The Prior Use Defence and Exhaustion Doctrine in Intellectual Property Law

Presented virtually at the launch event of issue 44(2) of the University of New South Wales Law Journal

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Steven Rares[1] 24 September 2021

Introduction

1I am delighted to launch, unfortunately only virtually, this issue of the distinguished University of New South Wales Law Journal. The editors have had to confront more than the usual obstacles to produce and set this issue on course due to the effects of the pandemic and the now three month long lockdown in Sydney, and I congratulate them for their efforts.

2The theme of this issue is intellectual property. Intellectual property, like much in life, is not always found in the cerebral world. Its practical application and uses are evident in our daily lives, from the mundane to items such as mobile phones that are now inseparable from us between the age of about six months to the moment when we face Hamlet’s question (not necessarily as, with him, a matter of choice) of ‘To be, or not to be’.[2] In the law, disputes relating to intellectual property generate other weighty questions such as the issue that once perplexed the Seventh Circuit Court of Appeals in Georgia-Pacific Consumer Products LP v Kimberly-Clark Corporation.[3] It had to decide whether the use of a quilt design embossed on toilet paper providing “utilitarian benefits”, such as softness, bulk, comfort, absorption and “non-nesting” properties, amounted to infringement of patent or trademark rights. Circuit Judge Evans, delivering the reasons of the Court of Appeals, began by saying:[4]

Toilet paper. This case is about toilet paper. Are there many other things most people use every day but think very little about? We doubt it. But then again, only a select few of us work in the rarefied air inhabited by top-rate intellectual property lawyers who specialize in presenting and defending claims of unfair competition and trademark infringement under the Lanham Act, 15 U.S.C. § 1051 et seq. And the lawyers on both sides of this dispute are truly first-rate. Together they cite some 119 cases and 20 federal statutes (albeit with a little overlap) in their initial briefs. We are told that during the ‘‘expedited’’ discovery period leading up to the district court decision we are called upon to review, some 675,000 pages of documents were produced and more than a dozen witnesses were deposed. That’s quite a record considering, again, that this case is about toilet paper.

3Contemplating what one could say on such topics as the Toilet Paper case brought to mind how Hamlet dealt with a similar torment in his speech: ‘To die, to sleep; To sleep, perchance to Dream; aye, there’s the rub’.[5]

4Perhaps counterintuitively, the law does not recognise any proprietary right in mere knowledge. Thus, if a client pays a lawyer, B, to use his or her skill and faculties to acquire knowledge and apply it, while keeping that knowledge confidential in the clients’ interests, neither the client nor the lawyer can prevent another lawyer, who had no dealings with either of them, from independently using his or her own skill and knowledge to achieve or discover the same result that B had. As Latham CJ said in Federal Commission of Taxation v United Aircraft Corp,[6] “… knowledge cannot be described as property except in a metaphorical sense”. The lawyer’s original idea to use an argument in a case, in itself, however brilliant, is not property. Thus, a lawyer who thinks of a fantastic or original point that he or she envisages will help his or her client cannot prevent someone else running the point, well or badly, before the originator gets the chance.

5What the law does protect, however, is the original expression of an idea through the beguiling matrix of intellectual property rights. You can patent something that is a useful and new invention so long as it is a method of manufacture. You can protect a trademark that consists in the exclusive right to a distinctive mark that conveys an association with you, your product or service. You can claim copyright, being the exclusive right to reproduce an original work that you have created, such as a book, artwork, film, video or webpage.

6Thus, O’Brien v Komesaroff[7] established that the lawyer can prevent another from copying his or her expression of ideas in unit trust deeds or corporate constitutions that he or she drafted. That is so even though each document contained much public property or common knowledge.[8] But, while the lawyer may have utilised considerable skill and ingenuity in producing those documents, if he or she wishes to establish a basis apart from breach of copyright that they contain information that the law would restrain being used, he or she must prove that another person’s use of the ideas would involve use of the lawyer’s or clients’ confidential information. Therefore, a lawyer who, by way of advice, regularly publishes to clients documents, such as unit trust deeds and corporate constitutions, no doubt adapted to the individual client’s circumstances, but based on the common knowledge of what such documents contain, must point to something more than the fact that he or she wrote the documents. As Mason J explained:[9]

It is a fundamental problem with the information which the respondent seeks to protect that it is information which, by way of advice to others, he regularly publishes to the world at large, albeit for a limited purpose. The nature of such information ill accords with the accepted conception of confidentiality, which in substance involves the person seeking to protect the information largely keeping it to himself….

… To simply say that the information is as to the effect and practical operation of discretionary trusts and private unit trust schemes does not identify the information and enable the Court to formulate an order. One needs to know not only what was the information conveyed but also what part of that information was not common knowledge.

7So, although our creative lawyer may have difficulty seeking to protect his or her idea from being exploited (or ruined) by someone else, the lawyer has other uses (at least in the legal profession’s eyes). Those uses would make it unwise to follow up the famous formula to create an ideal state coined by Dick, the Butcher, in another Shakespearian tragedy, Henry VI, ‘The first thing we do, let’s kill all the lawyers’.[10]

8Intellectual property law covers a wide field. It can appear intimidatingly technical to the uninitiated novice. Often one can pass off some knowledge as sufficient. Recent decisions of the Federal Court have considered products that competing businesses and their lawyers argued were discernibly similar or distinct, depending on which side of the coin one was, such as the following products that became exhibits: beer bottles,[11] burger wrappers[12] and garlic bread packaging.[13] Beer has been quite a regular player in these disputes – a few cans of Homer Simpsons’ Duff beer (characterised in an episode of the Simpsons dealing with the distinctive flavour from its brewing process as “Needs more dog”) have survived as souvenirs from Twentieth Century Fox Film Corporation v The South Australian Brewing Co Ltd.[14]

9The courts will also enjoin one trader passing off its goods or services as those of a rival. In Thomas Montgomery v Thompson,[15] Lord Macnaghten, with his customary pungency, discussed the terms of an injunction granted against a fraudulent trader who had set up a new brewery business in the town of Stone which, he noted, had “a supply of water admirably suited for brewing”. The plaintiff had for a century carried on its business there and for many years had been famous for producing ales known as “Stone Ales”, a name the defendant applied to the products he produced “in the hope of reaping where he had not sown”.[16] His Lordship said of the defendant:[17]

It would have been impossible for him to have called his ales “Stone Ales,” and to have distinguished his ales from those of the plaintiff. Any attempt to distinguish the two, even if honestly meant, would have been perfectly idle. Thirsty folk want beer, not explanations. If the public get the thing they want, or something near it, and get it under the old name – the name with which they are familiar – they are likely to be supremely indifferent to the character and conduct of the brewer, and the equitable rights of rival traders.

10The topics that I propose to discuss in this paper are the boundaries of a patentee’s monopoly in two areas of use of a potential invention – one area is unsettled, being the prior use defence under s 119 of the Patents Act 1990 (Cth), the other being now settled, namely the exhaustion doctrine, as the High Court recently determined in Calidad Pty Ltd v Seiko Epson Corporation.[18]

The defence of prior use – s 119

11What happens when a person is already making a product, using a method or process for which someone else obtains a patent? Can the other person continue what he, she or it was doing before the grant of the patent, or will that conduct constitute an infringement of the patent? Section 119 of the Patents Act provides such a defence to a claim for infringement of a patent.

12Lord Diplock described the general law position in Bristol-Myers Co v Beecham Group Ltd,[19] saying that:[20]

From earliest times it has been taken for granted that by that phrase [scil: “such manufacturers which others at the time of making such letters patent and grants shall not use”] it was intended to declare unlawful the grant of any patent which would put it into the power of the grantee to prevent any other trader from doing whatever he had done before in the course of his trade…

… The right of a trader to go on dealing by way of trade in any man-made substance in which he had dealt before, without impediment by a monopoly in that substance granted to the other person, was not dependent on his knowledge of its composition or how it could be made. If he had in fact dealt in that substance he had “used” it; his ignorance of these matters was irrelevant to the question of his use.

13In 2005, Hill, Finn and Gyles JJ said that the pre-2006 form of s 119 dealt with the principle that his Lordship described, namely that a person cannot be prevented, in “a restricted fashion”, from doing what they were doing prior to the grant of the patent.[21]

14A defence of prior use is provided in s 119 of the Patents Act. It has not itself had much prior use. Indeed, prior use exemptions have received very little attention in any jurisdiction.[22] The current form of this defence under s 119(1) provides that if, immediately before the priority date of the relevant claim in the patent, a person was exploiting the product, method or process in the patent area (Australia) or had taken definite contractual or other steps to do so, the person may continue to do that act without infringing the patent.

15However, the defence will not apply if, before the priority date, the person had stopped exploiting or abandoned (except temporarily) the steps to exploit the product, method or process in the patent area.[23] For the purposes of the defence, s 119(5) defines “exploit” as including making, having, selling, offering for sale, using or importing a product or as using a method or process and then doing any of the above acts with the resulting product.

16In 1998, Aldous LJ described the purpose of the English analogue of s 119(1)(a). He said that the defence it provided was to preserve, despite the grant of a patent to a third party, the right of a person who, at the priority date, is already engaging in a commercial activity, to continue to engage in any means of exploitation of that activity that otherwise would infringe.[24]

17The trial judge in that case,[25] Jacob J, had discussed the concept of a “commercial activity” in the sense that Aldous LJ later considered. Jacob J said that all the circumstances, including technical and commercial matters, had to be considered in deciding whether the alleged infringing activity was “substantially the same” as what the alleged infringer had been doing before the grant of the patent created the potential for infringement. He said that this:

is important in a case … where there are inherent minor variations in starting materials or the like. If the protected act has to be exactly the same (whatever that may mean) as the prior act then the protection given by [s 64 of the Patents Act 1977 (UK)] would be illusory. The section is intended to give a practical protection to enable a man to continue doing what in substance he was doing before.

(italic emphasis in original, bold emphasis added)

18Importantly, s 119(1)(a) appears to operate if the person engaged in any act of exploitation of the product (or other commercial activity) such as the importation of, or offer to sell, a product before the priority date. That section allows the person not merely to continue to do that act, but also to do any act that exploits the product. The right that s 119(1)(a) confers is, relevantly, to “do an act that exploits [the] product” (as “exploit” is defined in s 119(5)) without infringing the patent, provided that the person, immediately before the priority date, “was exploiting the product”. Thus, any act by which the person “was exploiting the product” will create a right, despite what would otherwise infringe the patent, to “do an act that exploits [the] product”. Unless this were so, a person who had imported a product before the priority date could continue importing, but could not sell it afterwards, which would sterilise the preservation of the right to import. Indeed, this also follows from s 119(1)(b) which, ordinarily, would give the importer the right “to exploit the product”, because that person is likely to have “taken definite steps (contractually or otherwise) to exploit” it.

19In Vehicle Monitoring Systems Pty Ltd v Sarb Management Group Pty Ltd (t/as Database Consultants Australia) (No 2),[26] Yates J observed that the defence under s 119(1) was limited to the alleged infringer’s own acts that exploited a product, method or process in a way that would infringe a patent, and did not extend to the alleged infringer authorising another person to exploit the invention.

20The learned authors of Lahore: Patents, Trade Marks and Related Rights[27] commented that his Honour’s construction of s 119(1) appeared, first, to contradict the purpose for which the Parliament enacted s 119 in substantially its present form in the Intellectual Property Laws Amendment Act 2006 (Cth) and, secondly, did not refer to s 117 (which equates use of an infringing product with its supply) in the context of how s 119 might operate.

21The Explanatory Memorandum for the 2006 Bill that was enacted stated:[28]

131. The reference to ‘product, method or process’ is intended to cover everything that could be covered by a patent. It is intended to be construed expansively, and is not intended to limit the operation of the section.

132. As a result of this amendment, if a person had, before the relevant priority date, been doing one act that would have constituted exploitation of a product, method or process (for example, if they had been making a particular product, or using a particular method or process), then even when the patent has been granted, they would have a right to continue to do that act, but in addition, they would have the right to do any other act that would constitute an exploitation of that product, method or process (for example, they would have a right to sell the product they had been making, or to sell a product resulting from using the method or process).

136. Subsection (4) allows the prior user to assign the whole of his or her prior use right under this section. The assignee may then have the full benefit of the prior use exemption. There is no provision for the prior user to licence his or her prior use right.

(emphasis added)

22This raises a question, particularly now in light of the High Court’s decision of the meaning of “exploit” in s 13 and the Dictionary in the Patents Act in Calidad,[29] whether Yates J’s construction of s 119(1) may be too narrow. Of course, s 119(5) has a bespoke definition of “exploit” as used in s 119. There could be some force in an argument that s 119(1) should be construed broadly to authorise a purchaser from a person entitled to exploit a product, method or process in accordance with s 119, to use the product, else the right of the vendor to sell it to the subsequent purchasing user would appear to be illusory. A narrow construction would effectively sterilise the ability of a wholesaler or distributor who had been importing a product from selling it to a new retailer (i.e. one in addition to those retailers which the importer had previously supplied) after the grant of a patent, because the retailer would infringe by offering the product for sale or selling it, as would the consumer who acquired it.

23The ordinary and natural meaning of s 119 appears to allow the person whom it protects to do anything to exploit the product (method or process), and thus to authorise a purchaser of the product to use it. Unless that were so, the patentee could threaten infringement proceedings against any potential or actual purchaser of a product offered for sale or sold by the person entitled to the s 119(1) right so that no effective sale could ever be made despite the express authority of the Parliament for the person to exploit the product by way of offer or sale of a product to which s 119(1) applies.

24The second important aspect of s 119 is s 119(4). That provides that a person can dispose to another of the whole of the disposer’s entitlement under s 119(1) to do an act without infringing a patent. The subsection gives the disponee the same rights as the disposer, or any predecessor in title of the disposer who had an entitlement under s 119(1). The natural and ordinary meaning s 119(4) appears to convey that the only way in which the “disposer” can “dispose of the whole of the disposer’s entitlement” under s 119(1) is by an assignment to the recipient.

25The terms of s 119(4) replicate what Lord Neuberger of Abbotsbury PSC said in Akers v Samba Financial Group,[30] namely, that “a ‘disposition’ normally involves a disponor and a disponee”. Thus, it is likely that a person relying on a disposition of a method or process under s 119(4) will have to identify some act by the disposer by which it disposed of its entitlement under s 119(1) to some third party disponee, called the “recipient” in s 119(4).

26A legal chose in action may be transferred by an assignment in writing under s 12 of the Conveyancing Act 1919 (NSW) and its analogues derived from s 25(6) of the Judicature Act 1873 (UK). However, equity did not require an assignment of property, including a legal chose in action, to be in writing, provided that the property was capable of being assigned under the principles of equity, as explained by Windeyer J in his classic judgment in Norman v Federal Commissioner of Taxation.[31] He said:[32]

Assignment means the immediate transfer of an existing proprietary right, vested or contingent, from the assignor to the assignee.

(emphasis added)

27In Halloran v Minister Administering National Parks and Wildlife Act 1974,[33] Gleeson CJ, Gummow, Kirby and Hayne JJ said:

Where an interest to be transferred is, as here, a creature of equity, equity requires a clear expression of intention to make an immediate disposition; that, in the absence of an applicable statutory requirement, suffices [See Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 30-31]. If the transaction is a contract rather than a conveyance, then consideration is essential to attract the support of equity [Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 31].

(emphasis added)

28It may be that s 119(4) requires the disposer to transfer, to the recipient, by writing or by some other identifiable act, the disposer’s entitlement under s 119(1) so that, from the moment of the disposition, the recipient may exercise the statutory right as it pleases and the disposer cannot ever do so again. While the sale of a product by a prior user could satisfy s 119(4) without requiring specific documentation to protect a purchaser, it is difficult to think of practical examples in which a disposition of an entitlement under s 119(1) to do an act that exploited a method or process could occur without a contemporaneous document recording that fact. However, it may be possible that circumstances may arise from which a clear, unmistakeable inference could be drawn from the disposer’s acts or conduct, that the disposer had transferred its entitlement to the method or process under s 119(1) once for all to an identified recipient.

29I will return to s 119 later.

The exhaustion doctrine

30Last year, in Calidad,[34] Kiefel CJ, Bell and Keane JJ, together with Gageler J,[35] over the dissent of Nettle, Gordon and Edelman JJ, held that a patentee’s rights, under s 13 of the Patents Act, to exploit an invention which is a product, namely, the rights to “make, hire, sell or otherwise dispose of or use” the product are, first, exhausted when it is sold, and, secondly, not infringed if a purchaser of the product modifies it so as to enable it to be reused.

31In that case, the patentee of Epson printer ink cartridges, as respondent at the High Court, must have thought it was on solid ground. That was because, since 1911, the decision of the Privy Council in National Phonograph Company of Australia Ltd v Menck,[36] which had overruled the High Court,[37] determined that a patentee’s statutory monopoly enabled it, at the time of sale of its product, to impose conditions that restricted the purchaser’s right to sell or use the product and that such a restriction bound any subsequent owner or user who knew of the restriction. However, it would seem that the ink was not yet dry on this area of intellectual property law.

32Counsel for the respondent were in the position described by Lord Russel of Killowen in his dissenting speech in Sudbrook Trading Estate Ltd v Eggleton,[38] where he wryly said, tracking back again to the Bard:

I felt considerable sympathy for counsel for the respondents when he was told that he had all the law on his side, but was (in effect) facing the prophets. (This is a paraphrase of my own remark in argument, when he was told that he had all equity behind him and I intervened to suggest that he had less in front of him.)

In the result I would dismiss this appeal. I can only exclaim with Macduff — “What! All my pretty chickens and their dam, at one fell swoop?”[39].

33The advantage of making a speech about the law is that one can speculate or float ideas without being accountable to the prophets or even held to it if counsel cite one’s words back in submissions. Returning to Calidad,[40] Kiefel CJ, Bell and Keane JJ noted that, in Impression Products Inc v Lexmark International Inc,[41] giving the judgment of the majority of the Supreme Court of the United States of America, Roberts CJ said that the plaintiff:[42]

had exhausted its patent rights in the cartridges “the moment it sold them”. Their Honours acknowledged that the single-use/no-resale restrictions in Lexmark’s contracts with its customers may be enforceable under contract law but they did “not entitle Lexmark to retain patent rights in an item that it has elected to sell”.

34Roberts CJ explained,[43] and the majority of the High Court adopted, that the “exhaustion doctrine” is not a presumption that arises on sale, rather it recognises a limit on the scope of the patentee’s statutory rights. His Honor said that a patentee is free to set the price and negotiate contracts with purchasers but may not, “‘by virtue of his patent, control the use or disposition’ of the product after ownership passes”.[44] After acknowledging that the effect of a patent is to grant to a patentee a right to prevent others from using or selling a product, his Honor explained that the exhaustion doctrine regards that exclusionary power as extinguished when the product is sold. Roberts CJ reiterated what earlier cases had held, namely that when a patentee chooses to sell a patented product, the product “is no longer within the limits of the monopoly”. Instead, the product becomes the “private, individual property” of the purchaser with all the rights and benefits of ownership.[45]

35Kiefel CJ, Bell and Keane JJ referred to the important distinction between the patentee’s right to make the product the subject of a claim in a patent and the right to sell or use such a product.[46] That was crucial in understanding whether, when Calidad Pty Ltd’s supplier made the modifications to the patented printer cartridges, it infringed the patent held by Seiko Epson Corporation. They found that by making, and later resealing, small holes in an empty Seiko printer ink cartridge to allow it to be refilled with ink, and reprogramming the memory chip card forming part of it so that the refilled cartridge could be reused, Calidad’s supplier had not caused the product, as originally sold, to cease to exist. Their Honours found that those modifications did not involve a replication (or re-making) of parts or features of the invention as claimed and that “There was no true manufacture or construction of a cartridge which embodied the features of the patent claim”. Rather, Kiefel CJ, Bell and Keane JJ characterised those modifications as being consistent with the rights of the owner of a product to alter it so as to improve its usefulness and enable its reuse or to prolong its “life”.[47]

36Kiefel CJ, Bell and Keane JJ explained their policy reasons[48] for preferring the exhaustion doctrine to the doctrine of implied licence. They held that:[49]

The exhaustion doctrine has the virtues of logic, simplicity and coherence with legal principle. It is comprehensible and consistent with the fundamental principle of the common law respecting chattels and an owner’s rights respecting their use. At the same time, it does not prevent a patentee from imposing restrictions and conditions as to the use of a patented product after its sale but simply requires that they be obtained by negotiation in the usual way and enforced according to the law of contract or in equity.

(emphasis added)

37Kiefel CJ, Bell and Keane JJ approached the construction of the patentee’s rights under s 13(1) by noting that the grant of a patent did not give the patentee positive rights to do what he, she or it could do anyway. Rather, the Patents Act gave the patentee negative rights; that is, the rights to exclude or prevent others from manufacturing, in a particular way or using, a particular invention.[50]

38Kiefel CJ, Bell and Keane JJ rejected the alternate construction of the patentee’s rights under s 13(1) of the Patents Act, based on the Privy Council’s reasoning in Menck,[51] as involving the patentee granting a purchaser an implied licence that could operate, on sale or use of a patented product, subsequently to restrict how the purchaser used or resold it.[52]

39Their Honours emphasised that the implied licence doctrine was based on a legal fiction that postulated that the patentee and purchaser agreed, by implication, to a limitation on the latter’s ordinary proprietary rights to use or sell his, her or its personal property in a product that he, she or it had purchased. They said:[53]

The implied licence doctrine is likely to cause confusion in part because it combines a fictional licence with the possibility of real restrictions. Whilst it seeks to provide the purchaser of patented goods with the full rights of ownership, it leaves open the possibility that there may be other restrictions which have been notified by the patentee. It engenders uncertainty.

40Gageler J agreed with the joint reasons and elaborated on them, saying that:[54]

The exhaustion of rights doctrine has a lineage that is decades longer than the lineage of the implied licence doctrine. It has been shown by repeated application in the United States to be workable and coherent. It sets clear statutory boundaries. It respects longstanding common law principle. It does not need to enlist equity in some way to prop it up. It strikes an appropriate balance between the interests of patentees and the owners of patented products. In so doing, it fits comfortably with the statutory object of the Patents Act 1990 as well as with the statutory language.

41In dissent, Nettle, Gordon and Edelman JJ said that:[55]

[s]tripping patentees of rights which they have held for more than a century[56] is a question for the legislature, not the courts. This Court should not make such a significant change in the rights of patentees, let alone in an appeal where decision of the point is not necessary to resolve the appeal. Resolution of the question does not affect the disposition of the litigation between these parties and, unsurprisingly, the adverse effects of such a change upon commercial arrangements negotiated by reference to those longstanding rights and remedies[57] were not addressed.

42Their Honours considered that the patentee’s exclusive right, under s 13, to authorise another person to exploit an invention was significant to their conclusion that the implied licence theory in relation to a product ought prevail.[58] They said that the construction of s 13 should not be confined to its prohibitory or exclusionary effects. They reasoned that the negative right in s 13 to exclude others from exploiting the patentee’s invention carried “with it the consequence that others do not have the ordinary liberty to make, use, exercise and sell the patented article”. Their Honours thought that such a construction gave “full measure to both elements of the expression ‘negative right’”, namely rights of monopoly.[59] Accordingly, they held that the patentee sold the product with an implied licence that the buyer could dispose of it as the buyer saw fit, but that the sale did not otherwise exhaust the patentee’s rights in relation to the actual product the subject of the sale and applied the conclusion of the Privy Council in Menck.[60]

43Nettle, Gordon and Edelman JJ also emphasised that patent rights are statutory and that concepts apposite to their application in one nation should not be seen as being readily capable of being appropriated to another nation’s statutory patent regime.[61]

44Their Honours emphasised that the exhaustion doctrine was a product endogenous to the legal systems in which it had developed, and in particular those of the United States of America and some European jurisdictions.[62] In distinguishing Impression Products,[63] their Honours said that the exhaustion doctrine:[64]

proceeds from the stated premise that in any sale the patentee cannot assign or devolve, as a matter of patent law, the right to use or sell because “the sale transfers the right to use, sell, or import because those are the rights that come along with ownership” and thus “the buyer is free and clear of an infringement lawsuit because there is no exclusionary right left to enforce”.[65] This reflects the different understanding of a differently framed patents statute. By contrast, the Australian patents Acts, and the courts, have made plain that the patentee has rights to exploit the invention and that those rights may continue beyond a sale.

(emphasis added)

Does the decision in Calidad[66] affect the construction of s 119?

45The prior use defence in s 119 is differently expressed to s 13, and, in particular, s 119 does not extend to the prior user having the power that s 13(1) confers on a patentee “to authorise another person to exploit the invention”. However, as I have noted above, s 119(4) does allow the prior user to dispose of the right to do an act that does not infringe another’s patent where the disponer was exploiting, within the meaning of s 119(5), a product or using a method or process, immediately before the priority date of the relevant claim in the patent that would otherwise infringe it.

46The exhaustion doctrine, in accordance with the majority’s decision in Calidad,[67] arguably, could be applied as follows. A prior user, by selling a product in circumstances that attract the prior use defence in s 119(1), might be thought also to dispose of, to the purchaser, the disponer’s right to exploit that particular product.

47It could be argued, of course, that this suggestion involves an implied disposition without any writing signed by the disposer (or vendor/prior user). Yet, how else is the disponee or purchaser of such a product able to use or resell it unless he, she or it has a concomitant protection under s 119(4) as the prior user had? Nor would the right of the prior user to sell the product be of much avail, if its purchaser were rendered an infringer of the patent by using the purchased product.

Conclusion

48No doubt, one day, an inventive patent attorney or practitioner will seek to explore what s 119 allows and discover whether Calidad[68] is a help, hindrance or irrelevance.

49The readers of the new issue of the Journal that I now launch will not find the answer to that question in its pages, although they will benefit from being able to read a wealth of scholarly articles of the high quality to which the Journal’s readers are fortunate to have become accustomed.



[1] A judge of the Federal Court of Australia, an additional judge of the Supreme Court of the Australian Capital Territory, a judge of the Supreme Court of Norfolk Island and the President of the Australasian Institute of Judicial Administration. The author acknowledges the assistance of his associate, Jacob Silove, in the preparation of this paper. The errors are the author’s alone.

A speech presented virtually at the launch event of Issue 44(2) of the University of New South Wales Law Journal on 24 September 2021.

[2] Shakespeare, Hamlet, act III, scene 1.

[3] 647 F 3d 723 (7th Cir, 2011).

[4] 647 F 3d at 725.

[5] Shakespeare, Hamlet, act III, scene 1.

[6] (1943) 68 CLR 525 at 536.

[7] (1982) 150 CLR 310.

[8] 150 CLR at 326 per Mason J, with whom Murphy, Aickin, Wilson and Brennan JJ agreed.

[9] 150 CLR at 326–327.

[10] Shakespeare, Henry VI, Part 2, Act IV, scene 2.

[11] Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd (2020) 384 ALR 230.

[12] Hashtag Burgers Pty Ltd v In-N-Out Burgers, Inc (2020)385 ALR 514.

[13] Goodman Fielder Pte Ltd v Conga Foods Pty Ltd (2020) 158 IPR 9.

[14] (1996) 66 FCR 451.

[15] [1891] AC 217.

[16] [1891] AC at 223.

[17] [1891] AC at 225.

[18] (2020) 384 ALR 577.

[19] [1974] AC 646.

[20] [1974] AC at 680.

[21] Jupiters Ltd v Neurizon Pty Ltd (2005) 222 ALR 155 at 182 [135].

[22] Jacqueline Simpkin and Michael Caine, ‘Patentees and Prior Users: Does Section 119 of the Patents Act 1990 (Cth) Get the Balance of Rights Right?’ (2021) 125 Journal of The Intellectual Property Society of Australia and New Zealand Inc. 17, 24.

[23] Patents Act 1990 (Cth) s 119(2).

[24] Lubrizol Corp v Esso Petroleum Co Ltd [1998] RPC 727 at 770 per Aldous LJ, with whom Roth and Brooke LJJ agreed at 785, in discussing a similar, but not identical, provision in s 64 of the Patents Act 1977 (UK).

[25] Lubrizol Corporation v Esso Petroleum Co Ltd [1997] RPC 195 at 215-216.

[26] (2013) 101 IPR at 514 [103].

[27] at [18,675].

[28] at [131]–[132] and [136].

[29] 384 ALR 577.

[30] [2017] AC 424 at 457 [65].

[31] (1963) 109 CLR 9 at 24–34.

[32] 109 CLR 9 at 26.

[33] (2006) 229 CLR 545 at 569 [70].

[34] 384 ALR 577.

[35] 384 ALR at 602 [112].

[36] [1911] AC 366; (1911) 12 CLR 15.

[37] National Phonograph Company of Australia Ltd v Menck (1908) 7 CLR 481.

[38] [1983] 1 AC 444 at 487.

[39] Shakespeare, Macbeth, act IV, scene 3.

[40] 384 ALR 577.

[41] 137 S Ct 1523 (2017); 123 IPR 375.

[42] 384 ALR at 582 [19], citing 123 IPR 380; S Ct 1531.

[43] 123 IPR 383; S Ct 1534.

[44] 123 IPR 380; S Ct 1531 quoting United States v Univis Lens Co Inc (1942) 316 US 241 at 250.

[45] 123 IPR 380; S Ct 1531.

[46] 384 ALR at 588 [45]–[46], 489 [48], 592 [65].

[47] 384 ALR at 593–594 [69]–[70].

[48] See too 384 ALR at 596–597 [84]

[49] 384 ALR at 595 [75]–[76].

[50] 384 ALR at 597 [85]–[87]; see too at 603–604 [115]–[119] per Gageler J.

[51] [1911] AC 366; 12 CLR 15.

[52] 384 ALR at 394 [71]–[72].

[53] 384 ALR at 596 [79].

[54] 384 ALR at 602 [112], 607 [134].

[55] 384 ALR at 610 [147]; see too at 633–634 [211]–[213]

[56] See National Phonograph Co of Australia Ltd v Menck (1911) 12 CLR 15; [1911] AC 336.

[57] Their Honours referred to their subsequent discussion of the point in footnotes at 622 [181] of their reasons, inter alia, Columbia Graphophone Co v Vanner (1916) 33 RPC 104 at 106; Columbia Graphophone Co Ltd v Murray (1922) 39 RPC 239 at 241; Columbia Graphophone Co Ltd v Thoms (1924) 41 RPC 294 at 296; Chloride Electrical Storage Co Ltd v Silvia Wireless Stores (1931) 48 RPC 468 at 470; Gillette Industries Ltd v Bernstein (1941) 58 RPC 271 at 278–9; Dunlop Rubber Co Ltd v Longlife Battery Depot [1985] 1 WLR 1033; [1958] RPC 473 at 476; [1958] 3 All ER 197 at 199; Sterling Drug Inc v C H Beck Ltd [1973] RPC 915 at 917–18; Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537 at 554–5; Dellareed Ltd v Delkim Developments [1988] FSR 329 at 345–7; Roussel UCLAF SA v Hockley International Ltd [1996] RPC 441 at 443–5; United Wire Ltd v Screen Repair Services (Scotland)Ltd [2000] 4 All ER 353; [2001] RPC 439; [2000] UKHL 42 at [68]–[72]; Schütz (UK) Ltd v Werit (UK) Ltd [2013] 2 All ER 177; [2013] RPC 395; (2013) 100 IPR 583; [2013] UKSC 16 at [66]; HTC Corporation v Nokia Corporation [2013] EWHC 3247 (Pat) at [154]–[156], [165].

[58] 384 ALR at 611 [150].

[59] Original italic emphasis; 384 ALR at 615–616 [164].

[60] [1911] AC 336; 12 CLR 15; 384 ALR at 616–617 [165]–[167].

[61] 384 ALR at 627–630 [196]–[202].

[62] 384 ALR 577 at 627 [196].

[63] 137 S Ct 1531 (2017).

[64] 384 ALR 577 at 630 [202].

[65] Lexmark at IPR 383; S Ct 1534, citing Bloomer v McQuewan 55 US 539 (1853) at 549.

[66] 384 ALR 577.

[67] 384 ALR 577.

[68] 384 ALR 577.


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