The America’s Cup (the “Auld Mug”) is the world’s oldest sailing trophy and enjoys a storied history of fierce competition – both on and off the water.  Whereas legal drama throughout the years was previously restricted to claims of sabotage, subterfuge, cheating or some far-fetched interpretations of the “rules”, the upcoming 2021 event has thrown up yet another reason to get off the water and into the courtroom – allegations of patent infringement.

Background

The 36th edition of the America’s Cup is scheduled to be held in Auckland, New Zealand, between 6 and 21 March 2021.  It pits the holders, Emirates Team New Zealand (ETNZ), up against the winner of a challenger series to be contested between Luna Rossa (Italy), Ineos Team UK and American Magic.  The concept of the challengers sailing off before matching up against the holder is nothing new.  However, what is unique to this event is the category of yacht in which the event will be contested – the new “AC75” (America’s Cup 75 class) is a 75-foot (23 metre) hydrofoil monohull vessel.  To the layperson, it’s a regular yacht that “flies” just above the waterline.

Again, the concept of a flying (or more correctly, “foiling”) yacht is nothing new.  For example, the 34th (2013) and 35th (2017) editions (held in San Francisco and Bermuda, respectively) used a class of foiling catamarans (double-hulled yachts), which, when conditions and crew-work were optimised, was able to get up on its foils (i.e., lift the hulls out of the water), thereby minimising drag and increasing speed.  The ultimate goal, of course, was to complete the entire course on foils, which was referred to as a “dry lap”.  Foiling catamarans certainly provided for spectacular racing over the two events.

Following the narrowest of misses in 2013, the 2017 event was won by ETNZ.  In accordance with the “rules” of the event, ETNZ not only got to host the next edition, but also had the authority to decide upon the class of boat in which the event would be contested.  Following lengthy consideration (much of which was centred upon conditions likely on the Hauraki Gulf where the 2021 event would be contested), ETNZ opted for a new class of boat – the AC75 foiling monohulls.

What’s a “foil”?

As shown on the official America’s Cup website, the hull of the AC75 lacks the traditional centred keel, but instead has a retractable “foil” on either side. When one of the foils is engaged with the water, and provided sufficient speed is reached, it acts in combination with the rear rudder foil to force/lift the hull out of the water, which in turn imparts the speed advantages mentioned above.  In operation, the leeward (on the side opposite to which the wind is coming from) foil is engaged with the water whilst the windward foil is retracted or held out of the water.

Shown below is an example of ETNZ’s test boat “Te Aihe” (a 50-foot scaled-down version of the AC75) foiling successfully during testing.

Despite the conceptual imagery linked above, all four syndicates are employing similar, although subtly different, foil designs.

So, what’s the patent problem?

Manoel Chaves, a Brazilian naval architect and boatbuilder, is the patentee in respect of New Zealand patent 740860, dated 31 October 2016.  NZ’860 is a granted patent derived from PCT/BR2016/050275 via WO 2017/083947.  It is entitled “Sail boat propulsion and stabilisation system and device”, which is more specifically characterised by IPONZ as a “Sail boat hydrofoil with pair of wings on opposite hull sides with downward keel and outstanding lift wing, with pivoting of keels and wings independently”.

According to media reports, Mr Chaves believes the canting foil system used in the AC75 boats is covered by NZ’860.  Mr Chaves’ representatives are understood to have contacted ETNZ in this regard.  However, the same article quotes ETNZ as having already denied patent infringement as of July 2020.

What does NZ 740860 describe and claim?

Figure 1 of NZ 740860 appears to illustrate, broadly, a hydrofoiling system arguably similar to those found on the AC75 yachts:

As we know, “similar” is a subjective term. That said, claim 1 of NZ 740860 is reasonably wordy, and construing it would no doubt account for several days’ court time should the matter ever proceed to trial:

  1. A system for propelling and stabilizing a sail boat, comprising a control panel, standard or electronic stabilization, actuated by a battery connected to a hydraulic aggregate that is connected to directional valves and solenoids through which each device of a pair of devices for propelling and stabilizing the sail boat is independently actuated respectively to larboard and starboard, and each device is provided with a wing keel, a counterweight or “lift” wing joined by a bulb, a cylindrical actuator of the counterweight or “lift” wing, a rotary hydraulic actuator for hoisting the assembly, an articulation shaft, which runs in the direction of the counterweight or “lift” wing and transverse to the keel, and a tilting shaft for the assembly, which is coupled to the boat broadside or to a mounting base provided for the boat broadside of already existing boats, beside sensors of the angle of attack of the counterweight or “lift” wing.

The dependent claims (claim 2, in particular) are even longer.  According to the above-linked media, ETNZ’s July 2020 response to Mr Chaves was that NZ’860 defines features not found on the AC75 yachts.  Quite what those features may be based upon my “elementary” understanding of the foiling system used on the AC75s and chemist’s understanding of claim 1, is uncertain.

Legal permutations

As noted above, all three challengers (Luna Rossa, Ineos Team UK and American Magic) are employing hydrofoils broadly similar, albeit subtly different to ETNZ.  If ETNZ is held to infringe, then does it necessarily follow that the three challengers are infringing also?  Alternatively, as the entity that created the new AC75 class, does ETNZ bear any responsibility for the challengers infringing?  Of course, until such time as the matter is formally contested in a New Zealand court, these questions are all strictly hypothetical.

A continuing history of more fun off the water than on it

In my time following the America’s Cup, which dates back to 1983, when Australia II defeated Dennis Conner’s Liberty, the event has been beset with a series of courtroom battles that, depending on one’s perspective, either amplify or detract from the drama on the racecourse.  From Australia’s winged keel (1983), to New Zealand’s “plastic fantastic” fibreglass boats (1987), to New Zealand’s “big boat” challenge (1988), to all the legal jostling regarding the citizenship rule, the use of technology, where the event should be staged when the Cup was held by landlocked Switzerland, etc., this has always been more than just a yacht race.

Watch this space.  The America’s Cup equals high stakes and big money. Whilst not your traditional battlefield for a patent dispute, it does have almost every other ingredient.

Authored by Gareth Dixon, PhD

For many manufacturers in Australia, Intellectual Property (IP) can be the most valuable asset the business owns. Why? Because IP can be used in a variety of ways to support a business, writes Greg Whitehead in the latest edition of AMT (Australian Manufacturing Technology) magazine.

For many manufacturing businesses in Australia, Intellectual Property (IP) can be its most valuable asset.  Why?  Because IP can be used in a variety of ways to support a business.

However, after the best part of two decades working within the IP industry and seeing numerous missed opportunities, it remains an unfortunate reality that leaders and key decision makers at many of Australia’s most innovative manufacturing enterprises, particulars SME’s, do not adequately understand the full range of ways in which they can capitalise on their IP.

This is a common theme across Australia’s advanced manufacturing sector, including within our most innovative companies developing highly specialised products and processes in areas such as aerospace and defence, automotive, clean and renewable technology, medical technology, biopharmaceuticals, mining and agribusiness.

All too often the typical ‘understanding’ is that IP is only used “to stop others from copying us”.  This results in the limited view that it is necessary to have a hard fought and costly battle in Court to resolve the issue at hand and gain value from an IP portfolio.

Such a narrow outlook adversely limits the potential to maximise the commercial value of innovations and ultimately the value of a company – in short, it potentially reduces the return on R&D expenditure.

This is not to say that a business should or must seek to register all of its IP.  Rather, it is incumbent on all business owners and managers to properly consider their company’s IP position so that they can confidently answer the question “Why have you, or why have you not, registered the company’s IP?

And for a business manager to be in a position to answer this question they must be well-informed and have a clear understanding of the potential means by which they can exploit IP rights to the benefit of the company.

By way of example, some benefits which can be realised with a structured IP strategy/portfolio include:

Recognition as market leader:  innovations can take many forms – from incremental improvements in a product to ground breaking developments which create a new standard for a specific industry.  For such innovations which become widely used and known throughout an industry, the existence of a corresponding IP portfolio can aid in further enhancing the profile and reputation of the company which produced the developments.  This can lead to growth for the business not only by way of increased sales but also by increasing the prospect of winning competitive tenders, particularly those having a relatively long-term supply and/or maintenance contracts.  Here the IP portfolio creates confidence and a point of difference for the company at the negotiating table.

Collaborative partnerships:  a further potential opportunity that arises from growing a company’s profile and reputation as an industry leader in providing innovative products and services relates to new opportunities to collaborate with third parties.  Such collaboration can arise through new relationships as a result of the company’s enhanced reputation within the relevant industry, as well as with existing partners such as suppliers, where the IP portfolio can be leveraged to negotiate better pricing to the benefit of the company owning commercially relevant IP rights.

Growth and expansion without capital expenditure:  by registering IP rights for key innovations, a company has opportunities to obtain revenue over and above that generated from its own sales alone.  Such additional revenue can be obtained through royalties paid to the IP owner by third parties who license the IP rights.  In this way, the IP owner can bring in additional revenue based on the actions of a third party, thereby saving on the expense of establishing new production facilities with additional capital equipment to increase capacity.  Here, it is important to recognise that registered IP rights are tied to a particular jurisdiction, which allows technology to be licensed on a state-by-state or country-by-country basis.

For example, a manufacturing companying operating only in the eastern states of Australia, and with no interest in expanding to the west, could license their technology to a companying operating in Western Australia.  The Eastern based company would benefit from increased revenue through royalty payments, thereby increasing its return on investment in the R&D which led to the relevant innovative breakthrough.  A similar strategy could be employed to license technology to a company in a foreign country outside Australia, particularly where the technology is likely to be adopted widely throughout an industry.

It should therefore be appreciated that the benefits of developing an IP portfolio and associated strategy tailored to the specific needs of a company, more often than not, arise from proactive, collaborative-based actions to leverage greater value from the effort and expenditure undertaken in R&D by the company, rather than battles within the Courts.  In other instances, a passive approach relying on the existence of an IP portfolio and associated profile in the market can also bring benefits, where third parties actively reach out to an IP owner to seek authorisation to use the IP under license or make an offer to purchase the technology.

In summary, the key take home message is for business leaders to consider whether their products/processes offer a competitive advantage in the market.  If so, some time should be spent considering the company’s IP position and put in place the most appropriate and robust IP strategy – whether by applying to register certain rights (e.g. patents, trade marks) or through controlled management of confidential information and trade secrets.

Finally, it is important to remember that the potential benefits outlined above reside with the true IP owner, and there are IP ownership implications associated with all business relationships – starting from employee contracts and the actions of staff to dealings with third party contractors.  Care must therefore be taken to ensure there is a suitable IP clause clarifying ownership in any contract before signing it.

This article was written and first published in AMT (Australian Manufacturing Technology) Magazine in their Feb/March 2019 issue.

Authored by Greg Whitehead

Australian courts have recently taken a dim view of competitors claiming that the patentee has made unjustified threats of patent infringement. It is now clear that, in relation to the assessment of damages, it is necessary for the defendant to show any threats made by the patentee were directly the cause of loss or damage to the defendant.

In Mizzi Family Holdings Pty Ltd v Morellini (No 3) [2017] FCA 870, damages relating to the unjustified threats were at issue. Mizzi held a patent for a sugar cane planting machine and sued Morellini for infringement. At first instance, it was found that Morellini’s machine did not infringe the patent and that Mizzi had made unjustified threats of patent infringement. (It was later found on appeal that Mizzi’s patent was invalid for false suggestion.) Mizzi had caused advertisements to be placed in trade journals, warning off potential customers of being in patent “infringement danger” if they were to buy competitive machinery to that disclosed in Mizzi’s patent application.
In light of a recent precedent, Morellini needed to establish causation between the threats and the damages claimed. The judge refused to find any liability even though customers did not want to take up the defendant’s machine, and “they were a bit cautious because they were waiting for all this to be over”. Although the judge accepted a general reluctance to deal with the invention, there was no finding that the reluctance was attributable to any threats.
The net effect of this decision is that it establishes the need for evidence of actual causation between the threat of patent infringement and the resulting loss by the
potential competitor. This is good news for patent holders but sets a high threshold for those wishing to invoke the unjustified threat ground in dealings with a patentee.

This article by Shelston IP Principal, Peter Treloar, first appeared in Managing Intellectual Property magazine, September 2017 issue.

Authored by Peter Treloar