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Crown use defence to infringement and the effect of disclosure by the crown on validity

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  • Feb 15, 2021
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Axent Holdings Pty Ltd t/a Axent Global v Compusign Australia Pty Ltd [2020] FCA 1373 (25 September 2020) 

This decision of Kenny J of the Federal Court of Australia considers many issues including the Crown use defence; whether information published by the Crown (and made available to it by a patentee) can be novelty defeating; and the effect that requesting an extension of time to renew a patent outside of the renewal fee grace period has on the relevant period during which the patent is taken to have ceased before it is restored.

The Background

Axent Holdings Pty Ltd, trading as Axent Global (Axent), commenced proceedings against Compusign Australia Pty Ltd and Compusign Systems Pty Ltd (together Compusign) as well as Hi-Lux Technical Services Pty Ltd (Hi-Lux) (the respondents) for infringing Australian Patent No. 2003252764 titled “Changing Sign System” (764 Patent). The 764 Patent claimed an earliest priority date of 4 October 2002 and was granted on 26 June 2008. The respondents filed a cross claim asserting the 764 Patent was invalid. Except for any issues under ss 22A and 138, the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) (Raising the Bar Act) did not apply.

The invention related to a changing sign system for use as a variable speed limit sign (VSLS) on roadways. The VSLS could be used to display a lower hazard speed limit instead of the normal maximum safe speed when a certain condition is detected. When the hazard speed limit is displayed, a portion of the sign is varied to conspicuously indicate the change of conditions.

Independent claims 1, 17 and 20 described an electronic variable speed limit sign, which has a plurality of lights forming the central speed limit numerals and annulus rings around those numerals. The specification explains that a change of conditions is indicated by flashing some of the annulus outer rings while always retaining one ring on, to fulfil the criteria of being a speed display sign, that is, by always showing a number in a circle on a display panel. Dependent claims 2 to 16, 18 to 19 and 21 to 27 specified a number of further features, and claim 28 was an omnibus claim.

In September 2001, Mr Fontaine, the director of Axent and named inventor of the 764 Patent, met with Mr Bean, who worked for VicRoads, to view a demonstration of Axent’s variable speed limit sign with a partly flashing annulus. Mr Fontaine stated that he subsequently received tender documents which included a VicRoads specification (the September 2001 specification), which contained a requirement, for variable speed limit signs, that part of the inner diameter of the annulus should be capable of flashing on and off.

The issues

Product or method claims

A preliminary question arose as to whether the claims were product or method claims for the purposes of determining infringement. Axent pleaded that the claims were to a product. The respondents submitted that the claim integers formed part of a method of using a variable speed limit sign. Her Honour rejected Axent’s submissions that the claims were framed in terms of capabilities, yet still construed the majority of the claims as product claims limited by result. Claims 12, 14 and 16 were construed as method claims which describe the operation of the claimed sign system.

Clarity

The respondents contended that independent claims 1, 17 and 23 lacked clarity because of the use of the terms “normal speed”, “input criterion” and “change in conditions”. Her Honour considered that when the claims were read as a whole, in the context of the specification, the skilled addressee would have no real doubt about what is intended by the above features and that the claims were clear.

Direct Infringement

Axent’s case was in substance that the supply by Hi-Lux and Compusign of their respective variable speed limit signs infringed all the claims of the Patent. Axent was unable to establish that either the Hi-Lux signs or the Compusign signs included relevant features of the product claims or that Hi-lux or Compusign performed the relevant claimed method in making their signs. Thus, the product and method claims were not infringed.

As omnibus claim 28 was narrowed “with reference to the examples”, and the specification included no ‘examples’, her Honour considered that there can be no infringement or alternatively that claim 28 was invalid for lack of clarity.

Indirect Infringement

Axent also relied on s 117 of the Patents Act 1990 (Act) to allege indirect infringement initially on the sole basis that the supply of a sign is, in and of itself, a supply that attracts the operation of s 117. Axent subsequently sought to broaden their case for indirect infringement to instances where the invention was for a method, rather than a product. Axent also sought leave to elicit from the respondents’ witnesses in cross-examination evidence as to the directions given and steps taken by the respondents when supplying their signage. The respondents submitted that it would be unfair to permit Axent to seek to make out an infringement case based on s 117 that it had not opened or properly foreshadowed. Her Honour agreed and held Axent to the case on which it opened. The evidence given by the respondents’ witnesses by way of cross-examination was admitted, however, it was limited in its use so that it could not be used to form the basis of an infringement case by reference to s 117. Axent was not able to make out its case of indirect infringement against the respondents.

Crown use defence

Hi-Lux submitted that each of VicRoads, the South Australian Department of Planning, Transport and Infrastructure, and the City of Greater Geelong was an authority of a State for the purposes of s 163 of the Act which provides that exploitation of an invention by or for the services of the Commonwealth, or a State is not an infringement of any patent rights.

Her Honour considered that each of the organisations were an Authority of the state and that the exploitation of the sign was for the services of each Authority. However, this was subject to s 163(3) which required that the exploitation of the invention was necessary for the proper provision of the services within Australia. Her Honour considered it may be that exploitation was not strictly necessary in the sense contemplated by s 163(3) because alternative signage was available and widely used. However, this was not considered further, in any event, as Hi-Lux failed to satisfy her Honour that the infringement  was authorised in writing by an authority of the State.

In particular, the documents in relation to Hi-Lux’s supply of signs to VicRoads and the City of Greater Geelong left open the possibility that Hi-Lux had a choice as to the electronic speed sign supplied, leaving it free to perform the relevant contract without infringing the claims of the Patent. It was clear that Hi-Lux was under no contractual obligation to supply an infringing item.

The contract for the supply and installation of variable speed limit signs between the Commissioner of Highways and Hi-Lux included a specification which set out the requirements for the variable speed limit signs. Her Honour noted the possibility this contract may have required a product that infringed the 764 Patent and thus, the infringing acts may well have been authorised for the purposes of s 163. However, in the absence of submissions or evidence to this effect, her Honour was not satisfied that the contract with the Commissioner required Hi-Lux to supply goods that necessarily infringed the patent in suit. Accordingly, Hi-Lux’s defence under s 163 of the Act did not succeed.

Innocent infringement

Compusign argued that they were not aware and had no reason to believe that a patent existed for the invention before receiving the letter of demand from Axent. Compusign gave evidence to the effect that they had not expected a patent to exist in relation to the requirements of the roads authorities’ specifications without the specifications referring to the patent. Her Honour considered that there was nothing in the relevant roads authorities’ specifications that would put a reader on notice of the existence of a relevant patent. Axent did not address the issue of innocent infringement.

Accordingly, if it were necessary to do so, her Honour would have provisionally refused to make an award of damages or an order for an account of profits in respect of any infringement by Compusign prior to the date of the receipt of the letter of demand.

Lapse of patent

Axent did not pay the renewal fees for the 764 Patent by the due date of 6 October 2015; nor did it pay the fees by 6 April 2016, within the 6 month renewal fee grace period. Axent applied for an extension of time which was granted on 1 September 2016 and the renewal fees were then applied to the 764 Patent. The 764 Patent therefore ceased to be registered for a period for the non-payment of fees.

The respondents submitted that Axent could not assert infringement of the patent from the day after that on which the renewal fee for the 764 Patent was due, 7 October 2015, to the day on which an application to extend the time to pay the renewal fee was granted, 1 September 2016. Axent submitted the relevant period began on 5 April 2016 (that is, approximately 6 months after 7 October 2015) and concluded on 1 September 2016. The commencement of the relevant period turns on the construction of reg 13.6 of the Patents Regulations 1991 (Cth), which relevantly provides that the period in which the renewal fee must be paid is the period ending at the last moment of the anniversary, however, if the renewal fee is paid within 6 months after the end of the relevant anniversary the period is taken to be extended until the fee is paid. The respondents submitted, and her Honour accepted, that the period is only “taken to be” extended if the condition of the renewal fee being paid within the 6 month grace period is satisfied. Had Axent paid the renewal fee at any time before the end of the 6 month grace period, the 764 Patent would never have ceased as the prescribed period would have been extended by reg 13.6(2)(a) to end on the day Axent paid the fee. However, Axent did not pay the renewal fee before 5 April 2016, and in consequence reg 13.6(2)(a) had no application.

Therefore, the prescribed period for renewal ended on 7 October 2015 being the point after the last moment of the anniversary date for the Patent. It follows that the Patent ceased on that day. The Patent was restored on 1 September 2016, when the extension of time for the renewal fee application was granted.

Prior use

The respondents relied on s 119(1) by way of defence to Axent’s infringement case. In the absence of evidence that either Hi-Lux or Compusign Australia was “making” an infringing product or “using” an infringing process before the priority date, neither could satisfy the requirements for the prior use defence required by s 119(1) prior to the Raising the Bar Act changes.

Invalidity of the Patent

The respondents submitted the claims were not novel because the invention was disclosed by the September 2001 specification and as part of the installation process for the Western Ring Road Project. Axent submitted that the September 2001 specification was merely a “wish list” that provided insufficiently direct disclosure and in any event was excluded from being considered for the purposes of novelty and inventive step because of s 24(1)(b) and/or s 24(2). Relevantly, s 24(1)(b) provides that, when assessing novelty and inventive step, the person making the decision must disregard any information derived from the patentee and made publicly available without their consent. Under s 24(2), the person making the decision must disregard any information given by, or with the consent of, the patentee, to the Crown, but to no other person or organisation.

Axent argued that it had disclosed its invention to VicRoads confidentially and never consented to VicRoads on-disclosing it in the September 2001 specification. The respondents contended, and her Honour agreed, that s 24(2) did not apply because the September 2001 specification was a disclosure made by, and not to, the Crown and the language of s 24(2) did not support the “reach-through effect” that Axent had argued.

There was still the further question as to whether s 24(1)(b) operated. A central issue was whether the information was made publicly available without the consent of Axent. Whilst there was no evidence that Axent expressly gave consent, having regard to the circumstances and the evidence, her Honour was satisfied that Axent positively consented to the inclusion of the claimed invention in the September 2001 specification. Accordingly, s 24(1)(b) did not apply.

Kenny J rejected the contention that the September 2001 specification was part of the common general knowledge or that it could be combined with the common general knowledge. Accordingly, the critical question was, whether each of the claims lacked inventive step by reference to common general knowledge alone. The evidence was clear that, apart from the flashing annulus feature, the other features of the claims were obvious as at the priority date. However, there was clear evidence that the skilled worker was aware of a flashing annulus feature well before the priority date.

Her Honour considered that no problem was overcome or barrier crossed by the adoption of the flashing annulus feature and that the evidence indicated a person skilled in the art would have taken the steps leading from the prior art to the claimed invention as a matter of routine. The 764 Patent was found invalid for lack of inventive step by reference to the common general knowledge alone, and claims 1, 9, 10, 14, 15, 17, 20 and 27 were invalid for want of novelty in light of the disclosure of September 2001 specification.

The Decision

Ultimately, Axent failed in its infringement case, even if it had succeeded, Compusign succeeded in its innocent infringement defence and all respondents succeeded on the lapsed patent defence. The Crown use and prior use defences failed.

Significance

The decision clarified that the prescribed period to pay a renewal fee to prevent a patent ceasing is only taken to be extended to the date of payment, if the fee is paid within the 6 month grace period. Accordingly, when the renewal fee is paid after the 6 month grace period by relying on an extension of time, the patent is taken to have ceased from the point after the last moment of the anniversary of the patent.

Regarding the Crown Use defence, the decision indicated that written authorisation by the Crown to exploit an invention may be explicit or implied, but the authorisation must be specific such that the necessary exploitation of the invention is authorised and that alternatives are not possible.

For information made available to the Crown by a patentee and subsequently published by the Crown, the decision indicated s 24(2) did not provide a “reach-through effect” to exclude such a publication from the prior art when considering novelty and inventive step.

The decision also offers guidance on the evidence required to establish innocent infringement in the case that a defendant was not aware, and had no reason to believe, that a patent for the invention existed.

Authored by Tam Huynh and Dean Bradley