Australian patent litigation is governed by the Patents Act 1990 (Cth) (the Act), which provides the legislative framework for the Australian patent system, and the rules and procedures of the Federal Court of Australia, in which Australian patent litigation is almost entirely conducted. As Australia is a common law jurisdiction, the decisions of the Federal Court and other Australian courts vested with the relevant jurisdiction have precedential value in providing guidance on the meaning and application of the Act.
In 2013, the Act was amended by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) (RTB amendments). The RTB amendments bring Australia's patent system more in line with other jurisdictions. The Act as amended applies to all patents or patent applications for which examination has not been requested before 15 April 2013. For all other patents or patent applications, the pre-RTB amendments law applies. This effectively establishes a class of 'new law' patents to which higher validity thresholds apply, while the lower validity thresholds continue to apply to 'old law' patents.
There is currently patent litigation activity in the Federal Court across a range of sectors, including pharmaceuticals, telecommunications, medical devices and mining.
II TYPES OF PATENT
There are currently two tiers of patents under the Act: standard patents and innovation patents.
Standard patents, as the name suggests, are the traditional form of patent protection available under Australian law. Standard patents have a term of 20 years, and can only be granted and enforced following examination by the Australian Patent Office and the expiry of an opposition period (or the successful resolution of any third-party opposition).
Innovation patents are intended to cover lower level inventions (innovations). Innovation patents are similar to 'utility models' that are available in some jurisdictions internationally, such as China and Japan. Innovation patents provide the same scope of rights and remedies for infringement as standard patents but have a lower threshold for patentability (i.e., 'innovative step' rather than 'inventive step'). Innovation patents have a shorter term of eight years, but can be granted quickly upon compliance with formal filing requirements. To be enforced, an innovation patent must be certified, which requires completion of examination by the Australian Patent Office. In practice, an enforceable innovation patent can be obtained quickly (in four to five months) and there is no pre-grant opposition available to third parties. However, legalisation has recently been tabled by the federal government, which, if passed, will result in the phasing out of innovation patents.
Australia has a patent term extension regime available for certain standard patents relating to pharmaceutical substances. Eligible patents may have their term extended by up to a further five years. The rights of a patentee during the extended term of the patent are limited compared with a patentee's rights during the initial 20-year term.
III PROCEDURE IN PATENT ENFORCEMENT AND INVALIDITY ACTIONS
Australian patent litigation can be conducted in the Federal Court of Australia and the Supreme Courts of the Australian States. In practice, patent cases are brought in the Federal Court (primarily in Sydney and Melbourne), which has judges experienced in intellectual property cases. For this reason, this article deals with the practice and procedure of the Federal Court.
Patent litigation is heard at first instance by a single judge. Jury trials are not available. The Federal Court has adopted an individual docket system, such that proceedings are allocated to a single judge from commencement, and that judge is then involved in all stages of the proceeding, including the final hearing.
i Standing and commencing patent infringement proceedings
Infringement proceedings may be started by the patentee or an exclusive licensee. An exclusive licensee is a 'licensee under a licence granted by the patentee and conferring on the licensee, or on the licensee and persons authorised by the licensee, the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons'.
The limitation periods applicable to torts under the laws of each state apply to the commencement of patent infringement proceedings – for example, in New South Wales, the relevant limitation period is six years from the date on which the cause of action accrues.
There is a cause of action available against any person who makes an unjustified threat of patent infringement, which can result in an injunction against the continuance of the threat and the recovery of damages sustained as a result of the threat.
Proceedings for patent infringement are commenced by an applicant by filing an originating application and statement of claim and serving the filed documents on the other party or parties (referred to as the respondents).
The statement of claim is a pleading that sets out each allegation of fact relied upon by the applicant to establish its claims. The respondent is then required to file a defence outlining the respondent's case against the claims of the applicant, including by admitting, not admitting, or denying each fact alleged by the applicant. The applicant may file a reply to the defence. In each pleading there must be included a certificate signed by the parties' legal representative, which certifies that the material available provides a proper basis for each claim in the pleading.
It is common that, in addition to the defence, a respondent will also file a cross-claim for revocation of the patent (in which case the applicant or cross-respondent can file a defence to that cross-claim). The Federal Court will normally hear both infringement and revocation claims together. This is in contrast to other jurisdictions where revocation proceedings are sometimes heard separately and can provide a basis for staying infringement proceedings.
Together, the pleadings identify the issues in dispute between the parties that are to be resolved by the court.
Following the filing of the originating application and statement of claim, the usual course of patent proceedings involves the following.
- An initial directions hearing (the 'first return date') in which orders will be made establishing a timetable for the next steps in the proceeding including the filing of remaining pleadings, the filing of evidence and potentially setting a hearing date.
- Following the close of pleadings (which occurs once the time to file a reply expires), the parties may apply for discovery (disclosure) of documents. Orders for discovery are not automatically made and it may be necessary to satisfy the court that discovery is necessary. In some cases, the court will only order discovery after evidence so that the scope of discovery can be narrowed.
- The exchange of evidence usually occurs in three stages: evidence in chief, evidence in answer, and evidence in reply. The same procedure is adopted in relation to both the claim and any cross-claim (e.g., the evidence in chief on an infringement claim and the evidence in chief on a validity cross-claim are often ordered to be filed at the same time).
- A hearing of infringement and validity issues (which usually takes one to two weeks per patent) followed by the handing down of the judgment likely at least three months (but may be more than six months) after the hearing.
- Any appeal.
It is possible for the patentee to apply for an amendment during the course of patent infringement or revocation proceedings, although the court has a discretion as to whether to allow such amendments. In exercising this discretion, the court will take into account issues such as delay and whether the patentee has given full and frank disclosure of its reasons for seeking the amendment.
iii Evidence and burden of proof
The general rule in Australian civil litigation is that a party who asserts a certain fact has the burden of proving it on the balance of probabilities.2 Consequently, in infringement proceedings, this burden normally rests on the patentee (or exclusive licensee) who asserts that particular conduct infringes their patent. Similarly, a party who seeks to revoke a patent has the burden of proving that the patent is invalid.
Evidence is typically provided in the form of an affidavit from a witness, who is then made available for cross-examination at the hearing. Witnesses may be factual or expert. Evidence can also take the form of documents (including discovered documents) or other exhibits tendered at the hearing. There is no deposition regime in Australia.
In patent matters, expert evidence is nearly always filed, with the purpose of providing an explanation of the specification's technical terms, the invention, and whether it is capable of being conducted by a skilled person, and to give evidence as to the common general knowledge. Expert witnesses must comply with a set of guidelines that explain to the witness the need to remain independent and uphold their overriding duty to the court, rather than the retaining party.
If parties to the proceeding each intend to call expert witnesses at the hearing, the court may direct that such evidence be delivered concurrently. This has become the court's preferred approach to receiving expert evidence in patent proceedings in the Federal Court.
iv Timing and costs
A proceeding in the Federal Court where both infringement and revocation are in issue usually takes between 12 and 24 months from filing (assuming the matter is fully contested) but, if it is complex, proceedings may take longer. Where there are particular circumstances justifying an urgent hearing, the Federal Court has demonstrated in a number of recent cases that it can accommodate a much shorter timetable from commencement to final hearing.
The costs of bringing patent infringement or validity proceedings depends on the complexity of the factual and legal issues, number of experts, the approach of each party, the solicitors and counsel chosen to act, and the length of the hearing. The cost of complex infringement proceedings with a cross-claim for revocation, which continues to a final hearing in Australia are in the same order as costs of a complex commercial litigation matter, for example, the costs may be around A$1 million or more.
In Australia, costs usually follow the event, which means that the unsuccessful party is responsible for the costs of the successful party. However, where the successful party is not successful on all issues, the court may apportion costs according to each party's degree of success in the proceeding. A party awarded costs will generally not receive 100 per cent of the actual costs incurred by the party, but would typically expect to receive approximately 60 per cent of their actual costs.
However, a court may order that costs be assessed on an indemnity basis, including in cases where the successful party made a settlement offer, which was not accepted, and went on to achieve an equal or more favourable outcome in the final judgment. Where indemnity costs are awarded, the successful party will receive costs that are close to the actual costs incurred.
v Preliminary relief
The court has wide discretion to grant interlocutory relief to maintain the status quo and to prevent a party from engaging in allegedly infringing conduct pending a final hearing. An application for interlocutory relief is typically commenced by filing an originating application (without the need for a statement of claim) and evidence, and is often used before the allegedly infringing product has been put on the market. For an interlocutory injunction to be granted, an applicant must establish that:
- there is a prima facie case on infringement (and issues of validity may also be considered);3
- the applicant would suffer irreparable harm for which damages would not be adequate compensation; and
- the balance of convenience favours the granting of the injunction.
The balance of convenience test primarily concerns the nature and degree of harm to the parties if the injunction is, or is not, granted. Other factors that may be considered include preservation of the status quo and any delay in commencing proceedings.
An interlocutory injunction is rarely granted on an ex parte basis, except for an interim period until the respondent has the opportunity to contest its continuation, and provided the applicant can demonstrate a risk of irreparable harm if such interim relief is not granted.
In the event that an injunction is granted, the applicant will be required to give an undertaking as to damages. This means that if the applicant is granted an interlocutory injunction, but is unsuccessful when the matter is finally decided at trial, the applicant undertakes to submit to such order (if any) as the court may consider to be just for the payment of compensation, to any person adversely affected by the operation of the interlocutory order, whether or not that person was a party to the proceedings.
iv SUBSTANTIVE LAW
Section 13(1) of the Act sets out the scope of the patentee's rights as being 'the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention within the patent area' (i.e., Australia). 'Exploit' includes:
- where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or
- where the invention is a method or process – use the method or process or do any act mentioned above in respect of a product resulting from such use.
A person can be sued for direct, or indirect or contributory, infringement.
Direct infringement occurs when a person, without the authorisation of the patentee, performs any of the acts falling within the scope of exclusive rights conferred by a patent, as defined by Section 13(1) of the Act and the definition of 'exploit' (see above).
The applicant must establish that the allegedly infringing product or process contains all the essential integers of a claim of the patent. This necessarily involves a comparison between the patent claims and the alleged infringing product or process.
Section 117 of the Act provides a statutory basis for a finding of contributory infringement for the supply of infringing products where the use of such products by the person to whom they are supplied falls into one of the following categories:
- if the product is capable of only one reasonable use, having regard to its nature or design – that use;
- if the product is not a staple commercial product – any use of the product, if the supplier had reason to believe that the person would put it to that use; or
- in any case – the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, from the supplier.4
A person may also be liable for indirect patent infringement at common law by authorising the infringement, jointly participating in the infringement or otherwise contributing to the act of infringement.5
ii Invalidity and other defences
Invalidity is dealt with in Section 138(3) of the Act (which sets out the grounds on which a patent may be invalidated) in combination with Section 18 of the Act (which provides the requirements for an invention to be patentable as a standard or innovation patent). In broad terms, the main grounds upon which a standard patent may be invalidated are:
- not a 'manner of manufacture' (i.e., patentable subject matter);
- lack of novelty;
- lack of inventive step;
- inutility – that is, the claimed invention does not attain the result promised by the patentee,6 and also a specific, substantial and credible use is not disclosed in the specification;7
- the invention was secretly used before the priority date by, or on behalf of, or with the authority of, the patentee;
- the patentee is not entitled to the patent;
- the patent (or an amendment to the patent) was obtained by fraud, false suggestion or misrepresentation;
- the complete specification does not disclose the invention in a manner that is clear enough and complete enough for the invention to be performed by a person skilled in the relevant art;
- the complete specification does not disclose the best method known to the applicant of performing the invention;
- the claims are not clear and succinct; and
- the claims are not supported by matter disclosed in the specification.
The above list applies for innovation patents, except that rather than the patent requiring an 'inventive step' (see (c)), an 'innovative step' (which is a lower threshold) is required.
The key tests for manner of manufacture, novelty and inventive or innovative step are summarised in subsections iii, iv and v. One consequence of the RTB amendments is that, in addition to inventive step (as discussed below), the grounds of inutility, disclosure, best method and support (previously fair basis) have been amended to bring them into line with the requirements in other jurisdictions, in particular Europe, including the United Kingdom.
iii Manner of manufacture (patentable subject matter)
Apart from the exclusions for human beings (for standard and innovation patents) and for plants and animals (for innovation patents only) in Subsections 18(2) and (3) of the Act, there are no categories of inventions that are automatically excluded from patentability under Australian patent law.
Rather, the boundaries of what may constitute patentable subject matter are controlled by the requirement that an invention must be a 'manner of manufacture' within the meaning of Section 6 of the Statute of Monopolies 1623.
The leading High Court case on this ground (NRDC)8 established that it is neither possible nor desirable to give a specific definition to the expression 'manner of manufacture' and that it is a flexible concept capable of adapting to changing needs and times. The key test, as established by NRDC, is that the invention must give rise to an artificially created state of affairs that is of practical utility and economic significance.9
The High Court has since held that the two requirements from NRDC are not a mechanistic test conferring a presumption of patentability.10 If the two NRDC criteria are met, the subject matter may be patentable, but other relevant factors must be considered, in particular consistency with the purposes of the Act and the international context.
Section 7(1) provides that an invention is novel unless it is not novel in light of prior art information that is publicly available anywhere in the world prior to the priority date.
The information can be gleaned from a single document, or through doing a single act. It is permissible to combine information from two or more related documents or from two or more related acts but only if the relationship between the documents or acts is such that a person skilled in the relevant art would treat them as a single source of information. A patent can also be invalidated on novelty grounds if the prior art information is contained in a single complete specification that, even though published after the priority date of the claim under consideration, has a priority date that precedes it, provided that the information was contained in the specification both on its filing date and when it was published (commonly referred to as a 'whole of contents' novelty citation).
Other than whole of contents novelty citations, prior art published after the asserted priority date of a claim can only be considered for novelty or inventive step if the priority date of the claim is found to be later than the date asserted by the patentee (and the prior art was published before that later date). In assessing claims to priority, the same test for fair basis (before the RTB amendments) or support (after the RTB amendments) is applied to the priority document relied upon to confer the asserted priority date.
To assess whether an invention is novel over (or not anticipated by) any particular piece of prior art, the courts apply the 'reverse infringement test', that is 'whether the alleged anticipation would, if the patent were valid, constitute an infringement'.11 In other words, prior art will only anticipate an invention if it discloses all of the essential integers of the claimed invention.12 The cases emphasise that a clear and precise disclosure of the subject matter of what is claimed is required. In particular, the prior art must contain 'clear and unmistakable directions' to carry out the invention in order to render it not novel.13
v Inventive step
Standard patents are subject to the inventive step test, while innovation patents are subject to the innovative step test, which has a lower inventive threshold.
Following the RTB amendments, under Section 7(2) of the Act, an invention is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art, in the light of the common general knowledge as it existed (anywhere in the world) before the priority date of the relevant claim, considered separately or together with the prior art information specified in Section 7(3).
Various observations have been made by the courts as to how to approach obviousness, although none are intended to replace the test laid down in Section 7(2). The most commonly applied test for inventive step (or obviousness) is whether the skilled person would directly be led as a matter of course to try the claimed invention in the expectation that it might well produce a useful result.14 However, this test may not be appropriate in all cases.
It is also important to recognise the limits imposed on the extent to which different sources of prior art information can be combined for the purposes of inventive step. Under Section 7(3) of the Act, the prior art information assessed for inventive step can be either any single piece of prior art information, or a combination of any two or more pieces of prior art information that the skilled person could, before the priority date of the relevant claim, be reasonably expected to have combined. It is impermissible to make a 'mosaic' of a number of independent items of information and then allege that the mosaic reveals the claimed invention.15
The RTB amendments significantly expand the scope of the prior art base and the common general knowledge relevant to the assessment of whether an invention involves an inventive step. As a consequence, 'new law' patents must satisfy a higher threshold of inventive step as compared with 'old law' (i.e., pre-RTB amendments) patents.
vi Defences to infringement
In addition to the ability to rely on a licence from the patentee (express or implied) as a defence to infringement, there are other limited defences available, some of which are discussed below.
Section 119 of the Act provides a prior use defence. This defence is available in limited circumstances where the alleged infringer can establish that, immediately before the priority date of the relevant claim, they were exploiting the claimed invention in the patent area or had taken definite steps to do so.
Section 119A of the Act provides a defence for acts done solely for purposes connected with obtaining regulatory approval for pharmaceutical products. The RTB amendments extend this defence to non-pharmaceutical products under Section 119B.
The RTB amendments also introduced a defence under Section 119C of the Act if an otherwise infringing act is done for experimental purposes relating to the subject matter of the invention.
v FINAL REMEDIES FOR INFRINGEMENT
The main remedies that can be sought in an infringement proceeding are the following:
- a permanent injunction;
- delivery up or destruction of infringing goods;
- damages or account of profits;
- additional damages; and
- declaratory relief.
i Permanent injunction
If a patent is held to be valid and infringed, the court will almost always grant a permanent injunction, although the remedy is discretionary. The injunction will restrain the infringing party from infringing the patent during the remainder of its term, and set out clearly the conduct that is prevented.
The infringing party may apply for a stay of injunction pending the determination of any appeal. Whether a court will grant such a stay will depend on the factual circumstances and in particular the desirability to preserve the status quo.
ii Damages or account of profits
Quantum (damages or an account of profits) is not usually considered until after liability has been determined (i.e., after the first instance judgment has been delivered and after any appeals have been exhausted). In practice, the issue of quantum is often settled between the parties if the court makes a finding of infringement of a valid claim.
In the event of an infringement, the applicant may seek, at its election, damages or an account of profits (not both).
Damages are assessed so as to compensate the applicant for the loss that has been caused to it as a result of the infringement. Damages can include loss of profits on the basis of lost sales where the applicant was either the patentee or an exclusive licensee.
Under the Act, the court may order 'additional damages' owing to, for example, the flagrancy of the infringement or the need to deter similar infringement in future. However, such damages are less common.
An account of profits involves the infringing party accounting to the applicant for all its profits that are attributable to the infringement.
vi OTHER TYPES OF PATENT PROCEEDING
In addition to proceedings for patent infringement and revocation, the Federal Court also hears appeals from administrative decisions of the Australian Patent Office concerning patent applications and oppositions.
In addition, the Act also provides for a number of other types of applications relating to patents that can be heard and determined by the Federal Court, including applications for:
- a declaration of non-infringement;
- relief from unjustified threats of patent infringement;
- amendment of a patent; and
- a compulsory licence.
Appeals from first instance decisions are conducted before the Full Federal Court, which is usually made up of three judges of the Federal Court. There is an automatic right to appeal single judge final (but not interlocutory) decisions of the Federal Court to the Full Federal Court. Typically, no further evidence is allowed on appeals, with the appeal to be determined based on the material accepted into evidence at first instance.
Parties may also seek to appeal decisions of the Full Federal Court to the High Court of Australia (which is the highest court in Australia). There is no automatic right of appeal. A party must apply for 'special leave to appeal'. Special leave is difficult to obtain and is rarely granted (although the High Court has shown recent interest in some patent cases) and typically requires that the appeal involve a genuine question of public importance, a difference of opinion between courts, or is otherwise required in the interests of justice. The appeal must also have significant prospects of success.
Following the date of judgment at first instance, the parties have 21 days to file a notice of appeal to the Full Federal Court. An appeal to the Full Federal Court is usually resolved within 12 months, with an appeal to the High Court (if special leave is granted) taking an additional six to 12 months to final judgment.
viii THE YEAR IN REVIEW
The Federal Court has recently revisited two important issues: the patentability of computer-implemented methods, and the defence of implied licence.
In a recent matter that has been closely followed by those in the Australian patent law profession, a single judge of the Federal Court ruled that a computer-implemented invention was not patent eligible subject matter, on the basis that it did not result in an improvement within the computer (which was patentable) but merely required generic computer implementation.16 The patentee appealed this decision, and the appeal was heard before an expanded bench of five Federal Court judges in November 2018. As at August 2019, the parties are still awaiting judgment on the appeal.
Australian patent law has long recognised the availability of an implied licence as a defence to patent infringement for goods sold by or with the authority of the patentee without limitations on use. However, there have been very few cases on the scope of this implied licence defence (being the Australian equivalent of 'patent exhaustion'). A recent Full Federal Court judgment has confirmed that it is presumed that the sale of patented goods carries an implied licence to import, use and dispose of the goods, if a patentee does not impose any conditions on the purchaser at the time of sale. While the question as to whether Australian patent law recognises a right to repair was left unresolved, this decision clarified that the implied licence will not shield purchasers from infringement for making, or remaking, the invention.17
The Federal Court has continued its emphasis on proactively managing cases to seek to ensure procedural time frames and costs are minimised wherever possible.
Proactive case management in the Federal Court is not treated as formulaic, with the court open to applying a number of methods to increase efficiency, including limiting discovery, encouraging parties to limit issues in dispute, the use of case management conferences, which encourage dialogue between the parties and the judge, the separation of issues of liability from issues of quantum, and costs orders that reflect the parties' relative success on different issues.
Further amendments to the Act are currently under consideration following recommendations by Australia's Productivity Commission. In July 2019, the federal government tabled legislation that proposed a number of amendments to the Act, including in relation to the availability of compulsory licences, the phasing out of innovation patents and Crown use of patents.
1 Sue Gilchrist is a partner and Steve Wong is a senior associate at Herbert Smith Freehills.
2 See Evidence Act 1995 (Cth), Sections 140 and 142.
3 For example, in Sanofi-Aventis Deutschland GmbH v. Alphapharm Pty Ltd (2019) 139 IPR 409, the Full Federal Court affirmed a decision to reject an interlocutory injunction on the basis that the invalidity case was sufficiently strong to qualify the conclusion that there was a prima facie case on infringement.
4 Northern Territory v. Collins (2008) 235 CLR 619 at  (per Hayne J); Generic Health Pty Ltd v. Otsuka Pharmaceutical Co Ltd (2013) 100 IPR 240 at  (per Bennett J).
5 Collins v. Northern Territory (2007) 74 IPR 296 at .
6 ESCO Corporation v. Ronneby Road Pty Ltd  FCAFC 46.
7 Section 7A of the Act.
8 National Research Development Corp v. Commissioner of Patents (1959) 102 CLR 252.
9 National Research Development Corp v. Commissioner of Patents (1959) 102 CLR 252 at 277.
10 D'Arcy v. Myriad Genetics Inc (2015) 115 IPR 1.
11 Meyers Taylor Pty Ltd v. Vicarr Industries Ltd (1977) 137 CLR 228 at 235.
12 Nicaro Holdings Pty Ltd v. Martin Engineering Co (1990) 16 IPR 545 at 559–560.
13 General Tire & Rubber Co v. Firestone Tyre and Rubber Co Ltd (1971) 1A IPR 121 at 137–138.
14 Aktiebolaget Hässle v. Alphapharm Pty Ltd (2002) 212 CLR 411 at .
15 Minnesota Mining and Manufacturing Co v. Beiersdorf (Australia) Ltd (1980) 144 CLR 253 at 292–293.
16 Encompass Corporation Pty Ltd v. InfoTrack Pty Ltd (2018) 130 IPR 387. This decision followed the approach adopted by the Full Federal Court on this issue in two earlier decisions: Research Affiliates LLC v. Commissioner of Patents (2014) 227 FCR 378; Commissioner of Patents v. RPL Central Pty Ltd (2015) 238 FCR 27.
17 Calidad Pty Ltd v. Seiko Epson Corporation  FCAFC 115.