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Tuesday, May 16, 2017

The Dating Game: Divisional Patents

By David Hunt, Lawyer

The Full Court of the Federal Court has clarified the date from which infringements of a divisional innovation patent will give rise to a right to recover compensation.

In Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54 the Full Court decided that owners of divisional innovation patents will only be entitled to compensation in respect of acts of infringement occurring from the date the patent is granted. This overturns an earlier Federal Court decision that identified the relevant date as the date the standard patent on which the divisional application is based was filed.

The innovation patent provides Australia's 'second tier' of patent protection, being quicker and easier to obtain than a standard patent but offering a shorter period of protection. Such patents may be applied for independently or as divisional applications based on an existing standard patent application.

The Full Court's decision has the potential to significantly reduce the amount of compensation that may be recovered in respect of the infringement of a divisional innovation patent. As a result, the decision limits the advantages of strategically filing divisional patents to directly target infringers.

Background


Australian Mud Company is the owner of a number of patents relating to core sampling processes, including a standard patent application filed on 5 September 2005 from which a number of divisional patents were subsequently derived. Two such divisional patents formed the basis of infringement proceedings brought against Coretell. The applications for these two patents had been filed in 2010 and 2011 in an effort to directly target Coretell, which had successfully defended two earlier infringement suits brought by Australian Mud Company relating to patents for similar technology.

It was third time lucky for Australian Mud Company, as the Federal Court found that Coretell had infringed the two divisional patents. While not disputing the Court's finding of infringement, Coretell did raise a number of questions regarding the outcome, including: whether it was liable for acts of infringement occurring since the date of the parent patent, that is, 5 September 2005,  or the dates of the divisional patents in 2010 and 2011?

The answer to Coretell's question is not clear from a mere reading of the legislation. However, in Britax Childcare Pty Ltd v Infa-Secure Pty Ltd (No 3) [2012] FCA 1019, following a detailed analysis of the legislation and surrounding materials, the Federal Court gave the answer as: the date of the parent patent application. For Coretell, that meant it would be deemed to have infringed Australian Mud Company's patent for much longer than under the alternative interpretation, allowing Australian Mud Company to claim greater compensation. It was this interpretation that was challenged by Coretell on appeal to the Full Court.

The Decision


The Full Court undertook its own analysis of the legislation, noting that the approach taken in Britax was inconsistent with its reading of the legislation and the underlying policy and produced a number of anomalies, including the fact that a person could be liable for the infringement of a patent before that patent is even drafted. As a result, the Full Court overruled Britax concluding that Coretell could only be liable for acts of infringement occurring from the dates of grant of the divisional patents.

Implications


The Full Court's decision may have a significant impact on the practice of patentees strategically filing divisional innovation patents in order to directly target infringers, due to the constraints it places on the compensation that can potentially be recovered. This may assist in addressing concerns raised in the Productivity Commission's recent report on Intellectual Property Arrangements (discussed in our earlier post) that the innovation patent system is being used as a strategic tool rather than for its intended purpose of encouraging innovation.

However, divisional patents (including innovation patents) will still provide a number of important benefits for patentees, including the ability to address an objection that a patent application claims more than one invention, and enabling the direct targeting of the activities of competitors, providing a standard patent application is still on foot, and that the subject matter claimed is supported by that application.


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