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Intellectual Property Bulletin – July 2009

In this issue: Our intellectual property lawyers and patent and trade marks attorneys provide an update on the latest cases and legislative developments affecting copyright, patents and trade marks. Articles include 'Bavaria NV wins beer appeal', 'Utility requirements for Australian patents', and discussion of the interlocutory injunction in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth and the software copyright appeal decision in Software AG (Australia) Pty Ltd v Racing and Wagering WA.

Copyright – Attorney-General's Copyright Consultation Forum

In brief: The Federal Attorney-General, the Hon. Robert McLelland MP, on 18 May 2009 convened a Copyright Consultation Forum in Sydney.

By Jim Dwyer, Partner, and Stephanie Essey, Paralegal

The participants represented the major interest groups who are owners or users of copyright material. The forum comprised representatives from a broad range of interest groups, including the Intellectual Property Committee of the Law Council of Australia, Copyright Agency Limited, the Australian Recording Industry Association, the Internet Industry Association of Australia and Commercial Radio Australia. Each attendee gave a short presentation, and identified two to three key copyright issues affecting their organisation and its members. The Attorney-General was present throughout the forum, and noted that he and the Federal Government were most interested in hearing and considering the issues raised on behalf of stakeholders.

Copyright – Copyright infringement: the scope of the software security testing exemption

In brief: The Federal Court1 clarifies the meaning of fair use for security testing of software.

By David Yates, Partner, and Katherine McMahon, Lawyer

Section 47F of the Copyright Act 1968 (Cth) (the Act) provides an exception to copyright infringement where a reproduction or adaptation of a computer program is made:

  1. by, or on behalf of, the owner or licensee of the copy of the program;
  2. for the purposes of 'testing in good faith the security of the original copy';
  3. only to the extent reasonably necessary to conduct the testing; and
  4. in circumstances where the resulting information is not otherwise readily obtainable.

While the Full Federal Court ultimately determined the appeal2 by Software AG (Australia) Pty Ltd (SAG) on the basis of contractual interpretation, in relation to s47F the Full Court concluded that the phrase 'testing in good faith the security of the original copy' does not extend to testing a copy of the original.

Background

In 2005, Racing and Wagering WA (RWWA) entered into a licence agreement with SAG (the Agreement), in respect of one of SAG's software systems (the System). The Agreement authorised RWWA to use the System on RWWA's mainframe computer at RWWA's head office. Relevantly, the Agreement also authorised RWWA to make a copy of the System (the Copy) for 'emergency restart purposes'.

RWWA made a Copy for its emergency disaster recovery system, located at a site operated by a third party (the Site). The Copy was not loaded into the memory of the mainframe computer at the Site, other than on four occasions when it was used for the purposes of emergency restart tests.

Although the Agreement permitted the making of the Copy for 'emergency restart purposes', it did not expressly provide that RWWA could install and test the Copy at the Site for those purposes.

SAG approached RWWA for over $3 million in additional licence and upgrade maintenance service fees in connection with the installation and restart testing of the Copy at the Site, claiming that the installation and testing was not permitted under the Agreement. RWWA commenced the proceedings, seeking in particular a declaration that it was not in breach of the Agreement and that its conduct was permitted under the Act. SAG responded with a cross-claim for damages for breach of contract.

The first instance decision

RWWA was successful at first instance and SAG's cross-claim was dismissed. The primary judge granted declarations to the effect that:

  1. SAG was not entitled to additional licence or maintenance fees in respect of the installation of the Copy on the mainframe computer at the Site;
  2. RWWA had not breached the Agreement by making the Copy and storing it at the Site; and
  3. RWWA was entitled to test the Copy pursuant to the terms of the Agreement and, in any event, pursuant to s47F of the Act.

SAG appealed from the dismissal of its cross-claim and the making of declarations i and iii.

The appeal decision

In relation to the Agreement, the Full Court held that the phrase 'emergency restart purposes' extended to testing the Copy to ensure that the System was capable of being restarted in the event of an emergency. Adopting the alternative interpretation put forward by SAG would result 'in a meaning that would be unreasonable or inconvenient'3 and, accordingly, would be contrary to the established principles of contract construction.

Having concluded that there had been no breach of the Agreement, it was unnecessary for the primary judge to consider whether RWWA's restart testing was permitted under the Act. However, the primary judge had nevertheless concluded that the testing was permitted under s47. Thus, the Full Court was required to revisit s47, notwithstanding that their findings regarding the scope of the licence effectively determined the appeal.

The Full Court observed that s47F is directed towards the need to test whether a computer program can withstand the threat of viruses or abuse, without consequently infringing the copyright in the program (as a literary work). The Full Court concluded that the phrase 'testing... the security of the original copy' in s47F 'should be confined to testing the original to ascertain its security from unauthorised access or against electronic or other invasion.'4 RWWA's conduct fell outside the ambit of s47F insofar as RWWA was testing a copy, not the original, and was doing so for disaster recovery purposes.

The Full Court therefore held that declaration (iii) should be varied by deleting the words 'and in any event pursuant to s47F of the Copyright Act 2968.'

This decision reinforces the need to ensure that software licence agreements expressly address emergency restart testing, including whether such testing is permitted and how the testing may be conducted. The Full Court's comments on the scope of s47F should shape the scope of testing activities permitted under such agreements for the licence fees payable.

Trade marks – Importance of identifying the correct owner of a trade mark

In brief: The decision in Television Food Network Pty Ltd v Food Channel Network Pty Ltd (No 2)5 involved an appeal from a Trade Marks Office opposition decision and demonstrates the importance of ensuring the correct applicant for an Australian trade mark application. As this case shows, an incorrect applicant could ultimately be fatal to the application.

By David Yates, Partner, and Joanne Been, Law Graduate

Background

The applicant in these proceedings, Television Food Network G.P. (TFN), is a US-based company that licenses channel suppliers and others to broadcast programs on subscription television in Australia. TFN is the owner of a number of trade marks in Australia that incorporate the words FOOD NETWORK.

The respondent is Food Channel Network Pty Ltd (FCN). Significantly, the respondent was not the original trade mark applicant. Trade mark application No. 967804 FOOD CHANNEL (the trade mark application the subject of these proceedings), was filed by Food Channel Pty Ltd (FC), a separate company that is linked to FCN by a common director.

In August 2003, trade mark application No. 967804 was lodged by FC in respect of goods in class 16. Following this application (and its subsequent assignment to FCN in January 2004), TFN opposed No. 967804 but the opposition was rejected by the Trade Mark Office in November 2006. The appeal by TFN to the Federal Court saw an opposition based on the following grounds:

  • FC was not the owner of the trade mark at the time of application: s58;
  • FC did not intend to use the trade mark at the time of application: s59;
  • the trade mark was likely to deceive or cause confusion having regard to a prior mark: s44(1);
  • TFN's trade mark had, before the priority date of No. 967804, acquired a reputation in Australia and, because of that reputation, the use of No. 967804 would be likely to deceive and cause confusion: s60; and
  • use of the trade mark would be contrary to law, in that it would constitute misleading or deceptive conduct in breach of s52 of the Trade Practices Act 1974 (Cth) and the tort of passing off: s42.
The decision

The appeal was successful and Justice Collier held that the registration of No. 967804 be refused.

Ownership of the trade mark: s58

FCN argued that ownership had been established through prior use of the trade mark. The court rejected this on the basis that 'use' by FC of the trade mark on menus for catering services (class 43) and promotional gifts (class 29) did not constitute use of the trade mark in relation to the category of goods and services for which the trade mark application was made (class 16). FCN also sought to argue ownership on the basis that FC, at the time of filing the application, intended to authorise FCN to use it. However, this argument was also rejected by the court. His Honour stated that even if FC had applied for registration with the intention of authorising FCN to use the mark, this did not assist FCN in defending an opposition based on a challenge to FC's ownership, as it did not resolve the key question of ownership. Indeed, Justice Collier considered the evidence presented by FCN as to ownership to be so confused (and, at times, contradictory) that it was not possible to make any definite findings on this question.

This confusion as to ownership was held by the court to be fatal to the application. The Act, it was stated, 'did not sanction a position such that a person who is not the owner of a trade mark can nonetheless apply for registration of a trade mark (and may thus be opposed), but the application itself can somehow be subsequently validated by later identification of the owner and that owner being assigned the application by the trade mark applicant'.

Intention to use: s59

The court also upheld the s 59 ground of opposition that the applicant did not intend to use the mark. The fact that:

  • a portion of FCN's evidence as to trade mark use was successfully discredited by TFN;
  • many of the documents that were tendered by FCN as evidence of use, which bore the trade mark, were left undated; and
  • these documents variously referred to the entity behind the trade mark as being FC or FCN and sometimes just Food Channel (which could mean either FC or FCN),

were just some of the reasons given by the court for its conclusion that the evidence before it was unsatisfactory and unclear as to which company may have used the mark, when and whether the mark was actually used, and, therefore, whether FC (the original trade mark applicant) had the requisite intention at the time of filing.

Deceptive similarity: s44

The issues considered in relation to s44(1) were:

whether TFN's trade marks, which were registered in respect of class 41 'publication of printed publications', were registered in respect of 'closely related services' to goods in class 16 in the nature of 'printed matter such as periodical publications, books..'; and,

if so, whether the various trade marks were deceptively similar.

In assessing the question of deceptive similarity, the court focused on the words of the two marks (namely 'Food Channel' and 'Food Network'), which it considered to be essential features. Expert opinion evidence tendered by TFN, which attested to the fact that the words 'channel' and 'network' were used interchangeably by the Australian media, was accepted by the court. On the basis of these findings, Justice Collier concluded that there was a 'real and tangible danger that members of the public, with an imperfect recollection of the essential features of the applicant's trade marks, [would] be caused to wonder whether goods under the trade mark "Food Channel" are from the same source' , and that, therefore, registration should be refused on the basis of s44(1).

Sections 60 and 42

The grounds of opposition based on ss60 and 42 were not upheld by the court.

Trade marks – Bavaria NV wins beer appeal

In brief: This Federal Court appeal6 dealt with the geographical significance of the word BAVARIA and potential connotations of its use on beer labelling. The appeal, therefore, potentially has implications for beer and wine brand owners who may wish to incorporate in their own brands geographically significant words.

By Andrew Butler, Partner, and Peter Ryan, Senior Associate

The facts and opposition decision

Bavaria NV (BNV) applied in August 2000 to register for goods including beers in class 32 the trade mark depicted below, having used it in Australia in relation to beers since 1988:

Bavaria is a German state, whose capital, Munich, is probably the country's brewing centre, as it hosts the annual Oktoberfest festival. BNV used a special 'Bavarian' method of brewing its beers, which originated in Germany in the 19th century, but BNV's beers were made in the Netherlands.

The Bavarian Brewery Association, Bayerischer Brauerbund eV (BBA), opposed BNV's application on behalf of 240 Bavarian breweries.7 BBA was successful under section 43 of the Trade Marks Act 1995 (the Act), on the ground that, as BNV's beers were made in the Netherlands, not Germany, BNV's mark contained a connotation likely to deceive or confuse consumers.

The appeal

BNV appealed to the Federal Court, and Justice Bennett considered the following principal grounds.

  • Section 41 – capacity to distinguish: This ground was not considered at opposition. Justice Bennett took the view that, even though there was clear evidence other traders may wish to use the word 'BAVARIA' for beers, BNV's trade mark was not simply for that word. Rather, it incorporated elements including the words 'Holland' and 'Beer', and borders and devices that were not just 'window dressing'. Accordingly, Justice Bennett found that BNV's trade mark had sufficient capacity to distinguish its goods from those of other traders and that this ground of opposition was not established.
  • Section 43 – connotation: The Hearing Officer found it was 'common knowledge' that a 'substantial number' of Australians would associate the word 'Bavaria' with beer, and be likely to be deceived or confused. Justice Bennett took the contrary view, finding no evidence that relevant Australian consumers would associate BNV's beer with Germany or consider it to be of European origin, or be aware of the 'Bavarian method' of beer making. Moreover, the 'other elements' of the trade mark would, in any event, dispel any possible confusion. Hence, this ground was not established on appeal.
  • Section 42 – contrary to law: For reasons similar to those under s43, Justice Bennett took the view that there was no misleading or deceptive conduct by Bavaria NV under ss 52 and 53 of the Trade Practices Act 1974 (Cth), and, hence, that this ground was not established.
  • Section 61 – geographic indications: BBA is the owner of a German trade mark registration for the words GENUINE BAVARIAN BEER and the Lady Bavaria Logo. That logo and the words BAYERISCHES BIER (English for 'BAVARIAN BEER') are Protected Geographic Indications in Germany, and, in Justice Bennett's view, Geographic Indications under ss 6 and 61 of the Act. However, those Geographic Indications are not for BAVARIA alone. Thus, Justice Bennett confirmed the Hearing Officer's view that BNV's mark did not contain or consist of a Geographic Indication, and that this ground, too, was not established. Even if it had been, Justice Bennett took the view that BNV would have a defence under s61(2), given BNV's prior use in Australia.
  • Sections 55 and 59 – discretion and intention: BBA argued that s55 of the Act gives the registrar or court a discretion to refuse registration even if no ground of opposition is established, and that BNV did not have an intention to use the mark under s59. Justice Bennett rejected the discretion argument, finding that s55 did not add an 'extra ground of opposition', and held that the appeal stage was too late for BBA to argue lack of intention.
The appeal decision

BBA did not establish any ground of opposition, and Justice Bennett therefore directed that BNV's application be allowed. As BBA did not file any appeal, BNV's application has since proceeded to registration.

In a separate but related development, the European Court of Justice (Europe's highest court) has recently ruled that BBA cannot use European Union rules protecting regional food names to block BNV from using the name Bavaria on its products in Europe

Trade marks – More than a bite-size issue: trade mark dispute between confectionery rivals

In brief: In a recent decision8, the Federal Court of Australia dismissed a case brought by well-known confectionery company Mars against Sweet Rewards, an Australian importer and distributor of a bite-sized chocolate product, 'Malt Balls'. Mars had alleged that the packaging of Malt Balls was similar to its Maltesers packaging, such that Sweet Rewards had engaged in passing off, misleading and deceptive conduct, and infringed two Mars trade marks.

By Sarah Matheson, Partner, and Anita Mirchandani, Lawyer

How does it affect you?
  • Owners of well-known products incorporating well-known trade marks who are contemplating taking action against alleged infringers may be 'victims of their own success', unless the alleged infringer is using a 'substantially identical' trade mark.
  • Proving infringement of a well-known trade mark on the basis of 'deceptive similarity' may be difficult when consumers are very familiar with the mark.
  • When assessing claims of passing off and misleading conduct, determination of the elements of the product get-up in which reputation is said to inhere is vital. If that reputation is significantly dependent on the name of the product, product get-up of a competitor that does not bear that name is unlikely to support a claim of passing off or misleading conduct.
The facts

Mars has for many years manufactured and distributed Maltesers. From mid-2005 to November 2006, Sweet Rewards distributed a chocolate-covered malt ball product known as 'Malt Balls'. The products are as shown:

Mars alleged that:

  • the distribution of Malt Balls was unlawful because the packaging wrongly suggested some connection to Maltesers;
  • the Malt Balls packaging misleadingly represented to consumers that the contents were the same as Maltesers;
  • the label on the Malt Balls packaging with pictures of the floating chocolate balls, some of which were sliced in half, misleadingly suggested to consumers that they were Maltesers; and
  • the Malt Balls packaging infringed two of Mars' registered trade marks.
Representations about source and origin

The court concluded that the following features of the Maltesers get-up had a reputation in consumers' eyes:

  • the use of the brand name 'Maltesers' written in a stylised script moving from the bottom left to the top right;
  • the red background; and
  • the floating chocolate balls, some of which were cut in half.

The court held that the principal component in the Maltesers get-up was the word 'Maltesers', and therefore it was 'highly unlikely that any ordinary consumer of chocolate confectionery could mistake something which is not called Malteser for a Malteser'. In that sense, Mars is a 'victim of its own success', because the name 'Malt Balls' distinguished the Sweet Rewards product from the Mars product.

Further, Sweet Rewards' use of its own mark, 'Delfi', with a skier motif, plus the different shade of red on its packaging, contributed to the finding that the two products did not originate from the same source. The similar use of its floating chocolate balls on Sweet Rewards' packaging was insufficient to overcome these other differences.

Product equivalence representation

Mars also argued that the Malt Balls packaging conveyed representations that the Malt Balls were made from the same ingredients, made from the same recipe or provided the same taste experience as did Maltesers.

The court held that in order for Mars to succeed, there must be a deceptive similarity between the appearance of the Malt Ball packaging and the Maltesers get-up. Finding a lack of deceptive similarity, the court rejected Mars' claim.

Whether every Malt Ball represents that it is a Malteser

Mars argued that Sweet Rewards' use of floating brown balls, including some depicted in cross-section and with yellow filling, in association with the words 'Malt Balls', on the packaging constituted a representation that Malt Balls were equivalent to Maltesers. Mars' argument was that the only malt ball confectionery most consumers know is Maltesers, so the depiction of malt balls on Sweet Rewards' product would indicate to such consumers that the Sweet Rewards malt balls are, in fact, Maltesers.

In rejecting this argument, the court said that it was highly unlikely that the depiction of floating chocolate balls on the packaging could mislead or confuse the public into thinking that they were purchasing Maltesers, given the words 'Malt Balls' on the packaging stating that '[t]o know that one is eating a "Malt Ball" is to know that one is not eating a Malteser'.

Trade mark infringement

The court rejected Mars' claim of trade mark infringement based on the following registered trade marks:

The court accepted Sweet Rewards' contention that the use of 'Malt Balls' was intended to be descriptive only. It was not disputed that Sweet Rewards was using 'Delfi' as a trade mark on its products. Accordingly, the relevant comparison was between the Mars registered trade marks and 'Delfi', and the use of 'Delfi' was not deceptively similar (or substantially identical) to the Mars registered trade marks.

Mars also alleged that each element of the Malt Balls product infringed its trade marks and that these elements were deceptively similar to the elements of the Maltesers get-up. The question of deceptive similarity involves a comparison of the impression a consumer would have of the relevant marks, allowing for imperfect recollection in considering whether there is a tangible risk of deception or whether the resemblance between the marks would cause confusion. Generally, reputation is irrelevant. However, if a mark is 'notoriously so ubiquitous' so as to signify the proprietor's goods exclusively, reputation has a role to play. Given that the Maltesers trade marks are well known among consumers, the court considered the likelihood of a consumer forgetting the Maltesers trade marks when looking at Sweet Rewards' Malt Balls product was 'vanishingly small'.

The court dismissed all Mars' claims and awarded costs in favour of Sweet Rewards.

Conclusion

This decision highlights that where a trade mark is well known and dominates the get-up of the goods to which it is applied, there is a low likelihood that a lesser-known product, with get-up bearing only some similarities, will generate confusion and deception among consumers.

Patents – Utility requirements for Australian patents

In brief: Regardless of whether a patent for an invention is novel and inventive, if the specification itself does not meet statutory requirements, the patent may be liable to revocation. In a recent case, the finding of non-infringement depended on the construction of the object stated in the introduction to the patent specification, starkly illustrating the significant potential dangers of such object statements.

By Dr Daniel Wadsworth, Patent & Trade Marks Attorney, and Chris Bird, Partner

Infringement

Uniline brought proceedings9 in the Australian Federal Court against the patentee, SBriggs, in relation to alleged unjustified threats of infringement of Australian patent AU706458, and sought revocation of the patent. The patent in question related to spring clutches used with roller blinds and to claims for a clutch assembly with a helical spring having sections wound in opposing directions. The question of infringement involved determining whether Uniline's product, having a spring clutch using three separate and opposing helical springs, fell within the scope of the patent claims.

Uniline contended that the claims were limited to a single unitary spring, and argued that this construction was consistent with the object statement in the specification, which set out two distinct promises to be fulfilled. The object statement read as follows:

It is an object of the present invention to provide a bi-directional clutch which avoids the need for a plurality of helical springs and complex configuration of the second shaft.

Despite SBriggs' arguments that this statement should be read very broadly, and that both advantages need not be present, the court agreed with Uniline, finding that the specification promised a clutch that avoided the need for a plurality of helical springs, and avoided the need for a complex configuration of the second shaft.

In construing the relevant claims, the judge concluded that '... the natural and plain language of claim 1 describes a single spring comprised of united sections...', and that this was consistent with the object stated.

The court concluded that a unitary spring was an essential feature of the claim and that Uniline therefore avoided infringement.

Utility

A patent must be useful and, if not, can be revoked on this ground. The court noted that '... lack of utility rises and falls on the construction of the object of the invention recited in the specification'. Uniline contended that the invention would lack utility if the claims were held to cover the use of multiple springs. The judge agreed, holding that due to the construction he had given to the object clause, claims that contemplated a plurality of springs would not express the stated object and would have rendered the invention lacking in utility, and therefore liable to be revoked.

Significance of the decision

Object statements are commonly included in patent specifications, particularly in applications that originate outside Australia. Regardless of novelty and inventive step, a patent risks revocation in Australia if an object statement makes a promise that the claims cannot keep. The key message is that, prior to acceptance of an Australian patent application, the specification should be reviewed by a patent attorney and amended as necessary to revise or remove any object statements. Any promises made can be clearly stated to be no more than mere desirable outcomes of the claimed invention.

Patents – Some relief for pharmaceutical manufacturer

In brief: Justice Sundberg of the Federal Court of Australia10 has granted pharmaceutical company Wyeth's application for an interlocutory injunction restraining Sigma from 'marketing, taking orders for, selling, supplying, offering to supply or otherwise exploiting in Australia' its generic formulation of venlafaxine hydrochloride.

By Sarah Matheson, Partner, and Suzy Muller, Lawyer

Background

Venlafaxine hydrochloride is a serotonin-norepinephrine reuptake inhibitor prescribed for the treatment of major depression and anxiety disorders. Wyeth's patent has expired, but its patent for an extended release formulation of venlafaxine hydrochloride (Efexor-XR) is in force until 20 March 2017.

Sigma obtained Australian Register of Therapeutic Goods listing of an extended release formulation of venlafaxine hydrochloride on 26 February 2009, under the name 'Evelexa-XR'. Evelexa-XR was first publicly disclosed on the ARTG on 6 March 2009. Sigma asserts it became aware of Wyeth's patent for the extended-release formulation on the same day. Sigma launched Evelexa-XR on 1 May 2009 and commenced importing the product into Australia, with a view to having the product delivered to pharmacists for sale by 1 June 2009.

The Federal Court's decision

The court considered that both Sigma and Wyeth had a prima facie case, but concluded that the balance of convenience favoured the grant of an interlocutory injunction.

Sigma had offered undertakings that, until resolution at trial, it would:

  • not apply to list Evelexa-XR on the Pharmaceutical Benefits Scheme;
  • maintain full and complete accounts and records of its sales of Evelexa-XR and all expenses incurred;
  • retain all proceeds from its sales of Evelexa-XR, without disbursement, in a separate account; and
  • not 'bundle' venlafaxine hydrochloride with any other product.

Despite these undertakings, the court was concerned that Wyeth was likely to lose up to 50 per cent market share if the injunction were not granted. It was also suggested that without an injunction, other generic manufacturers were likely to enter the market, making Wyeth's damages almost impossible to quantify.

Serious question to be tried/prima facie case

Sigma conceded there was a serious question to be tried as to infringement of Wyeth's patent, but the court also looked at the comparative strength of the prima facie case on validity. Sigma's main challenge to validity on the grounds of obviousness and manner of manufacture was that the claimed methods of treatment amounted to no more than a new use of a known substance for which its recognised properties make it useful. The court considered that there was a serious question to be tried in relation to inventive step and manner of manufacture. It did not consider that Sigma could make out a prima facie case on the other asserted grounds of priority, fair basis or novelty.

Irreparable harm

Sigma argued that as Evelexa-XR was the only generic on the market, any lost sales of Efexor-XR would be readily quantifiable as translating directly into sales of Evelexa-XR. The court did not accept this submission because:

  • Sigma was well placed to assume up to 50 per cent of the market share quickly;
  • refusing to grant the injunction would allow other generic suppliers to enter the market, making quantification of loss near impossible; and
  • due to the strong sales of Efexor-XR, any reduction in price would have a great impact on profits.
Balance of convenience

The court was persuaded that Wyeth was the most likely to suffer from a disturbance of the status quo, and was influenced by the fact that Sigma had entered the market 'with its eyes wide open'.

The court also considered that a failure to grant the injunction was not in the public interest, due to the possibility of confusion among vulnerable patients. Justice Sundberg expressed concern that if Wyeth were successful at trial, patients who switched to Evelexa-XR would be switched back to Efexor-XR when the generic was ultimately taken off the market, and would suffer harm as a result.

Trends

The grant of this injunction on 3 June 2009 follows the recent decisions of the Federal Court of Interpharma Pty Ltd v Commissioner of Patents11, GenRx Pty Ltd v Sanofi Aventis 12 and Merck & Co Inc v GenRx Pty Ltd13, and suggests that the Federal Court is increasingly open to arguments of irreparable harm and unquantifiable loss in pharmaceutical cases.

Patents – Claim scope in divisional patent applications

In brief: In dismissing an appeal from an unsuccessful patent opposition, the Federal Court of Australia found the claims of a divisional patent application fell within the scope of the claims of its parent application. The decision was reached despite different language appearing in the claims of the applications, indicating Australian courts' willingness to adopt a practical approach to the task of claim construction.

By Anthony Selleck, Senior Associate, and Chris Bird, Partner

Divisional applications

Divisional patent applications are filed to obtain patent rights over inventions disclosed in an already pending application, referred to as a 'parent' application, and may be filed at any time during the parent's pendency. However, the claims of a divisional application filed more than three months after publication of acceptance of its parent application must fall within the scope of the claims of the parent (Australian Patents Act 1990, section 102(2)(a)). In other words, the divisional claims cannot read onto matter not covered by the parent claims. The policy intent behind this restriction is to give the public certainty about the extent of rights provided by accepted patent applications.

Divisional applications falling foul of this requirement are not entitled to the priority date of the parent application, which may, of course, have devastating consequences for the patent's validity.

Claim construction

The sole issue for the Federal Court was whether the claims of G.E. Betzdearborn Canada Company's divisional application fell within the scope of the claims of its parent application14. During opposition proceedings against the divisional application's grant, a Delegate of the Commissioner of Patents found the divisional claims to be properly within the scope of the parent claims. To address the issue, on appeal from the Delegate's decision, the court had to construe the claims of both applications and determine whether the divisional claims read onto subject matter not covered by the parent claims.

Memcor Australia Pty Ltd made two key submissions in support of their contention that the divisional claims were broader than the parent claims, namely:

  • the parent claims were limited to a device in use, whereas the divisional claims were directed to a device per se; and
  • the divisional claims omitted a number of limitations found in the parent claims and thus were broader than the parent claims.
Device in use

The inventions in question related to microfiltration membrane devices for filtering particles from solutions using membranes with very small pores. The broadest claim of the parent application defined 'A microfilration membrane device, for withdrawing permeate substantially continuously from a multicomponent substrate...'. Memcor relied on the use of the word 'for', along with other language in the claim referring to the device being 'in' the substrate, in support of its argument that the claim was limited to a device when used in a particular manner. As the claim of the divisional application was directed to a device per se, the applicant argued that the divisional claims did not fall within the scope of the parent claims.

In rejecting Memcor's submission and finding the parent claims to be directed to a device per se, the court construed the word 'for' to have its, now well-understood, meaning in patent law of signifying a device that is suitable for a particular purpose, rather than a device only when used for that purpose. The remaining language in the claim, the court held, described the conditions under which the device would operate, rather than limiting the claim to a device when actually operating under those conditions.

Omission of claim features

The court also rejected Memcor's submission that the divisional claims, in omitting certain features found in the claims of the parent, were broader than the parent claims. In reaching this conclusion, the court found that the asserted features either did not constitute actual limitations in the parent claim, or were present in the divisional claims, albeit being expressed using different language.

For example, the words 'substantially continuously' were held not to constitute a limitation in the main claim of the parent application, with the result that their omission from the divisional claim did not make that claim broader than the parent claim. Moreover, a limitation of the parent claim that the fibres be 'swayable' was found in the corresponding divisional claim through language specifying the length of the fibres as being sufficient to permit restricted displacement of an 'intermediate portion' of the fibre.

Conclusion

This decision can be seen as a rather generous interpretation of the relevant provision of the Patents Act – too generous, in the eyes of Memcor, which has now lodged an appeal with the Full Federal Court.

General matter – PBS cost recovery legislation

In brief: Legislation passed by the Commonwealth Parliament in June, and at the time of writing awaiting Royal Assent, will give the Federal Government authority to recover various costs incurred in the administration of the Pharmaceutical Benefits Scheme by prescribing fees for applications relating to listings and pricing.

By Sarah Matheson, Partner, and Nikki Macor, Law Graduate

Structure and timing of the cost recovery regime

The National Health Amendment (Pharmaceutical and Other Benefits – Cost Recovery) Bill 2008 [No. 2] (Cth) (the Bill) states that regulations may be made in respect of services exercised by the Commonwealth relating to the Pharmaceutical Benefits Scheme (the PBS) and the National Immunisation Program (NIP). The Explanatory Memorandum notes that those services include the performance of the Pharmaceutical Benefits Advisory Committee's functions, such as making recommendations in relation to the inclusion of medicines in the PBS and NIP. Among other things, the Bill specifically provides that the regulations may prescribe fees for such services.

The detail of the costs recovery regime will be contained in regulations that were circulated in draft form for review by the Senate Standing Committee on Community Affairs prior to the passage of the Bill through the Senate. The start date of the costs recovery regime will, in effect, be that of the regulations rather than the legislation. In that regard, the Government has stated that the commencement date of the regulations will be announced only after industry consultation on the implementation issues.

The Bill requires that an independent review of the cost recovery regime's operation be conducted after two years, and that the report of that review be tabled in Parliament.

Indicative fees

The draft regulations prescribe fees for lodgment of applications for certain services in relation to PBS listings. The fees vary across types of application and evaluation categories. Indicative fees for applications are $119,500 for a major submission, for example an application to list a new drug on the PBS, and $12,500 for a minor submission, such as an application for a new form or manner of administration for a listed drug.

Fees are also prescribed for pricing services. These include a fee of $1000 for a Pricing Authority Secretariat listing, and up to $25,000 for a price agreement or determination as to the maximum price pharmacies may charge for a medicine.

Consequently, fees of up to $145,000 may be payable in order to have a new medicine listed and priced for the PBS. Fees will be indexed annually.

Failure to pay prescribed fees is dealt with by means of a 'down tools' provision in the Bill, which entitles the Minister to order services to be refused until any prescribed fees are paid. The draft regulations include mechanisms for the review of decisions regarding fees.

Exemptions

Fees will not be charged for applications:

  • relating to orphan drugs;
  • relating to drugs exempt from entry in the Australian Register of Therapeutic Goods because of an approval granted due to unavailability of a drug or a public health event of national significance; or
  • to reduce the price of a drug, change the name of a manufacturer, remove a drug or brand, change pack size where there are no price implications, change wording at Medicare's request, or make a Government-mandated change.

The Department of Health and Ageing may waive fees if an application involves the public interest and payment of the fee would make the application financially unviable.

Implications

It has been argued that the regime will provide an incentive to companies to ensure applications are of a high quality in order to avoid unnecessary re-filing costs. However, despite the proposed exemptions for orphan and financially unviable public interest drugs, there remain concerns that the regime will potentially create a disincentive for companies considering launching low-profit or small population medicines in Australia.

While intended by the Government to ensure the sustainability of the PBS, the cost recovery regime will impose a significant additional cost on pharmaceutical companies, which may ultimately be passed on to consumers.

General matter – Fast Track List

In brief: The Fast Track List offers a speedy and cost-effective means of resolving commercial disputes and enforcing most intellectual property rights.

By Sarah Matheson, Partner, and Kelly Griffiths, Lawyer

On 24 April 2009, the Chief Justice of the Federal Court of Australia issued Practice Note No 30: Fast Track Directions (the Federal Fast Track List). The Federal Fast Track List is intended to ensure that applications filed in the list are 'heard and finalised within 5 to 8 months from the date of filing (depending on their complexity) and to reduce costs by limiting discovery and avoiding lengthy interlocutory disputes'.

The Federal Fast Track List is similar to the pilot version established by the Victorian Note to Practitioners – Directions for the Fast Track List (the Victorian Fast Track List). The Victorian Fast Track List was launched in May 2007 and was limited to applications filed in the Victorian District Registry. The Federal Fast Track List is available in all state registries of the Federal Court.

The Victorian Fast Track List has already proven to be a useful forum for litigants wishing to resolve disputes quickly and effectively, with 86 proceedings filed since May 2007. Matters commonly dealt with in the Victorian Fast Track List include intellectual property disputes.

Applications in the Federal Fast Track List

Matters that may be heard in the Federal Fast Track List include:

  • proceedings arising from or relating to a commercial transaction;
  • an issue that has importance in trade or commerce;
  • the construction of commercial documents;
  • an issue that has importance in personal insolvency; and
  • intellectual property rights (excluding patents).

Existing proceedings may be transferred to the Federal Fast Track List by agreement between the parties or court order.

The Federal Fast Track List may not be used:

  • where the trial is likely to exceed five days;
  • where the proceedings relate to a matter to be heard by the Corporations Panel; or
  • for matters relating to admiralty law, maritime law, taxation law or matters arising under the Patents Act 1990 (Cth).
Key features of the Federal Fast Track List

Applications in the Federal Fast Track List are commenced by a 'Fast Track Statement'. A Fast Track Statement sets out a summary of the nature of the dispute, the issues the applicant considers are likely to arise in the proceeding, the relief claimed and the legal grounds for that relief. The respondent must file a 'Fast Track Response' in reply to the applicant's Fast Track Statement, again in summary form. The substitution of these documents for more technically complex pleadings is intended to save the parties time and costs.

Active case management is a requirement of the Federal Fast Track List. Scheduling Conferences and Pre-Trial Conferences are mandatory. Prior to and at these conferences, parties are required to outline the issues and facts in dispute, in an attempt to narrow those issues and streamline the conduct of the proceeding.

The parties' discovery obligations are less onerous in the Federal Fast Track List than they are in standard proceedings. Unless otherwise ordered, discovery in relation to liability is confined to documents on which a party intends to rely and documents that have a significant probative value adverse to a party's case.

There are specific requirements for interlocutory applications in the Federal Fast Track List, which proceed by way of a written brief not exceeding five pages in length. The responding party provides an answering written brief, also not exceeding five pages. The judge decides the interlocutory application according on the papers, unless the judge determines that an oral hearing would specifically add to, clarify or explain the written briefs.

Victorian Fast Track List – what has changed?

Unlike the Victorian Fast Track List, a respondent may object to a matter being heard in the Federal Fast Track List. While the applicant retains the advantage of having the time to prepare for a proceeding it is anticipating commencing, a respondent in the Federal Fast Track List must work to a much shorter timeframe than for proceedings in other courts.

A respondent who receives an application marked for hearing in the Federal Fast Track List has 14 days to give the court and the applicant written notice of any objection to the proceeding being heard in the Federal Fast Track List, including a brief statement of reasons. A respondent will need to provide cogent reasons why the Fast Track List is an inappropriate forum for the dispute.

Benefits of the Fast Track List

The Federal Fast Track List offers a fast and cost-efficient means of enforcing a variety of intellectual property and other rights. However, patent rights holders need to be aware that patent disputes may not be heard in the Federal Fast Track List.

Intellectual property rights are often key business assets, and issuing proceedings in the Federal Fast Track List provides a forum to achieve a final outcome relatively quickly and at a comparatively lower cost than in a standard proceeding. In determining whether and where to issue proceedings, potential litigants should assess whether the matter is appropriate for the Federal Fast Track List.

Update – Ice TV Pty Limited v Nine Network Australia Pty Ltd

The High Court of Australia handed down its decision in Ice TV Pty Limited v Nine Network Australia Pty Ltd on 22 April 2009, marking the end of a three-year battle over copyright infringement. The court unanimously upheld IceTV Pty Limited's appeal, finding that it did not reproduce a substantial part of Nine's television program schedules in its electronic program guides. For an in-depth look at the case, please see our Focus.

Update – Gallo v Lion Nathan

Further to our report on the Gallo v Lion Nathan Full Federal Court decision in our April 2009 Intellectual Property Bulletin, Gallo has filed an application for special leave to appeal to the High Court.

The special leave application is likely to be heard later this year, probably in, or after, September 2009. We will continue to report on any developments in the case.

Footnotes
  1. Software AG (Australia) Pty Ltd v Racing and Wagering WA [2009] FCAFC 36.
  2. 20 March 2009.
  3. Software AG (Australia) Pty Ltd v Racing and Wagering WA [2009] FCAFC 36 [35].
  4. Ibid, [68].
  5. [2009] FCA 271.
  6. Bavaria NV v Bayerischer Brauerbund eV [2009] FCA 428 (30 April 2009).
  7. Opposition by Verbrand Bayerischer Brauerbund eV to registration of 847343 (2006) ATMO 30 June 2006.
  8. Mars Australia Pty Ltd v Sweet Rewards Pty Ltd [2009] FCA 606.
  9. Uniline Australia Ltd v SBriggs Pty Ltd [2009] FCA 222.
  10. Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2009] FCA 595.
  11. (2008) 79 IPR 261.
  12. (2007) 73 IPR 502.
  13. (2006) 70 IPR 286.
  14. Memcor Australia Pty Ltd v G.E. Betzdearborn Canada Company [2009] FCA 508.

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