4 min read

Ono Pharmaceutical Co., Ltd. et al [2020] APO 43 (16 September 2020)

Background

Australia’s Patents Act provides a patent term extension (PTE) to account for the delays that can occur when obtaining regulatory approval for a pharmaceutical substance.   The extension can last for up to five years and is available when the following requirements are met:

  • the patent, in substance, discloses and claims a pharmaceutical substance per se, or a pharmaceutical substance when produced by recombinant DNA technology;
  • goods containing or consisting of the pharmaceutical substance are included in the Australian Register of Therapeutic Goods (ARTG); and
  • the first regulatory approval for the pharmaceutical substance occurred more than five years after the filing date of the patent.

The length of a patent term extension is equal to the period between the filing date of the patent and the date of the earliest first regulatory approval, reduced by five years.

The decision

Ono Pharmaceutical Co., Ltd. et al [2020] APO 43 concerned a request to extend the term of a patent covering anti-PD-1 antibodies.  The patent included claims for two blockbuster drugs; Merck Sharp & Dohme’s KEYTRUDA and the patentee’s OPDIVO, both of which received regulatory approval in Australia, but on different dates.  The question at issue, then, was which regulatory approval date was relevant for deciding the patentee’s PTE request.

The patentee hedged its bet, filing two PTE requests; one based on KEYTRUDA, which received regulatory approval on 16 April 2015, and another based on OPDIVO, which received regulatory approval on 11 January 2016.  From the patentee’s perspective, the request based on OPDIVO was preferred as it would result in a longer extended term (an additional 8 months, 26 days).  However, the Patent Office refused that request, finding that KEYTRUDA was included on the ARTG first and therefore should form the basis of the request.  The patentee disagreed and requested to be heard.

In the hearing, the patentee submitted that the “first regulatory approval date” should be the approval date of their own product, OPDIVO.  This, they argued, was consistent the purpose of the extension of term provisions, that being to restore the time lost by patentees in gaining marketing approval, and to compensate the patentee for the additional time, expense and difficulty in developing and commercialising a new drug.

The patentee argued that the reference to “first” regulatory approval in the Act was only important when multiple regulatory approval dates existed for the same substance, such as for different delivery forms (e.g. capsules, gel capsules, tablets, slow-release, different amounts, etc) that manifested in different ARTG registrations.  According to the patentee, it was only logical, given that the regime is intended to be beneficial and remedial, that it can only be about rewarding patentees for their work and, by implication, not the work of others.  If not, the patentee would not receive the full extension of term for their product.

The Delegate accepted that the PTE regime was designed to encourage the development of new drugs, but rejected the patentee’s broader purposive construction of the Act.  Such a construction, the Delegate noted, would encourage companies to develop a substance that is not new and seek regulatory approval as late as possible, secure in the knowledge that a PTE will be granted for the (not new) substance.  According to the Delegate, this type of scheme would not incentivise new drugs. Rather, it would incentivise new extension applications.

The Delegate acknowledged that there is some ambiguity in the words of the Act insofar as they do not say one way or the other whether the relevant pharmaceutical substance is only that belonging to the patentee, or whether it includes other, equivalent substances owned by third parties.  But the Delegate also noted that this ambiguity had been dealt with previously by the Patent Office in G.D. Searle LLC [2008] APO 31.  In that case, the Patent Office held that an application for PTE must be based on the earliest inclusion on the ARTG of a pharmaceutical substance falling within the scope of the claims, irrespective of the sponsor of the goods.  Moreover, in Pfizer Corp v Commissioner of Patents (No 2) [2006] FCA 1176, the Federal Court of Appeals held that “the term of the extension is based on the earliest inclusion, regardless of the identity of the sponsor. It is not open to the Commissioner to calculate the term of the extension only on the basis of goods sponsored by the Patentee.”

The Delegate therefore found that the substance with the earliest regulatory approval date for the purpose of the PTE request was KEYTRUDA, not OPDIVO.  As such, the patentee’s request for a PTE based on OPDIVO was refused.

Conclusion

In circumstances where a patent claims more than one registered pharmaceutical substance, this decision confirms that the earliest registered substance will be used to determine eligibility for a PTE and to calculate the length of the extension, irrespective of whether the registered substance is owned by the patentee or by a third party.  Patentees should therefore be aware of all pharmaceutical substances covered by their claims, not just those they are seeking to commercialise. If a patent application covers more than one pharmaceutical substance, an applicant may be well-advised to file one or more divisional applications to ensure that each registered substance is quarantined within its own patent, thus enabling maximum extensions to be sought for each patent separately.

Authored by Ean Blackwell and Duncan Longstaff

5 min read

Sovereign Hydroseal Pty Ltd v Steynberg [2020] FCA 1084

An application for preliminary discovery of documents relating to the constituents of a ‘sealing composition’ and methods of using it to seal passages was granted in circumstances where an exclusive licensee of the asserted patent suspected infringement by a third party based on past employment, access to confidential information, information from a private investigator, and the similarities of the processes being carried out by both parties. The scope of the discovery order was limited due to the financial circumstances of the respondent.

Background

Sovereign Hydroseal Pty Ltd (Sovereign) is the exclusive licensee of Australian Patent No. 2012216392 (392 Patent) which relates to a method and composition for sealing passages such as cracks, joints and voids in concrete structures and geological formations using a sealing composition. The sealing composition, which includes a mix of latex and additional components, is delivered into a passage under pressure in order to seal the structure from water ingress.

Together with the joint patentees, Relborgn Pty Ltd and Triomviri Pty Ltd, Sovereign sought an order for preliminary discovery of documents to be produced by Mr Johannes Steynberg (Steynberg), a former employee of Sovereign operating a business called ‘H2O Seal’, pursuant to which a process was being used for sealing cracks and joints involving a ‘liquid rubbery substance’ injected by pumps. Sovereign contended that it required production of these documents on the basis that it did not have sufficient information to decide whether to start a proceeding against Steynberg in respect of causes of action for patent infringement, breach of confidence, breach of contract, and contempt.

During the period July 2008 to June 2009, when Steynberg was employed by Sovereign, he had received training on how to seal a passage in a body such as a geological formation with a seal composition, including insight into types of equipment as well as details of the materials and compositions used. For the purposes of his work, Steynberg had access to Sovereign’s confidential information including details of product specifications and formulations, processes involving those products, customer records and customer information.

Since cessation of his employment by Sovereign in 2009, Steynberg had held multiple business interests in Queensland in relation to waterproofing and water sealing. On two separate occasions in 2009 and 2011, Steynberg established businesses which were subsequently deregistered after settlements with Sovereign. On both occasions, Steynberg was alleged to have infringed on the intellectual property of Sovereign, which he denied. Justice McKerracher declined to take into account material from these previous disputes, other than in a general sense by way of common background. However, his Honour noted that it was relevant to showing that Steynberg had some opportunity to acquire relevant information.

In September 2019, Sovereign became aware of Steynberg’s involvement in H2O Seal by way of a ‘flyer’ on the H2O Seal business, internet-based searches, and enquiries made by a private investigator. The investigator obtained information that indicated Steynberg was using a product called ‘N-LICS’, and that H2O Seal used ‘a natural nano-technology rubber grout injected under pressure into the voids sealing cracks and joints’. Concerned that Steynberg was using at least one method of sealing cracks and joints that infringes the method claimed in the 392 Patent, Sovereign applied for preliminary discovery under Rule 7.23 of the Federal Court Rules 2011 (Cth). Other related issues included Steynberg’s alleged contraventions of contractual obligations and injunctive orders entered, as part of earlier proceedings in 2011.

Arguments

Steynberg did not contest that Sovereign subjectively believed that it may have a right to obtain relief, but argued that the belief was not reasonably held. Steynberg argued against Sovereign’s allegations as follows.

  1. The photos on the flyer did not ‘reveal any confidential information of Sovereign’ and ‘it would be difficult to conclude that [Sovereign] has a reasonable belief’ based on them.
  2. The material filed by Sovereign included evidence of Steynberg employing a blend of rubber emulsions injected under pressure into a passage, which convert from liquid to solid via coagulation, but did not reveal whether Steynberg was using the same formula as Sovereign. Accordingly, Steynberg argued, the evidence and Sovereign’s contentions were insufficient to ground a reasonable belief as defined in subrules 7.23(1)(c) that he may be using the same method, process or composition as Sovereign such that a potential patent infringement claim may arise.
  3. Steynberg further alleged that Sovereign had engaged in misleading or deceptive conduct by accusing him of using ‘very similar chemicals and methods’ previously used in his H2O Control Systems business, but that the present proceedings had not revealed he had been doing so.
  4. Finally, Steynberg pressed the point that Sovereign’s right to discovery under Rule 7.23 needs to be weighed against Steynberg’s interest in protecting his own intellectual property rights with respect to the methods he had developed and was using from disclosure to Sovereign (his competitor).

Decision

In considering subrule 7.23(1)(a) and (c), the Court found that the evidence established the following.

  1. Even though none of the information provided by Sovereign proved that Steynberg was employing the same method or chemical compositions, the processes being carried out by both parties appeared on their face to be very similar.
  2. It was not clear how more detailed information regarding the precise constituent element of Steynberg’s sealing composition could be obtained outside of the preliminary discovery orders sought, and therefore Sovereign was entitled to test that composition.
  3. Neither a lack of awareness of the 392 Patent, nor the fact that others were apparently using the same process in the market, provided an adequate response to Sovereign’s patent infringement allegation or an answer to Sovereign’s discovery orders.
  4. Steynberg held documents regarding the methods and chemical compositions he used to seal passages which were directly relevant and could help Sovereign in deciding whether to seek relief.

Justice McKerracher concluded that Sovereign had established an adequate foundation for a ‘reasonable belief’ that it may have had the right to obtain relief from Steynberg, and that Steynberg may have had documents directly relevant to that question. In relation to subrule 7.23(b), the Court ruled that in combination with prior enquiries including web-based searches and an investigation, the contested discovery notice served by Sovereign to Steynberg constituted a sufficiently reasonable enquiry.

Considering the requirements for an order to be fulfilled, McKerracher J allowed Sovereign’s application for preliminary discovery subject to the provision of security for the costs of compliance. The order to provide security for costs was made in response to the expansive terms of discovery sought by Sovereign, taking into account concerns regarding Steynberg’s financial capacity to comply.

Significance

This case highlights how preliminary discovery applications can be used by a patentee or exclusive licensee to inform its decision-making in relation to whether to commence a proceeding in respect of potential patent infringement.

The case also confirms the observations made by the Full Court in Pfizer Ireland Pharmaceuticals v Samsung Bioepis Au Pty Ltd (2017) 257 FCR 62 (which we previously analysed here). In terms of subrule 7.23(1)(a), the main point of consideration when granting preliminary discovery orders is not whether the belief in the applicant’s rights to relief is based on speculation, but rather whether the belief resulting from that speculation is a reasonable one. Potential applicants should bear in mind, however, that the scope of discovery sought can be restricted as a result of factors such as the financial capacity of the third party to comply with the order.

This decision is another illustration of the relatively low thresholds for obtaining preliminary discovery in connection with suspected infringement of an Australian patent, particularly for patents that claims compositions or manufacturing processes that cannot otherwise be readily discerned from public information or inspection of product samples (even if such samples can be obtained).

Authored by Chris Byrnes and Duncan Longstaff

3 min read

The New Zealand Court of Appeal has issued a decision that upholds decisions by the Trade Marks Office and High Court, finding that concurrent use of the trade marks ACTAZIN and ActiPhen is likely to cause confusion.

In Australia, a Trade Marks Office decision found that the marks are not deceptively similar.

Is this just a case of differing views or does it tell us something more about differences between assessments in the two countries?

The New Zealand Decisions

Both the ACTAZIN and ActiPhen trade marks were used, or intended to be used, in relation to nutraceuticals containing kiwifruit. The botanical name for kiwifruit is Actinidia, which is relevant to the parties’ decisions to use trade marks containing the prefix ACT-.

In the case of ActiPhen, the applicant, Pharmazen, indicated that the suffix “Phen” is a reference to phenolic compounds, being phytonutrients that are naturally occurring in plants.

The decision of the Assistant Commissioner of the Trade Marks Office was based on a view that the marks are visually similar and have a substantial degree of similarity in their likely pronunciation.

The High Court found that the marks look similar and are “phonetically extremely similar”.

The Court of Appeal was persuaded to uphold the decision of the High Court on the basis that:

  • both marks are invented words and so do not convey dissimilar ideas;
  • they are of a similar length (seven vs eight letters), have three syllables, share the first syllable “ACT” and conclude with the letter “N”, resulting in significant visual similarity;
  • there was no persuasive evidence to indicate that “ACT” is a recognised abbreviation of Actinidia, or is otherwise descriptive, generic or a common part of trade marks for the specified goods;
  • while there was no independent or expert evidence as to pronunciation, and accepting that the marks in question may generate a variety of pronunciations, the Court found “a substantial degree of similarity”;
  • the first part of the trade marks was considered the most important for the purposes of comparison – this principle is derived from the decision in Re London Lubricants (1920) Ltd’s Application (1925) 42 RPC 264 at 279.

Interestingly, while all three decisions expressed the view that there is a substantial degree of phonetic similarity between the trade marks, they all differed slightly on the most likely pronunciations of the marks:

  • The Assistant Commissioner considered the most likely pronunciations to be “Act-a-Zin” and “Ac-te-Fen”;
  • The judge of the High Court considered the most likely pronunciations to be “Act-i-zin” and “Act-i-fen”;
  • The Court of Appeal thought that ActiPhen would most likely be pronounced “Act–teh-fayrn”, and that both ACTAZIN and ActiPhen would be pronounced with a falling inflection and primary emphasis on the first syllable “Act”.

The case was unusual in that the owner of the ACTAZIN trade mark was only using its mark for export. This led to argument being presented on behalf of Pharmazen that there can be no likelihood of confusion if the products will not be competing in the New Zealand market. However, the Court of Appeal confirmed that the assessment required under section 25 involves consideration of notional use.

In passing, it is worth noting that use for the purposes of export protects a registered mark against cancellation for non-use.

The Australian Decision

While only at the level of the Trade Marks Office, in Australia the opposition to registration of ActiPhen was unsuccessful because the Registrar’s delegate found that:

  • while the trade marks “share the same three letter prefix ACT- and the last letter ‘N’, there exist such differences in spelling that there is a clear picture of dissimilarity between the trade marks”;
  • the trade marks contain very different aural and visual structures within the trade mark being “-iPhe-“ in comparison to “-azi-“ which are very different in look and sound”;
  • the trade marks are likely to be pronounced in a number of different ways by the general monolingual Australian consumer particularly when the suffixes of the trade marks are so different. I do not believe that ActiPhen would be pronounced in so similar a fashion as ACTAZIN by a significant number of consumers. The differences in spelling between the trade marks is simply too great”.

The sharp “eye” or “ee” sound at the end of Acti in ActiPhen was noted, as was the fact that the representation of the mark makes it clear how the word would be broken for the purposes of pronunciation. The difference in the central syllable and the importance of the “zee” sound was noted in ACTAZIN.

Comments

The Court of Appeal in New Zealand was referred to the Australian Office decision; however, this was not considered persuasive. Separate from jurisdictional differences, the Court noted that there is a difference in the onus between Australia and New Zealand. In Australia, the opponent bears the onus of establishing that there is a likelihood of deception or confusion, while in New Zealand the onus rests with the applicant to demonstrate that there is no likelihood of deception or confusion.

Significantly also, the New Zealand accent can give rise to differences in aural similarity. The New Zealand accent tends to clip vowels so that, for example, “e” tends to become like “i”, so “sheep” can sound like “ship”, and “i” tends to become like “u” so “fish” sounds like “fush”.

Allowing for accents is difficult since accents vary across a population. However, while accent differences do not usually make a significant difference, the present case demonstrates that they can. The difference in the New Zealand accent helps explain the different view taken on phonetic similarities between the trade marks.

The present case can be seen as demonstrating that while the principles to be applied in an assessment of similarities between trade marks are generally consistent between Australia and New Zealand, differences in decisions are possible due to:

  • The difference in onus which, in Australia, requires the opponent to establish a likelihood of confusion, while in New Zealand the applicant needs to demonstrate that there is no likelihood of confusion;
  • Differences in the pronunciation of words;
  • The simple fact that comparing trade marks often involves no clear dividing line between names that are, or are not, too similar. Consequently, it is quite possible for different decision-makers, faced with the same facts, to make different findings.

The New Zealand decision also demonstrates that if a party wishes to argue a ground, such as dissimilarities in pronunciation, evidence supporting such claims is likely to strengthen their arguments.

Authored by Sean McManis

9 min read

Australia’s Full Federal Court recently delivered judgment in an appeal in a significant patent case: Mylan Health Pty Ltd v Sun Pharma ANZ Pty Ltd [2020] FCAFC 116.  The case concerned three patents relevant to Mylan’s oral lipid-lowering agent, Lipidil® (fenofibrate).

An enlarged Full Court bench comprising 5 judges (Middleton, Jagot, Yates, Beach and Moshinsky JJ) was appointed to hear and decide Mylan’s appeal.  This was because Mylan sought to clarify the Full Court’s previous statement in Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91; 154 FCR 31 that the characterisation of an alleged anticipation as a “suggestion” in relation to the invention, is “not necessarily fatal to a novelty argument”.  Mylan submitted this statement by the Full Court did not countenance “mere speculation” or “the presentation of no more than a reasoned hypothesis” as an anticipatory disclosure.  On this basis, Mylan submitted to the Full Court (unsuccessfully, as explained below) that the trial judge (Nicholas J) had erred in finding that a hypothesis stated in a prior art document relating to a clinical study deprived methods of treatment claims of novelty.

The Full Court’s decision also provided important guidance in relation to the approach taken by Australian courts in considering obviousness, the construction and infringement of ‘Swiss-style’ claims under Australian patent law and the extent to which consistory clauses alone can provide fair basis for a claim.

Method of treatment and Swiss-Style claims lack novelty in light of clinical trial protocol

The Full Court considered whether method of treatment and Swiss-style claims could be anticipated by prior art comprising a protocol for a clinical trial of the claimed method.

Mylan argued that such a protocol could not be novelty-defeating, because at most it identified a hypothesis that required testing, and could not be understood as teaching or recommending that the claimed method be put to clinical use.  The Full Court rejected that analysis and upheld the trial judge’s finding that Mylan’s method of treatment and Swiss-style claims lacked novelty.

The Full Court held that, in assessing novelty, the key question is whether the information disclosed in the prior art is sufficiently specific and complete to be equal to the invention that is later claimed.  If so, then even a protocol for a trial to test the claimed method could be novelty-defeating.  The Full Court acknowledged that, in this respect, Australia’s law on novelty differs from the law applied by UK courts in cases such as Regeneron Pharmaceuticals Inc v Genentech Inc [2012] EWHC 657 (Pat) and Hospira UK Limited v Genentech Inc [2015] EWHC 1796 (Pat), which hold that the prior art must disclose actual achievement of the relevant therapeutic effect to be novelty-defeating.

This aspect of the Full Court’s decision arguably fails to give due consideration to the proper meaning and importance of words such as “treat” and “prevent” in method of treatment and Swiss-style claims.  As Mylan contended, at the stage of disclosing the protocol for a clinical trial, it is not known whether the product or method under consideration does in fact “treat” or “prevent” the particular condition or illness of interest, and there is a significant prospect that it will later prove ineffective or unsafe.  The approach of the Full Court and the primary judge makes clear that the nature and extent of the prior-published clinical trial protocol or other document will be critical in each case.  Those case-specific factual issues will be especially important in future cases, as it would seem a harsh outcome for patentees for statements of unproven hypotheses, theories, ideas or suggestions to anticipate and invalidate (for lack of novelty, putting aside considerations of obviousness which depend on the common general knowledge and availability of prior art) claims to a method that the patentee has subsequently proven effective and safe in “treating” or “preventing” the particular condition or illness.

Obviousness of formulation and method of treatment claims

Australian Courts generally assess obviousness by asking whether, before the priority date, a skilled person presented with the same problem as the patent owner would have been “directly led to try the claimed subject matter with a reasonable expectation of success” (referred to as the “modified Cripps question”).  Historically, that test has been applied in a strict manner by Australian courts, leading a number of patents to be upheld in Australia that have been invalidated on obviousness grounds in other jurisdictions.

Recently, however, Australian courts have adopted a more flexible interpretation of the Cripps test.  This Mylan case continues that trend.  The trial judge held two of Mylan’s patents (one relating to nanoparticulate formulations of fenofibrate, the other relating to methods of preventing or treating retinal damage associated with diabetes by administering fenofibrate) invalid on obviousness grounds, and the Full Court upheld those findings.

The following aspects of the Court’s obviousness analysis are notable:

  • Mylan’s patent for a nanoparticle formulation of fenofibrate included claims which required the use of specified surface stablizers.  The trial judge did not find that the skilled person would have been directly led to select those specific stabilizers with an expectation that they would be effective. Rather, he found that the claimed stabilizers were logical to try and that routine, trial-and-error testing would have demonstrated their suitability.  The Full Court agreed this was sufficient to support an obviousness finding.
  • In relation to Mylan’s method of treatment patent, an expert gave evidence that, before the priority date, his expectation of success with the claimed method would have been less than 50%.  The trial judge held that evidence was not inconsistent with a finding of obviousness, because the Cripps test does not require a numerical assessment.  Again, the Full Court agreed with that analysis.

The test for obviousness applied by Australian courts remains more demanding upon the party seeking revocation than the approach taken by (for example) the European Patent Office or the UK courts.  However, the Mylan decision continues a trend in Australian patent cases towards a more flexible application of the obviousness test that is somewhat closer to the approach taken by the European Patent Office and UK courts.  This serves to emphasise the importance of careful preparation of the obviousness defence in close collaboration with inventors and key expert witnesses.

Defining the scope of Swiss-style claims

The claims asserted by Mylan included Swiss-style claims.  Swiss-style claims are typically drafted in the form “Use of [active ingredient] in the manufacture of a medicament for the treatment of [disease or disorder]”.  They came about from the need to satisfy particular requirements for patentability which formerly applied under the European Patent Convention.  Although these requirements do not exist in Australia, Swiss-style claims are routinely included in Australian patents as their scope is different from that of method of treatment claims, which are also permitted under Australian law.

The Full Court in this Mylan case examined the interpretation of Mylan’s Swiss-style claims, having regard to the decision of the UK Supreme Court in Generics (UK) v Warner-Lambert [2018] RPC 2, and provided guidance on determining the scope of such claims under Australian law.

One of the Swiss-style claims asserted by Mylan recites:

 “Use of fenofibrate or a derivative thereof for the manufacture of a medicament for the prevention and/or treatment of retinopathy, in particular diabetic retinopathy”.

The Full Court confirmed that the claim, if valid, conferred a monopoly in respect of the method or process of making the medicament, and that the method or process is complete upon manufacture.  The monopoly did not extend to a method of treatment – that being the province of method of treatment claims.  The Full Court also confirmed that Swiss-style claims are purpose-limited in the sense that the medicament resulting from the method or process is characterised by the therapeutic purpose for which it is manufactured, as specified in the claim.  The Full Court rejected the “outward presentation” test that was favoured by Lords Sumption and Reed in the UK Warner-Lambert case.

In the first instance decision, the primary judge said that the the crucial question concerning the infringement of a Swiss-style claim was whether the manufacturer had made or will make the medicament with the intention that it be used in the treatment of the designated condition.  On this basis, to prove infringement of a Swiss-style claim, it would not be enough to show that it was “reasonably foreseeable” that a generic product would be put to the use referred to in those claims (although foreseeability could be relevant in the overall analysis).  The trial judge held that, to prove infringement of Swiss-type claims, it would be necessary to show that the generic intended that its product be put to the use referred to in the Swiss-style claims.

The Full Court disagreed with this approach, instead finding that infringement of a Swiss-style claim is concerned with what the allegedly infringing manufacturer has done, not what it intended to do.  That is, not what a generic manufacturer intended, but what the generic product is for.  According to the Full Court, a single factual question arises when considering infringement:  as the product of the claimed method or process, is the medicament for the specified therapeutic purpose?  The question, the Full Court said, is answered having regard to “all the circumstances of the case”.

The Full Court pointed to several such “circumstances” that will be relevant in determining the therapeutic purpose of the medicament as defined by a Swiss-style claim.  First, the court noted that the physical characteristics of the medicament as it emerges as a product of the manufacturing process, including its formulation and dosage, packaging and labelling, and its patient information, will be an important consideration.  So too will evidence of the manufacturer’s actual intention in making the medicament, where such evidence is available.  Both factors are relevant considerations, but neither is determinative.

On the facts of this case (which included “skinny labelling” confining the approved indications of the generic product to indications outside the conditions within Mylan’s method of treatment claims), the Full Court held that Mylan had not proved that Sun’s fenofibrate products were “for” the second medical use covered by Mylan’s Swiss-type claims.

The Full Court also gave consideration to the reasonably foreseeable use or uses to which the medicament would be put after manufacture.  But while a reasonably foreseeable use may be relevant in deciding the therapeutic purpose of a medicament, it is also not determinative:  it might be reasonably foreseeable that a product might be put to a particular use, but it does not necessarily follow that the product, as manufactured, is for that use.

The Full Court agreed with the primary judge that mere suitability of a medicament for a claimed purpose cannot be determinative of the question of infringement of a Swiss-style claim.  The fact that the patent has been granted on the basis of a second medical use means that there are multiple uses to which the medicament could be put.  Evidence of suitability for use was therefore considered ambiguous and could not alone answer the question whether the medicament, as manufactured, is one for the specified therapeutic purpose.

Ultimately, the Full Court found that the Swiss-style claims, if valid, would not have been infringed by the manufacture of Sun’s competing product.  Of particular relevance to the Full Court’s decision was the fact that the competing product could be used in a large number of diseases other than retinopathy.

The decision validates the importance of including both Swiss-style claims and method of treatment claims when protecting a therapeutic use in Australia.  Both types of claim are permitted in Australia, and although their scope is limited to the specified therapeutic use, each will directly capture a different infringer.  In particular, Swiss-style claims provide a more direct avenue than method of treatment claims for pursuing manufacturers of competitive pharmaceutical products, rather than the medical practitioners who perform the treatment.

Consistory clauses may not provide fair basis if too broad 

Mylan’s third patent, relating to an immediate-release micronized formulation of fenofibrate, was found by both the primary judge and the Full Court to be invalid for lack of fair basis.  The Full Court endorsed the primary judge’s reasoning that the disclosure elsewhere in Mylan’s patent specification made clear that the invention was to the immediate release fenofibrate composition and a method for preparing it, whereas Mylan had advanced a construction of a consistory clause and corresponding claims to the effect that the invention extended to any composition of fenofibrate which satisfies the specified dissolution profile.  The Full Court affirmed that, as Sun Pharma had submitted, this is “a paradigm example of claims which travel beyond the matter disclosed in the specification”, amounting to invalidity for lack of fair basis.

The fair basis test considered in this case still applies to Australian patents for which examination was requested prior to 15 April 2013, when the “Raising the Bar” amendments came into effect.  The ‘fair basis’ requirement is generally considered to be a lower standard for patentees than the ‘support’ requirement that replaced it from 15 April 2013, which Australian Parliament expressly intended to align more closely with requirements under European law.  Therefore, if a consistory clause alone will not necessarily provide fair basis, that risk is likely to be even more significant for more recent patents and pending future patent applications required to meet the higher standard of support (such as an “enabling disclosure”).

Authored by Duncan Longstaff and Michael Christie, PhD

1 min read

Shelston IP has been named as a finalist in the Australian Law Awards for Intellectual Property Team of the Year.  

Now in its 20th year, the Australian Law Awards, run in partnership with Principal Partner UNSW Law, bestows the industry’s most prestigious accolades recognising excellence across the entire legal industry.

The awards showcase professional development and innovation, celebrating both the individuals and firms that are leading the way in the industry.

Award recipients represent a true cross section of the legal industry, recognising the contributions of the profession’s most senior ranks through to its rising stars.

“It is our pleasure to mark the 20th year anniversary of the Australian Law Awards,” said Lawyers Weekly editor Emma Ryan.

“This annual event represents the premier benchmark for those operating in the business of law, covering vast practice areas, level of experience and contribution to the profession.

“I would like to congratulate all of the finalists for this year’s event. We look forward to celebrating with you soon.”

This recognition reinforces the strength of our service and dedication to our clients.

Authored by Duncan Longstaff

11 min read

This article discusses the current state of the law concerning electronic signature and witnessing of documents in Australia including so-called click-wrap contracts, e-signing laws and the specific electronic witnessing regulations arising from the COVID-19 pandemic.

In general, terms, Australian law establishes that most documents can be executed electronically.  There are exceptions for certain formal documents.  However, in the absence of the temporary COVID-19 Witnessing Regulation discussed below, the position in relation to electronic witnessing of documents is far from clear.

1.  Electronic Signature of Documents

1.1  Basic contractual requirements

The essential requirements for a binding contract in Australia are derived from ancient English law:  (1) there must be a clear offer; (2) there must be acceptance of the offer (3) there must be an intention to create legal relations between the parties; and (4) there must be consideration (benefit) flowing to each party in forming the contract.  Documents executed as deeds are an exception to the benefit requirement but have their own issues in relation to execution and witnessing.

The need to show acceptance of the offer potentially raised questions in an e-commerce world.  However, it was no great step for Australian law to recognise online acceptance given the gradual evolution of contract law in a world of changing business and technological conditions.

1.2  Oral contracts

Even oral contracts have always been generally capable of enforcement subject to the necessary proof of the contract being available.  This general enforceability rule excludes documents with specific statutory requirements for writing such as dealings with real property beginning with the English Statute of Frauds 1677.  From a legal perspective, oral contracts are highly undesirable given the challenges in proving that the basic requirements for a contract mentioned above have been met.  It can be difficult to prove the terms of the offer, or the terms may not be sufficiently clear – especially in a situation where one of the parties to the alleged contract is likely disputing the terms or that a contract even exists.  It can also be difficult to prove that the other party has accepted the terms of the offer, in the absence of clear actions indicating acceptance, such as performing or commencing to perform the contract.  Therefore, while theoretically enforceable, oral contracts are obviously undesirable for evidentiary reasons.

1.3  The rise of electronic communication

Long before electronic mail was invented, written electronic communication flourished, beginning with the telegram and the telex and progressing to the facsimile machine.  These technologies are now either obsolete or rapidly approaching that point.  However, the law adapted easily to these technological developments.  Numerous cases have held that an offer accepted by telegram, telex or fax was legally binding – with the necessary intention to create legal relations established by the transmission of the communication.  The early Tasmanian decision of the Full Court of the Supreme Court of Tasmania in Dehle v Denham (1899) 1 N & S 128 followed earlier English authority in upholding the validity of a contract formed by the exchange of telegrams.  Later cases in relation to telex and fax communications are to the same effect.

1.4  Ticket cases – published terms and acceptance by action

In addition to oral contracts and electronically formed contracts, the courts have long held that a contract can be created where a party indicates acceptance of a contract not by signing it but by conduct.  A good example of this is the so-called ticket cases – the carpark owner conspicuously displays access terms at the entrance to the carpark or the car owner receives a printed ticket containing the entry terms at the entry point.  By entering the carpark, the car owner is taken to have accepted those terms, without any signature required.  It is worth noting that not all cases before the court have upheld the validity of a ticket/conduct based contract.  The courts have refused to enforce ticket-based contracts where the terms were only visible after entry to the carpark, if the terms could not be rejected prior to entry or if the contractual terms were onerous and not sufficiently drawn to the customer’s attention.  Despite this, the courts have generally upheld contracts created in this situation without the need for any signature.

1.5  Shrink-wrap contracts

For decades now, companies such as Microsoft have sold software containing a notice about the licence terms printed on the outside of the plastic (or shrink-wrap) packaging.  By opening the packaging, the user is taken to have accepted the licence terms contained inside the package.  If the customer does not wish to accept the terms, the customer can return the product for a refund.  Again, although with some reluctance due to the lack of full disclosure of the legal terms prior to purchase, the courts have generally upheld the enforceability of shrink-wrap contracts.  While the days of shrink-wrap licences are largely over due to the rise in e-commerce and online downloading of software, the general principles of enforceability remain.

1.6  Click-wrap contracts

We have seen above that an oral contract, a contract formed by telegram exchange, a carpark contract accepted by entry and a shrink-wrap contract can be enforceable without any formal signature.  It was therefore inevitable that a contract created by someone clicking an OK or Place Order button on a website or even simply proceeding to access the website might be bound by the website or online purchase terms, provided of course that those terms were adequately disclosed.  The ubiquitous nature of e-commerce now places the enforceability of such contracts beyond any doubt.

1.7  Electronic Transactions Acts

As demonstrated by the various examples above, general contractual principles were flexible enough to adapt to changing business and community requirements for execution of documents.  However, to provide greater certainty, the Australian Federal Government passed the Electronic Transactions Act 1999 generally confirming the validity of electronic transactions and electronic signatures in particular.Beginning with New South Wales and Victoria in 2000, all Australian States and Territories passed corresponding Electronic Transactions Acts.  The Acts are broadly the same as the Federal Act but there are certain State-based variations that need to be considered with care.

Each of the Acts specifies three requirements for valid electronic execution of a document.  Firstly, there must be a method to identify the person who is signing and to confirm the person’s intention to be bound.  Secondly, the agreed method of identification must be as reliable as is appropriate taking into account the purpose of the communication (more formal or serious documents require a high level of certainty).  Thirdly, the person receiving the signature (generally the other party to the transaction) must consent to the use of the specified electronic means to execute the document and to confirm the signatory’s identity.

While most documents can be executed electronically, some of the Acts specify one or more of the following exceptions: documents that need to be witnessed (for example, deeds or statutory declarations), documents requiring personal service, court documents, powers of attorney and wills.  Interestingly, the Corporations Act 2001 is specifically excluded from the operation of the Acts.  Refer below for further discussion.

It is important to note that these Acts do not replace or over-ride the common law position in relation to contract formation and execution discussed above.  They are intended to provide further support for electronic transactions where the requirements of the particular Act are met.  So, electronic execution of a particular document may be enforceable at common law in accordance with the general principles and examples set out above even if the particular mode of execution does not meet the Act’s requirements, or if the type of document is specifically excluded from the operation of the Act.

1.8  Corporations Act 2001

Section 127 to 129 of the Corporations Act deal with execution of documents by companies.  Section 127(1) states that a document is sufficiently executed by a company if signed by two directors, a director and secretary or the sole director/secretary, without the need for the company seal to be affixed.  When a document is executed in any of these ways, section 129 specifies that other parties can rely on that execution as binding without the need to undertake further enquiry to confirm that the execution was authorised.  This raises an important question about whether electronic signature by these officers meets the requirements.

Interestingly, and somewhat confusingly, the Corporations Act is excluded expressly from the operation of the Electronic Transactions Acts discussed above.  The purpose and effect of this exclusion has created conflicting views as to whether other parties can rely on documents executed by company officers electronically.  Some argue that the exclusion shows a clear intent by Parliament that company documents should be signed physically (and not electronically).  Others argue that the Electronic Transactions Acts only supplement, and do not replace the common law, as they explicitly confirm.  Applying this principle, electronic signature by company officers is still permitted because the common law generally permits electronic execution and accordingly section 129 of the Corporations Act is still available for electronically executed documents.

There is no clear legal authority to resolve this issue which suggests that the safest approach is for company officers to physically sign documents.  However, in practice, the authors’ experience is that the vast majority of documents today are executed and exchanged electronically including where companies are parties.  It is very difficult to see a court holding that such a document is not validly executed as this would create commercial chaos.

2.  Electronic Witnessing of Documents

Having considered above in some detail the legal effectiveness of the electronic signature of documents in Australia, we now consider the legal effectiveness of the electronic witnessing of documents.  Many documents do not require that signatures be witnessed for the document to be effective. The above principles can be readily applied to documents where witnessing is not required.  However, certain statutes regulating the execution of particular types of documents do specify that execution of such documents must be witnessed for the document to be legally effective.  Examples of documents in this category include deeds, wills, statutory declarations/oaths, powers of attorney and real property (land) related documents.  Australian contract law has proved to be very flexible in relation to electronic signature and acceptance of most contracts. However, statute law has proved to be far less flexible in relation to electronic witnessing of documents. The position in relation to electronic witnessing at common law is unclear due to the lack of Australian cases considering the issue.  Following recent legislative intervention, electronic witnessing is permitted, at least temporarily, as outlined below.

2.1  Impact of the COVID-19 Pandemic

In addition to enormous personal hardship, the COVID-19 pandemic has caused major business interruptions across the globe and has presented serious challenges to the execution of documents.  Social distancing measures, community lockdown rules and the closure of interstate and international borders has redefined the way people including parties negotiating contracts and lawyers and clients are able to interact.  Telecommunication applications specialising in video chat and voice calls (e.g. Skype, Zoom, Facetime, etc.) have now become the norm for business interactions during the COVID-19 pandemic. Although these applications have allowed parties to continue many dealings virtually, they are obviously unable to solve the legal requirement for witnesses having to be physically present when witnessing the signing of certain documents.  For example, under the Conveyancing Act 1919 (NSW), a person who witnesses the signing of a deed made under the laws of New South Wales must be physically present at the time the deed is signed by the signatory.

2.2  The Regulation

In response to this problem, on 22 April 2020, the New South Wales Government amended the Electronic Transactions Act 2000 by enacting the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (Regulation).  The Regulation is set to expire on 20 September 2020 unless extended.  It allows a person in New South Wales to witness the signature of certain documents by audio visual link (AVL) provided certain requirements are satisfied. In particular, the Regulation at section 2(1) provides that:

if the signature of a document is required under an Act or another law to be witnessed, the signature may be witnessed by audio visual link, and arrangements in relation to witnessing signatures and the attestation of documents may be performed by audio visual link” (our emphasis).

The Regulation lists several types of documents that fall under the definition of “document”. These include deeds, agreements, affidavits (including annexures and exhibits) and statutory declarations. In addition, the Regulation defines AVL as a “technology that enables continuous and contemporaneous audio and visual communication between persons at different places, including video conferencing”.

To assist in understanding and implementing the Regulation, on 22 May 2020, the Law Society of New South Wales issued guidelines entitled “Implications of the Electronic Witnessing Provisions – Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (New South Wales) and its impact on the practice of property, wills and estate practitioners” (Guidelines).

(a)   The specific requirements of the Regulation

Witnesses who choose or are required to witness signing of documents by AVL in accordance with the Regulation must:

  1. Observe the person signing the document (the signatory) sign the document in real time”. Based on the Guidelines, witnesses should ask the signatory to have their camera at an angle that allows witnesses to see concurrently the signatory and their act of signing the document.
  2. Sign the document or a copy of it to either attest or confirm they witnessed the signing of the document or copy. If a document is being signed as a counterpart, witnesses should sign the counterpart “as soon as practicable after witnessing the signing of the document” or if the signatory scans and sends to the witness the document by electronic means, sign the counterpart “as soon as practicable after witnessing the signing of the document” – see section 2(3) of the Regulation.
  3. “[B]e reasonably satisfied” that the document they sign is the same document as the document signed by the signatory. Based on the Guidelines, a witness should request the signatory to either read the document aloud or hold the document against the camera to permit the witness to compare the document to be signed by the signatory with the document they have with them.  This is obviously quite problematic for long documents.
  4. Endorse the document by specifying the method used to witness the signatory’s signature and that the signatory’s signing of the document was witnessed in accordance with the Regulation. Witnesses can endorse the document with a statement that “the document was signed in counterpart and witnessed over audio visual link in accordance with clause 2 of Schedule 1 to the Electronic Transactions Regulation 2017” – see the Note under section 2(2)(d) of the Regulation.

(b)   The Guidelines’ recommendations to lawyers

In addition to providing recommendations to people witnessing documents generally, the Guidelines provide specific recommendations to lawyers where they are required to witness documents.  According to the Guidelines, if a lawyer is witnessing his or her client’s signature on a document under the Regulation, they should observe the following:

  1. Confirm the client’s identity – This can be achieved in several ways, including by requesting a copy of the client’s identification document, asking the client to hold an identity document that displays his or her face against the camera, or requesting the client to sign a piece of paper so that the signature can be compared with the signature displayed on his or her identity document. Ultimately, a lawyer must be satisfied with the client’s identity. It is also recommended that lawyers maintain records of the method used to confirm their client’s identity.  This issue will obviously be less problematic for regular clients.
  2. Only take instructions from clients – Lawyers should only take instructions directly from their clients and no one else, regardless of the AVL tool that they use to communicate with clients.
  3. Clients’ mental condition and undue influence – Lawyers should ask clients whether any other person is present in the video call, be attentive to unusual body behaviours from clients suggesting duress, take time in taking clients’ instructions, understand that clients may not be familiar with AVL technologies and allow clients to terminate the video call at any time.
  4. Privacy and confidentiality – Lawyers can achieve this by several means, including by ensuring that they and their clients utilise secure internet connections, hold the video call in a private location, use headsets, delete browser history once the video call has ended and switch off pop-up notifications if the screen on the device being used is being simultaneously shared by the lawyer and the client.
  5. Document storing – Lawyers should store all documents together if the document was signed in counterparts to demonstrate that their client’s act of signing was done in accordance with the Regulation.
  6. Counterparts – If the document being signed by clients is to be signed in counterparts, lawyers should ensure that the documents expressly reflects this.
  7. Recording Video Calls – Although lawyers are not obliged to record their video calls with clients, it may be advisable to do so as this can be evidence that they complied with the Regulation. Obviously, recording the video call requires the client’s consent.  Furthermore, lawyers should ensure that the recording is of good quality as otherwise a court may hold that “there is no way for the Court to know exactly what transpired” between the parties involved in the process of signing the document (see Re Besanko [2020] VSC 170).
  8. Electronic signature – According to the Guidelines, electronic signature is still permissible. That is, if electronic signature was permissible prior to the introduction of the Regulation it continues to be. This means that electronic signatures are not permissible for affidavits and statutory declarations as these documents are expressly excluded from the operation of the Electronic Transactions Acts.

2.3   The Regulation and its uncertainties

Although the Regulation does provide a temporary solution to the challenges imposed by the COVID-19 pandemic, it has remained silent on several points involved in the process of electronic witnessing under the Regulation. These are:

  1. Real time” – although section 2(2)(a) of the Regulation requires witnesses to witness the signatory’s act of signing in “real time”, the Regulation is silent on what is to be understood by “real time”. Potential issues that may arise from this include lawyers and clients who hold video calls at different time zones. Based on the Guidelines, lawyers should understand “real time” as the actual time the witness does in fact witness the signing of the document by the signatory.
  2. Location of witness and signatory – the Regulation does not indicate where the signatory and witnesses should be located at the time the document is signed. As provided under the Guidelines, this can raise questions of where the document was made. According to the Guidelines, “it may be appropriate to seek judicial guidance or declaratory relief before taking action to implement the instrument”.
  3. Original and copy versions – the Regulation does not determine which document should be considered the original and which should be deemed as a copy. According to the Guidelines, lawyers should “produce or certify all documents” as signed by the signatory and the witness.
  4. When the document is made – the Regulation fails to address the issue of when the document is made, in particular whether the document should be considered to be made when it is signed by the signatory or by the witness. According to the Guidelines, “the safest approach is to treat the document as not being executed until the witness has signed”.

Despite these ambiguities and shortcomings, the Regulation provides a useful means of ensuring documents are properly witnessed when physical proximity between signatory and witness is not feasible.

2.4  Expiry of the Regulation

The Regulation is currently due to expire on 20 September 2020.  However, as the New South Wales Parliament has the power to extend the time of its application, we may see the Regulation still being applied for a period of time longer than was originally expected if travel restrictions and lockdowns are extended or re-imposed.  In view of this, as the Regulation has left a few uncertainties it is important that transacting parties and their lawyers applying the Regulation ensure that witnesses and signatories adopt measures that minimise the risks of the validity of the document they sign being later questioned for not meeting the requirements of the Regulation.  Furthermore, as some social distancing restrictions have been recently lifted across New South Wales, those who wish may still choose to witness the signing of documents in the traditional way.

Concluding Remarks

Electronic execution of most documents is clearly permitted under Australian law and will generally be enforceable provided basic contractual requirements including clear disclosure of the offer terms are met.  However, the legal status of electronic witnessing of documents is far less clear.  While temporarily useful, the COVID-19 Regulation is obviously a transitory phenomenon linked to the extraordinary effects of the COVID-19 pandemic and will have no operation after its specified expiry date.

No doubt electronic witnessing of documents will be formally recognised by statute in the future but that appears to be some time away yet.  For now, its use is limited to the specific circumstances and lifespan of the COVID-19 Regulation.  The COVID-19 Regulation and its operation will provide a useful template and learning experience for future more general legislation facilitating electronic witnessing of documents.  In our view, that legislation is long overdue.

Authored by Chris Bevitt

6 min read

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

Aristocrat Technologies Australia Pty Limited (ATA) appealed to the Federal Court from an Australian Patent Office decision that four of its innovation patents (the Patents) for electronic gaming machines (EGMs) should be revoked to failing to define patentable subject matter.  The Federal Court allowed the appeal, finding that the EGMs were patentable subject matter.

Background

EGMs, also called “slot machines”, are a combination of hardware and software components.  The hardware includes cabinets with video display screens, a “slot” or other vending device to receive money or other forms of credit, and various internal electronics, including an internal computer to operate software to operate the EGM.  The internal computer, commonly called a “game controller”, runs software to visually display reels with symbols on the screen and simulate movement of the reels, in order to play a game based on the displayed symbols.  Typically, a person makes a wager or monetary bet via the vending device to play the game on the EGM.  In this case, the novel and innovative features of the Patents lay in the aspects of the game played on the EGM, as controlled by the computer, and not in any aspect of the hardware (which was essentially generic for EGMs).

ATA had filed the Patents and requested examination of each one before the Australian Patent Office.  The Patents each defined in their respective independent claims an EGM comprising various hardware components and the steps performed by the game controller to execute the game.  During examination, the Patents were each objected to for failing to define patentable subject matter (known as “manner of manufacture” under the Australian Patents Act 1990 (Cth)).  The basis of the objection was that the substance of the invention was in the rules or procedure for playing the game, and so was a mere scheme that was unpatentable.  ATA requested a hearing before a Delegate of the Commissioner of Patents to decide the issue.  The Delegate agreed with the examiner and held that the Patents did not define patentable subject matter, finding that the hardware components of the claimed EGM did not add anything of substance to the “inventive concept”, being the game. ATA appealed the Delegate’s decision regarding each of the Patents to the Federal Court.

Decision

In the Federal Court appeal, Burley J reviewed the authorities on patentable subject matter and found that in determining whether a patent defined patentable subject matter, there was a two-step test.  The first step was to consider whether the invention related to a mere scheme or business method.  If so, the second step was to consider whether the invention is in the computerisation of the scheme or business method.

Expert evidence

In deciding the issue, Burley J followed the recent Full Federal Court decision in Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86, where it was held that expert evidence on patentable subject matter was of limited use.  As such, the extensive expert evidence filed by both parties during trial before the Rokt decision issued was mostly ignored.  However, Burley J did rely on expert evidence as to the highly regulated nature of EGMs in Australia as an indication that EGMs must have a particular construction and are built for a specific (and limited) purpose.

Are inventions relating to EGMs a mere scheme?

In applying the two-step approach, Burley J found that the invention claimed by each of the Patents was not simply a mere scheme or business method.  Rather, Burley J construed each of the claimed inventions as 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”.  As the initial question was answered in favour of patentability (ie, not a mere scheme), it was not necessary to answer the second question (ie, whether the invention lay in the computerisation).

In support of his finding, Burley J pointed out specific hardware components of an EGM, including the display for displaying the virtual reels, credit input mechanism (vending device), game play mechanism (buttons) and the game controller that are characteristic of EGMs.  Also, due to the highly regulated environment in Australia in which EGMs can be operated, these factors demonstrated that the invention is a machine specifically designed to provide a specific gaming function.  Accordingly, the combination of the physical hardware components and the virtual software components (being the virtual reels and displayed symbols) produced the “invention”.  Thus, the invention had a specific character and a single purpose – to enable a person to play a game.

The fact that the hardware components were agreed by both ATA and the Commissioner to be part of the common general knowledge in the art did not detract from this finding.

Mechanical equivalent

It was also noted by Burley J that the Commissioner of Patents had conceded that a traditional gaming machine comprised solely of hardware and mechanical components that implemented the same game without any software would have been patentable subject matter.  To Burley J, this concession was inconsistent with the Commissioner’s position that effectively separated the game rules or procedure from the hardware in an EGM only because of its electronic nature.

Comment

It seems that the particular construction of EGMs and their highly regulated nature influenced Burley J’s assessment of whether the claims of the Patents defined patentable subject matter.  Despite the agreement of both parties that the hardware components were conventional in the art of gaming machines, the specific function and purpose of those hardware components, compared to generic computer or processor parts typically found in other computer-implemented inventions, led to the finding that the invention was not simply a scheme or business method, and so was decisive.

While this reasoning seems logical to some extent, the test for when hardware forms part of the invention appears to remain somewhat arbitrary. It could be said that hardware components of EGMs are just as “generic” or “conventional” within the EGM field as general computer elements, like a processor or memory.

Justice Burley J relied upon previous Federal Court decisions in which EGMs were found to be patentable subject matter: Neurizon Pty Ltd v LTH Consulting and Marketing Services Pty Ltd (2002) 58 IPR 93 at [15] and [101] (Dowsett J) and Aristocrat Technologies Australia Pty Limited v Konami Australia Pty Limited (2015) 114 IPR 28 at [60] (Nicholas J). However, each of those previous decisions was decided prior to keyFull Federal Court decisions confirming the current principles for determining the patentability of computer-implemented inventions, particularly Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161 and Rokt.

While this decision is of benefit to EGM manufacturers, it should be noted that the claims are limited to those hardware components.  As such, the claims are of limited scope to physical EGMs and thus online gaming platforms, mobile devices and even desktop computers appear to be free to simulate the same game the subject of these claims without fear of infringing the claims if they do not also provide the hardware components defined by the claims of the Patents.

Significance

The decision provides some guidance on the patentabilty of computer-implemented inventions that employ specific and not generic hardware.  Where a computer-implemented invention employs hardware components are specific to the invention or purpose-built, then the invention will be patentable, even if those hardware components are well-known in the technical field.

However, due to this requirement for specific or purpose-built hardware, the decision has limited application to the patentability of computer-implemented inventions in general, such as those found to be unpatentable in previous Federal Court decisions.  In particular, many computer-implemented inventions are specifically, and advantageously, designed to be “hardware-neutral” so they can efficiently leverage a wide variety of computer technologies (such as personal computers, smartphones, physical and wireless internet networks, satellites, etc).  This recent decision does not provide any additional hope for companies seeking patent protection in Australia for such inventions.

Accordingly, in the appropriate circumstances, patent applicants should carefully draft their patent applications to emphasise the combination of hardware and software in achieving a computer-implemented invention, and especially whether the hardware components are specific to a particular technical field or serve a particular purpose, and are not simply generic computer components applicable to all fields of computer technology.

Authored by Andrew Lowe and Duncan Longstaff

5 min read

In the recent decision of the Intellectual Property Office of New Zealand, Frucor Suntory New Zealand Limited v. Energy Beverages LLC [2020] NZIPOTM 5 (11 May 2020), Energy Beverages LLC (Energy Beverages) was unsuccessful in its application for revocation of the green colour mark (V Green mark) owned by Frucor Suntory New Zealand Limited (Frucor).

The full decision can be found here.

Background

The parties are competitors in the energy drink market. Energy Beverages produces the “MOTHER” branded energy drink and Frucor the “V” branded product.

In June 2017, Energy Beverages filed an application for non-use revocation of Frucor’s registration 795206 in class 32 for “Energy drinks; none of the aforementioned being cocoa – based beverages”.

Below is a representation of the V Green mark and endorsement that appears on the NZ Trade Marks Office database:

V Green mark

“The mark consists of the colour green (Pantone 376c), as shown in the representation attached to the application, applied as the predominant colour to the goods, their packaging or labels., Section 18(2) of the Trade Marks Act 2002 applies.”

The relevant non-use period is 21 May 2014 to 21 May 2017.

Energy Beverages filed the revocation application following a threat of infringement from Frucor arising from its use of an ink mix equivalent to Pantone 376c in its “KICKED APPLE get-up” for its MOTHER energy drink.

Energy Beverages claimed that Pantone 376c looks like:

Pantone 376c

which is different to the registered mark. It consequently claimed that Frucor had not made genuine use of the V Green mark in New Zealand during the relevant period, applied as the predominant colour to its goods, their packaging or labels.

Both parties gave evidence regarding the Pantone Colour Matching System (PCMS), which is an internationally recognised system of standardising colour tones.

Frucor established that it had submitted an original square sample cut from a roll of labels coated with PMS 376 with metallic finish with the application for registration of the V Green mark. PMS 376 is a base formula for a green colour.

Energy Beverages argued the Frucor could not have used Pantone 376c on its V cans because the “c” suffix indicates it is a colour that can only be applied to coated paper stock and not metallic substrates.

Frucor admitted that the colour swatch supplied with the application was not Pantone 376c, but only “the PMS reference which best reflects the colour of 376 when printed on a metallic substrate” such as a can or metallic foil label. This view was consistent with Energy Beverages’ own evidence – “Frucor has mixed up a colour – the “V” green – to match or mirror Pantone 376C as closely as possible”.

Frucor submitted that the difference in colour between the sample provided at filing and the representation appearing on the register was due to the degradation in colour from the copying and scanning processes undertaken during the digitisation of IPONZ IP records in 2009. Energy Beverage’s own evidence demonstrated how printed colour degrades through such repeated processes.

Issues for determination

  • What is the appropriate representation of the trade mark for the purposes of assessing use?

In the High Court decision in Levi Strauss & Co v Kimbyr Investments [1994] 1 NZLR 332, Williams J held that the written explanation of the mark defines the trade mark and not the image of the mark on the register:

the opening words of the written description state that “the mark consists of”. In the absence of any other words explicitly stating that the pictorial representation is to govern, those words are decisive”.

While noting that the colour swatch attached to the trade mark application was a considerably different shade of green to that appearing on the register, the Assistant Commissioner applied Levi Strauss and found that the relevant representation is that attached to the application for the trade mark, as specified in the written explanation. Accordingly, she did not consider that the different representation of the colour on the register was relevant to the assessment of use of the trade mark.

Although not strictly necessary for the Assistant Commissioner to reach a conclusion as to the reason for the difference between the colour chip as shown on the register and the colour as described in the application, she accepted Frucor’s explanation that the difference appears to have arisen from the process of uploading the colour swatch to the register during the digitisation process in 2009.

  • Was there genuine use of the V Green trade mark in the course of trade during the relevant period?

Having found that the written explanation of the trade mark overrides the representation provided, the issue for determination is whether the evidence of use relied upon by Frucor constitutes qualifying genuine use of “the colour green (Pantone 376c) as shown in the colour swatch attached to the application, applied to the goods, their packaging and labels”.

Energy Beverages claimed that Frucor’s evidence of use was insufficient to establish genuine use of the mark in the course of trade in New Zealand. It argued that the representation of the mark as attached to the application and the reference to “the colour green (Pantone 376c)” are inconsistent, or otherwise incapable of together describing a trade mark, or being used as such. The Assistant Commissioner rejected this argument as an attempt by Energy Beverages to challenge the validity of the mark itself (which is not permitted under s66).

The Assistant Commissioner agreed with Energy Beverages’ contention that the goods referred to in the written explanation of the trade mark are the beverages themselves (Frucor did not contend that the trade mark is applied to the liquid drink), but accepted Frucor’s submission that the use of the trade mark on cans or bottles is use “in relation to” the goods. She said this conclusion is of little significance to the revocation application, because if use of the trade mark on cans or bottles does not constitute use in relation to the goods, it will certainly constitute use in relation to packaging.

After reviewing the different categories of use, the Assistant Commissioner was satisfied that there was sufficient evidence of use of the V Green trade mark by Frucor in New Zealand during the relevant period, on V cans, can multipack shrink wrap and paperboard packaging for multipack bottles, as well as related promotional and advertising materials.

Consequently, the application for revocation failed and the V Green trade mark was permitted to remain on the register.

Takeaway

This decision is informative in clarifying how to interpret depictions of non-traditional marks that appear on the Register of Trade Marks in New Zealand, and indicates the importance of accurately describing such trade marks in the application for registration.

Authored by Kathy Mytton and Sean McManis

28 min read

During the past decade, the patent-eligibility of computer-implemented methods has been a particularly vexing focal point for Australian patent law and practice. With computer technologies now ubiquitous and relatively mature, applying the centuries-old “manner of manufacture” test in a way that is practical and predictable in the eyes of practitioners and their clients has proven somewhat elusive for examiners and hearing officers of the Australian Patent Office and judges of the Federal Court at both first instance and on appeal.

In many ways, this Australian experience has mirrored the challenges faced by US patent practitioners seeking consistency in application of the principles set down by the Supreme Court in Alice Corporation Pty Ltd v CLS Bank International (2014) 134 S Ct 2347 and by UK and European practitioners in grappling with legislative exclusions of computer-implemented schemes and presentations and statements of principle in cases such as Aerotel Ltd v Telco Holdings Ltd (and others) and Macrossan’s Application [2006] EWCA Civ 1371.

The decision in late 2019 of an expanded 5-member bench of the Full Court of the Federal Court of Australia in Encompass Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161 has provided additional clarity on where Australian law draws the line between unpatentable schemes or ideas with incidental computer-implementation and patentable inventions involving technical applications of ideas or improvements in how computers operate. The principles and approach endorsed in the Encompass decision were followed by another Full Court in last week’s long-awaited decision in Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86. Other recent decisions of the Australian Patent Office and Federal Court of Australia have produced outcomes that are generally consistent with the principles articulated in Encompass and applied in Rokt, in finding both for and against patent-eligibility in different cases.

Accordingly, Australian practitioners are now better-placed to advise their clients on the likely strength of “manner of manufacture” issues and grounds relating to methods involving some element of computerisation, both during drafting and prosecution of patent applications, and in connection with both enforcing and seeking to revoke granted patents. In this article, we provide commentary on these recent developments and practical guidance on the new best practice with respect to Australian patents with computer-implemented aspects.

The Encompass Case

Background

The Encompass case concerned two similar innovation patents relating to a method of displaying information related to “entities” (such as individuals and corporations) and the connections between those entities so as to provide business intelligence. The claimed method would allow a user to generate and display a “network representation” by querying remote data sources. The claimed method would then allow the user to select a node (representing an entity) on the network representation, perform further searches to retrieve information related to the selected node and provide the retrieved information to the user – such as by updating the network representation to display further nodes, from which further searches could be performed, and so on.

Encompass’s innovation patents in suit referred in the body of their specifications to each specific function of the claimed method being realised “in a number of ways, depending on the preferred implementation”. The patents did not stipulate any specific hardware, programming or software to perform the invention. Indeed, the specifications repeatedly emphasised that the steps of the claimed method “may be achieved in any suitable manner” or “using any other suitable technique” or “mechanism”.

First Instance Decision

At first instance in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421, Perram J found all claims of both of Encompass’s innovation patents invalid for failing to meet the manner of manufacture requirement. His Honour also found some claims (those which lacked a “purchasing step”, which was held to contribute substantially to the working of the invention) invalid for lacking innovative step in light of a prior art platform known as “They Rule”, and otherwise dismissed InfoTrack’s other challenges to validity based on novelty and innovative step in light of prior art, alleged self-anticipation, secret use and section 40 (clarity, support and sufficiency).

Expanded Full Court Appeal Decision

An expanded Full Court of five Judges (Allsop CJ, Kenny, Besanko, Nicholas and Yates JJ) heard the appeal by Encompass and its exclusive licensee SAI Global. The Commissioner of Patents also exercised her right to appear and make submissions, which were broadly aligned with those of InfoTrack in arguing the Encompass Patents did not satisfy the manner of manufacture test. The Institute of Patent and Trade Mark Attorneys (IPTA) also sought, and ultimately was granted, leave to make written submissions in the appeal as amicus curiae, which were broadly aligned with those of Encompass and SAI Global in arguing the Encompass Patents should qualify as patent-eligible computer-implemented methods.

The Full Court essentially upheld all of the findings of the primary judge, finding all of the claims of both of Encompass’s patents invalid for failing to meet the manner of manufacture test and the claims that lacked the “purchase step” (claims 1 and 3-5 of the 164 Patent) invalid for lack of innovative step.

Generic computer implementation

The Full Court confirmed that where, as a matter of substance, there is “no more than an instruction to apply an abstract idea [or scheme] (the steps of the method) using generic computer technology”, there will be no patentable subject matter. It is not enough that an “uncharacterised electronic processing device (for example, a computer) is employed as an intermediary to carry out the method steps”. An “idea for a computer program” where it is “left…to the user to carry out that idea in an electronic processing device…which itself is not characterised” is not patentable subject matter. The Full Court upheld the primary judge’s findings that Encompass’s innovation patents fell into this category and accordingly failed to claim (or even disclose) any patentable subject matter.

The role of Prior Art in the “manner of manufacture” assessment

An issue raised before the Full Court by IPTA as an intervener was the trend in examination practice before the Australian Patent Office of considering prior art in assessing patentability. The Full Court emphasised the caution expressed in previous judgments against importing concepts of novelty and obviousness in the assessment of manner of manufacture, but declined to comment on the examination practices of the Commissioner of Patents in unrelated matters.

In a seminar delivered in November 2019, the Patent Office stated that to identify the substance of the claim and what is the alleged or actual contribution, the need to understand “inventiveness” may include a consideration of prior art. This approach has attracted criticism from members of the profession. The Full Court in Encompass did not provide any firm guidance as to the approach adopted by the Commissioner. It is important to refer to the Patent Office Manual of Practice and Procedure at 2.9.2.2 identifying the current practice:

In order to determine the substance [of a claim]…. consideration should be given to the claimed invention and the contribution that it makes to the art. Logically this consideration may take into account the prior art at the priority date rather than merely common general knowledge.

As outlined below, the Full Court’s comments in the very recent Rokt decision suggest this approach may no longer be followed.

In any event, there are a number of ramifications to the consideration of prior art in assessing patentable subject matter, which have not yet been tested. Of particular concern is Section 24 of the Patents Act 1990 (Cth), which provides a grace period in which authorised or unauthorised publication or use of the invention in certain prescribed circumstances is disregarded for the purposes of novelty and inventive/innovative step. However, this provision does not exclude such disclosures from being considered for the purposes of manner of manufacture. It is currently unclear if, when utilising these grace period provisions, disclosure of the invention before the priority date could prevent a patentee from obtaining a valid patent on the basis of patentable subject matter.

Related Patent Office Opposition Decision

InfoTrack subsequently succeeded in its opposition to the grant of Encompass’ Australian Standard Patent Application No. 2013201921, the parent application of the two innovation patents in suit in the Federal Court proceedings described above: InfoTrack Pty Limited v Encompass Corporation Pty Ltd [2019] APO 48 (31 October 2019). The Delegate followed the reasoning of the Full Court in finding that standard patent application invalid for lack of manner of manufacture, despite some of its claims including more specific steps relating to techniques for disambiguation, and also found the claims to be obvious in light of the They Rule prior art.

The Rokt Case

Background

The case involved a patent application entitled “A digital advertising system and method” belonging to tech company, Rokt Pte Ltd. The application related to a computer implemented system and method that linked users to online advertising by presenting an “engagement offer” when a user accessed a website. The engagement offer was targeted based on a user’s previous interactions. It provided a context-based advertising system in which users who were more likely to engage with advertising were shown specific offers to increase engagement over traditional methods of digital advertising.

Patent Office and First Instance Appeal Decisions

In 2017, an unsuccessful hearing decision issued in which the Delegate of the Commissioner of Patents decided that the application was not patentable on the basis that it was not a “manner of manufacture”. In 2018, Rokt successfully appealed the outcome of the hearing decision to the Federal Court, in which the primary judge (Robertson J) ruled that the invention of the application was directed to patentable subject matter. Disagreeing with the Federal Court’s judgement, the Commissioner of Patents appealed the Federal Court’s decision to the Full Federal Court.

Full Court Appeal Decision

Overturning the primary judge

The judgement of the Full Court (Rares, Nicholas and Burley JJ) closely followed the guidance of the expanded Full Court’s earlier decision in Encompass in assessing patentable subject matter by focusing on the disclosure and detail provided by the specification, assessing whether the invention is a scheme, and then considering the implementation of the scheme in the computer.

The Full Court found that the primary judge erred in his findings in the original decision by relying too heavily on the opinion of Professor Verspoor, Rokt’s technical expert, in adopting her answers to the questions which characterised the substance of the invention. The primary judge was also found to have relied on the technical problem and solution identified in the specification, without addressing the question of whether the technical solution was actually claimed.

The Full Court found that the primary judge did not engage in any analysis of the central question of whether invention was found to lie in the implementation, or whether it amounted to simply “an instruction to ‘put’ the scheme into computer technology.” Their Honours emphasised the danger in adopting an expert’s opinion without additional legal analysis, noting the importance of the legal approach to understand the invention under assessment of manner of manufacture.

Limiting the use of common general knowledge to construing the claims and specification

The Full Court’s decision emphasised that consideration of the common general knowledge should be used only for construing the specification, and not to provide characterisation or evidence of what constituted ’generic software’ or the use of computers for their ‘well known’ purpose. The approach endorsed by their Honours was to carefully review the specification to ascertain whether the computer technology is being utilised for its basic, typical or well-known functions to implement anything more than a mere scheme.

Generic software

Following the decision in Encompass, their Honours considered the matter of whether the claimed method was implemented using generic software. The Full Court observed in Encompass that the claims of the invention did not define any particular software of programming to carry out the invention, and so it was left up to those using the method to implement a suitable computer program for the purpose of carrying out the method. Agreeing with that approach, the Full Court in the Rokt case identified the problem addressed by Rokt’s invention as enhancing consumer engagement levels. The solution was determined to be the provision of an intermediate “engagement offer” targeted to a user interacting with digital content.

A Marketing scheme

In light of these observations, the invention was classified as “a marketing scheme”. This gave rise to a key consideration in assessing patentable subject matter: whether the computer is a mere tool in which the invention is performed, or whether the invention lies in the computerisation. Following the approach laid out in Encompass, their Honours came to some strikingly similar conclusions regarding the detail in the specification:

in our view nothing about the way that the specification describes the computer hardware or software indicates that either is any more than a vehicle for implementing the scheme, using computers for their ordinary purposes

The specification does no more than describe the architecture of the hardware in a most general sense.

…the claim provides no content to suggest a different conclusion. Despite its length and detail, it contains no integer that serves to characterise the invention by reference to the implementation of the scheme beyond the most general application of computer technology utilised in an online environment.

Although it was determined that the specification represented a solution to problems in marketing, the lack of detailed description suggests that the scheme in which this solution was achieved did not involve the use of computer technology “other than as a vehicle to implement the scheme”.

In drawing a direct parallel between the position of the patentee in Encompass, their Honours concluded that the claimed invention amounts to an instruction to carry out the marketing scheme, and that the invention provides no more than a list of steps which may be implemented using computer technology for its well-known functionality.

At the time of publication of this article, Rokt still has the ability to seek special leave to appeal to the High Court of Australia.

Other Recent Federal Court and Patent Office Decisions

Technological Resources Pty Limited v Tettman [2019] FCA 1889 (2019)

The Federal Court of Australia recently overturned an Australian Patent Office (APO) opposition decision regarding the “manner of manufacture” requirement for patentable subject matter. In the Federal Court appeal, Jagot J found that the Delegate had mischaracterised the claimed invention and that the claimed invention was not analogous to those considered to be mere schemes.

Background

After Mr Tettman successfully opposed the grant of Australian Patent No. 2011261171 entitled “Separating mined material” (171 Application) before the Commissioner of Patents, Technological Resources Pty Limited filed an appeal to the Federal Court of Australia.

The 171 Application claims methods and apparatus for identifying and separating mined material on a bulk basis (a form of ore sorting in which a sensor is used to make an assessment of material on a bulk basis) and describes how low grade iron ore can be upgraded by implementing a system that assesses the grade of segments of ore and then separates the ore based on the assessed grade of segments of ore. The main ground of contention in the decision was that the claimed invention was not a manner of manufacture (i.e. not patentable subject matter) on the basis that what was claimed was a mere scheme, involved only mere working directions and was a mere collocation.

Arguments – mere collocation, mere scheme and working directions

Mr Tettman argued that the individual integers of the claimed method were known and the claimed invention involved the use of known systems to a purpose to which they were all well suited.

Technological Resources argued that the invention of its method claims was not a combination of parts at all, but rather a method comprising a series of steps undertaken in a sequential manner for the processing of ore, and does not proceed to the next step until it has completed the previous step. Accordingly, it was argued that the steps plainly have a working inter-relationship.

Mr Tettman relied upon the initial reasoning of the Delegate which found that the claimed invention did not involve a manner of manufacture since what was claimed was a mere scheme and mere working directions. Technological Resources argued that the 171 Application did not involve a business method or scheme and is distinct from gathering, processing or presentation of information in the fields of finance or business. The “…claimed invention resides in the field of mining or mineral processing, a technical field, and involves methods and apparatus for the processing of ore in a series of physical process steps to produce upgraded material, a physical and tangible result. So understood, the invention is a classic example of a manner of manufacture according to traditional principle”.

Decision

Justice Jagot found that the methods and apparatus claimed were in fact different to anything that formed part of the common general knowledge that had been supported by the parties’ expert evidence.

Justice Jagot also found that the claimed invention was not analogous to those considered to be mere schemes. Her Honour found that the Delegate’s reasoning involved a mischaracterisation of the claimed invention, which “involves physical steps carried out on a physical product using physical apparatus, to produce a physical and tangible result. It does not bear a resemblance to the cases on which the Delegate relied” Importantly, no meaningful analogy to Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 or Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 could be drawn.

Repipe Pty Ltd v Commissioner of Patents [2019] FCA 1956 (2019)

Two innovation patents directed to software inventions were revoked after the Court determined that a lack of technical detail in the specifications meant the patents were not patentable subject matter. The claimed inventions failed to provide sufficient technical detail to be considered more than mere generic computer implementation.

Background

Repipe Pty Ltd (Repipe) was the owner of two similar innovation patents, directed to methods of providing information to a portable user device to improve compliance by employees with field risk management procedures and requirements in industries such as construction and mining.

After three adverse examination reports issued in relation to each of the Patents, and an unsuccessful hearing in which a delegate of the Commissioner of Patents issued a decision (Repipe Pty Ltd [2018] APO 42), Repipe appealed that decision to the Federal Court. Both parties agreed that the only issue disputed was whether the Patents claimed inventions that were a manner of manufacture under s 18(1A)(a) of the Patents Act 1990 (Cth).

Arguments

Repipe submitted the substance of the invention claimed in the first patent was the combination of the server, communications network and a portable computing device configured and controlled in the specified way by a specific software application so the user can use and create an expanding collection of items to select from as each field worker completes his or her own risk management document. It was submitted that each of the inventions claimed in the Patents provided a technical solution to a technical problem.

The Commissioner argued that the substance of the invention in both Patents was a mere scheme for sharing and completing workplace health and safety documents, emphasising that there was a lack of any meaningful technical detail in the claims or the accompanying description of the specification. In particular, the claims recited ordinary computer functions without prescribing the technical means by which any such functions must be performed. The lack of detail left the selection of hardware and creation of software to implement the steps entirely up to the person skilled in the art.

Decision

The decision of the Court hinged on the question of whether or not the method of each invention merely required generic computer implementation of a scheme or abstract idea. Justice McKerracher determined that there was “no meaningful technical content” in either specification, despite providing detail as to the computing device functionality, and highlighted the absence of specific application software being claimed or even identified in any claim of the Patents, as well as drawing attention to the absence of computing programming logic or code being disclosed. In paragraph 93, His Honour noted:

To implement the scheme, a reader must use his/her own skill and knowledge to write an appropriate software application. No such application is disclosed in the Patents.

Justice McKerracher relied heavily on the authority of the recently issued expanded Full Federal Court decision in Encompass. His Honour found the claimed methods merely required generic computer implementation and therefore could not be a manner of manufacture.

Watson v Commissioner of Patents [2019] FCA 1015 (2019)

In this Federal Court of Australia decision, Mr Dale Watson appealed a decision by the Delegate of the Commissioner of Patents to revoke an innovation patent entitled “A Method of Innovation”.

Background

Mr Dale Watson was the owner of an innovation patent entitled “A Method of Innovation”. Method claim 1 of the innovation patent recited:

A method of innovation comprising the steps of an organisation engaging with an innovation services provider to innovate, said organisation disclosing aspects of the organisation to said innovation services provider and specifying a financial return to said innovation services provider for said innovation, wherein said innovation services provider describes or defines said innovation as a corresponding IP right prior to its disclosure to said organisation and the amount of said financial return is determined, at least partially, from the value or benefit or advantage of any sort or any other consideration or value of any kind to said organisation of said IP right.

During examination for certification of the innovation patent, five examination reports were issued, all of which concluded that the invention was directed to a business model, and therefore was a mere scheme and not a “manner of manufacture”. After the fifth examination report, a hearing was requested. In the resulting hearing decision, the Delegate of the Commissioner of Patents also concluded that the claims were directed to a business scheme or model. That decision of the Delegate was appealed to the Federal Court.

Arguments

Mr Watson submitted that a necessary step in the method of the claims was the definition of the innovation as a corresponding IP right (such as a patent, trade mark, design, plant breeder’s right or copyright). Mr Watson then contended that the product of the claimed invention was the IP right created by following the method of the invention, and as such the product consisted of an “artificial state of affairs”. Mr Watson argued that the invention claimed was patentable because it was “something that can be made by man… or at the least [was] some new mode of employing practically his art and skill”, thereby amounting to an observable phenomenon. Mr Watson further submitted that the IP right, as claimed in claim 1, was “a useful product” that was a “tangible, physical and observable effect”.

Decision

Justice Rares dismissed Mr Watson’s appeal, concluding that the claimed invention is directed to an abstract idea for a business scheme under which persons can agree to contract for intellectual property services, where those services might result in the creation of an IP right that might be useful and, if so, make an additional agreement as to a reward.

The claims were considered to involve a collocation or combination of well-known steps. The idea of providing remuneration on the basis of success and the calculation of a reward based on some relationship of the value of what is created for the engaging party was not considered to be new, nor was the combination of such a method of remuneration with the engagement of a professional. The claims were determined to amount to no more than assertions of a method that might produce a result.

Justice Rares noted that one would have to follow the claimed method in full before knowing whether or not the original engagement of the innovator fell inside or outside of the scope of the claims. As Rares J put it, “to allow such a… monopoly would have a chilling effect on all intellectual property professionals… because they would be at risk of infringing the patent if they followed the supposed method and succeeded in producing a useful result”. Consequently, his Honour concluded that the method was not considered to be patentable based on the claimed subject matter being a mere scheme or business model and the unsettling ramifications of allowing such subject matter to be deemed eligible for a patent.

Leave to Appeal Refused

An application by Mr Watson for leave to appeal was recently refused in Watson v Commissioner of Patents [2020] FCAFC 56. The Full Court refused leave to adduce fresh evidence to challenge the primary judge’s observations. Despite Mr Watson’s attempts to align the claims of the application to those of NRDC (National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252), the Full Court rejected this assertion and instead considered the claims to be more in line with the scheme of Grant (Grant v Commissioner of Patents (2006) 154 FCR 62), stating that “at most, the claimed invention is a business innovation, not a technological or technical innovation.” Ultimately, the Full Court confirmed the primary judge did not err in his findings, and concluded that the claim was “a description of an idea, said to be new, as to how parties might go about organising their affairs in relation to the creation of an intellectual property right and payment for it. There is no greater specificity or substance in the claim than that.”

Apple Inc. [2019] APO 32

An invention relating to computer user interfaces, and more specifically to context-specific user interfaces for indicating time, was found by the Patent Office to be a manner of manufacture. Whilst the original Examiner and the Delegate were divergent in their characterisation of the substance of the invention, it was ultimately found that the claimed invention of re-using animation sequences to produce user interface objects provided a technical advantage in reducing computational burden.

Background

Apple Inc (Apple) is the owner of Australian Patent Application 2015298710 (710 Application). The 710 Application was the subject of an earlier Patent Office decision, in which the Delegate remitted the application back to examination to determine the state of the art so that an informed decision could be made on whether the substance of the invention was a manner of manufacture.

Upon the application returning back to examination, the original Examiner maintained that “the substance of the alleged invention is a presentation of specific aesthetic content” and concluded that the invention as claimed was not a manner of manufacture. On 20 November 2018, Apple then filed a request to be heard a second time, which resulted in a further decision from the Australian Patent Office (the later decision)

Decision

During examination and in submissions for the hearing of the earlier decision, Apple argued that the substance of the invention lies in the re-use of animation sequences in order to generate varied presentations while using less memory to store the animations used as compared to individually storing each full presentation (and thus storing duplicated content multiple times). Apple disagreed with the Examiner’s characterisation, that the substance of the invention “is a presentation of specific aesthetic content” and submitted that instead, the characterisation set out in the earlier decision should be adopted.

In assessing manner of manufacture requirements, the Delegate referred to the principles set out in D’Arcy v Myriad Genetics Inc [2015] HCA 35, Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 and Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150.

The Delegate ultimately found that the claimed invention was directed towards a manner of manufacture. In particular, the Delegate was of the view that the specific manner in which the invention re-used animation sequences to produce user interface objects provided a contribution to the art. That contribution, which reduced computational burden in producing user interface objects, was technical in nature and therefore lies within established principles of what constitutes a patentable invention.

Facebook, Inc. [2020] APO 19

In this recent Patent Office decision, it was found that claims to a method that helps applications share information are directed to patentable subject matter based on the technical improvement provided by the invention, despite concluding that the claims only required generic computer implementation.

Background

The subject of the long-awaited decision is Australian Patent Application 2014209546 (546 Application) in the name of Facebook, Inc (Facebook). The 546 Application provides a method which enables applications to communicate with each other by accessing a shared memory. Most applications, when installed on a mobile device, are “sandboxed”, which means that application data and code execution are isolated from other applications. As such, the applications do not have the ability to communicate with each other. Facebook’s invention enabled data to be written to a shared memory location that is outside of the application’s sandbox, thereby allowing information to be shared.

Facebook requested the hearing back in August 2018, reaching an impasse with the Examiner after a fourth Examination Report was issued. The only matter under consideration was the outstanding patentable subject matter / manner of manufacture objection. After the initial hearing on 21 November 2018, Facebook was invited to file further submissions on three different occasions, including to make comments on a piece of prior art raised by the Delegate as evidence of the state of the art.

The Delegate’s Decision

The Delegate’s decision focused predominately on consideration of five questions taken from Aristocrat Technologies Australia Pty Limited [2016] APO 49 (Aristocrat). These questions included:

  • Is the contribution to the claimed invention technical in nature?
  • Is the computer merely the intermediary, configured to carry out the method, but adding nothing of the substance of the idea?
  • Does the claimed invention merely require generic computer implementation?
  • Does the invention result in an improvement in the functioning of the mobile device?
  • Does the claimed invention solve a technical problem in the functioning of the computer?

The Delegate considered that the substance of the invention lies in a series of steps where data is received, executed, an indication is stored and then the indication is transmitted through a different application along with user information. The claims allow for advertising attribution and conversion tracking, and the Delegate concluded that the conversion tracking was not technical in nature.

The Delegate accepted the use of the computer was intrinsic to the claimed method, as the invention operates entirely between a mobile device and an online system and therefore requires the use of a computer. However, he was not convinced that the steps of the claim (including executing data and installing an application) were more than generic computer implementation.

In considering whether the invention resulted in an improvement in the functioning of the mobile device, the Delegate agreed with Facebook that the claimed method appeared to be performing something new. There was enough detail to confirm that the method provides a technical improvement as “the device is now able to do something that it could not do previously”.

The Delegate also agreed that the “sandboxing” of native applications was a technical limitation faced by application developers. Interestingly, whilst it was recognised that “sandboxing” still exists in light of the method being utilised, the Delegate concluded that the invention works around the existing sandboxing, and therefore ruled that there was a technical improvement in the device.

After determining the substance of the invention to be a technical improvement in the functioning of the device, which worked around a technical limitation, the claims were found to be a manner of manufacture.

Implications, Commentary and Practical Guidance

Australia’s legal test for patent-eligibility of computer-implemented inventions

Australian patent law does not explicitly exclude software or computer-implemented inventions from patent-eligibility. Computer-implemented inventions may still be patentable in Australia on a case-by-case basis, particularly where they result in an improvement in computer technology. The scrutiny applied to computer-implemented inventions arises as computers can readily be programmed to perform all manner of schemes, tasks or ideas that might improve the human experience, but which are not themselves patentable subject matter.

Recent guidance in this area has made it easier to predict when inventions are likely, or unlikely, to meet the requirements for patentable subject matter, by considering whether the inventive concept of the invention lies in an idea or scheme which can be generically implemented using computers, or in a technical application which makes an improvement to computer technology or otherwise involves some physical effect or phenomenon.

Inventions involving physical steps carried out on a physical product using physical apparatus, to produce a physical and tangible result, remain patentable if they give rise to an artificially created state of affairs of utility in a field of economic endeavour (the useful arts), as established by the High Court of Australia in NRDC. Applications directed to abstract ideas, schemes and intellectual information have never been held to be patentable in Australia. The Patent Office remains poised to reject applications if they lack a useful physical result or technical effect, if they lack well-defined boundaries, or if granting the patent would be negative effects on innovation.

However, the implementation of an idea in a computer may be considered patentable if the invention lies in the computerisation. There is required some ingenuity in the way in which the computer is used, rather than simply using the computer for its well known or generic functions. Implementation of an abstract idea can be characterised as “generic” when an invention claimed is indifferent as to the particular device or lacks detail as to the particular means of implementation. Where the claims identify wholly generic or conventional means of carrying out some part of an abstract idea or scheme – any ingenuity is in the scheme and not in the computerisation or use of a computer. That is, the computer is considered as acting only as a tool for implementing the abstract idea.

As the Full Court in Encompass warned, a patent specification should not, “…having identified the cardinal steps of the exemplified method, [leave] it to the user to implement the method in the way he or she might choose to do so, assisted by broadly-expressed and non-limiting suggestions or possibilities.”

If the invention includes or uses more than generic software or hardware, this must be reflected in the claims and supported in the specification by meaningful technical detail. Claims reciting specific (non-generic) software or programming steps, rather than just the idea or information flow, may satisfy the manner of manufacture test.

Further, as demonstrated in Facebook, Inc., an invention which overcomes or circumvents a technical limitation by providing a technical improvement to how a device functions may still be considered patentable subject matter where the use of the computer is intrinsic to the method, even if the steps are themselves considered to be generic.

Practical guidance for drafting and prosecuting Australian patent applications for inventions with computer-implemented aspects

The recent decisions on computer-implemented inventions have provided practical guidance for drafting and prosecuting Australian patent applications in this space.

Many of the inventions which were the subject of recent decisions failed the patentable subject matter test based on a lack of technical detail as to the function, implementation and application of the software and hardware of the invention. The key takeaway is that technical detail within the specification is crucial to showing that the contribution of the invention is technical and provides an improvement to computer technology, or that the inventive concept lies in the computerisation of the method.

Accordingly, it is necessary to avoid using only functional language to describe the result or purpose of a step in an invention. An application should describe how the invention is actually performed and implemented, in a technical sense, rather than broadly describing an idea or information flow. Specifications should include sufficient technical detail on how any hardware, computer functions or software used for carrying out the invention actually perform their technical functions and improve computer technology. Describing the details of a particular algorithm or technical effect may reduce the risk of the invention being characterised as abstract or requiring mere generic computer implementation. Similarly, figures should have detail and support the technical description of the invention.

Broad, sweeping statements such as “any appropriate manner”, “any generic system” or “any suitable manner”, “mechanism” or “technique”, or “can be implemented in any manner, such as executed by a computer” should be avoided or at least minimised if the patentee wants to show that the computerisation is more than generic utilisation of a computer. Phrases such as these leave the details of the implementation up to the user, and during later prosecution, can give rise to difficulties in arguing that these are more than just generic steps. Similarly, generic figures or paragraphs which could appear in any patent application in the computer-implemented space can result in adversely diluting the technical effects and advantages of the invention. These may additionally give rise to potential section 40 support/enablement or sufficiency issues.

There should be a focus on understanding and describing the detail of how the computer-implemented invention works, rather than focusing solely on what it achieves or the end result. Engaging with the inventors and programmers or technical staff when having the application drafted is good practice as it provides good technical description as well as insight into the unique details of the inventiveness. This information can then be used to support arguments and assertions made by the patentee of the technical effects and advantages when prosecuting the applications.

Every application is examined on a case-by-case basis. Drawing analogies with other issued decisions or cases may not prove persuasive if there is not a significant overlap in the technology. However, arguments against patentable subject matter objections can ultimately be strengthened by technical detail disclosed in the specification.

Whilst the test of patent eligibility remains somewhat nebulous, and that is appropriate given there is a need to provide flexibility, it is becoming easier to predict which side of the line a purported invention is likely to fall by considering where the inventive concept lies: in the idea/scheme which can be routinely implemented using computers (unlikely to be patent-eligible), or in some technical application which either improves the use of the computer or otherwise involves some tangible product or effect beyond the idea (more likely to be patent-eligible).

Shelston’s deep expertise and experience with patents for computer-implemented inventions

Shelston’s team includes experienced ICT-focused patent attorneys who can consult as to relevant questions of patent drafting and patentable subject matter. Our expert litigators are very well-placed (particularly having represented clients in both the Encompass and Research Affiliates matters) to advise on enforcement or revocation strategy in this important and highly active area of patent law.

* The authors were engaged by InfoTrack in its successful challenge to the two Encompass innovation patents at first instance and before an expanded bench of five Judges in the Full Court of the Federal Court of Australia and its successful opposition to a related patent application in the Australian Patent Office.

Authored by Duncan Longstaff, Alana Gibson, Mark Vincent and Tam Huynh

5 min read

Mr Vitaly Pilkin appealed from a Federal Court decision summarily dismissing his patent infringement proceedings against Sony Australia and refusing leave to serve Sony entities out of jurisdiction in the US and the UK (see our discussion of that earlier decision in our Best Patent Cases 2019 publication).  The Full Federal Court refused Mr Pilkin’s application for leave to appeal the decision, upholding the primary judge’s findings that due to a deferral in the patent priority date to the date of key amendments, the claimed invention could not be novel in light of prior art products.  The Full Court observed that Mr Pilkin had a substantial and contestable case in response to prior US patent publication considered by the primary judge to deprive the claimed invention of novelty, but noted that was to no avail because the appeal failed, and his infringement case should be summarily dismissed, on other grounds.

Background

Mr Pilkin (Pilkin) sued Sony Australia for infringing his innovation patent AU 2010101517 (the Patent), by its sale of the PS Vita, PS3 and PS4 consoles (the Consoles) in Australia since 22 February 2012.  Mr Pilkin also sought to serve proceedings on US and UK based Sony entities.  In response, Sony Australia and the Sony entities (the Sony parties) conceded that their consoles fell within the scope of the claim of the Patent but sought summary dismissal because the Patent had a later priority date than its claimed priority date, meaning that the sales of the Consoles anticipated the Patent, and that the Patent also lacked novelty over a US patent publication (the Case patent).

The Patent

The Patent was an innovation patent, converted from a national phase patent application of a PCT application, having a priority date of 5 October 2009.  The PCT application described the invention as an electronic device, with various options for the location of a touch pad and/or a joystick on the device.  The claims corresponded to this description, listing the possible locations of the touch pad and the joystick as alternatives.  The Patent was amended on 11 July 2014 to state only one claim, an electronic device having, inter alia, a front touch screen visual display, a rear touch pad and a joystick.  The possible locations of the joystick on the electronic device were omitted from the claim.

First Instance Decision

Priority Date

Justice Rares found that on a reading of the PCT application, he agreed with the Sony parties that the amendment was beyond the original disclosure in the PCT application.  It was clear that the location of the joystick on the device other than on the front surface was essential to the invention.  Hence, the omission of any particular location of the joystick in the claim of the Patent meant that the amendment was a broadening amendment, deferring the priority date of the Patent to 11 July 2014.

Novelty

The effect of the deferred priority date for the Patent meant that the sales of the Consoles anticipated the claim of the Patent as the sales occurred earlier, since at least 2012.  It was also held that the Case patent anticipated the claim of the Patent, as it described that a folded over laptop could include a joystick to control a cursor on the front screen display.

Summary dismissal

As there were no reasonable prospects of success in Mr Pilkin’s causes of action, in light of the novelty issues created by the deferred priority date of the patent, the patent infringement proceedings were dismissed.

Service out of jurisdiction

Justice Rares held that the facts pleaded by Mr Pilkin did not establish a prima facie case for relief to warrant service on the Sony entities in the US and the UK.  The US Sony entity was only incorporated in April 2016, and so did not exist at the time of first sales of the Consoles in 2012.  Also, the press release relied upon by Mr Pilkin did not establish that the US Sony entity had taken over manufacturing of the Consoles.  The failure of Mr Pilkin’s infringement claims also meant that there was no prima facie case against the UK based Sony entities.

Appeal Decision

Mr Pilkin sought leave to appeal on all grounds, repeating his submissions made in the first instance decision – that the amendment to the Patent only removed various alternatives listed in the PCT claims, and that the location of the joystick was not an essential integer to the invention.  Mr Pilkin further argued that the Case patent did not provide clear and unmistakable directions to all the features of the claim.

In a unanimous decision, the Full Federal Court refused Mr Pilkin leave to appeal, agreeing with Rares J’s reasons and findings on the deferred priority date for the Patent, its invalidity due to the sales of the Consoles and the lack of a prima facie case to warrant service out of jurisdiction.

However, the Full Federal Court considered that Mr Pilkin’s submissions on the Case patent were sufficiently reasonable to make that issue contestable.  The Full Court also noted that the central reason for the primary judge’s finding of lack of novelty was that a skilled person would have been able to produce the claimed device through trial and error experiments.  This central reason was not supported by evidence and related more to inventive step issues.  However, Mr Pilkin’s failure on his other grounds meant the issues relating to the Case patent were immaterial, because his application for leave to appeal was to be dismissed, and his infringement case was to be summarily dismissed, on the other grounds described above.

Significance

The decision illustrates the dangers in amending patent claims to remove integers asserted to be optional.  While the removal of optional integers may appear to narrow the scope of a claim, there could be an argument that this in effect broadens the scope of the claim beyond its original disclosure.  Patent applicants and patentees should exercise caution in amending the claims or drafting claims with too many alternative integers to avoid a potential loss of priority date and thus lose validity by reason of a later amendment.

The decision also highlights the need to clearly separate the criteria for novelty from the criteria for inventive step.  The basis for the finding on lack of novelty for the Case patent relied on matters relating to inventive step and unsupported by evidence.

Finally, the case emphasises the importance of accurately pleading consistent facts.  The contradiction between the dates of the alleged infringing conduct and the existence of the US Sony entity led to refusal of the application to serve out of jurisdiction.

Authored by Andrew Lowe and Mark Vincent