Northern Territory v Collins

[2008] HCA 49

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(Judgment by: Hayne J)

Northern Territory
vCollins

Court:

Judges: Gummow ACJ
Kirby J

Hayne JHeydon J
Crennan J

Hearing date:
Judgment date: 16 October 2008

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Judgment by:
Hayne J

31. The facts and circumstances giving rise to this appeal are set out in the reasons of other members of the Court and need not be repeated here.

32. The disposition of the appeal depends upon the proper construction of s 117 of the Patents Act 1990 (Cth) ("the Act"). Although the text of the section appears in the reasons of other members of the Court, it is as well to set it out. It provides:

"(1)

If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.

(2)

A reference in subsection (1) to the use of a product by a person is a reference to:

(a)

if the product is capable of only one reasonable use, having regard to its nature or design - that use; or

(b)

if the product is not a staple commercial product - any use of the product, if the supplier had reason to believe that the person would put it to that use; or

(c)

in any case - the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier."

33. The appellant identified three questions of construction of this section:

"(1)

Is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act?

(2)

Is the grant of ... a statutory licence [to 'go upon Crown lands and take ... timber'] the 'supply' of a 'product' within the meaning [of] s 117(1) of the Act?

(3)

Is the timber to be taken under the statutory licence a 'staple commercial product' within the meaning of s 117(2)(b) of the Act?"

The first of those questions is cast in general terms not taken from the text of s 117, and divorced from the particular facts of this case. The generality of its expression must not be allowed to direct attention away from some important features of s 117(1).

Engaging s 117

34. Section 117(1) is engaged where there is "the supply of [a] product by one person to another". At the relevant time, the dictionary in Sched 1 to the Act provided that "supply" includes "supply by way of sale, exchange, lease, hire or hire-purchase". The dictionary did not (and does not) contain any definition of "product" but the dictionary's treatment of the word "exploit" distinguishes between "where the invention is a product" and "where the invention is a method or process". Read as a whole, s 117 can be seen to proceed on the footing that the word "product" has its ordinary meaning and is not confined to a patented product or a product that is itself the result of applying a patented method or process.

35. Although s 117(1) is engaged only where there is "the supply of [a] product by one person to another", s 117 is directed to an identified sub-set of such transactions. That sub-set is identified first by the introductory words of s 117(1) - "[i]f the use of a product [the product that is supplied] by a person would infringe a patent" - and second by the amplification in s 117(2) of what is meant by "the use of a product by a person". At the risk of undue abbreviation the amplification provided by s 117(2) can be described as inviting attention, in the particular cases identified in each paragraph of the sub-section, to "only use" (s 117(2)(a)), "known use" (s 117(2)(b)) and "instructed use" (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin consideration of an issue about the application of s 117(1) will be to examine what is said to be the use of the product that is alleged to engage the provision. It is that use which must be identified as the use which would infringe the patent because the hinge about which s 117 turns is its introductory words: "[i]f the use of a product by a person would infringe a patent".

36. When the question is approached in that way, it will be observed that to ask whether supply of an input for a patented method or process (or resulting product) is capable of attracting s 117(1) may direct attention away from the relevant statutory questions. Those questions are: is there a supply of a product; what is the use of the product (as use is elucidated in s 117(2)); and does that use infringe the patent?

37. The answer that is to be given to the last of the three questions just identified will, of course, turn upon whether the use in question contravenes the patentee's exclusive rights under s 13 of the Act, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. And that requires close attention to what is meant by "exploit". In particular, it requires close attention to what is said in the dictionary in Sched 1 to the Act about "exploit", namely that:

" exploit , in relation to an invention, includes:

(a)

where the invention is a product - make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or

(b)

where the invention is a method or process - use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use."

38. The question which the appellant submitted arose in this matter - is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act? - was framed as it was in the expectation that it could and should be answered in the negative. When the questions presented by s 117 are identified in the manner set out earlier in these reasons it is apparent that a variety of quite different cases may arise for consideration under s 117. In particular, the different kinds of use that are identified in s 117(2) may present radically different issues about the relationship between the relevant use and the patentee's exclusive rights to exploit the relevant invention. That is reason enough not to attempt some singular answer to a general question about when s 117 may be engaged.

39. It is also reason enough to doubt that differences which may be identified in what was said by Gummow J in Rescare Ltd v Anaesthetic Supplies Pty Ltd ^[18] and Black CJ and Lehane J in Bristol-Myers Squibb Co v F H Faulding & Co Ltd ^[19] are usefully expressed in terms of the kind that the appellant's first question employed. Rather, questions about the application of s 117 must be approached with a close focus upon the relevant statutory language. That will require identification of the relevant use of the product and the relevant exclusive rights of the patentee. It is not useful, and may be misleading, to proceed by first seeking to establish a singular and all-embracing explanation of the operation of s 117 by excluding certain types of patent or certain types of product from any possible operation of the section.

40. For the reasons that have been given, it is convenient to deal next with the third of the questions posed by the appellant - is the timber a "staple commercial product"? That question should be examined now because it bears upon whether there was a relevant "use" within s 117(2) and, as indicated earlier in these reasons, s 117 is hinged about the identification of "the use of a product by a person [which] would infringe a patent".

Staple commercial product

41. I agree with Crennan J that a staple commercial product is one that is supplied commercially for various uses. While I agree with her Honour that this does not mandate an inquiry into whether there is "an established wholesale or retail market" ^[20] , I greatly doubt that a product could be described as a "staple commercial product" if there were not some market for its sale for various uses. The doubt lies in the fact that the product must be a commercial product and that, to be a "staple commercial product", it must be an article of commerce that not only can be used in a variety of ways but also is traded for use in various ways. But no question of that kind arises here. As Crennan J points out, leaving aside any supply to Australian Cypress Oil Company Pty Ltd ("ACOC"), timber of the kind at issue in this case was supplied to various licensees for a variety of uses. Those transactions were not so few or infrequent as to deny the existence of a market for the supply of that kind of timber for a variety of different uses.

42. The phrase "staple commercial product" must be read as a whole and it must take its meaning from the context in which it sits. In particular, it is to be recalled ^[21] that s 117 creates a liability in a supplier of a product where the act of supply would otherwise not infringe a patentee's rights. Section 117 imposes liability on the supplier if use of the product supplied by the person to whom it is supplied would infringe.

43. In this setting "staple commercial product" should not be given a narrow meaning. To do so would expand the classes of supply which are reached by s 117, thus expanding the rights of the patentee where, by hypothesis, the act of supply is not otherwise an infringement of the patentee's monopoly. Further, the meaning given to "staple commercial product" must recognise that the central focus of s 117 falls upon the use of a product. The construction of the section must be approached with these two matters at the forefront of consideration.

44. The drafting history of the provision is also important. The 1984 report of the Industrial Property Advisory Committee ^[22] recognised that each of patent law and competition law must, "so far as practical, accommodate the legitimate operation of the other". The need to resolve the tension between inhibiting competition and providing sufficient protection for the monopoly rights of patentees can be seen as informing the recommendation of that Committee ^[23] that:

"in general the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe a patent, should itself be an infringement of the patent".

The government's published response to the Committee's report ^[24] and, more immediately, the Explanatory Memorandum to the Patents Bill 1990 (Cth) ^[25] , both stated an intention to implement this recommendation of the Committee.

45. It will be recalled that the Industrial Property Advisory Committee referred to "the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe" (emphasis added). The Committee's reference to the supply of goods whose only use would infringe is evidently taken up in s 117(2)(a). Likewise, the reference to supply accompanied by a positive inducement finds reflection in s 117(2)(c). But the Explanatory Memorandum to the 1990 Bill saw no incongruity between the Committee's recommendations and the addition of reference to "any use of a non-staple commercial product to which the supplier had reason to believe that the receiver would put it" ^[26] . And it is this reference which is reflected in s 117(2)(b).

46. This third kind of supply and use may not fit so easily in the class of supplies accompanied by a positive inducement as the kinds of "instructed use" with which s 117(2)(c) deals. But having regard to the text of s 117(2)(b), and to what was said in the Explanatory Memorandum, it appears that s 117(2)(b) was seen as cognate with, if not a species of, supply accompanied by "a positive inducement ... to perform actions which would innocently or knowingly infringe" ^[27] . This points against reading s 117(2)(b) as having extended or expansive reach.

47. Section 117(2)(b) cannot be read as dealing only with products that have no more than one reasonable use. Section 117(2)(a) deals with those cases. It follows, therefore, that the cases with which s 117(2)(b) deals at least include the supply of a product which can have more than "one reasonable use". It is then to be observed that the supplier's having reason to believe that the product would be put to an infringing use is not sufficient to engage the provision - the product must be "not a staple commercial product". What meaning is to be given to that phrase?

48. To read "staple commercial product" as identifying a product that is supplied commercially for various uses does not reflect the notion of principal or chief importance sometimes conveyed by the adjective "staple". But as Crennan J concludes, "staple", used adjectivally in the compound expression "staple commercial product", should not be read as directing attention to the economic significance of the product concerned. Rather, it should be read as inviting attention to the variety of uses to which the product both can be, and is in fact, put. It is that variety of uses which, when the product is supplied commercially, makes the product a staple commercial product.

49. As the reasons of Crennan J show, this construction of the provision is not inconsistent with the desire, expressed ^[28] in the government's published response to the report of the Industrial Property Advisory Committee, to harmonise Australian patent law with the laws of Australia's major trading partners. But, as those reasons also show, the laws of the United States of America and the United Kingdom relating to indirect infringement are each expressed in terms that differ in important respects from s 117. There is, therefore, only limited assistance to be gained from considering the expressed desire for harmony with major trading partners.

50. It may be thought that to read "staple commercial product" as identifying a product that is supplied commercially for various uses leaves little effective work to be done by s 117(2)(b). In particular it can be observed that cases of "only one reasonable use" are dealt with in s 117(2)(a), and yet many cases in which a product has various uses will not fall within s 117(2)(b). The resolution of this apparent tension between the two provisions lies in the recognition that s 117(2)(a) is concerned with a product capable of only one reasonable use, whereas "staple commercial product" takes its operation from what is seen to occur in the market-place. The two paragraphs pose radically different questions. The question posed in s 117(2)(a) is: For what can the product be used? By contrast, the question posed in s 117(2)(b) is: To what uses is the product in fact put? If it is in fact supplied commercially for various uses, it is a staple commercial product and the supplier of such a product is not to be held liable as an infringer because the person to whom the product is supplied uses it in a way that infringes, even if the supplier has reason to believe that it may be used in that way. Reading the provision on this basis would bring within the reach of s 117(2)(b) the supply, for example, of a product previously traded for only one use where the supplier has reason to believe that it will be used for a new and infringing use. It would leave beyond the reach of s 117 the supply of a product that has previously been traded for various uses unless the supply falls within s 117(2)(c) - where the supplier instructs or induces a particular use which infringes, or advertises the product for that use.

51. Once the product in question in this case is identified as a staple commercial product, it is evident that none of the three kinds of case identified in s 117(2) is engaged. Identification of the product as a staple commercial product takes the case outside s 117(2)(b) and, because the product has more than "one reasonable use", s 117(2)(a) is not engaged. It was not suggested that the case of "instructed use", for which s 117(2)(c) provides, applies in this case.

52. Although the conclusion that the timber in question is a staple commercial product is determinative of the present matter, it is as well to add something shortly about the question of "supply".

Supply

53. The provisions of the dictionary in Sched 1 to the Act dealing with "supply" are referred to earlier in these reasons. It is evident that the word is used in the Act with a large operation.

54. The licences granted to ACOC permitted that company to "go upon Crown Lands and take ... timber". No doubt those licences permitted the licensee to sever standing trees and take the severed timber. And for that permission the licensee was bound to pay royalties fixed by reference to what was taken. Was there a "supply" of the timber? Or was there, as the appellant submitted, no more than the supply of permission to enter and take?

55. Whether there was a supply of timber is not to be answered by attempting to classify what was granted as an interest in realty or personalty ^[29] . Nor is it to be answered by asking whether there was a sale of a chattel ^[30] or by asking, as the appellant submitted, whether the conditions of the licence were enforceable only by forfeiture. Rather, it is to be observed that the licences permitted the licensee to sever and take the timber. That being so there was a supply of the timber. The appellant supplied the licensee with the timber by granting the licences it did.

Conclusion and order

56. For these reasons, I agree that the appeal should be allowed with costs and that consequential orders should be made in the form proposed by Crennan J.