5 min read

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

6 min read

A perpetual motion machine is one that can do infinite work with no energy input.  Such a machine is impossible as it would violate the first or second law of thermodynamics (that internal groan isn’t likely be your last).

The first law of thermodynamics relates to the conservation of energy, so if you are not adding energy to a system, you cannot take energy out and expect the system to work indefinitely.

The second law of thermodynamics relates to entropy, defining that the total entropy of a system will always increase over time.  Some energy is always lost through friction or otherwise dissipates so that not all of the energy is produced as work.

Violating a few of the laws of thermodynamics hasn’t seemed to be a problem for countless individuals, even long before there was any way of protecting their intellectual property, and now that there is, the good burghers of IP Land have decided that such machines are unpatentable subject matter.

The purpose of this article is not to start reciting and examining the law.  It is what it is, and a simple googling will tell you so, but that does not stop inventors from claiming machines that do more work or create free energy from nothing.  Some even explicitly claim perpetual motion as an essential feature.

As a patent searcher, when I have to conduct a novelty search into an inventor’s magnum opus, and I look at the IPC (International Patent Classification) and find that there is an obscure subclass specifically dedicated to that aspect of the technology, I know things are not going to end well.

The same goes for perpetual motion, or as the Latinistas of WIPO have put it, perpetua mobilia.  There are four IPC classes that specifically mention perpetua mobilia, and a couple more that seriously think about it.

  • F03G7/10 Mechanical-power-producing mechanisms using energy sources not otherwise provided for, with a 1-dot subclass for alleged perpetua mobilia
  • F03B17/04 Other machines or engines, with a 2-dot subclass for alleged perpetua mobilia
  • H02K53/00 Alleged dynamo-electric perpetua mobilia
  • H02N11/00 Generators or motors not provided for elsewhere; Alleged perpetua mobilia obtained by electric or magnetic means

The two others are F03G3/00 Other motors, e.g. gravity or inertia motors; and F25B9/00 Compression machines, plant, or systems, in which the refrigerant is air or other gas of low boiling point, but for simplicity I am going to ignore these.

The CPC (Cooperative Patent Classification) is almost identical, except the H02N11 class has been subdivided so that the CPC gives H02N11/008 as the relevant subclass.

There are two points to make here.  First, they all say “alleged”.  They are giving inventors the benefit of the doubt before refusing the application.  Second, these classes have been in place since year dot of the IPC, way back in 1971.  These are not classifications that have expanded over time as the level of innovation in these areas demands it, and where a subclass has been added years later.  They were always there; the idea has always been doubtful.

I have conducted a search in PatBase in the four IPC and CPC classes above as well as looking for the keywords “perpetual motion” in the title, abstract or claims, for anything filed since January 2015.  There are a few other keywords that could be used, but it is useful to look for those inventors who are upfront about their ambitions.  This search finds just under 8000 patent families.  I will take an extra step at this point and remove any family where one of the classes above is not the first listed.  Any family falling into this category would appear to have utility by being classified first in a typical IPC or CPC class, and having an alleged perpetua mobilia class thrown in at the end just in case.  After doing this I am down to just over 3100 patent families of genuine alleged perpetual motion machines.

Looking at this data set, there are a few things that really stand out.

While there are fifty-seven jurisdictions around the world that can claim some passing interest in perpetual motion, the Peoples Republic of China accounts for almost half of all patent families in this field, and as with Chinese patent applications in general, the number is rising year on year.

Another stand out is that electrical devices are the predominant field of endeavour, outstripping mechanical devices by a factor of 3 to 1.  This probably reflects the modern world where renewable energy generation and storage is a growing industry, and generating free energy forever for zero cost is an attractive proposition.  These points are apparent in the ‘concept cluster cloud’ below.  This is a chart generated by PatBase Analytics that gives frequently occurring concepts or keywords found within the set of 3100 patent families more prominence, in this case with a larger font.

One last stand out is that some of these applications get granted, even when they are classified primarily in an alleged perpetua mobilia class.  In fact, almost two hundred per year are granted, as shown below.  Most of them, about three quarters, are granted in China, and it appears that the majority of these are utility patents, where there is little or no examination and a lower requirement for an inventive step.  That still leaves a substantial proportion of granted patents theoretically with unpatentable subject matter.  It may be that some of these applications had multiple inventions, and the unpatentable ones have been weeded out, or that at first glance it appeared to be a perpetual motion machine, but was not, or was suitably amended to enable acceptance and grant.

So, the question remains: what is allegedly new in the field of perpetual motion machines?

I would be loath to point out anything I thought was half serious, just in case it’s ‘the real deal’, so I will stick to highlighting a few of the more unusual patent applications in the field.

CN10456473A is a perpetual motion machine for drawing water from a low level reservoir to a higher level one using a waterwheel and siphon tube where a portion of the water siphoned is used to drive the waterwheel while the remaining portion is sent to the higher reservoir.

The interesting thing about this specification is that three quarters of it is dedicated to an essay on the futility of perpetual motion, before moving on to time travel, the space-time continuum, gravitation energy, and last of all, God.  The last quarter, without a hint of irony, describes the invention.

CN105587479A is a gravity driven perpetual motion machine based on the idea that a circular chain, where part of the chain rests on a sloping surface, and by calculating the relevant gravity force vectors, conclude that the sloped portion of the chain weighs less than the portion of the chain that is vertical, and as such the heavier part of the chain will pull the lighter part up the slope thus creating perpetual motion.

Energy generation doesn’t rate a mention for this device.  Its sole utility appears to be as a toy.

GB2547229A relates to electric vehicles, where the vehicle has two batteries.  The energy from one battery is used to propel the vehicle, while the vehicle engine charges the second battery.  When the first battery is drained, the roles of the batteries are reversed, and the second battery now propels the vehicle while the first battery is recharged by the engine, thus negating the need to stop and refuel.  There’s not much to this specification, certainly no grand theory of everything nor any delving into the nitty gritty of the laws of physics, no doubt because the idea is so obvious and useful that it needs no further explanation.

AU2016256693 was withdrawn before examination occurred.  There’s not really anything to say about this one as the title says it all, which is:

The Newton Perpetual Motion Machine is a Machine which uses the outside source of energy initially then it will work by newly discovered method. Albert Einsteins equation e=mc2 so energy is everything. But; Who made them as they are now? In the Quantum world; Everything is made of uncertain things the elementary particles So, we cannot able to say anything with absolute certainty. So, laws of thermodynamics. This machine may violate the first and second laws of thermodynamics so It might not make any general sense like a spooky action in a distance (Quantum entanglement). Energy is the law.

One thing I can say about most of these inventors is that they have some idea of the laws of thermodynamics, know that they can’t be violated, and know that perpetua mobilia do violate the first and second laws, but it does not stop them from trying, and claiming, to have achieved the impossible.

Authored by Frazer McLennan

For a number of years, Shelston IP has partnered with Girls Invent an organisation dedicated to inspiring and motivating girls to become successful innovators. At Shelston IP, innovation is our passion, and we are excited to support Girls Invent through our pro bono advice program in its mission to encourage innovation.

Girls Invent invited Allira Hudson-Gofers and Tam Huynh to take part in a podcast to discuss their successful careers and the influences that have shaped them to become the women they are today.

Tune in here to listen to what they had say.

Authored by Allira Hudson-Gofers and Tam Huynh

2 min read

To celebrate International Women in Engineering day (23 June 2020), Shelston IP would like to highlight our outstanding female patent attorneys and patent engineers qualified in this field.

With 30 years of experience in the patent profession, Caroline Bommer is the female engineer that we aspire to be. She provides a wonderful example of the possibilities for our young female attorneys and is appreciated by all of her clients, particularly in her effective communication and her ability to understand their business strategies. Caroline’s mechanical engineering expertise is also extensive, including practical knowledge acquired prior to joining the patent profession in the industries of building, transport, aerospace, and defence. She has a keen interest in green technologies, with many years of personal involvement in solar car racing. Ask her to take you for a spin!

Tam Huynh works in the fields of electrical engineering and information technology patents. Growing up, Tam would find any excuse to integrate electronics into her arts and crafts projects. This included raiding her Dad’s electronics kit to make LED greeting cards for her family. She went on to study Computer Engineering at University and undertook a project exploring the use of solar power technologies and their application with mobile devices. Tam now assists with the ongoing management of patent portfolios in a range of fields, including electrical power systems, information and software systems, mining and automation, and medical devices. Tam also holds a Bachelor of Commerce degree and her accounting background adds additional depth to her handling of financial-system related inventions.

With childhood memories of jumping off a red billy cart and yelling “Newton’s third law”, Allira Hudson-Gofers brings her enjoyment of physics and engineering into her role as the head of Shelston IP’s Engineering and ICT Patents Group. Allira studied both mechatronics and biomedical engineering at University, going on to develop particular expertise in research, product development, regulatory affairs, and intellectual property in the medical technology space. She now applies this expertise, together with her recent MBA studies, to help her clients protect and commercialise their innovations.  

Connie Land had her interest in the human body and medical devices sparked in high school, which lead her to pursue a degree in Biomedical Engineering. Connie started her career with hands-on experience maintaining, repairing, and programming medical devices.  Last year, after discovering that the role of a patent attorney was a career option for engineering graduates, she hung up her tools and joined Shelston IP as a Patent Engineer. Connie now works with medical devices in a different capacity and uses her passion and knowledge of medical devices and technology to help her clients navigate the path to obtaining patent and design protection. She is currently studying a Masters in Intellectual Property and is looking forward to becoming a registered patent attorney in Australia and New Zealand. 

Authored by Allira Hudson-Gofers, Caroline Bommer, Tam Huynh and Connie Land

It’s that time of the year once more in Australia: National Ride2Work Day (Wednesday 16 October 2019).  In celebration of pedal power, here’s a tour of some weird and wacky cycling patents.

One wheeled vehicle (US patent 325,548)

This curious vehicle, where the rider sits inside the wheel, was patented by John Otto Lose in 1885.  I love the way the illustrator has gone to the trouble of including a little umbrella in case of rain (not an essential feature of the invention).

Aerial bicycle (US patent 563,793)

Another slightly bizarre contraption was invented by Hiram Nickerson and patented in 1896.  The crucial problem, which seems to render this invention almost completely impractical, is that without a network of elevated track, the aerial bicycle can’t go anywhere.

Rowing bicycle (US patent 642,544)

Like the idea of rowing and fresh air but scared of the water?  No problem!  Louis Burbank has the solution for you with this rowing bicycle, patented in 1900.  More recent iterations of such a machine are available for purchase in 2019, but I suspect it’s probably a niche market.

Double bicycle for looping the loop (US patent 790,063)

Next up, it’s Karl Lange’s patent, granted in 1905, for a “double bicycle for looping the loop for circus and other performances.”  I’m not sure I fancy my chances with this one.  Especially without a helmet.

Exercising device for water use (US patent 4,241,688)

More recently, Ralph and Kathryn Mansolill’s 1980 patent is for a device useful for exercising in a swimming pool or other body of water.  The general idea is not to achieve some sort of miraculous unicycling on water.  In essence, the device is buoyant so that it can support a person “in a substantially seated upright position in the body of water such that the neck, head and upper shoulders of the person remain out of the water, allowing the person to exercise the legs, arms and torso while neutrally buoyant.”

Mowing apparatus adapted to be towed by a pedal-operated vehicle and the like (US patent 5,410,864)

Can’t afford a motorised ride-on lawnmower?  In 1995, Thomas Lacy and Kenneth Shackles, Jr. patented this mowing apparatus adapted to mount to the frame of a vehicle such as a bike.  Especially handy if you have a long, thin lawn.

Apparatus for harnessing wind to drive a bicycle (US patent 6,932,368)

Granted in 2005, Vladimir Zam’s patent protects his sail attachment which, when connected to a bicycle, harnesses wind to drive the bicycle forward.  My assumption is that it’s not intended for use on crowded city streets and I guess it might take a bit of practice not to fall off and hurt yourself when the wind changes direction.  However, Google suggests that others have also proposed bicycles with similar attachments – so perhaps this idea may have wind in its sails yet.

Body-connected bike (US patent 6,805,657)

Do you live in a small apartment and don’t have space for a bicycle?  Just do away with the frame.  And the pedals.  Indeed, Justin Trenary’s 2004 patent does just that.  It’s an interesting concept, probably quite exciting for downhill riding, but I’m not tempted to replace my commuting bike with one of these any time soon.

Authored by Serena White, DPhil and Charles Tansey, PhD

This important decision by the Full Court of the Federal Court in Calidad Pty Ltd v Seiko Epson Corporation [2019] FCAFC 115 clarifies the position on an area of law that, surprisingly, is still developing in Australia, namely the scope of the implied licence issuing from the sale of a patented product.

Re-manufacturers that refurbish and repurpose used patented products should take heed of this decision, as work that goes beyond mere repair of damaged or broken parts, or that replaces or refurbishes parts that extend the useful life of the product, may be considered an infringement of the patentee’s exclusive right to make the product.

Calidad has foreshadowed a request for special leave to appeal to the High Court on the anterior question of whether the “implied licence” or the “patent exhaustion” doctrine is the correct approach in Australia. Calidad has until 2 August 2019 to apply to the High Court for that leave to appeal.

Background

Seiko Epson sells Epson printer cartridges worldwide. The Epson cartridges embody the invention claimed in the two Australian patents in suit. The cartridges are designed as a consumable product, and are intended to be discarded and replaced when the ink runs out. This is achieved by memory chips programmed to recognise when a cartridge is spent, thereby preventing the cartridges from being refilled. Each cartridge is also configured to be compatible with only certain Epson printers.

After initial sale of the original Epson cartridges, a third party modified the used cartridges to enable them to be re-used. Calidad then imported and sold the cartridges in Australia, in competition with the original Epson cartridges.

Calidad asserted an implied licence to treat the cartridges as an ordinary chattel deriving from Seiko’s unconditional sale of the original Epson cartridges. In the alternative, it asserted that a patentees’ right to exploit the patented product under the Patents Act 1990 (the Act) did not include the right to prevent a subsequent owner of the product from repairing or refurbishing the product and dealing with the refurbished product.

The Modifications Made

The process of refurbishment carried out by the third party, first, involved cartridges being emptied and cleaned in preparation for refilling. Replacement ink was then injected into the cartridge through a new entry port created in the cartridge, which was subsequently sealed.

Next, for some cartridges, the memory chip was reprogrammed so that the cartridge would not read as spent (referred to as the “current products”). For other cartridges a new memory chip was inserted and the modified circuit boards refitted to the cartridges. Some cartridges were further modified by changing their interface pattern to allow them to be used with a wider range of Epson printers than originally intended. These latter categories were referred to as the “past range of products”.

There was no dispute that all the modified cartridges supplied by Calidad fell within the scope of claim 1 of each of the patents in suit.

Opposing Doctrines: Implied Licence vs Patent Exhaustion

The right of a patentee to control what may be done with a patented product, once sold, gives rise to competing rights: the patentee’s exclusive right to “exploit” the patented product under the Act, which includes the right to make, use, sell and import the product inter alia, and the personal proprietary rights of ownership in a chattel at common law.

Two opposing doctrines have developed to address this tension.

  • The doctrine of patent exhaustion was endorsed by the United States Supreme Court in Impression Products v Lexmark (2017) 581 U.S. 1523. Under this doctrine, upon the first authorised sale of a patented product by or with the consent of a patentee, all patent rights in that article are exhausted. The Full Court in the present case confirmed unequivocally that under Australia’s current law there is no doctrine of exhaustion.
  • The implied licence doctrine provides that the sale of a product embodying a patented invention with the authority of the patentee carries with it an implied licence permitting the purchaser to use, maintain, re-sell and import the product without infringing the patent. Such implied licences are subject to any conditions of sale the patentee imposes and “brings home” to the purchaser at the time of sale. This approach was adopted in the United Kingdom and Australia following the Privy Council’s decision in National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 (Menck).

At first instance Justice Burley found that Menck applied in Australia. Both parties advanced the appeal and cross-appeal on this basis. However Calidad has reserved the right to challenge the approach taken in Menck in any subsequent appeal to the High Court, including raising at that stage its contention that the doctrine of exhaustion should apply in Australia, as it does in the United States.

The First Instance Decision

Material modifications?

Justice Burley held that Calidad infringed the Seiko patents in relation to the past range of products (where memory chips were replaced or the interface pattern was changed), but not the current products. Burley J’s analysis turned on whether the implied licence, which was taken to have arisen validly, was terminated by the modifications carried out by the third party. This was to be determined by whether the product was “materially altered” by the modifications.

The Full Court

Scope of the Implied Licence

The Full Court (Greenwood, Jagot and Yates JJ), each in separate judgments, found entirely in favour of Seiko. The Full Court concurred in finding that the primary judge erred by asking the wrong question – that is, was the implied licence brought to an end by the materiality of the modifications. Instead, the question to be addressed was whether the modifications constituted conduct outside the scope of any implied licence arising from an unrestricted sale. Each of the Full Court judges held that the modifications brought into existence a new article, which could only be properly characterised as an impermissible making of the patented product, and unequivocally outside any possible licence recognised by Menck. The licence did not come to an end by reason of the materiality of the modifications – it never authorised the relevant conduct of Calidad and the third party from whom it procured the cartridges.

Yates and Jagot JJ, in their separate reasons, pointed to the fact that none of the modifications amounted to repair on any reasonable view. The cartridges were not damaged – they had instead been consumed in the manner intended by Seiko upon their manufacturer and sale. An implied licence did not authorise modifications or refurbishment after the useful life of a patented article. Jagot J also observed that the refurbishment process involved “unmaking” the patented cartridges by effectively removing one integer of the patent claims (by creating a hole in the ink container) and then making a new patented article when adding that integer back in (by sealing the newly-made hole to re-establish a functional ink container). Yates J considered that Calidad’s assertion of a right of refurbishment was an unsupported embellishment of the subject matter dealt with in the United Kingdom cases, as the cases themselves refer only to repair.

Licence to repair?

The question of whether Australian patent law recognises an implied licence to repair did not arise on the facts of the present case, leaving this question, ostensibly, to be resolved on another occasion.

However the exclusive right to “exploit” the invention granted to a patentee under s 13 and Schedule 1 of the Act does not include (at least expressly) the exclusive right to repair a patented product. Under the current legislative regime, arguably, an implied licence to repair is not required, provided the work performed does not cross over into an impermissible making of the invention. Consistent with this view, the United Kingdom courts have long recognised a right to repair (essentially as an implied contractual term associated with the purchase of a product), but more recently have characterised this as a residual right to do whatever does not amount to making the invention (Lord Hoffman in United Wire Ltd v Screen Repair Services (Scotland) Ltd [2001] RPC 24).

Patent Exhaustion – would the outcome be any different?

Even if the patent exhaustion doctrine were found to apply in Australia, the outcome of this case may be unchanged. As Jagot J persuasively states in obiter, neither an implied licence nor the doctrine of exhaustion would “result in the loss of the right to prevent the making of new embodiments of the invention, whether or not the new embodiment involved starting from scratch or re-using and modifying parts of the patented product as sold”. Patent exhaustion applies to the particular product as sold, and not to the making of a new embodiment of the invention.

Implications for Re-manufacturers 

Re-manufacturers will need to carefully consider whether their activities may infringe the patent rights of original product manufacturers, particularly where work goes beyond mere repair of damaged or broken parts, or where parts are replaced or refurbished thereby extending the useful life of the patented article.

Each case will, however, turn on its facts – both with respect to the nature of the patented invention and the article that embodies it. As observed by Jagot J, “…all the cases, in one way or another, are about the scope of the implied licence which necessarily arises on the sale of every patented article, the scope of which will depend upon all relevant circumstances including but not limited to the nature of the patented article, the circumstances of the sale, and the imposition at the time of sale of any express restrictions on the use which the purchaser may make of the article after sale”.

We await with interest any further developments in the law should the High Court choose to address this question.

Authored by Duncan Longstaff and Dr Roshan Evans

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

Executive summary

– Evidence establishing the state of the prior art is important, as this evidence may influence the other statutory factors in assessing distinctiveness.

– Prior art evidence should be limited to before the priority date of a design to be fully persuasive.

– Side by side comparisons between a design and the prior art may assist in demonstrating a visual effect in favour of distinctiveness.

– An appropriate Statement of Newness and Distinctiveness indicating any specific new and distinctive features may increase the prospects of success.

Background

This is a decision of IP Australia as the Australian Designs Office on the validity of a registered design for a coffee maker by Pi-Design AG (Pi).  In Australia, designs are examined only for formalities before registration.  However, it is necessary to request substantive examination to enforce the registered design – this process is called “certification”.

In this case, Pi obtained registration for its design for a coffee maker – Design No. 201515424, Registration No. 365096 (the Design) – and requested examination of the Design.  An examination report issued, citing Pi’s earlier design for a coffee maker, Design No. 201514163, Registration No. 363750 (the Earlier Design), as rendering the Design invalid. After a response to the examination report was unsuccessful, Pi requested to be heard on the issue.

Submissions

Pi conceded that there were many similarities between the Design and the Earlier Design.  However, Pi submitted that there was a significant difference in that the Design incorporated double walls for the sides and bottom of the coffee maker, whereas the Earlier Design only had single walls.

The decision

The primary issue was whether the Design was distinctive over the Earlier Design, as it was quickly held that the Design and the Earlier Design were not identical due to the double walled appearance of the Design.  Hence, the Design was new.

The hearing officer agreed with Pi’s submission that the informed user was someone familiar with coffee makers but noted that the Design and Earlier Design relates to a specific type of coffee maker – a non-electric “pour-over” coffee maker (in contrast to an expresso machine, for example).  Accordingly, in the hearing officer’s view the informed user would “pick out” smaller differences between two coffee makers of this type than between a pour-over coffee maker and an expresso machine.

The hearing officer then considered the statutory factors in assessing substantial similarity between the Design and the Earlier Design from the point of view of the informed user, being:

  • giving more weight to similarities than differences;
  • having regard to the state of development of the prior art base;
  • the features identified in any Statement of Newness and Distinctiveness (SND);
  • the amount, quality and importance of any similarities; and
  • having regard to the freedom of the design creator to innovate.

State of development of prior art base

Pi had submitted evidence of the state of the prior art for coffee makers. However, the hearing officer noted that this evidence was defective as it included results that were published after the earliest priority date of the Design.  Despite this defect, this evidence was of some assistance in assessing the freedom to innovate.  The hearing officer referred to the search conducted during examination and noted that the prior art base was crowded with many types of coffee maker designs, indicating that smaller differences may be more significant.

Freedom to innovate

In considering this factor, the hearing officer noted that many coffee makers of the pour-over type shared common features that were dictated by their function, such as the conical filter holding portion, its location above the decanter and the use of a handle or thermal collar to safely transfer the hot liquid.  Also, the hearing officer noted from Pi’s evidence that this type of coffee maker had a small footprint and there seemed a preference for a relatively simple design, indicating there was market demand for these features.

Amount, quality and importance of similarities

The hearing officer held that there was a large amount of similarity, as conceded by Pi, but did note that the greater portion of the Design incorporated the double walled appearance.  The quality and importance of the similarities were informed by the freedom for the designer to innovate.  Hence, those features in the Design and the Earlier Design that were dictated by function, such as the conical filter holding portion, as well as the features dictated by market demand, such as the slimness and simplicity of the design, were to be discounted.  Accordingly, the large amount of similarities between the Design and the Earlier Design were offset by the quality and importance of those similarities being relatively low.

Statement of Newness and Distinctiveness

The hearing officer found the SND of the Design was not helpful as it only generically referred to the shape and configuration of the coffee maker.  There was not any reference to a specific feature that was identified as being new and distinctive.

Assessment and decision

The large amount of similarities between the Design and the Earlier Design were to be given more weight, and so suggested a lack of distinctiveness.  However, this was offset by the state of the prior art suggesting small differences are significant, the quality and importance of the similarities being relatively low and the freedom to innovate. These factors were in favour of a finding of distinctiveness.

The hearing officer found that the factors were finely balanced but ultimately was persuaded to find that the Design was distinctive over the Earlier Design.  This was assisted by the informed user being found to readily note smaller differences and by Pi supplying a side by side comparison of the Design and the Earlier Design when in use, as shown in the accompanying picture where the single walled design is on the left and the double walled design is on the right.

This side by side comparison accentuated the double walled appearance of the Design and its associated visual effect due to the contrast provided by the coffee to the double walls.

Comment

This decision illustrates the importance of evidence to establish the state of the prior art, which in turn may influence the other statutory factors in assessing distinctiveness.  In the present case, Pi was able to show through its prior art evidence that the large amount of similarities between the Design and the Earlier Design were offset by the other factors of the quality and importance of similarities and the freedom to innovate.

However, Pi’s prior art evidence was not fully accepted as it included designs published after the earliest priority date of the Design and reliance had to be placed on the prior art search conducted by the Examiner.

Also, providing a comparison between the designs enabled Pi to emphasise the visual effect created by the double walls that persuaded the hearing officer to find that the Design was distinctive.

The case further demonstrates the importance of using an appropriate SND to indicate new and distinctive features.  If the SND of the Design had focussed on its double walled appearance, then it is likely that the hearing officer (and possibly the examiner) would have more readily found in favour of distinctiveness of the Design.

Authored by Andrew Lowe

It’s World Intellectual Property Day on April 26 and this year celebrates the brilliance, ingenuity, curiosity and courage of the women who are driving change around the world and shaping our common future.

In that spirit, an invention by three Melbourne schoolgirls has the potential to solve a global problem on the world’s tennis courts: keeping track of the score in social games.

Thirteen year-olds Alice Wilson, Susannah Lutze and Mikayla Lee, who are all in year 8 at Camberwell Girls Grammar School, have developed a simple device that straps to the throat of a tennis racquet that could resolve the constant question that bedevils amateur players everywhere: ‘What’s the score?’

The students, with the guidance of the Girls Invent program and pro bono work from intellectual property specialists at Shelston IP, are well advanced in securing IP protection over their invention, the Score Buddy, which has a potential global market.

Girls Invent runs specifically designed workshops to help guide girls to develop new products, from idea generation through to commercialisation and market entry. They currently operate programs in 150 Australian schools. CEO Mark Glazebrook said, “The Score Buddy team are a great example of the core ingredients for success: passion, determination, smarts and magnetism to bring people along with them. The Girls Invent program in partnership with the school creates the creative space for every girl to thrive and not just accept what others think they can do.”

Shelston IP has supported Girls Invent through its pro bono program since 2016. Senior Associate Allira Hudson-Gofers (herself a mechatronics and biomedical engineer and an Australian representative player in handball and beach handball) said the girls’ development work on Score Buddy was extremely impressive. A provisional patent application has been filed and discussions are underway about which other territories to file for IP protection. “All of the girls I’ve spoken with through the Girls Invent program are incredibly enthusiastic and have some great ideas. They’ve put together prototypes and thought ahead about the next steps in developing their inventions. It’s really encouraging for these girls to be innovating and seeing the potential for STEAM subjects to lead to practical results and opportunities.”

One of the Score Buddy inventors, Susannah Lutze, said, “We are really excited because we recently visited Tennis Australia’s innovation centre and in a few weeks we are visiting an engineering company to possibly help us with the next stage.”

The young inventors are seeking financial backers and, with help from a Dutch industrial design company, hope to have a working prototype completed by the end of the year.

Principal of Camberwell Girls Grammar School, Debbie Dunwoody, believes that an education focused firmly on the future is vital. “We want our students to develop entrepreneurial skills and we know that they will need to create their own opportunities in the future. Girls Invent is a really inspiring and accessible program for our girls to learn about and understand their capacity to be creative innovators. The program really connects them to all elements of STEAM (Science, Technology, Engineering, Arts, Mathematics) and focusses them on ‘design thinking’.

Authored by Katrina Crooks

Seiko Epson Corporation v Calidad Pty Ltd [2017] FCA 1403
Infringement Repair v rebuild Implied licence Mechanical Electrical

Burley J

In this first instance Federal Court of Australia proceeding, Burley J considered the tension between the rights of the purchaser of a patented product, and the rights of the patentee to maintain control of the product in order to determine under what circumstances the importation and sale of refilled printer cartridge will infringe patent rights applicable to the original cartridge. Ultimately his Honour confirmed the “implied licence” approach applied in National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15 and cast a new test to determine whether the repair or refurbishment of a patent product will extinguish the implied licence.

The proceeding also covered issues of trademark infringement, misleading and deceptive conduct and breach of contract.

Background

Seiko Epson Corporation (Seiko) is a global manufacturing company which manufactures and sells printer products, including printer cartridges under the trademark Epson. Epson products are sold within Australia via its exclusive distributor, Epson Australia Pty Ltd. (EAP).

The respondents, comprising the Calidad group of companies (Calidad), purchased “refilled” Epson cartridges from Ninestar Image (Malaysia) SDN. BHD (Ninestar) and imported the refilled cartridges into Australia for resale as Calidad branded cartridges fully compatible with Epson printers (Calidad cartridges).

The process used by Ninestar to refill the cartridges is relatively complex requiring more than simply replenishing the ink reservoir with ink. Each cartridge includes a memory chip which records and stores data indicative of the amount of ink in the cartridge. This ink data is used to prevent printing if the amount of ink remaining in the cartridge falls below a threshold level. The chip also acts as an inbuilt restriction since simply refilling a depleted cartridge will not restore it to a functional state. Accordingly, Ninestar’s process necessarily made an un-trivial modification to the cartridge to either “reset, reprogram or replace” the memory chip.

Issues and decision

The proceedings brought by Seiko and EAP against Calidad contended that the importation and sale of the Calidad cartridges infringed the claims of its Australian patents (Australian Patents Nos. 2009233643 and 2013219239).

Both patents relate to a printing ink cartridge adapted to be attached to an inkjet printer by means of a plurality of electrical terminals. The patents propose “a structure for preventing the information storage medium [or memory] from shorting and becoming damaged due to a drop of liquid being deposited on the terminals connecting the printing apparatus with the storage medium”.

Calidad did not dispute that the refilled cartridges fall within the relevant claims of the patents. Rather, Calidad submitted that under principles established in National Phonograph it is the beneficiary of an implied licence to use the cartridges including the right to resale.

The central dispute in these proceedings concerns the intersection of a patentee’s rights to control the use of patented goods after sale with the rights of the purchaser as the owner of those goods to deal with them.

Implied Licence

In some jurisdictions, this tension is dealt with by a “doctrine of exhaustion” under which the patent right is said to be exhausted following the first sale (eg, the recent landmark United States Supreme Court decision in Impression Products, Inc. v Lexmark Intern., Inc.137 SCt 1523 (2017)). However, under Australian law, the most relevant authority is National Phonograph, in which the Privy Council adopted the implied licence approach.

Under this approach, where the sale of goods is made without any restriction by the patentee, (sale sub modo) the purchaser or subsequent owner of a patented product is conferred an unrestricted right of use or an implied licence, which covers at least the rights to import, use and dispose of the product. In his Honour’s view, as supported by more recent Australian judgments (Austshade Pty Ltd v Boss Shade Pty Ltd[2016] FCA 287; (2016) 118 IPR 93), this remains the correct approach under Australian law.

Burley J noted that while the implied licence approach allows the patentee to impose limitations on the implied licence, the onus lies upon the patentee to notify the purchaser of those restrictions at the time of sale otherwise they may not hold. Furthermore, any restriction or limitation notified by the patentee does not reside or run with the goods so that any restriction will not be encumbered on subsequent owners unless they are made aware of the restrictive conditions upon taking title.

Significantly his Honour saw no difficulty, with reference to the authorities, of implying the licence where the patented goods are first sold outside of the patent area (that is, broadly, outside Australia). Having examined and established the above law and principles, his Honour found that the initial sale of the Epson Cartridges to purchasers overseas granted an implied licence to those purchasers to dispose of the cartridges as they wished, including giving or selling them to another party. Furthermore, his Honour was not satisfied by Seiko’s submission that the cartridges included an “inbuilt restriction” by virtue of the technical limitations imposed by the memory chip. Therefore, the implied licence was without restriction and could be attached to cartridges imported and sold in Australia irrespective of the original sale being made elsewhere or that the cartridges may have been discarded by the original purchaser and collected by Ninestar.

When do modifications extinguish an implied licence?

In the present case however, the Epson cartridges had been refilled and the memory reset, reprogrammed or replaced by Ninestar to restore the original function. Ordinarily, such a modification might be regarded as a question of either repair to, or the “making” of, a patented product – whereby the former is permissible and the latter an infringement. However, since the modification to the cartridges had been made outside the Australian jurisdiction, the modification could in no way amount to a “making” infringement of the Australian claims, irrespective of degree.

Thus, the critical question was not based on a repair / making analysis, but rather whether Calidad could rely on the umbrella of the original implied licence attached to the cartridges at sale, or whether the modifications were such that the implied licence could be considered as extinguished.

Having not found any authority directly addressing the issue, Burley J was of the view that the threshold question to be considered is “whether or not the modified product is materially the same embodiment of the invention as claimed as the product that the patentee sold without restriction.”

His Honour further explained that in order “to assess whether or not the implied licence continues after modifications are made one must consider the significance of modification work done on a product and how the modifications in question relate to the features of the patented product that are defined by the claim. Where that work done, or alteration made, does not concern a claimed feature, then the work is irrelevant to the analysis. That is because the patentee’s rights to limit the use of the patented product arise because the product represents an embodiment of the claimed features” [178]

Furthermore, Burley J applied a three stage test as follows:

  1. What is the scope of the invention as claimed?
  2. What is the manner in which the patentee’s product is an embodiment of the invention as claimed?
  3. To what extent do the modifications made affect the patented product insofar as it represents an embodiment of the claims?

The Calidad Cartridges

His Honour applied the three step test to the Calidad cartridges. In respect of the claimed invention, the parties had agreed that the trial should be focused entirely upon claim 1 of Australian Patent No. 2009233643. That claim and its relevant features, is broadly summarised by Burley J at [201]:

“It may be seen that the features of the product claimed, broadly, are that it is an ink cartridge that can be attached to a printer by inserting it, with both the ink cartridge and printer having a plurality of terminals. The ink cartridge must have a memory driven by a memory driving voltage (integer [2]), an electronic device driven by a higher voltage (integer [3]), terminals electrically connected to the memory and terminals electrically connected to the electronic device (integer [4]), and contact portions for the terminals which are arranged in a particular way (integers [5]-[11]).”

His Honour interpreted the “memory” feature as being a hardware component rather than information or data.

The modifications made by Ninestar involved eleven different types of Epson cartridges and nine different refilling processes. As previously noted, a key step to refilling the cartridges and restoring them to a functional state was to “reset, reprogram or replace” the memory so that it would not indicate the cartridge as being depleted. Ninestar accomplished this by either:

  • Re-writing the memory without physical replacement of the unit; or
  • Replacing the memory chips entirely – a process which involved cutting out the printed circuit board (including the memory chip) from the cartridge; replacing the memory chip on the board with a generic chip; and refitting the board to a cartridge (which in all likelihood was a different cartridge).

In the former case his Honour found that re-writing the memory did not materially alter the product as it represented an embodiment of the claims of the Seiko Patent. However, where the chips had been replaced with a generic chip, his Honour found that the modifications materially affected, and changed, the embodiment, and thereby represented a material change to the embodiment that Seiko sold. In such cases the implied licence was extinguished by the modification.

Burley J found another modification in Ninestars refilling process which extinguished the implied licence from the original sale. This was where Ninestar’s refilling process included a step of cutting off a physical interface pattern used to “key” the cartridges to a particular model of printer. His Honour noted that the modification to the interface pattern was borderline in the context of the present analysis. He concluded that since the claim recited “A printing material container adapted to be attached to a printing apparatus by being inserted in an insertion direction” the modification fell on the wrong side of the line and would serve to terminate the implied licence.

Implications

The decision provides a contemporary review of the correct legal approach for determining the purchaser’s rights to use a patent good under Australian law.  In particular:

  • The presumption that the sale of a patented good provides the purchaser (and any subsequent owner) with an unrestricted right of use – even across jurisdictional boundaries.
  • Patentees wishing to maintain control of patented goods after sale must clearly and expressly communicate limitations at the time of acquisition. Any limitations do not automatically pass from the initial purchaser to a subsequent owner.

Furthermore, the case breaks new ground by establishing a test for determining the scope of modification which would extinguish an implied licence by linking the modification made to the embodiment of the invention as claimed.

Appeal

Calidad have recently appealed the decision on grounds of non-infringement and that the implied licence of Seiko’s patent rights was not extinguished by the modifications they made in refilling the cartridges.

Authored by Duncan Longstaff