Case review by Fiona Galbraith
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Collins v Northern Territory [2007] FCAFC 152
Summary
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The Full Federal Court in this case considered whether certain aspects of the Northern Territory’s (“NT’s”) conduct may amount contributory infringement of a patent under section 117 of the Patents Act 1990 (Cth).
A majority of the Full Federal Court held that the NT’s grant of a licence to harvest certain trees amounted to a supply of those trees, so the NT’s conduct could be contributory infringement under s 117. The majority also held that liability under s 117(b) could arise, because the species of trees supplied by the NT were not a staple commercial product.
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Background
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The Collins own a patent for a process of producing blue essential oil from a particular species of cypress tree. The oil has been promoted as being “blue gold”, with potential not only in perfumery and aromatherapy but also in flavouring and pharmaceuticals. The dispute in this case arose because the NT granted a licence to Australian Cypress Oil Company (“ACOC”) to take certain trees from Crown lands. ACOC (allegedly) used the trees obtained from the Crown lands to produce the blue essential oil in a way that infringed the patent.
The Collins brought proceedings against the NT, claiming that because the NT granted ACOC a licence to take timber from Crown lands, the NT had engaged in contributory infringement of Collins’ patent. One of the Collins’ aims in suing the NT appears to be to have the rights to take the timber from Crown lands granted to them exclusively.
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The case – contributory infringement
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Direct infringement of the patent and the validity of the patent have not yet been considered by the Federal Court in this case. Instead, the trial was directed to two separate preliminary questions which would answer the question of whether the NT could be a contributory infringer of the patent, assuming the patent was valid and ACOC was infringing it.
A party may engage in contributory infringement of a patent if it supplies a product that is later used by another person in a way that infringes a patent. In establishing whether the supply of the product amounts to contributory infringement, s 117 of the Patents Act requires the use of the product to be an infringing use in one of three circumstances, either
(a) if the product is capable of only one reasonable use, having regard to its nature or design—that use; or
(b) if the product is not a staple commercial product—any use of the product, if the supplier had reason to believe that the person would put it to that use; or
(c) in any case—the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier.
The first question “whether the Territory had supplied a product to ACOC the use of which would infringe the patent” would answer whether s 117 applied to the NT’s conduct.
The second question “whether the product so supplied was capable of only one reasonable use, namely that of producing a blue coloured oil by the process protected by the patent, or the product is not a staple commercial product and the Territory had reason to believe it would be put to the infringing use complained of by the Collins” would answer whether the NT’s supply was within the circumstances contemplated by s 117 (a) or (b), and was therefore a supply (potentially) amounting to contributory infringement.
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The result
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A majority of the Full Federal Court answered the separate questions in the Collins’ favour. Branson and Sundberg JJ, held that the terms of the licence to ACOC obliged ACOC to take the timber from the land, and this meant that the NT had supplied the timber by granting ACOC the licence. French J disagreed that the terms of the licence amounted to a supply of the timber.
The next question was whether the timber was a “staple commercial product”. There is little case law on what “staple commercial products” are and the majority suggested that a quality of such a product is that it is “an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product”.
Here, the majority classified the product narrowly and found that the product was unmilled trees of the particular cypress species, rather than any type of timber whatsoever. The evidence indicated that a person who wished to obtain an unmilled tree of that species could not purchase it from a supplier without difficulty because there was no existing market for the product. On that basis, the majority held the product was not a staple commercial product. French J also disagreed with the majority on this point, holding that the relevant product was “millable timber” of various species, which were a staple commercial product.
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How can contributory infringement of a process claim occur under s 117?
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The majority also discussed the conflicting judicial authority regarding how s 117 applies to process claims. In Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1, the Full Court agreed in obiter with Gummow J’s conclusion at trial that (because of the definition of “exploit” in the Patents Act) it is a precondition to the operation of s 117 in relation to a method claim that there be a product whose use would infringe that method claim. Following Rescare, the NT submitted that the word “product” in s 117 could never apply to an input into a process. Accordingly, the NT should not be liable under s 117.
In contrast, in Bristol-Myers Squibb Co v FH Faulding & Co Ltd (2000) 97 FCR 524, Black CJ and Lehane J adopted a literal construction of s 117, so that, if followed in this case, if the product used by ACOC infringed the patent and the NT, as supplier of the product to ACOC, had reason to believe that ACOC would so use the product, then the supply of the product would be an infringement of the patent by the NT.
The majority declined to express a preference for either approach, saying that a determination as to whether ACOC has infringed the patent was required in order to consider the part of the NT’s submission based on Rescare, and whether ACOC infringed the patent was outside the scope of the trial judge’s enquiry.
Accordingly, the operation of s 117 as it applies to process or method claims remains open to debate.
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