A first for Australian courts 5 min read
The Patents Act 1990 (Cth) provides an exemption to patent infringement in relation to acts 'done for experimental purposes'. However, the exemption had not (until recently) been considered by any Australian court. More than a decade after the exemption was introduced, the Federal Court has provided guidance on its application in Jusand Nominees Pty Ltd v Rattlejack Innovations Pty Ltd [2022] FCA 540.
Key takeaways
- The term 'experimental purposes' does not limit the exemption to work performed in scientific laboratories. However, it does connote some application of the scientific method to discovering new information or testing a principle or supposition.
- The 'experimental purpose' must be the predominant (but not necessarily the sole) purpose. For example, research may fall within the exemption even if it's funded by a commercial partner with a view to making profit in the future.
- Any organisations intending to rely on the 'experimental purposes' exemption must ensure that the relevant experimental purpose, methodology and results are clearly documented.
What is the 'experimental purposes' exemption?
After years of debate, Australia introduced an 'experimental purposes' exemption to patent infringement as part of the Raising the Bar reforms in 2012. Under section 119C of the Patents Act 1990, a person does not infringe a patent by doing an act 'for experimental purposes relating to the subject matter of the invention'. Among other things, this can include:
- improving or modifying the invention;
- determining the properties of the invention; or
- determining the validity of the patent.
The 'experimental purposes' exemption provides an important carve-out, especially for organisations operating in R&D-heavy areas such as biotechnology and pharmaceuticals. However, the exemption had not (until recently) been considered by any Australian court.
Background to the dispute
Jusand Nominees Pty Ltd (Jusand) owned innovation patents addressing an issue encountered in underground mines, where long narrow boreholes are drilled upwards into rock. Drills often break, leaving large fragments lodged in boreholes. Those fragments can later unexpectedly fall from the boreholes, creating a safety hazard. In brief, Jusand's invention is a product that sits slightly inside a borehole. If a drill fragment becomes dislodged, the product absorbs the impact and stops the fragment.
Mr Sutton invented a competing product that worked in a similar fashion — the SafetySpear. A number of important events followed.
- A mining contractor (Byrnecut) performed three sets of 'drop tests' on prototype SafetySpears, in which drill fragments were dropped from the top of a borehole to determine whether a SafetySpear would stop them.
- A mechanical equipment provider (Murray) sold 200 SafetySpears to Byrnecut under a 'Partnering Agreement' between Murray and two companies associated with Mr Sutton.
- Byrnecut performed a 12-month 'trial' of these SafetySpears across its mine sites.
Jusand asserted that the SafetySpear infringed its innovation patents. Murray sought to rely on the experimental purposes exemption, arguing that its sale of the 200 SafetySpears to Byrnecut did not infringe because the sale was made for 'experimental purposes'.
The Federal Court's decision
Justice Rofe found the innovation patents were invalid and not infringed. However, her Honour went on to consider whether Murray could have relied on the 'experimental purposes' exemption.
What are 'experimental purposes'?
Justice Rofe commenced by acknowledging that section 119C strikes a balance between the patentee's right to be rewarded for their invention and the public's ability to study, test and improve on the invention (among other things). Her Honour confirmed that the word 'experimental' has its ordinary English meaning and is not limited to work performed in scientific laboratories. However, it does connote:
- at least some application of scientific method to the discovering of new information or testing a principle or supposition;
- the testing of a hypothesis;
- the existence of a protocol or methodology setting out the purpose of the experiment and the variables to be measured or observed; and
- the recording and reporting of results or observations.
Her Honour also recognised that an act does not need to be solely for experimental purposes to attract the exemption. Often there will be a commercial aspect to an experiment — for example, research may be undertaken with, and partially funded by, a commercial partner. However, the act must have the predominant purpose of gaining new knowledge or testing a principal supposition about the invention.
Were the SafetySpear tests for 'experimental purposes'?
Justice Rofe accepted that Byrnecut's initial 'drop tests' would fall within the exemption. These tests were performed to determine whether a limited number of prototype SafetySpears worked. Where they did not work, Mr Sutton wrote reports which speculated the reason for the failure and proposed solutions.
On the other hand, Byrnecut's later 12-month trial would not fall within the exemption. Her Honour described this trial as 'nothing more than use in the ordinary course of mine operations'. In reaching this conclusion, she had regard to several factors.
- Byrnecut's earlier 'drop tests' had already established the safety and efficacy of the SafetySpear.
- The Partnering Agreement did not suggest that Byrnecut's trial was experimental as:
- its stated object was to identify and exploit sales opportunities (not to experiment);
- Byrnecut bought the SafetySpears at full price (without any discount that might be expected for an experimental product); and
- the term of the agreement was only half the length of the supposed trial.
- The trial involved no scientific method — including no documented methodology, no formal instructions to mine operators and no formal monitoring of results.
Having found that Byrnecut's trial was not for 'experimental purposes', Justice Rofe considered it unnecessary to reach a conclusion on whether Murray's sale to Byrnecut would fall within the exemption.
Significance
This is the first time the 'experimental purposes' exemption has been considered by an Australian court.
Justice Rofe's decision provides some guidance for organisations that wish to rely on the exemption to perform follow-on work that might otherwise infringe a competitor's patent. The predominant purpose of any such work must be the discovery of new information or testing of a principle or supposition. It is also important to document thoroughly the experimental purpose, methodology and results.
Interestingly, Justice Rofe found it unnecessary to consider how the exemption applies to acts of supply. That is, if Party A supplies a product that allegedly infringes a patent to Party B to use for experimental purposes, to what extent can Party A argue that its supply was for experimental purposes and is therefore exempt? We consider that Party A should be able to rely on the exemption provided that the act of supply itself had a predominant experimental purpose. On the other hand, if the supply is predominantly commercial in nature (for example, Party A created a stockpile of the products before any request was made by Party B), the fact that Party B goes on to use the product for experimental purposes may not save Party A from infringing. This is a matter that will ultimately depend on the circumstances of each transaction.
Actions you can take now
- Consider whether your organisation can make use of the 'experimental purposes' exemption in relation to actions that would otherwise infringe a competitor's patent.
- If your organisation currently relies on the exemption, or intends to in the future, ensure that the experimental purpose, methodology and results are clearly documented.
- Get in touch with Allens if you have questions or would like assistance.