Australia: Three Superior Court Decisions Look Set to Have Serious Patent Implications

In summary

This article discusses three leading patent cases delivered by Australia’s superior courts during the past 12 months, each of which has important implications for Australian patent law, practice and policy.

Discussion points

• The High Court’s missed opportunity to provide clarity on Australia’s requirements for the patent eligibility of computer-implemented inventions
• The Full Federal Court’s confirmation that the Commonwealth Government could not recover damages for higher prices paid to an innovator pharmaceutical company during the period of enforcement of an interlocutory injunction restraining the launch of a generic product
• The High Court’s affirmation of the Full Federal Court’s decision that only human inventors (and not artificial intelligence platforms) are entitled to apply for patents

Referenced in this article

• Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2022] HCA 29
• Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97
• Commissioner of Patents v Thaler [2022] FCAFC 62
• Patents Act 1990 (Cth)

Injunctions at a glance

Split decision regarding computer-implemented inventions

On 17 August 2022, the High Court of Australia issued a split decision in Aristocrat v Commissioner of Patents.^[1] This case related to the patentability of computer-implemented inventions – in particular, to a system and method for an electronic gaming machine (EGM). With six justices presiding over the appeal (after the seventh fell ill on the day of the hearing) the High Court was divided three-to-three on whether Aristocrat’s application concerned patentable subject matter. The split decision means that the appeal was dismissed, and the decision of the Full Federal Court, rejecting Aristocrat’s patent application, was upheld.

While the High Court’s decision has not provided the clarity that patent owners and IP professionals were hoping for regarding the patentability of computer-implemented inventions in Australia, it leaves the door open for further development of Australian law in this area. It also offers some key takeaways for patentees, confirming that an advance in computer technology is not essential for patent eligibility, and that characterisation of the invention remains as important as ever.

The case has been remitted to the Federal Court for further consideration and is ongoing. Further clarity from the case, therefore, may be obtained in the coming months or years.

Summary of the decision

The issue for determination by the High Court was whether Aristocrat’s invention, relating to a system and method for a feature game on an EGM, was patentable subject matter under Australian law. All members of the Court agreed that an invention must be more than a mere scheme or abstract idea to be patentable,^[2] in line with well-established principles; however, the justices were divided as to the proper characterisation of Aristocrat’s invention.

Chief Justice Kiefel, together with Justices Gageler and Keane (the Kiefel decision), characterised the invention as nothing more than a new system or method of gaming that was merely an abstract idea without any variation of generic computer technology. It followed from that characterisation that the invention was not patentable subject matter.^[3]

By contrast, Justices Gordon, Edelman and Steward (the Gordon decision) characterised the invention as an EGM that was altered by implementation of the feature game. Their honours were satisfied that there was inventiveness and ingenuity in the incorporation of the game into the EGM, and concluded that the invention constituted patentable subject matter.^[4]

Key takeaways

It was hoped that the High Court’s decision would clarify the patentability of computer-implemented inventions under Australian law. Although the decision has not resolved this issue, it does present some key takeaways.

Advancement in computer technology not required

An important issue for consideration by the High Court was whether the Full Federal Court adopted a correct approach to assessing the patent eligibility of computer-implemented inventions. A plurality in the Full Court adopted a two-part test that involved asking whether the claimed invention involved an advance in computer technology.^[5] As argued by Aristocrat before the High Court, that approach presents the risk that a computer-implemented invention may be held to lack patent-eligible subject matter, notwithstanding that it involves an advance or technical contribution in another field of technology.

Both the Kiefel and Gordon decisions rejected the Full Court’s approach. On their face, these decisions seem to indicate that computer-implemented inventions that result in an improvement in another field of technology may constitute patentable subject matter.^[6]

This provides some reassurance for patentees whose inventions may not involve an advance in computer technology but nevertheless deliver technical advantages in other fields.

Characterisation remains crucial for determining patentability

The split between members of the High Court in this case ultimately hinged on the correct characterisation of Aristocrat’s invention, demonstrating how significant this step is for determining patentability.

The Kiefel decision emphasised the lack of ‘adjustment to generic computer technology’ or the lack of a component that is ‘physically affected’ by Aristocrat’s invention,^[7] quoting Grant v Commissioner of Patents,^[8] while the Gordon decision emphasised the game controller of the invention providing an ‘altered’ EGM.^[9] While establishing no binding precedent, these comments highlight the importance, under current Australian law, of ensuring that a computer-implemented invention is described in sufficient detail to enable it to be clearly distinguished over generic or standard computer technology.

Future implications

Unfortunately, the High Court’s decision does not resolve the questions that surround the patent eligibility of computer-implemented inventions in Australia. Being a split decision, it does not provide a binding precedent on which lower courts or administrators can rely. As such, it is unlikely that the decision will impact the current examination practice at IP Australia. In individual cases, arguments for or against patentability may be developed from the principles explained in the Kiefel and Gordon decisions.

The uncertainty surrounding the patent eligibility of computer inventions under Australian law remains for now. Nevertheless, the split decision leaves the door open for the High Court to further consider the patentability of computer-implemented inventions in the future, including in this same case, should it continue and move back up through the levels of appeal again after being remitted to the Federal Court.

No pay day for Commonwealth in Sanofi damages claim

On 26 June 2023, the Full Court of the Federal Court of Australia delivered its keenly awaited judgment in Australia v Sanofi.^[10] It upheld the trial judge’s decision that the Commonwealth Government (the Government) is not entitled to damages arising from the grant of a 2007 interlocutory injunction preventing Apotex from launching generic clopidogrel products, on the basis of a patent that was later found to be invalid.^[11]

In the 2008 financial year, Sanofi’s Plavix clopidogrel products (also sold in Australia as Iscover by Bristol Myers Squibb), a medication inhibiting the formation of blood clots, was the third most heavily Government-subsidised prescribed drug in Australia. The Government’s costs for that year extended to approximately A$170 million.

In August 2007, Apotex commenced legal action to revoke Sanofi’s Australian Patent No. 597784 covering the product and was quickly met with an interlocutory injunction application. The injunction was granted and remained in force until the patent was ultimately found wholly invalid by the Full Court and special leave for appeal to the High Court was refused. Apotex’s clopidogrel products were launched on 1 May 2010.

On grant of the interlocutory injunction, Sanofi was required to give the ‘usual undertaking as to damages’, by which it undertook to compensate any person adversely affected by the operation of the injunction.^[12] After the patent was revoked, both Apotex and the Government brought claims pursuant to the undertaking, seeking damages for their losses resulting from the delayed launch of Apotex’s products. Apotex’s claim was settled, whereas the Government continued with its claim: the Government’s claim was based on its lost opportunity for pricing decreases for clopidogrel products, which would have been triggered by a first generic entry, including (1) an immediate mandatory price reduction and (2) further price disclosure-related price reductions, which would have occurred in the years following. The Government’s claim on this basis exceeded A$325 million plus interest.

Key findings and implications

The Full Court upheld the decision of the trial judge that the Government did not succeed in making out its case.^[13] Ultimately, this finding arises from a failure to make out the counterfactual that Apotex would have launched in the circumstances at play at the relevant time, had Sanofi not obtained an interlocutory injunction.

The appeal decision highlights the complexities in establishing that counterfactual to the required standard. In addition, the Full Court did not consider the trial judge’s finding that it was more likely than not that the Government would have been prepared to reverse statutory reductions in the reimbursed price for Sanofi’s products triggered by the generic listing on the Government’s Pharmaceutical Benefits Scheme (PBS), if sale of the generic product was subsequently restrained by a permanent injunction.^[14] Both of these matters are likely to continue to be raised in interlocutory injunction hearings as factors requiring a re-evaluation of the delicate balance between the interests of both parties in such a scenario.

The decision also highlights the need for compelling evidence, supported by contemporaneous documents, from the ultimate decision makers at the generic party and the Government to convince the Court that, but for the grant of the interlocutory injunction, the generic product would have been launched and listed on the PBS in the face of the significant damages risk if patent infringement was later made out.

Finally, in overturning the judge’s conclusion that the Government’s losses were not a direct consequence of the interlocutory injunction (because it did not restrain PBS listing), the Full Court has alleviated some pressure on the need to explicitly include a restraint in that regard in interlocutory injunction orders.

First-instance decision against the Government

The first-instance decision delivered in May 2020 was the first case dealing with a claim by the Government for damages in these circumstances. The Government had previously settled claims for compensation against Wyeth relating to extended release formulations of the antidepressant venlafaxine (Effexor XR) and against AstraZeneca relating to the rosuvastatin (Crestor). The judgment also followed the late 2018 Federal Court decision relating to venlafaxine, in which the generic party claims were upheld, including third-party generic companies who were not party to the proceedings.^[15]

At first instance, Justice Nicholas confirmed that, in principle, a claim by the Government on an undertaking regarding damages in these circumstances could be made out; however, the Government failed in its case in several respects:

• The Court found that the Government’s losses were not a direct consequence of the interlocutory injunction granted. In this case, the injunction prohibited commercial activities such as manufacture and sale, but did not explicitly restrain listing by Apotex of its products on the PBS. There had been some debate at the original interlocutory injunction hearing regarding whether PBS listing would be a patent infringing act and, therefore, whether the Court should restrain that act by injunction; however, Apotex, in any event, gave a separate undertaking to refrain from PBS listing its products, given that practically it would not have been able to meet the guarantee of supply requirements of PBS listing in the face of an injunction on supply. Crucially, the Court found that Apotex’s undertaking was not supported by any undertaking regarding damages from Sanofi. Accordingly, it found that the loss was directly caused by Apotex’s decision not to list on the PBS, not by the interlocutory injunction itself.^[16]
• Despite Apotex’s Australian managing director giving evidence that Apotex would ‘almost certainly’ have launched ‘at risk’,^[17] Justice Nicholas was not satisfied that Apotex’s CEO and ultimate decision maker, who did not give evidence, would have authorised a launch if no interlocutory injunction had been granted.^[18]
• The Court found that it was more likely than not that the Government would have been prepared to reverse statutory reductions in the reimbursed price for Sanofi’s products triggered by the generic listing on the PBS, if sale of the generic product was subsequently restrained by a permanent injunction.^[19]

Full Court upholds decision against Government

On appeal, the Full Court focused on two key issues – whether the trial judge erred in finding that:

• Apotex would not have sought to PBS list its clopidogrel products even if it had not been restrained by the interlocutory injunction (Apotex launch and listing issue); and
• the loss claimed by the Government did not flow directly from the interlocutory injunction (directness issue).^[20]

The Court noted that other issues in the appeal all related to ‘further hypothetical causative obstacles sequentially secreted within each other’,^[21] all within the overarching hypothetical scenario where Apotex did list and launch its products in 2008; however, these issues did not arise if one of the two key issues above was decided against the Government. That proved to be the case.

On the Apotex launch and listing issue, the Court reviewed a significant body of both documentary and testimonial evidence relied on at trial, including a substantial number of emails. Among other asserted errors, the Government argued that the trial judge had failed to have regard to various parts of this material and submissions made at trial, and that he had erred in drawing a Jones v Dunkel inference against the Commonwealth for failing to call Dr Sherman (ie, an inference that evidence from Dr Sherman, the ultimate Apotex decision-maker, would not have assisted the Government).^[22] Notably, the Government also claimed that by reason of his delay in giving judgment (31 months from hearing), the trial judge had lost the advantage usually afforded to a trial judge with regard to the assessment of credit of witnesses.

The Full Court rejected all these arguments, affirming the trial judge’s approach to the evidence. On the question of delay, it found that the trial judge had clearly set out his reasons, showing that he was very much aware of the detail of the evidence and its significance. The judge’s reasons were described as ‘a most thorough and searching excavation of the very complicated factual questions which the case generated’.^[23]

The Government, therefore, failed to show that, had the injunction not been granted, Apotex would have launched its products. Its failure in this crucial respect was determinative of the case.^[24]

The Court also considered the directness issue, on which it found that the trial judge had erred in applying such a strict causative test.^[25] Notwithstanding an intermediate causative step (Apotex’s undertaking not to PBS list) between the grant of the interlocutory injunction and the loss suffered by the Commonwealth, the loss did flow directly from the injunction.

Further implications

It remains to be seen whether the Government will seek special leave to appeal to the High Court – an appeal that might be considered ambitious in light of the Full Court’s strong endorsement of the trial judge’s approach to the evidence in the case. Regardless, it is likely that the implications of this case will be felt not only in future damages cases, but also at the interlocutory injunction stage.

Patent law does not recognise AI as eligible inventor

In November 2022, the High Court refused an application for special leave to appeal made by Stephen L Thaler from the April 2022 decision of the Full Federal Court of Australia^[26] that his ‘device for the autonomous bootstrapping of unified sentience’ (DABUS) artificial intelligence (AI) platform was not entitled to apply for an Australian patent because it was not human.

Background

Dr Thaler filed Australian Patent Application No. 2019363177 on 17 September 2019, which relates to a container with a wall including a fractal profile with corresponding convex and concave fractal elements on the interior and exterior surfaces. Those features were said to enable multiple containers to be coupled together via ‘inter-engagement’ while also improving grip and heat transfer. Dr Thaler has pursued patents for this invention, naming DABUS as the inventor, in high-profile cases worldwide, including in the United Kingdom^[27] and the United States.^[28]

Refusal by the Commissioner of Patents

In a decision delivered on 9 February 2021, the Deputy Commissioner of Patents (the Deputy Commissioner) concluded that only a person (natural or legal) can be granted a patent and that, in the absence of devolution of title from the inventor, the inventor will be the applicant.^[29] Although an applicant can be entitled to have the application assigned to them, it was generally understood that a machine cannot own property and, therefore, cannot assign something it does not own.

Successful appeal by Thaler to the Federal Court

The Deputy Commissioner’s decision was, surprisingly, overturned on appeal to a single judge of the Federal Court, Justice Beach, in a decision delivered on 30 July 2021.^[30] Justice Beach reasoned that the word ‘inventor’ in the Patents Act 1990 (Cth) (the Patents Act) should be interpreted flexibly to account for unforeseen technological advances,^[31] and that it is a noun that can be a person or a thing.^[32]

Successful appeal by the Commissioner of Patents to the Full Court

In a decision delivered on 13 April 2022,^[33] the Full Court of the Federal Court of Australia (Chief Justice Allsop and Justices Nicholas, Yates, Moshinsky and Burley) overturned the decision of Justice Beach and found that only a human can be an inventor. They noted, in particular, that section 15(1)(a) of the Patents Act provides that ‘a patent for an invention may only be granted to a person who is the inventor’ and that the ordinary English meaning of ‘inventor’ is the person responsible for making the invention, that being ‘the person who makes or devises the process or product’.^[34]

High Court did not wish to hear the issue

The High Court’s November 2022 refusal of Dr Thaler’s application for special leave makes clear that the Patent Act, as it stands, provides only for the grant of patents to human inventors and their successors in title. Any change to that position must arise from legislative change rather than case law.

There is significant and active debate throughout the Australian legal and patent professions, industry and Government about what Australia’s policy position and law, including in relation to patents and copyright, should be with respect to AI-generated works. It will be especially interesting to follow these developments, in Australia and internationally, over the coming months and years.

Footnotes