Case review by Virginia Beniac-Brooks
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The High Court (Gummow ACJ, Kirby, Hayne, Heydon and Crennan JJ) recently handed down its decision in Northern Territory v Collins [2008] HCA 49 concerning the “contributory infringement” provision of the Patents Act 1990 (Cth). In four separate concurring judgments (Gummow ACJ and Kirby J issued a joint judgment) the Court overturned the Full Federal Court’s decision and held that the timber ofCallitris intratopica was a “staple commercial product” and as such the conduct of the appellant, the Northern Territory Government, did not fall within the scope of section 117(2)(b) of the Act. While the findings in relation to the timber being a staple commercial product were by themselves sufficient to dispose of the appeal, it is unfortunate that only two judges of the Court (Hayne and Crennan JJ) gave any real consideration to the construction of s 117 and its applicability to patented methods or processes. Unfortunately, the question of whether s 117 has any operation for patented methods or processes remains largely unanswered.
The issue before the High Court was whether the Northern Territory Government was liable under s 117 for infringement of the Collins’ patent by its supply of timber to Australian Cypress Oil Company Pty Ltd (“ACOC”). For the purposes of the appeal it was accepted that ACOC extracted blue cypress oil from the trees using the patented process and was a direct infringer.
S 117 provides as follows:
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"(1) If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.
(2) A reference in subsection (1) to the use of a product by a person is a reference to:
(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."
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In deciding this issue the High Court had regard to three questions put forward by the Northern Territory. First, whether the literal meaning of s 117(1) has the consequence that supply of an "input" into a patented method or process (or an input into a resulting product) is incapable of engaging the operation of this section. Second, whether the grant of statutory licences to ACOC under the Crown Lands Act by the Northern Territory constituted a "supply" of a "product" within the meaning of s 117(1). Third, whether the "product", the supply of which was alleged to breach s 117, namely timber, was a "staple commercial product" within the meaning of s 117(2)(b). In short the Northern Territory succeeded on the appeal but only in relation to the third question.
Notwithstanding their decision on the third question, both Hayne and Crennan JJ considered in some detail the question of the application of s117 to the supply of an "input" into a patented process. In separate judgments their Honours noted that to engage s 117(1) there needed to be “the supply of [a product] by one person to another” . In Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 111 ALR 205, the then Justice Gummow in the Federal Court suggested that because the term 'infringe' was not defined by the Act, the starting point for any enquiry in relation to contributory infringement was with the definition of 'exploit', being the exclusive right granted to the patentee by a patent pursuant to s 13 of the Act (which had the affect of rendering s 117 inoperative for patented methods and processes). However, Justices Hayne and Crennan suggested that the starting point should be s 117 itself, read as a whole.
At [35]-[36] Hayne J noted
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“Although s 117(1) is engaged only where there is "the supply of [a] product by one person to another", s 117 is directed to an identified sub set of such transactions. That sub set is identified first by the introductory words of s 117(1) – "[i]f the use of a product [the product that is supplied] by a person would infringe a patent" – and second by the amplification in s 117(2) of what is meant by "the use of a product by a person". At the risk of undue abbreviation the amplification provided by s 117(2) can be described as inviting attention, in the particular cases identified in each paragraph of the sub section, to "only use" (s 117(2)(a)), "known use" (s 117(2)(b)) and "instructed use" (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin consideration of an issue about the application of s 117(1) will be to examine what is said to be the use of the product that is alleged to engage the provision. It is that use which must be identified as the use which would infringe the patent because the hinge about which s 117 turns is its introductory words: "[i]f the use of a product by a person would infringe a patent".
When the question is approached in that way, it will be observed that to ask whether supply of an input for a patented method or process (or resulting product) is capable of attracting s 117(1) may direct attention away from the relevant statutory questions. Those questions are: is there a supply of a product; what is the use of the product (as use is elucidated in s 117(2)); and does that use infringe the patent?”
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On the question of whether the definition of “exploit” limits the operation of s 117 on process and method patents Crennan J noted at [128] that:
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a consideration of the complete definition of “exploit” in respect of a method or process indicates that there is no reason to deny the application of s 117 to a product (including, as here, an unpatented product) supplied by the supplier, preparatory to any carrying out of the patented method by a person to whom the product is supplied. The secondary materials referred to above [the IPAC Report] show that the latter type of product was the main target of the legislation. The word “product” in s 117 is not confined to a product resulting from the use of a patented method or process.”
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Heydon J did not reach a firm conclusion on this issue but rather concurred with Crennan J that the conduct of the Northern Territory Government did not fall within the scope of s 117(2)(b) and as such it was not necessary to consider the other two questions raised.
Gummow ACJ and Kirby J on the other hand raised a number of observations about the first question but again did not reach any firm conclusion. In what appears to be a passing shot at Crennan J and her Honour’s reliance on the IPAC Report, Gummow ACJ and Kirby J first observed that it was the fundamental duty of the Court to“give meaning to the legislative command according to the terms in which it has been expressed; legislative history and references to the pre existing law should not deflect the Court from its duty in resolving an issue of statutory construction which ultimately is always a text based activity.”Their Honours then noted that there were a number of significant provisions in the Act, which operate in a wide range of circumstances, and draw a clear distinction between an invention that is a product and one which is a method or process. Gummow ACJ and Kirby J then noted the principles expounded by the High Court in NRDC concerning the concept of “manner of manufacture” and what can be regarded as a “vendible product” and that the distinction between an invention that is a product and an invention that is a method/process that may or may not yield a product continues on in the current Act through the definition of “exploit”. Finally, again noting that the current Act does not provide a definition of what constitutes an infringement, their Honours at [21] simply observed:
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“Section 117 does not itself speak to the exclusive rights given by the patent. Rather, the provision identifies conduct and prescribes conditions in which that conduct will be an infringement of the patent. The conduct is the "supply of [a] product" by one person to another. The critical condition for the imposition of liability for infringement is that which is stated first. This is that "the use of [the] product" by the person to whom it is supplied "would infringe [the] patent" (s 117(1)). As the reasons of Hayne J demonstrate, this is informed by the application of s 117(2) and consideration of the exclusive rights given by the patent.”
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While the common law principle of accessorial or joint tortfeasor liability remains available in Australia and, notwithstanding its limitations, may provide some comfort to holders of patents directed to processes or methods, it is nonetheless disappointing that the High Court was unable to reach a unanimous decision on the operation of s 117 as it relates to process or method patents.
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