Northern Territory v Collins

[2008] HCA 49

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(Judgment by: Gummow ACJ, Kirby J)

Northern Territory
vCollins

Court:

Judges:
Gummow ACJ
Kirby JHayne J
Heydon J
Crennan J

Hearing date:
Judgment date: 16 October 2008

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Judgment by:
Gummow ACJ
Kirby J

1. To assist in appreciation of the issues which arise on this appeal from the Full Court of the Federal Court of Australia (Branson and Sundberg JJ; French J dissenting) ^[1] it is appropriate first to describe the structure and conduct of the litigation which gave rise to the appeal to the Full Court.

The structure and conduct of the litigation

2. By their amended statement of claim in the Federal Court Mr and Mrs Collins ("the respondents") sued the Northern Territory of Australia ("the Territory") alleging infringement by the Territory of Australian Standard Patent No 742711 ("the Patent") granted pursuant to the Patents Act 1990 (Cth) ("the Act"). The respondents are the registered owners of the Patent.

3. The respondents alleged that the Territory had "supplied" to Australian Cypress Oil Company Pty Ltd ("ACOC") certain timber from trees of species of the genus Callitris and that ACOC had used that timber to produce an oil called "blue cypress oil" by means of a process claimed by the Patent. The alleged "supply" was said to be found in statutory licences granted to ACOC to take timber from certain Crown lands in the Territory. The terms of the licences and the circumstances in which they were granted are explained in the reasons of Crennan J.

4. The respondents did not join ACOC as a party in the action although against the Territory they pleaded in general terms that the activities of ACOC had amounted to infringement. However, the respondents alleged that the supply by the Territory of the timber to ACOC was an infringement by reason of s 117 of the Act.

5. Section 117 is headed "Infringement by supply of products" and deals with what is known as "contributory infringement", although that expression is not used in the section or elsewhere in the Act.

6. Section 117(1) states:

"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."

The reference in s 117(1) to "the use of a product by a person" is, among other things, a reference to "any use of the product, if the supplier had reason to believe that the person would put it to that use"; but this is so only "if the product is not a staple commercial product". That is the effect of par (b) of s 117(2).

7. The title given to the invention in the Patent is "Methods of producing essential oils from species of the genus callitris" and there are 20 claims. All but claim 12 are claims to a method; claim 12 is a claim to a blue oil containing guaiazulene when produced by a method according to any of claims 1-11. The statement of claim did not identify any particular claim or claims which ACOC was said to have infringed.

8. The primary judge (Mansfield J) on 6 February 2006 directed that there be a separate trial on certain issues. His Honour later explained that the order was made to deal with the alleged contributory infringement by the Territory without extending the hearing into issues of validity of the Patent and infringement by ACOC. The validity of the Patent and infringement by the alleged actions of ACOC were assumed at the separate trial.

9. In many cases the formulation of specific questions to be tried separately from, and in advance of, other issues assists in the more efficient resolution of litigation, but where, as appears to have been the case here, preliminary questions are of mixed fact and law there is a particular need for precision both in formulating the questions and in specifying the facts upon which they are to be decided ^[2] .

10. At the trial of the separate issues the parties agreed to a reformulation of issues on the footing that, if Mansfield J decided any of the issues adversely to the interests of the respondents, the action itself must be dismissed. His Honour proceeded accordingly and the upshot was that the action was dismissed on 8 December 2006.

11. The respondents' appeal to the Full Court was successful. The decisive holding by the majority was that there was no "staple commercial product" within the meaning of par (b) of s 117(2); French J was of the contrary view. The order of the Full Court set aside the order of the primary judge dismissing the action and remitted the matter to his Honour for such further hearing as was necessary in the light of the joint reasons of the majority of the Full Court.

12. In this Court the ultimate issue must be whether the decision of the Full Court is shown to be erroneous. However, the Territory, as appellant, in its written submissions and their development in oral argument, tended to obscure the matter by identifying the ultimate issue as being:

"[W]hether the grant of a statutory licence to 'go upon Crown lands and take ... timber' can amount by force of s 117 of [the Act] to an infringement of a patent for a method or process (or a product resulting from a method or process) into which the timber is to be used by the licensee as an input."

13. The Territory submits that, in addressing that ultimate issue, three questions arise. They are said to be:

"(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 such a statutory licence 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 question

14. With respect to the first question identified by the Territory, we agree with Hayne J that the variety of quite different cases that may arise for consideration under s 117 provides a powerful reason not to attempt some singular answer to a general question as framed by the Territory.

15. In the Full Court, the majority emphasised, correctly, that there fell outside the scope of the separate questions any enquiry as to infringement of claims of the Patent ^[3] by ACOC. The primary judge had decided the issues as follows ^[4] :

"[T]he grant of the licences to ACOC in their terms, and in their context, did not amount to the supply of the timber to ACOC so as to expose [the Territory] to liability as a contributory infringer of the patent under s 117(1) of the Act, even if - contrary to my conclusion - the conduct amounted to the use of the timber within s 117(2)(b) of the Act, and even assuming on the Collins' favour that the timber was used by ACOC so as to infringe the patent".

16. We would elaborate the analysis in the reasons of Hayne J with four observations. The first stresses what has been said in this Court on several occasions in recent years, to the effect that the fundamental duty of the Court is to give meaning to the legislative command according to the terms in which it has been expressed; legislative history and references to the pre-existing law should not deflect the Court from its duty in resolving an issue of statutory construction which ultimately is always a text based activity ^[5] .

17. The second observation is that in numerous and significant provisions of the Act, which operate in a wide range of circumstances, a distinction is drawn between an invention which is a product and an invention which is a method or process. Examples include s 13 and the definition of "exploit" (content of patent monopoly), s 16 (co-ownership of patents), s 18(4) (microbiological processes and products), s 70 (pharmaceutical substance claims), s 119 (prior use), s 121A (burden of proof of infringement of a process patent), s 123(2) (innocent infringement), s 133 and the definition of "work" (compulsory licences), s 135 (reasonable requirements of the public), ss 144 and 146 (void licence conditions) and ss 167 and 168 (Crown use).

18. The third observation is that the drawing of the present legislation in this way reflects the understanding of the principles of patent law expounded by this Court in National Research Development Corporation v Commissioner of Patents (" NRDC ") ^[6] . The Court emphasised that over time the expression "manner of manufacture" in the Statute of Monopolies of 1623 ^[7] had been construed so as to include a practice of making, as well as the means of making and the product of making; there was, however, no necessity for the derivation of a "vendible product" in the literal sense, so that an artificially created state of affairs, such as (in NRDC itself) the inhibition in the growth of weeds by application of a selective herbicide, would suffice. Hence the distinction now drawn in the definition of "exploit" in the Act between an invention which is a product, and an invention which is a method or process which may or may not yield a product.

19. The definition of "exploit" in the dictionary in Sched 1 to the Act is as follows:

" 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."

20. The final observation concerns the position of s 117 in the statutory scheme as a whole. Subject to the Act, a patent gives the patentee the exclusive rights to exploit the invention for the term of the patent (s 13). Infringement proceedings may be brought to enforce those rights (s 120) and relief granted by way of injunction, damages or an account of profits (s 122). While the Act establishes some exceptions to infringement (ss 118-119A) and offers protection for innocent infringement (s 123), no definition is given for what constitutes an "infringement" ^[8] . The statutory scheme instead fixes attention on the exclusive rights given by the patent, as illuminated by the definition of "exploit" found in the dictionary to the Act.

21. Section 117 does not itself speak to the exclusive rights given by the patent. Rather, the provision identifies conduct and prescribes conditions in which that conduct will be an infringement of the patent. The conduct is the "supply of [a] product" by one person to another. The critical condition for the imposition of liability for infringement is that which is stated first. This is that "the use of [the] product" by the person to whom it is supplied "would infringe [the] patent" (s 117(1)). As the reasons of Hayne J demonstrate, this is informed by the application of s 117(2) and consideration of the exclusive rights given by the patent.

The second question

22. The second question identified by the Territory concerns the treatment of the licences conferred upon ACOC by the Territory under the Crown Lands Act (NT) which permitted the licensee to sever and take the timber. This being so, and as Hayne J explains, there was a "supply" of timber within the meaning of s 117(1) of the Act. The result is that the majority of the Full Court correctly held that "the Territory provided or furnished the timber to ACOC, and thus supplied it to ACOC" ^[9] . This conclusion is not, with respect, to be answered by reference to the classification of the interest granted as one in real property or personal property or as involving the sale of a chattel ^[10] . The Act itself affords the applicable classification and invoking others is likely to mislead.

The third question

23. The remaining question is whether the timber taken under the statutory licences was a "staple commercial product" within the meaning of s 117(2)(b) of the Act. We agree that the question should be answered in the affirmative and thus in favour of the Territory, with the result that the appeal to this Court must succeed.

24. In his dissenting reasons French J referred ^[11] both to the adoption in earlier legislation of other jurisdictions, particularly in the United States and the United Kingdom, of expressions with an affinity to, but not identity with, the expression "not a staple commercial product" now found in par (b) of s 117(2) of the Act and to the relatively brief treatment of that expression in the report of the Industrial Property Advisory Committee ^[12] which preceded the enactment of s 117.

25. French J referred, in particular, to the enactment of §271 of the Patent Act of 1952 ^[13] which introduced into the statute law of the United States the expression "not a staple article or commodity of commerce suitable for substantial noninfringing use". Contemporary discussion in the United States indicates that in legislating in that way the Congress may have proceeded on the footing that the interest in the free flow of commercial goods justified "a flat exclusion of staple articles" ^[14] . When used as an adjective, the word "staple" as then understood in the United States ^[15] was given the following meanings:

"(1)

Pertaining to, or being a market or staple for, commodities; as, a staple town. Now Rare .

(2)

Established in commerce; occupying the markets; settled; as, a staple trade.

(3)

Fit to be sold; marketable. Rare .

(4)

Regularly produced or made in large quantities; belonging to wholesale traffic; hence, principal; chief

'Wool, the great staple commodity of England'." (italics in original)

26. Of course, the word "staple" has found its way into the language of a contemporary Australian statute designed to apply to modern conditions in this country. However, when the standard local dictionaries are consulted, they do not yield a meaning different from that in the United States. Thus the word has been defined ^[16] , relevantly:

"(1)

a principal commodity grown or manufactured in a locality.

(2)

a principal commodity in a mercantile field; goods in steady demand; goods of known or recognised quality.

(3)

a principal item, thing, feature, element, or part.

(4)

the fibre of wool, cotton, flax, rayon, etc, considered with reference to length and fineness."

27. French J expressed his conclusions upon this aspect of the case in terms with which we respectfully agree. His Honour said ^[17] :

"There is a preliminary question about the classification of what was supplied for the purpose of determining whether it was, at the time of supply, a staple commercial product. That translates, in the present case, to the question whether the relevant class is unmilled timber or unmilled timber of the species Callitris Intratropica. If the product class were rightly described as unmilled timber there would be no debate. The Court could take judicial notice of the fact that unmilled timber is a staple commercial product.

...

Millable timber in the form of standing trees is not a product manufactured to a particular use. The evidence is clear that in the case of Callitris Intratropica its timber is suitable for use in a variety of applications for which timber generally is used. This was the evidence of Mr Brocklehurst and it was not contested. There was evidence to like effect provided from Mr Collins' side of the debate in the submission made on his behalf by his accountant, Mr Cavanagh, in June 1995. The relevant product class to which it belonged, for the purposes of s 117(2)(b) was 'millable timber'.

For the preceding reasons the timber taken by ACOC from the Howard Springs Plantation area pursuant to the licences granted to it by [the Territory] was a staple commercial product for the purposes of s 117 of the Act."

28. As a result, while by reason of the grant of the licences by the Territory there was a supply of timber within the meaning of s 117(1), that supply could not constitute contributory infringement by the Territory, even if (as was not established but was assumed) there were an infringement by ACOC of valid claims of the Patent.

29. It follows that, like Hayne J, Heydon J and Crennan J, we answer the third question in favour of the Territory and this is the sole ground upon which we would allow the appeal. The conclusion that the timber in question is a staple commercial product is, as Hayne J and Heydon J emphasise, determinative of the present matter.

Orders

30. It follows from the structure in which the litigation has been cast, that the appeal to this Court should be allowed with costs, the order of the Full Court of the Federal Court set aside and in its place the appeal to that Court should be dismissed with costs. The result will be that the order of the primary judge dismissing the action against the Territory is reinstated.