost on the automatic 12.5% reduction in price.

While Nicholas J accepted the Commonwealth’s loss was a reasonably foreseeable consequence of the interlocutory injunction, his Honour held it did not result directly from the injunction in the relevant sense. At [445], his Honour explained:

Even if it is accepted, as I have found, that the first Apotex undertaking would never have been given if the interlocutory injunction had not been granted, it does not follow that the Commonwealth’s loss flowed directly from the interlocutory injunction. The terms of the interlocutory injunction did not prevent Apotex Australia from applying for a PBS listing of its clopidogrel products or from taking any other steps to obtain such a listing. Doing so would not have involved a breach of the interlocutory injunction. The Commonwealth’s loss was a natural and direct consequence of Apotex Australia not being able to apply to list its clopidogrel products on the PBS with effect from 1 April 2008, which was the precise conduct to which the first Apotex undertaking was directed, but not something the interlocutory injunction expressly or implicitly prohibited. This strongly suggests, in my view, that the loss alleged by the Commonwealth in this case was an indirect consequence of the interlocutory injunction.

It is worth considering the ramifications of that conclusion. First, it has been held that it is not an infringement of the patent for someone to apply for PBS listing of a drug containing the protected invention.[7] Further, the Commonwealth is not in a position to require a generic company to refrain from giving an undertaking not to seek PBS listing unless there is an undertaking as to damages. Thirdly, His Honour’s reasoning would apply equally to the losses claimed by Apotex under the undertaking as to damages, not just the Commonwealth’s. If you are acting for a ‘generic’ in this situation, therefore, make sure any undertaking as to damages extends to any undertaking not to seek PBS listing.

Sanofi argued that, even if it did not get an interlocutory injunction, the Minister (or delegate) would refuse listing of Apotex’ product in the PBS on the grounds of patent infringement until the outcome of the proceeding was known. Sanofi’s own witnesses, however, admitted such an outcome was unlikely. Instead, Nicholas J considered an application for listing would most likely have been approved if Apotex had given the necessary guarantee of supply. At [419], Nicholas J said:

I do not think it likely that the Delegate would have refused the application on the basis that a trial of the patent proceedings would shortly take place or that a judgment might be expected to be given some time between May 2008 and August 2008. In my view the Delegate is likely to have been most influenced by two matters: first, the willingness of Apotex Australia to provide an assurance of supply and, second, the absence of any interlocutory injunction restraining any such supply. I think it unlikely that a Delegate would have questioned the ability of Apotex Australia to either comply with its assurance of supply or comply with its obligations under the guarantee of supply. So far as the latter was concerned, I consider it most likely that the Delegate would have proceeded on the basis that, in the event that there was some failure on the part of Apotex to supply during the guaranteed period, then it would be open to the Minister in that situation to exercise one or more of the powers available under the relevant provisions of the NHA including the power to delist the Apotex Australia clopidogrel products and the power to reverse the 12.5% statutory price reduction.

Another area of dispute between the parties was what would have happened if the interlocutory injunction had not been granted but, as in fact happened, the trial judge found Apotex infringed. Mr Millichamp from Apotex gave evidence Apotex would have applied to have the Apotex product delisted. Sanofi argued that, in that situation, it would have been able to get the 12.5% automatic price reduction reversed. The Commonwealth contended that reversal was unlikely. There was a at least one prior case where the price reduction had been reversed before the price reduction became automatic. In the unexplained absence of the person who was the relevant decisionmaker within the Government at the time,[8] Nicholas J considered at [529] the chance the Commonwealth would not have reversed the price reduction to be less than 10%.

Sanofi disputed that interest was payable on compensation ordered under the undertaking as to damages. While his Honour did not finally decide the point, Nicholas J indicated at [697] that he would have ordered Sanofi to pay simple interest on the sum awarded on the basis that it would have been just and equitable to do so.

In light of the evidence that it would take only 2 to 3 weeks for Apotex to have written its own Product Information, Nicholas J would not have denied the Commonwealth recovery because the Product Information (and other stipulated regulatory disclosures) infringed Sanofi’s copyright.[9] His Honour considered at [643] there was “good reason to believe” that no interlocutory injunction would have been granted to restrain copyright infringement in that time frame.

Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543

  1. Australian Patent No 597784 for the dextro-rotatory enantiomer of methyl alpha–5 (4,5,6,7-tetrahydro (3,2-c) thieno pyridyl) (2-chlorophenyl)-acetate, a process for its preparation, and pharmaceutical compositions containing it.  ?
  2. One curiosity of this outcome is that Sanofi’s corresponding patents in Canada and the USA were both upheld as valid and infringed.  ?
  3. Further interlocutory injunctions were put in place pending the outcomes of the appeals.  ?
  4. In essence, while there was only one source of clopidogrel – Sanofi (and BMS as a licensee) – clopidogrel was listed in the PBS in formulary F1. As soon as a second, competing source obtained listing, Sanofi’s listing would be moved into formulary F2 with an automatic price reduction of 12.5% imposed by statute. See [144] – [145]. Paragraphs [36] – [77] contain a useful explanation of how the pricing of products listed on the Pharmaceutical Benefits Scheme works and, in particular, the automatic reductions on pricing that apply when a second (usually generic) drug is listed.  ?
  5. The evidence disclosed that Apotex’ strategy, having successfully developed its generic clopidogrel (and having at least a further 18 months to complete development of a product based on a different salt), was (1) to secure ARTG listing then in short order (2) to apply for PBS listing, (3) to launch to the trade on an “at risk” basis – i.e. ensure the trade knew Apotex might have to withdraw the product if Sanofi’s patent was valid and (4) then to put Sanofi on notice of its plans to launch by bringing the revocation proceeding. An explicit part of the strategy was to secure the benefit of the undertaking as to damages if Sanofi did block sales through an interlocutory injunction.  ?
  6. The trial judge reached the statutory age for retirement in that month.  ?
  7. Warner-Lambert Company LLC v Apotex Pty Ltd (2017) 249 FCR 17  ?
  8. The fact that the person was no longer working for the Commonwealth was not a sufficient justification for the failure to call her.  ?
  9. The Copyright Act 1968 was subsequently amended to preclude the use of copyright against such materials. See now s 44BA.  ?

The Commonwealth gets nothing on Sanofi’s undertaking as to damages Read More »

Productivity Commission Response No 2 – No 2

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The Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020 received Royal Assent on 26 February 2020.

The Act as actually passed (with amendments) is available here (to get the text from Austlii when I went there, I had to download the RTF or plain text format). There is also now a Revised Explanatory Memorandum.

As assented to, section 2 now prescribes that the abolition of the innovation patent regime will occur 18 months after Royal Assent — 26 August 2021.

(Remember, this is achieved by specifying an additional ground for “the formalities check” in new s 52(3) – an application for an innovation patent may pass “the formalities check” only if the date of the patent would be before [26 August 2021]. There is presumably a good reason why it doesn’t just say The Commissioner must reject the application for an innovation patent if the date of the patent would be on or after [26 August 2021].)

The Revised Explanatory Memorandum explains that 18 months has been chosen to ensure that persons who have filed a provisional application or a basic application under the PCT are not prejudiced. Such a person has up to 12 months from the filing date to file a complete application in Australia and an additional 6 months has been allowed to allow them enough time to make a decision.

As you will recall both ACIP and the Productivity Commission recommended abolition of the innovation patent. The Revised Explanatory Memorandum explains that the Government has accepted those recommendations because (footnotes omitted):

The policy intention of the IPS was to encourage SMEs to innovate and benefit from their scientific progress. In practice however, the innovation patent system has been found to have limited use by SMEs as 74 per cent of SMEs and private inventors filed once and never again; 83 per cent never received an enforceable right; and 78 per cent let their innovation patent expire early rather than pay the minor cost of the renewal fee. The Productivity Commission found that the majority of SMEs who use the innovation patent system do not obtain value from it, and that the system imposes significant costs on third parties and the broader Australian community. Given this, the innovation patent system has shown to be unlikely to provide net benefits to the Australian community or to the SMEs who are the intended beneficiaries of the system.

Section 4 in the Act as passed also requires the Minister to establish a review of the accessibility of patents for small and medium enterprises within 3 months (i.e. by 26 May 2020). Matters the review should consider include:

(a) the cost of applications for patents; and

(b) processing times of patents; and

(c) advice provided by the Australian Government with respect to the patent application process; and

(d) awareness of the patent application process.

The written report from the review must be submitted to the Minister within 12 months of commencement and the Minister must table it in both Houses of Parliament within 15 sitting days of receiving the report.

In addition to these matters, the Act also:

  • introduces an objects clause into the Patents Act 1990 – Sch 1 Part 1;

The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.

  • revises the Crown use provisions in both the Patents Act and the Designs Act – Sch 2 & 3;
  • amends the compulsory licence provisions for patents to be based on a “public interest” test rather than a failure to meet the reasonable requirements of the public in Australia – Sch 4;
  • provides for electronic seals in the Patents and Trade Marks Offices – Sch 5;
  • permits objection to ‘omnibus claims’ to be raised at opposition, re-examination and revocation stages as well as examination – Sch 6;
  • permits the Commissioner of Patents to redact information (i.e. parts of documents) as well as documents where confidentiality requires it – Sch 7; and
  • amends the circumstances a translation of a patent application originally in a foreign language will require a certificate of verification – Sch 8.

All the amendments commenced on 27 February 2020 except for the abolition of innovation patents and Sch 8. The timing of the abolition of innovation patents has been discussed above. Sch. 9 commences on 26 August 2020.

Productivity Commission Response No 2 – No 2 Read More »

Productivity Commission Response No 2

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Parliament has now passed the wonderfully named Intellectual Property Law Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019. Text here[1] and EM here.

When enacted, the “Act” will amongst other things:

(a) insert an objects clause, new section 2A, into the Patents Act:

The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.

That clears things up nicely doesn’t it?

(b) suppress the granting of more “innovation” patents;

(c) harmonise the regimes for Crown use of patents and registered designs;

(d) introduces a revised regime for compulsory licensing of patents.

The suffocation of innovation patents will be achieved by introducing new sub-section 52(3) into the Patents Act.

Sub-section 52(3) will make it a requirement of the formalities check that the date of the patent (if granted) must be a date before the date the amendment came into force.

According to the form of the “Act” on Parliament’s website sub-section 52(3) will come into force 12 months after the “Act” receives Royal Assent.[2]

Once the sub-section comes into force, therefore, it will be possible to seek further innovation patents only where they are based on filings with a date before the commencement date so, for example, a divisional application.

  1. The bill does not become an Act until it receives the Royal Assent.  ?
  2. There had been reports that the phase out period would be extended to 18 months, but that does not appear to be reflected in the document on Parliament’s website. These reports also indicated that there was to be a review of the impact of “abolition” on Australian small and medium enterprises.  ?

Productivity Commission Response No 2 Read More »