News Centre - Article 8
 

Contributory Infringement in Australia

Northern Territory v Collins [2008] HCA 49
 

- Bill Bennett

Introduction

On 16 October 2008, the High Court of Australia handed down the first Australian decision to give any detailed consideration to the meaning of the term “staple commercial product”, as that term is used in the contributory infringement provision of the Australian Patent Statute.

The Statutory Framework

Contributory infringement was introduced into Australian Patent law with the enactment of the Patents Act 1990.  The stated intention was to harmonise Australian contributory infringement law with the contributory infringement law of major trading partners, and particularly with that of the US.

Section 117 of the Patents Act 1990 reads as follows:

“(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.”

In summary, the supplier of a product will be liable if:

(a)  the product is capable of only one reasonable use, being the infringing use; or

(b)  the product is not a staple commercial product, and the supplier had reason to believe that the recipient would put the product to an infringing use; or

(c)  the product is supplied together with inducement or instructions to use the product in an infringing manner.

Note that, in none of the three scenarios recited above, is there any express requirement that the recipient of the supplied product actually be a direct infringer.  Put differently, the supplier may be liable under Section 117, even if the recipient of the supplied product never directly infringes the patent.

 

Facts & Issues

 In the subject case, the patent was directed to a process for extracting oil from a particular species of tree (Callitris Intratropica) which is commonly known as “Cyprus Pine”. 

The Government of the Northern Territory (“the Northern Territory”) granted several licenses to the Australian Cyprus Oil Company Pty Ltd (“ACOC”) to enter government land and remove Cyprus Pine trees. 

The patentee commenced proceedings and asserted that, by issuing licenses to ACOC, the Northern Territory had infringed the patent under the provisions of Section 117(2)(b). 

For reasons of expediency, the trial court decided to try the issues of “supply” and “staple commercial product” as a preliminary matter.

In the preliminary trial, the patentee asserted (a) that the Northern Territory was supplying Cyprus Pines to ACOC, (b) that Cyprus Pines were not a “stable commercial product”.

The Northern Territory denied that it was supplying Cyprus Pines to ACOC, and argued that the grant of a license was merely permissive, rather than being a positive act of “supply” as required by Section 117(1).  Further, the Northern Territory asserted that Cyprus Pines were a “staple commercial product” and therefore outside the operation of Sub-section 117(2)(b).

 

Findings at Trial

At first instance, the trial court agreed with the Northern Territory’s submissions on both points of contention.  Specifically, the trial court agreed that the grant of a license was merely permissive, and did not amount to a positive act of “supply” as required by Sub-section 117(1).  The trial court also agreed with the Northern Territory that Cyprus Pines were “staple commercial products” and hence not within the operation of Sub-section 117(2)(b).

Findings on Appeal

On appeal, both of the trial court’s preliminary findings were overturned by a 2:1 majority. 

On the question of whether the Northern Territory was supplying Cyprus Pines to ACOC, the majority construed the license as containing provisions which placed obligations on ACOC.  As such, the majority declined to treat the license as being merely permissive, but rather treated the license as being tantamount to a contract of sale.  For example, at paragraph 124 of the majority judgement it was stated:

“There is no doubt that ACOC was in need of the Territory’s timber. It was unable to obtain it without the Territory’s consent. The Territory said ACOC could have the timber so long as it paid for it. It would grant ACOC a license to come onto its land and take the timber. Indeed it obliged ACOC to take it. In those circumstances, in the events that happened, the Territory provided or furnished the timber to ACOC, and thus supplied it to ACOC.” (underlining added)

On the question of “staple commercial product”, the majority gave considerable weight to the fact that Cyprus Pines had been virtually abandoned as a plantation species since 1977.  As a result, it was a relatively scarce natural resource.  The majority noted that there was no evidence to suggest that there was an established wholesale or retail market for unmilled trees of the type in question.  Rather, the evidence suggested that a person desiring to acquire such unmilled trees would have no choice but to apply to the Northern Territory for a license and, for that license to be granted, the licensee would have to assume significant obligations in respect of the harvesting process.  Having laid this groundwork, at paragraph 158 the majority concluded that:

“It would be unhelpful for this Court to hazard a comprehensive test for the purpose of determining whether any particular product is a ‘staple commercial product’ within the meaning of s 117(2)(b) of the Act. However, it seems to us 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. In our view, having regard to the evidence reviewed above, unmilled Callitris Intratropica trees, at least in the Northern Territory, are not a ‘staple commercial product’ within the meaning of s 117(2)(b) of the Act.” (underlining added)

Findings on Further Appeal to the High Court

On further appeal, the High Court upheld the finding that the Northern Territory had supplied, but reversed the appeal court’s conclusion that the supplied trees were not a staple commercial product.

The minority judgement of Gummow J & Kirby J declined to narrowly look at the product as being unmilled Callitris Intratropica trees.  Rather, they looked at the product more broadly as being unmilled trees.  They then readily concluded that unmilled trees were a staple commercial product.

The majority judgement of Hayne J, Heydon J & Crennan J adopted a different approach.  They looked at the uses of the product and concluded that, if the product had “various uses”, then it was a staple commercial product by virtue of these other non-infringing uses.  This approach is more in accord with, for example, the US approach which refers to “substantial non-infringing use”.

For example, at paragraph 145, Crennan J, with whom Hayne J & Heydon J agreed stated:

“The phrase "staple commercial product" means a product supplied commercially for various uses. This does not mandate an enquiry into whether there is "an established wholesale or retail market" or into whether the product is "generally available" even though evidence of such matters may well be sufficient to show that a product is a "staple commercial product". The relevant enquiry is into whether the supply of the product is commercial and whether the product has various uses.”

 

Conclusion

With this decision, the High Court has significantly limited the operation of Section 117(2)(b).  The Court has effectively established that a product which has various other non-infringing uses will only be captured by the contributory infringement provisions if it is supplied together with instructions or inducements to infringe (i.e. under the operation of Section 117(2)(c)).

© Bill Bennett September 2008 – Pizzeys Patent Attorneys – bbennett@pizzeys.com.au