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Relying on the Grace Period for Divisional Applications in Australia

Mont Adventure Equipment Pty Limited v Phoenix Leisure Group Ltd Pty (2008) FCA 1476 (first instance)

Mont Adventure Equipment Pty Limited v Phoenix Leisure Group Ltd Pty (2009) FCAFC 84 (the Appeal)

- David Miles PhD and Alison McMillian PhD

Introduction

In October 2004, Mont Adventure Equipment Pty Limited (“Mont”) began offering a new type of travel pack for sale in Australia. On 13 May 2005, Mont relied upon the grace period to file a standard patent application (“the parent”) to seek protection of these packs. 

On 22 November 2006, in response to concerns regarding potential infringement Mont filed an innovation patent application claiming divisional status from the parent.  This enabled Mont to (i) quickly obtain enforceable patent rights for its “Astro 65” and “Astro 80” model travel packs and (ii) commence infringement proceedings against Phoenix Leisure Group Ltd Pty (“Phoenix”).  In response, Phoenix cross claimed that the innovation patent was invalid because it lacked novelty and an innovative step in light of Mont’s disclosure of the travel packs in 2004.

The Crux of the First Instance Case

Phoenix’s cross claim raised the question as to whether Mont could rely on the grace period as provided by the Act1 and Regulations2 to justifiably disregard their previous disclosure of the packs as prior art in defending the validity of the innovation patent.  The answer to this question was critical to Mont’s case as Mont admitted that its Astro 65 and Astro 80 model packs as sold in October 2004 disclosed each of the features of the claims of the innovation patent. 

The Court appropriately turned in the first instance to the grace period provisions under Australian law, that being Section 24(1) of the Act which reads as follows:

For the purpose of deciding whether an invention is novel or involves an inventive step or an innovative step, the person making the decision must disregard: (a) any information made publicly available, through any publication or use of the invention in the prescribed circumstances, by or with the consent of the nominated person or patentee, or the predecessor in title of the nominated person or patentee; and (b)… but only if a patent application for the invention is made within the prescribed period. (emphasis added)

In determining the meanings of “in the prescribed circumstances” and “within the prescribed period” the Court turned to Clauses 2.2 (1A) and 2.3 in the Regulations. Clause 2.2 (1A) reads:

(1A) For paragraph 24(1)(a) of the Act, the circumstance that there was a publication or use of the invention within 12 months before the filing date of the complete application is a prescribed circumstance. (emphasis added)

 

Clause 2.3 reads:

(1A) For information of the kind referred to in paragraph 24 (1) (a) of the Act, if the applicant relies on the circumstance in subregulation 2.2 (1A), the prescribed period is the period of 12 months after the information was first made publicly available.

(1) …

(2) …

(3) Subregulation (4) applies:

(a) if an application for a patent is a  divisional application:

(i) under section 79B of the    Act for an invention disclosed in the specification filed with a previous application for a standard patent (the original application); …

(ii)…; and

(b) only to information disclosed in the divisional application that was disclosed in the original application.

(4) For determining the prescribed period for subsection 24 (1) of the Act, the filing date of the divisional application is taken to be the filing date of the original application.

 

Upon consideration of the above statutes, the Court concluded that for an applicant to validly rely on the grace period, the first publication or use of the invention must have occurred within 12 months before the filing date of the complete application.  It became quite clear from the Court’s reading of the provisions that the case would turn on the interpretation of the phrase “the filing date of the complete application”, that being

  • 13 May 2005 - the filing date of the parent application, or
  •  22 November 2006 - the filing date of the divisional innovation patent.

Submissions

In putting forth their arguments, Mont was of the view that the “filing of the complete application” on its construction would give a filing date of 13 May 2005 in which the 12 month ‘grace period’ provided for in clause 2.2 would commence on 13 May 2004.  Mont then concluded that according to section 24 of the Act, information made publicly available by the sale of the travel packs from October 2004 would have to be excluded from the prior art base in determining whether the invention claimed in the innovation patent is novel and involves an innovative step. 

Mont went on to say that:

“the complete application refers to the first complete application, referable to the disclosure of the invention… And the conceptual underpinning for that submission is that it’s the first disclosure of the invention that … controls the validity of the patent” as per paragraph 31 in the transcript and that,

 

“there is no apparent legislative intention discernable that would provide the benefits of divisional status (in return for the disclosure of the invention on filing of the parent application) on the one hand and yet remove any grace period benefits accruing to that status on the other.”5

In submitting counter-arguments, Phoenix was of the view that the “complete application” referred to in clause 2.2(1A) refers in this case to the divisional application.  Phoenix drew the Court’s attention to the perceived application of section 24. Phoenix considered that section 24 applies “whenever it is necessary to decide whether an invention is novel or involves an inventive/innovative step ....” 3  

Phoenix was of the opinion that section 24 applies where “the grant or revocation of a patent is in issue” and “the decision-maker must focus on the invention as claimed in the application”. Phoenix argued that if those two requirements were met in this case, “the complete application” referred to in clause 2.2(1A) must mean the complete application for the patent, the grant or revocation of which is in issue, here the divisional application.”3

Phoenix went on to say that this construction is consistent with the “apparent purpose” of ection 24, which it considered was to protect against non-grant or revocation of a patent for want of novelty and/or an inventive/innovative step, where the complete application is made within a specified period after the first use of the invention claimed in the patent.3 

Decision

From a literal reading of the provisions, the judge of the Court, Justice Stone, was persuaded by Phoenix’s arguments and held that the 'complete application' in light of section 24(1) refers to the complete application for the patent, the grant or revocation of which is in issue, in this case the divisional innovation patent.  The result of this decision was that the grace period in respect of the innovation patent was the 12-month period immediately prior to the filing of the divisional application not the 12 months prior to the filing date of the parent application.  Thus, the Court held that the filing date of the complete application was 22 November 2006, the filing date of the divisional innovation patent.  This set the grace period clock from 22 November 2005, well after the first sale in October 2004 and in effect invaliding Mont’s innovation patent.

Mont’s Response to the Decision

Mont appealed the decision and asserted that the interpretation of the grace period provisions by Judge Stone “would have the anomalous effect of providing that any divisional application... would be entitled to the same priority date as its parent application.... but would be deprived of the benefit of any grace period available to the parent which disclosed the invention.”4

Ramifications if the Appeal was not successful

A broad ramification of the first judgement if upheld in the Appeal would be the weakening of the established Australian practice of relying upon the grace period of a first filed Australian application (parent) to exclude self disclosure(s) relevant to a subsequently filed application (divisional).  The validity of any subject matter contained in the divisional application could have been in question and the divisional application itself could have been retrospectively invalid if:

(i) The first filed application was filed so as to take advantage of the grace period following a self disclosure;

(ii) The subject matter claimed in the divisional was described in the self disclosure; and

(iii) The divisional was filed after the 12 month anniversary of the self disclosure.

Still further, an applicant of a parent application claiming the benefit of the grace period would not find a divisional, which is filed outside of the parents’ grace period, helpful in obtaining valid monopolies of subject matter disclosed in the divisional in the following circumstances;

(i) in response to a potential infringer as per Mont’s strategy;

(ii) in response to multiple inventions being identified during examination or on applicant’s own initiative and

(iii) as a means of continuing prosecution.

 In our view, the denial of the ability to obtain a valid divisional application from a validly filed parent application is contrary to the fundamental basis for divisional applications as espoused in Article 4G of the Paris Convention.

Paris Convention Article 4G:

(1) If the examination reveals that an application for a patent contains more than one invention, the applicant may divide the application into a certain number of divisional applications and preserve as the date of each the date of the initial application and the benefit of the right of priority, if any.

(2) The applicant may also, on his own initiative, divide a patent application and preserve as the date of each divisional application the date of the initial application and the benefit of the right of priority, if any. Each country of the Union shall have the right to determine the conditions under which such division shall be authorized.

The period between issuance of the decision at first instance and the appeal was one of considerable practical uncertainty.  The practice response to this uncertainty was to identify and carefully asses each “grace period” application.  In many cases, a conservative approach was taken to file one or more precautionary divisional applications immediately prior to expiry of the parent’s grace period (if it had not already expired).

The Appeal

The Appeal in Mont Adventure Equipment Pty Limited v Phoenix Leisure Group Ltd Pty (2009) FCAFC 84 was considered by the full court.  Judges Emmett, Bennett, and Jagot comprised the full court on this case.

In light of the possible overhaul and weakening of divisional practice in Australia, the Institute of Patent and Trade mark Attorneys of Australia (IPTA) which is the peak professional body representing Australian patent and trademark attorneys deemed it necessary to intervene in support of Mont’s appeal.  It is very rare for IPTA to request leave to intervene which provides some indication as to the unfavourable reception of the first court decision by the profession as a whole.

IPTA’s specific involvement

The court granted IPTA leave to intervene in the appeal by the making of written and oral submissions on the basis that IPTA would;

 

  • not seek an order for costs if Mont were successful,
  •  submit to an order to pay any additional costs incurred by Phoenix if Mont were unsuccessful and
  • bear, in any event, any additional costs of the parties incurred in dealing with any oral or written submissions made by IPTA.

Submissions

Arguments by Phoenix

According to Phoenix, the legislators intended to deprive a divisional application of the benefit of the grace period in respect of a claim that is not "fairly based" on matter disclosed in the parent specification filed with a previous application for a standard patent (i.e. the original application) even though it is "disclosed" in the parent.

Arguments by IPTA/Mont

IPTA (with support of Mont) says that s 24 of the Act, when read in conjunction with the Regulations, provides that the person making the decision of whether an invention is novel must disregard:

  • any information made publicly available, through any authorised or consensual publication or use of the invention within 12 months before the filing date of the complete application;
  • but only if a patent application for the invention is made within 12 months after the information was publicly available.

 “IPTA submits that, read in this way, the provisions contemplate a symmetry between the "complete application" and the "patent application". The symmetry is brought about, it submits, by the 12 month period.”

 

The Crux of the Appeal

Similar to the first case, the appeal would turn on the meaning given to clause 2.2(1A) in view of section 24 to determine whether Mont’s innovation patent could enjoy the same grace period as its parent.

 

Phoenix had argued that the legislators had used the word "disclose" to link a divisional and a parent, and the words "fairly based" to impart a priority date to the divisional thus allowing a different interpretation for priority date requirements and grace period requirements.

However, Jagot J cited the following passage from ICI chemicals & Polymers Ltd v The Lubrizol Corporation Inc (2000) FCR 214,

"it would be a rare case indeed where a claim which claims matter in substance disclosed in the specification as filed is not, equally, fairly based on the matter described in the specification (and vice versa)." 

Jagot J further mentioned that the construction put forward by Phoenix results in a situation which would be prima facie inconsistent with the treatment of divisional applications in all other parts of the Act and Regulations.  Jagot J highlighted the fundamental requirements of the task of statutory construction which was acknowledged by all parties.  Jagot J specifically mentioned that Clause 2.2(1A) forms part of a broader statutory scheme and that the clause should be construed in context "so that it is consistent with the language and purpose of all the provisions of the statute" and "on the prima facie basis that... [the statutory] provisions are intended to give effect to harmonious goals" (Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69] and [70]).

Jagot J considered that extrinsic material relating to the amendments to the Act and Regulations which introduced the grace period (in this case, the Explanatory Statement of 2002) may be considered in the task of construction (s 15AB of the Acts Interpretation Act 1901 Acts Interpretation Act 1901 (Cth)) but notes that the "words of the statute, not non-statutory words seeking to explain them, have paramount significance" (Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529; [2006] HCA 11 at [22]).

Jagot J was of the view that the 12 months used for the establishment of a priority date and the 12 months used for the grace period are congruent and found support for this as per the aforementioned explanatory memorandum which her Honour thought was an indication that the draftsperson had divisional applications in mind for the purpose of those amendments. 

It is unlikely that the amendments were intended to treat divisional applications inconsistently with the balance of the Act and Regulations.”

 

Emmett J agreed with Jagot J’s views and made the following observations.

  • It was more likely that the legislators assumed that there was no distinction in substance between the concept of an invention "disclosed" in the specification of a parent and a claim for an invention being fairly based on matter disclosed in the specification of the parent.
  • There is no requirement for a divisional application to be "fairly based" on the parent application. The only requirement is that the invention claimed in the divisional be "disclosed" in the specification of the parent application.
  • the phrase ‘the filing date of the complete application’ must be construed in the context of all the provisions of the 1990 Act and the Regulations, so as to give a harmonious result achieving the apparent goal of the provisions. To construe the phrase as referring to the Parent Application and not to the Divisional Application achieves that result."

Bennett J in support of Jagot J and Emmett J said that "the drafting of the Regulations is not a model of clarity".  There are many in the profession who would not only agree with Bennett J’s view but consider it applicable to the entire Act.

Bennett J also said that the "overriding purpose of the Act and Regulations, including the amendments to the Regulations in 2002 (introducing the grace period) is to maintain the system whereby a divisional application travels with its parent."  Bennett J concluded that the relevant legislation indicates that the intention was to give divisional applications the same protection as the parent application in the same circumstances.

 

The Appeal Decision

The judges were unanimous in upholding the appeal.  They all:

  • Agreed that the clause was poorly drafted and the question was one of statutory interpretation;
  • Looked at the purpose of the Patents Act 1990 (Cth) (“Patents Act”) and the Regulations as a whole and found that they provided a scheme which linked a number of dates for a divisional patent application with that of the parent, including the priority date for eligible claims and the filing date of the patent; and
  • Concluded that the filing date of the complete application is 13 May 2005.

 

Conclusion

To the relief of many Australian practitioners, the law regarding divisional patent applications and the grace period is again consistent with the patent profession’s general understanding of the legislation.

It is clear that a divisional patent application can rely on the grace period afforded by s 24 of the Patents Act and the Regulations, where its parent application is entitled to do so. 

 

It is apparent from this case that legislative provisions need to be clear to avoid unnecessary legal wrangling and a review of the entire Act and Regulations to determine possible ambiguities or discrepancies that lie within may be beneficial.

Overall, the message learned from the first instance case and the appeal is to avoid, if at all possible, reliance of the grace period to disregard a self disclosure as prior art. That is, ensure that Australian patent applications are filed prior to such a disclosure and that an Australian application is filed for each invention disclosed.

The Federal Court of Australia’s first instance decision and appeal decision can be viewed online.6

To discuss this case or the content of this article, please contact Dr David Miles at dmiles@pizzeys.com.au.

Dr David Miles, Associate, and Dr Alison McMillian, Senior Associate, are registered patent attorneys in Australia with Pizzeys Patent and Trade Mark Attorneys in the Chemical and Life Sciences Group of the Brisbane Office. Pizzeys Patant and Trade Mark Attorneys are located on Level 14, ANZ Centre, 324 Queen Street, Brisbane QLD 4000. David and Alison can be reached by telephone on 61 7 3221 9955.

(1)Patents Act (Cth) 1990

(2)Patent Regulations (Cth) 1991

(3)See paragraph 20 of the Court transcript of first instance case (online as per endnote 7. below)

(4)Ibid 3, Sub-Regulation 2.3(4)

(5)See Paragraph 22 of the Court transcript of first instance case (online as per endnote 7. below)

(6)The transcript of the first instance case can be found at www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2008/1476.html whilst the appeal transcript can be found at www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCAFC/2009/84.html?query=^mont%20phoenix