Collins v Northern Territory - [2007] FCAFC 152

FEDERAL COURT OF AUSTRALIA
Collins v Northern Territory [2007] FCAFC 152
INTELLECTUAL PROPERTY – patents – infringement – contributory infringement – supply of a product – what constitutes supply – reason to believe that person supplied would put product to infringing use – criteria of reason to believe – staple commercial product exclusion – statutory licence to enter and remove timber of particular species – timber used to produce oil according to patented process – whether grant of statutory licence constituted supply for purposes of contributory infringement – whether mere permission to collect constitutes supply – whether statutory licence confers realty interest in the nature of profit a prendre – whether grant of realty interest constitutes supply – whether unmilled standing timber the subject of the licence constituted a staple commercial product – timber commercially useable for non-infringing purposes – relevant product class – unmilled timber
PROPERTY LAW – licence – profit a prendre – interest in the nature of profit a prendre – statutory licence to cut and remove timber – contractual licences compared
WORDS AND PHRASES – “supply” – “staple commercial product” – “reason to believe”
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VINCENT COLLINS AND MARYANN COLLINS v NORTHERN TERRITORY OF AUSTRALIA
NTD 2 OF 2007
FRENCH, BRANSON AND SUNDBERG JJ
20 SEPTEMBER 2007
PERTH (HEARD IN DARWIN)

IN THE FEDERAL COURT OF AUSTRALIA

NORTHERN TERRITORY DISTRICT REGISTRY

NTD 2 OF 2007

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

VINCENT COLLINS AND MARYANN COLLINS
Appellant

AND:

NORTHERN TERRITORY OF AUSTRALIA
Respondent

JUDGES:

FRENCH, BRANSON AND SUNDBERG JJ

DATE OF ORDER:

20 SEPTEMBER 2007

WHERE MADE:

PERTH (HEARD IN DARWIN)

THE COURT ORDERS THAT:
1.The appeal be allowed.
2.The orders made by the primary judge on 8 December 2006 be set aside.
3.The respondent pay the appellants’ costs of the appeal.
4.The matter, including the question of the costs of the first instance hearing to date, be remitted to the primary judge for such further hearing as his Honour deems necessary and determination in the light of the joint reasons for judgment of Branson and Sundberg JJ.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NORTHERN TERRITORY DISTRICT REGISTRY

NTD 2 OF 2007

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

VINCENT COLLINS AND MARYANN COLLINS
Appellant

AND:

NORTHERN TERRITORY OF AUSTRALIA
Respondent

JUDGES:

FRENCH, BRANSON AND SUNDBERG JJ

DATE:

20 SEPTEMBER 2007

PLACE:

PERTH (HEARD IN DARWIN)

REASONS FOR JUDGMENT
French J
Introduction

Since 21 January 1999 Vincent and Maryann Collins have been the registered owners of Australian Patent No 742711 entitled “Methods of Producing Essential Oils from the Species of the Genus Callitris”. The patent claims a process for producing a blue, guaiazulene-containing oil from a mixture of the bark and wood of the trees of the species Callitris Intratropica. In 1998 and 1999 the Northern Territory Government (the Northern Territory) granted four miscellaneous licences under the Crown Lands Act 1992 (NT) to the Australian Cyprus Oil Company Pty Ltd (ACOC). The licences entitled ACOC to take timber from the failed Howard Springs Plantation. The timber was from trees of the species Callitris Intratropica. They had originally been grown by the Northern Territory for use for commercial timber and associated products. However in or about November 1995 the Northern Territory had decided, upon advice, that they were not of sufficient quality for their initially intended use for commercial timber. The timber was used by ACOC to produce blue cyprus oil.
Mr and Mrs Collins commenced proceedings in this Court on 4 November 2005. They alleged that by issuing the licences to ACOC the Northern Territory had infringed their patent. In characterising the grant of the licences as infringement of the patent the Collins invoked s 117 of the Patents Act 1990 (Cth) (the Act) which extends the concept of infringement to cover so called contributory infringement. They claimed that, by granting the licences the Northern Territory had supplied the timber, that the timber was not a staple commercial product and that the Northern Territory had reason to believe that it would be put to an infringing use.
Mansfield J directed a separate trial of the issues as to whether:
(a)the Northern Territory had supplied a product to ACOC, the use of which would infringe the patent; and
(b)the product if so supplied, was capable of only one reasonable use, namely that of producing a blue coloured oil by the process protected by the patent or the product is not a staple commercial product and the Northern Territory had reason to believe it would be put to the infringing use complained of by the Collins.
In hearing the separate issues, his Honour assumed the validity of the patent and that ACOC was infringing it. He found, inter alia, that the grant of the licences did not constitute a supply of the timber within s 117 of the Act and that it was a “staple commercial product” within the meaning of that section. On this basis the grant of the licences did not come within the expanded concept of infringement through contributory infringement as defined in that section. His Honour dismissed the Collins’ application. They have appealed against his decision.
The issues of law and fact raised by this appeal are not without difficulty. In some respects they are novel. The appeal raises for consideration what constitutes supply of a product for the purposes of the contributory infringement provisions of the Act. It also raises the question of what constitutes a staple commercial product, the supply of which is excluded from the scope of contributory infringement unless accompanied by instructions or inducement for infringing use.
In my opinion, the licences granted by the Northern Territory to ACOC in the nature of a realty interest akin to a profit a prendre. They did not amount to the supply of the timber. And if that conclusion be incorrect, the timber itself was a staple commercial product within the meaning of s 117. For these reasons in my opinion the appeal should be dismissed. Branson and Sundberg JJ are of a different view and the appeal will therefore be allowed.
Statutory framework
Section 117 of the Act extends the concept of infringement to “contributory infringement”. 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.
“Supply” is defined inclusively in Schedule 1 of the Act:
“supply” includes:
(a)       supply by way of sale, exchange, lease, hire or hire-purchase; and
(b)offer to supply (including supply by way of sale, exchange, lease, hire or hire-purchase).
Also relevant are the provisions of the Crown Lands Act 1992 (NT) which provide for the grant of licences in relation to crown lands. The relevant section is s 91 which provides, inter alia:
Miscellaneous licences
(1)      The Minister may grant licences to go on Crown lands, or lands subject to a lease granted, whether before or after the commencement of this Act, on behalf of the Crown, or dedicated or reserved lands, and to take from the land –
(a)       live or dead timber or wood;
(b)stone, shell, sand, gravel, clay or earth, not being or supposed to be metalliferous;
(c)salt;
(d)seaweed;
(e)bark; and
(f)any other substance or article the property of the Territory.
(2)      Licences in pursuance of this section shall not be granted for a period longer than 12 months.
Subsection (3) excludes certain categories of land from the application of the licensing power.
Section 94 provides that the fees payable in respect of a licence are those prescribed under s 8 of the Crown Lands Act “... or such other fees, not exceeding those, if any, so prescribed, as the Minister thinks fit and specifies in the licence document.” Section 94(2) provides:
A licence granted under this Act (other than a licence granted under s 92 or 93) is subject to such terms and conditions as are prescribed in the Regulations, or such other terms and conditions, not inconsistent with those, if any, so prescribed, as the Minister thinks fit and specifies in the licence document.
Reference should also be made to s 102, which makes it an offence to fell trees or saplings growing on Crown land or to cut, saw, remove or sell timber lying or being on that land other than in pursuance of a lease or licence or other lawful authority.
The Crown Lands Regulations provide for applications for miscellaneous licences. Such applications are required to be in writing and to specify, inter alia, the purpose for which the licence is required and to be accompanied by the prescribed fee (reg 38). The Minister is empowered to approve or refuse such applications or to return them for amendment (reg 39). Such licences may be granted for terms of 3, 6 or 12 months (reg 41) and under reg 44 it is provided:
The holder of a miscellaneous licence may take and remove from the land included in his or her licence only that substance or material for which the licence is issued.
There is also provision for royalties to be imposed (reg 46):
Royalties
The Minister may determine a royalty on the material removed from the land to which a miscellaneous licence relates, and the amount of the royalty, if any, and the time and place of payment shall be specified in the licence.
Regulation 48 provides for forfeiture of miscellaneous licences for breach in the following terms:
Where the holder of a miscellaneous licence has failed to comply with –
(a) a condition of the licence; or
(b) a requirement of, or under, this Division,
the Minister may, by notice in writing to the holder specifying the failure, forfeit the licence.
The licences granted from 1993 in relation to Howard Springs Plantation
As appeared from the affidavit of Paul Wharan, the Director, Land Administration of the Northern Territory, trees of the species Callitris Intratropica were planted in the Howard Springs Plantation in the late 1960s. Between 1993 and 2001 responsibility for issuing permits or licences in respect of the plantation rested with the former Conservation Commission of the Northern Territory and thereafter the Department of Planning and Infrastructure.
On 30 April 1993 the Conservation Commission issued a permit to Mr Collins “to carry on trade or commerce in Howard Springs Forest Park”. The trade or commerce permitted was identified in a schedule to the permit as “Crop thinning of Callitris Intratropica”. The permit was for a period of 12 months. It related to a portion of the plantation known as Compartment 13B. It provided for a royalty of 20 cents per stem felled. The permit was backed by an Operational Agreement between Mr Collins and the Conservation Commission.
A dispute arose between the Northern Territory and Mr Collins about whether he had been issued with a second permit for the period 18 October 1994 to 17 October 1999. That dispute is not material for present purposes. However at some point during that period a reserve which had existed over Howard Springs Plantation was revoked and it became Crown Land subject to administration by the Department of Planning and Infrastructure.
On 16 April 1996 a miscellaneous licence 1839 was issued to Blue Cyprus Holdings Pty Ltd under the Crown Lands Act. It was a lease “to go upon Crown Land … and to take therefrom [Callitris Intratropica] during the period from the 1^st day of April 1996 to the 31^st day of March 1997 …”. Special conditions attached to the licence imposed a royalty of $2.50 per tree collected. They required retention of a minimum number of 100 trees per hectare which could be either Callitris or Eucalypts. Stumps were to be removed and, after extraction, the site levelled to a standard which would allow reliable access by a tractor/slasher.
On 3 July 1998, following a competitive tender process, the first of four miscellaneous licences was issued to ACOC under the Crown Lands Act. It was entitled “Licence to go Upon Crown Lands and Take there from Timber”. Its term ran from 6 July 1998 to 6 August 1998. It covered part of portion 2820 comprising an area of about one hectare. “Conditions” attaching to the licence included the following:
(i)A royalty payment of $2.50 per tree (Condition 2).
(ii)A statement that the licence carried no right to a lease nor did it entitle the licensee to use the land for residential purposes (Conditions 4 and 5).
(iii)A power to terminate on 14 days’ notice for breach of any of the conditions (Condition 4).
(iv)A requirement that the licensee “will, in respect of the licensed land ensure that all plantation trees including stumps are removed”. (Condition 14)
(v)A requirement that the licensee rehabilitate the site to a standard allowing reasonable access by a tractor/slasher (Condition 15).
(vi)A statement that, absent compliance with the two preceding conditions, the Northern Territory would have “a right to enter on to the licensed land and do all things necessary to that end” at the expense of the licensee (Condition 17).
A second miscellaneous licence was issued to ACOC on 10 May 1999 allowing it to go on Part Sections 2820 and 2821 as delineated on a plan attached to the licence and comprising an area of 271 ha. The term of the licence was 1 April 1999 to 31 March 2000. The conditions attached to it were similar to those of the first licence. The royalty, however, was fixed at 5% of the FOB price of the essential oil and any other products derived from the timber harvested from the licensed area (condition 2). The other relevant conditions of the first licence, summarised above, were repeated in the second licence.
The third licence was issued on 29 March 2000 for a period from 1 April 2000 to 31 March 2001. It covered the “Part Portions 2820 and 2821 Hundred of Bagot as delineated on the attached map comprising an area of 271.7 Hectares or thereabouts …”. The royalty payments and the relevant conditions were otherwise similar to those specified for the second licence.

The fourth licence was issued on 15 May 2001 for a period from 1 April 2001 to 30 June 2001. It covered part portion 2821 Hundred of Bagot as delineated on an additional plan. The part of portion 2821 covered by the licence appeared identical to that area of portion 2821 covered by the third licence. Similar conditions applied as in the case of the second and third licences.
The second, third and fourth licences required compliance with approved site management plans. Only those relevant to the third and fourth licences were in evidence. The site management plan for the third licence stated its purpose as “… to ensure that impacts to land within the plantations are minimized and that adjacent land within the catchment is protected through the adoption of appropriate forms of land management”. Section 2 dealt with an operational plan. Section 3 set out physical limitations to be identified. These included the retention of a buffer zone to protect water ways and drainage lines. Section 4 provided for rehabilitation of harvested areas and required, inter alia, that stumps would be removed as harvesting progressed and would be chipped and distilled along with other parts of the trees. Section 5 required preparation of a schedule indicating the timing and sequence of events of operations in line with the future requirements for development. Section 6 provided for suspension or restrictions on operations. Section 7 provided for environmental management. There was then a reference to the statutory requirements of the Northern Territory Water Act 1992 and occupational health and safety requirements.
The findings of the primary judge
At the hearing Mr and Mrs Collins did not contend that the timber was only capable of one reasonable use. It was therefore unnecessary for his Honour to consider the application of s 117(2)(a). There was evidence from a forester, Peter Brocklehurst with the Department of Natural Resources, Environment and the Arts, about the uses of Callitris Intratropica trees. Mr Brocklehurst described the wood of the trees as having the following characteristics and qualities:
(a)       termite resistance
(b)       light structural timber.
Mr Brocklehurst said he was aware that such trees had been used and are still being used for the following applications:
(a)       poles, fence posts and rails
(b)       flooring
(c)       light construction
(d)       oil extraction
(e)       mulch
(f)        traditional indigenous uses.
There was also material put before his Honour by Mr Collins which included a proposal to the Northern Territory prepared on his behalf by Mr Peter Cavanagh, a taxation accountant, in June 1995 and entitled “PROPOSAL FOR THE FORESTRY OPERATIONS AT HOWARD SPRINGS PINE PLANTATION”. In that submission it was stated:
There are five main avenues of income able to be produced through the pine forest plantation located at Howard Springs, these are:
1/        Milled Timber – milling everything possible even five foot logs.
2/        Woodchip Mulch – using all surplus material eg branches, leaves etc.
3/        Pine Oil Extraction – from the woodchip.
4/Potting Mix – using either the woodchip and/or sawdust from the milling
5/Firewood – can be collected from dead tree litter.
At that time it appeared that Mr Collins had purchased his own timber sawmill and was looking for a permanent base to set up the machinery. The submission to government said:
The production of Cypress Pine [a description for trees of the species Callitris Intratropica] for flooring, decking, panelling and the Pinus Caribaea for furniture production, general construction (formwork) and pallets is possible from the milled timber at the plantation, generally the timber is of a high standard and all the current uses for pine wood is suitable for this milled timber.
The submission went on to refer specifically to the two types of pine wood in the Howard Springs forest and said of Callitris Intratropica:
The second and most common type of timber at the plantation is Callitris Intratropica (Tropical Cypress Pine) which has a multitude of uses because of it’s (sic) unique properties. Being of a different nature to the Pinus Caribaea it takes around 12.5 trees to produce a cubic metre of wood and approximately five trees to produce a cubic metre of woodchip.
His Honour’s findings included the following:
1.The Northern Territory had reason to believe that ACOC would use bark and wood from the timber in combination for the purpose of producing blue cypress oil. The availability to the Northern Territory of the Collins’ patent was information from which the manner of use of the timber by ACOC could reasonably have been discerned.
2.The use of bark and wood from the timber to produce blue cypress oil does not infringe the patent per se. The patent protects the process of the production of blue cypress oil from the wood and bark of the timber.
3.The grant of the licences to ACOC in their terms and in their context did not amount to the supply of timber to ACOC so as to expose the Northern Territory to liability as a contributory infringer of the patent under s 117(1) of the Act.
4.In November 1995 or thereabouts the Northern Territory decided upon advice that the trees at Howard Springs were not of sufficient quality for their initially intended use for commercial timber and other associated products.
5.There were other commercial uses for the timber at the time that the Northern Territory decided that the trees were not suitable for their initially intended forestry use. There was residual commercial value in the timber including timber processing, oil production, wood chip production and decorative purposes. His Honour observed that Mr Collins had proposed a number of potential uses which he described as “only the tip of the iceberg”. His views reflected those of Mr Brocklehurst about the characteristics and uses of the timber.
6.At the time of its invitation for tenders in mid-1997 and prior to the grant of the licences to ACOC the Northern Territory recognised that the major commercial interest was in harvesting the timber for the extraction of essential oil.
7.Up to the point at which the plantation was written off by the Northern Territory the timber, as acknowledged by Mr and Mrs Collins, was a staple commercial product.
8.The decision of the Northern Territory not to maintain the plan to allow further growth of trees on the Howard Springs land for harvesting for timber did not result in the timber from those trees losing its character as a staple commercial product.
On the hearing of the appeal Mr and Mrs Collins contended that their apparent “concession” that the relevant timber was a staple commercial product up to the time the plantation was “written off” by the Northern Territory for commercial forestry production, was wrongly made. No point was taken in respect of that “concession”. This appeal can be determined on the assumption that it was not made.
The grounds of appeal
The grounds of appeal, as they appeared in a notice of appeal against his Honour’s decision filed on 18 January 2007, were numbered 2 to 4 and were in the following terms:
2.The learned trial judge erred in his interpretation and application of the definition of “supply” as used in Section 117(1) of the Patents Act 1990 ( Cth) (“the Act”) by finding that:
(a)there is no positive act of the Territory which, in terms of the definition “supply” in the Act amounted to a “supply”.
(b)the grant of licences to ACOC and in terms and in their context did not amount to the supply of Timber to ACOC so as to expose the Territory to a liability as a contributory infringer of the patent under Section 117(1) of the Act.
3.The learned trial judge erred in finding that the product supplied by the Respondent was a staple commercial product.
4.The learned trial judge should have held that:
(a)the timber supplied by the Respondent was not a staple commercial product; or
(b)alternatively if the timber was at any time a staple commercial product, it ceased to be classifiable as a staple commercial product when the timber was not maintained for the purpose of sylviculture. [sic]
The Collins seek declarations that the Northern Territory supplied a product to ACOC the use of which would infringe the patent and that the product is not a staple commercial product.
The notice of contention
By its notice of contention, the Northern Territory submitted that the primary judge’s decision should be upheld on the following grounds:
(c)That the “product” said to be supplied, howsoever described, was not a “product” the use of which would infringe the subject patent for the purposes of Section 117 of the Act; and
(d)That the “product” that could be relevantly described as an input into the process of the subject patent was:
(i)the bark and wood of Callitris Intratropica; and/or
(ii)the bark of Callitris Intratropica and the bark and wood of one or more species of the genus Callitris;
whereas what was purportedly “supplied” in the present case was Trees of the species Callitris Intratropica.
Accessorial liability for infringement before contributory infringement
Prior to the enactment of the Act there was no liability under Australian law for merely facilitating infringement. The same was true in the United Kingdom before the enactment of the Patents Act 1977 (UK). Suggestions to the contrary were rejected by Jessell MR in Townsend v Haworth LR 12 CD 830, noted in Sykes v Howarth (1879) 12 Ch D 826:
You cannot make out the proposition that any person selling any article, either organic or inorganic, either produced by nature or produced by art, which could in any way be used in the making of a patented article can be sued as an infringer, because he knows that the purchaser intends to make use of it for that purpose.
That authority was followed and applied by the Court of Appeal in Dunlop Pneumatic Tyre Co Ltd v David Moseley & Sons Ltd [1904] 1 Ch 612. See also Adhesive Dry Mounting Co Ltd v Trapp & Co (1910) 27 RPC 341 at 353 and Belegging-en Exploitatiemaatschappij Lavender v Witten Industrial Diamonds Ltd (1979) 5 FSR 59 at 64-66.
Despite the absence of statutory provisions relating to contributory or indirect infringement it always was, as it still is, the law that a person is liable as an infringer who aids or induces or procures another to infringe a patent. In Gibson and Campbell v Brand (1841) 1 WPC 631, Tindal CJ said:
… he that causes or procures to be made, may well be said to have made them himself.
To attract that accessorial tortious liability, it is not enough to sell an article knowing that it would be used in a way which would infringe the patent of another: Dow Chemical AG v Spence Bryson & Co Ltd (1982) 8 FSR 397 (CA). What was, and still is, required was conduct of the kind that would characterise a person as a joint tortfeasor at common law. As was said in the 16^th Edition of Tyrell on The Law of Patents (Sweet & Maxwell, 2006) at p 8-40:
Persons may be liable for infringement if their acts are such as would make them joint tortfeasors under the general law.
Liability as a joint tortfeasor has been said to require concerted action with another in the commission of the infringement or a “concerted design”: Morton-Norwich Products Inc v Intercen Ltd [1978] RPC 501 at 513 (Graham J). There is other authority for the proposition that inducing or procuring an infringement attracts liability as a joint tortfeasor. Some of the cases seem to use the words “joint tortfeasor” to refer only to the class of persons involved in a common or concerted design to infringe and assign liability to persons inducing or procuring infringement under a wider head of accessorial tortious liability. Whatever the proper nomenclature, mere facilitation of an infringement does not amount to procuration of or involvement in it: Molnlycke v Procter & Gamble (No 4) [1992] RPC 21 at 29 (Dillon LJ).
The rejection by the English Courts of the proposition that conduct merely facilitating infringement is a species of infringement, was followed by the High Court in Walker v Alemite Corporation (1933) 49 CLR 643 at 650 (Rich J), 654 (Starke J, Evatt J agreeing) and 658 (Dixon J, McTiernan J agreeing). Dixon J put it thus (at 658):
… it is settled law that the exclusive property in a combination invention is not infringed upon by the sale of the components … that selling articles to persons to be used for the purpose of infringing a patent is not an infringement of the patent … and that sale with a knowledge that the purchaser will use the articles for infringement is not itself an infringement although the vendor gives the purchaser an indemnity: the vendor must have made himself a party to the act of infringement … Further … it is not enough that the article sold has no other use than a use in the course of what amounts to infringement. The basis upon which these rules rest is that whatever is not included in the monopoly granted is publici juris and may be freely used as of common right.
The accessorial tortfeasor doctrine was applied by the Court. The position was summarised by Professor S Ricketson in his First Edition of The Law of Intellectual Property (Law Book Co, 1984). He said (at p 989) that liability for infringement under the Patents Act 1952 (Cth), would be imposed in the following circumstances:
1.Where the vendor sells all the parts of a patented product together – this will be regarded as the sale of the whole product and therefore an infringement.
2.Inducing a person to commit an infringement of a patent will probably in itself constitute an infringement, eg where materials for use in a patented process are sold with instructions for use in that process.
3.Liability as a joint tortfeasor may be imposed where a person acts pursuant to a common design with another person, even though the first person himself commits no act of infringement, eg because he simply supplies part or is situated outside the jurisdiction.
The position appears to be the same in Canada and New Zealand where there is no statutory provision for contributory or indirect infringement. Attempts to persuade the courts to a judge-made doctrine of contributory infringement have been rejected in Canada: Beloit Canada Ltd v Valmet Oy (1988) 21 CPR (3d) 1 FCA – leave to appeal refused by the Supreme Court (1998) 21 CPR (3d) and see Faurecia Automotive Seating Canada Ltd v Lear Corp Canada (2004) FC 421. In New Zealand see Whangapiarita v Allflex New Zealand Ltd (1995) 5 NZBLC 103,733; Nu-Pulse New Zealand Ltd v Milka-Ware (ANZ) Ltd (High Court, Hamilton CP 8/97 14/10/99 Master Faire). Israel is an example of a jurisdiction in which such a doctrine has developed: see Benyamini A, “Indirect infringement of patents in Israel: judge-made law” in Vaver and Bently (ed) Intellectual Property in the New Millenium (CUP, 2004) p 109 ff.
Involvement as an accessorial or joint tortfeasor continues in both the United Kingdom and Australia as a basis for imposing liability notwithstanding the enactment of statutory provisions for contributory infringement in s 60(2) of the Patents Act 1977 (UK) and s 117 of the Act: Caterpillar Inc v John Deere Ltd (1999) 48 IPR 1; Murex Diagnostics Australia Pty Ltd v Chiron Corp (1995) 30 IPR 277. Its application to the statutory liability for infringement is supported by the requirement enunciated by Dixon J that “the vendor must have made himself a party to the act of infringement”. It is no doubt too late in the day to say that this may not require that such participation be labelled as tort. The imposition of liability for infringement on persons who would be regarded at common law as joint tortfeasors arguably flows from the words of the Act imposing direct liability. In any event there is ample and long standing authority for the proposition that one who induces or procures another to infringe a patent and, a fortiori, one who takes part in a concerted design or purpose for the commission of that infringement by another, commits a tort: Ryan v Lum (1989) 14 IPR 513 at 521-522 (Young J) and authorities there cited. The proposition relies upon the general principle enunciated by Jordan CJ in Independent Oil Industries Ltd v Shell Co of Australia Ltd (1937) 37 SR(NSW) 394 at 414:
… as a general rule the doing of any act which violates a legal right is unlawful. If the right is in rem the wrongful violation constitutes a tort. In this case, any person who procures another to violate the right is a joint tort-feasor with him, and the injured party may sue either of them alone or both of them jointly for the tort.
A similar proposition was advanced in Spotless Group Ltd v Proplast Pty Ltd (1987) 10 IPR 668, with which Wilcox J agreed in BEST Australia Ltd v Aquagas Marketing Pty Ltd (1988) 83 ALR 217 where his Honour said:
It seems to me that the principles applicable to joint tortfeasors equally apply to contraventions of those statutory rights which are enforceable by civil remedies.
See also: CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 (Cooper J).
In Ramset Fasteners(Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999)164 ALR 239 the Full Court, following a careful review of the authorities, said (at [41]):
These authorities show that liability for infringement may be established, in some circumstances, against a defendant who has not supplied a whole combination (in the case of a combination patent) or performed the relevant operation (in the case of a method patent). The necessary circumstances have been variously described: the defendant may “have made himself a party to the act of infringement”; or participated in it; or procured it; or persuaded another to infringe; or joined in a common design to do acts which in truth infringe. All these go beyond mere facilitation. They involve the taking of some step designed to produce the infringement, although further action by another or others is also required. Where a vendor sets out to make a profit by the supply of that which is patented, but omitting some link the customer can easily furnish, particularly if the customer is actually told how to furnish it and how to use the product in accordance with the patent, the court may find the vendor has “made himself a party to the [ultimate] act of infringement”. He has indeed procured it. So to hold is not in any way to trespass against the established line of authority which, as Dixon J made clear in Walker v Alemite, is based upon the need to confine a monopoly to the precise area in which it operates. That protects the mere vendor of an old product, though selling with knowledge of the purchaser’s intention to infringe a combination patent; but it affords no excuse to the person who sets out to induce customers to do what falls fairly within the area of the monopoly.
The application of the joint tortfeasor or accessorial tortious liability doctrine to the statutory liability for infringement of a patent is referred to as background to the enactment of s 117 and for a better understanding of the mischief to which it was directed. Section 117 necessarily travels beyond the range of tortious accessorial liability for infringement.
Contributory infringement in the USA – the judge made law
In contrast to English doctrine, contributory infringement of a patent was regarded as an actionable wrong in the United States from the 19^th century. It dates back to Wallace v Holmes 29 F Cas 74 (CC Conn 1871). A combination patent for a burner for an oil lamp was held infringed by the sale of the burner without a chimney, a component which could readily be obtained. The rationale for the doctrine in the United States was explained by Blackmun J delivering the opinion of the majority of the Supreme Court in Dawson Chemical Co v Rohm & Haas Co 448 US 176 (1980) (at 188):
It exists to protect patent rights from subversion by those who, without directly infringing the patent themselves, engage in acts designed to facilitate infringement by others. This protection is of particular importance in situations, like the oil lamp case itself, where enforcement against direct infringers would be difficult, and where the technicalities of patent law make it relatively easy to profit from another’s invention without risking a charge of direct infringement.

The scope of the doctrine as it existed in the first half of the 20^th century was described in a 1938 Note in the Harvard Law Review:
The standard doctrine is that one who knowingly advises or induces another to infringe, eg, by furnishing him with materials with the intent that they be used in the infringement, is liable as a contributory infringer; and further, that where the materials are specially adapted for the infringing use and are practically suitable for no other use, such intent may be inferred.
The Scope of the Patent Monopoly: Control of Supplies and Accessories and Restrictions on Use (1938-1939) 52 Harv L Rev p 309
As to the notion of staple commercial products it was said in the same Note (pp 309-310):
Although the doctrine of contributory infringement may not be applicable at all to the sale of certain common articles of merchandise, it has not been regarded in the past as limited to articles peculiarly adapted to the patented process, since relief has been granted where the articles furnished were fairly standard products.
This was said to be on the theory that commerce in such articles should not be impeded by holding the seller liable, even though the seller’s attention was called to the buyer’s direct infringement. Debate in the United States about the scope of the doctrine was informed by concerns about its implications for competition. It was limited by concern about misuse of patent rights. It was put thus in Dawson Chemical Co 448 US 176 (1980) (at 189):
The difficulty that the doctrine has encountered stems not so much from rejection of its core concept as from a desire to delimit its outer contours. In time, concern for potential anticompetitive tendencies inherent in actions for contributory infringement led to retrenchment on the doctrine.
Many of the cases in the United States arose in the context of tying contracts where a patentee sold patented articles on condition that the purchaser would buy other materials exclusively from the patentee or its licensee. In Motion Picture Patents Co v Universal Film Manufacturing Co 243 US 502 (1917) the Court held that a patentee’s rights in a patent for a film projector did not support a requirement that the purchaser use only its unpatented film. Carbice Corporation of America v American Patents Development Corporation 283 US 27 (1931) involved a patent for a refrigerating transportation package. The package used dry ice. The patentee sold dry ice upon condition that it only be used in its patented packages. It sued Carbice Corporation for contributory infringement because Carbice sold dry ice in the knowledge that it was to be used in the patented transportation packages. In ruling against liability for contributory infringement, Brandeis J on behalf of the Supreme Court said (at 33-34):
Infringement, whether direct or contributory, is essentially a tort, and implies invasion of some right of the patentee … The Dry Ice Corporation has no right to be free from competition in the sale of solid carbon dioxide. Control over the supply of such unpatented material is beyond the scope of the patentee’s monopoly; and this limitation, inherent in the patent grant, is not dependent upon the peculiar function or character of the unpatented material or on the way in which it is used. Relief is denied because the Dry Ice Corporation is attempting, without sanction of law, to employ the patent to secure a limited monopoly of unpatented material used in applying the invention.
In Leitch Manufacturing v Barber Co 302 US 458 (1938) the relevant patent protected a process for using a thin film of bituminous asphalt emulsion to prevent freshly laid cement roads from prematurely drying. No tying contract was involved. The patentee sued a seller of asphalt emulsion which was intended for use in the patented process. The Supreme Court held that Carbice did not depend upon tying contracts and was applicable to all patents including process patents.
The doctrine of contributory infringement was called into question in two decisions of the Supreme Court in Mercoid Corporation v Mid-Continent Investment Co 320 US 661 (1944) and 320 US 680 (1944). They concerned a combination patent for a domestic heater. One of the components of the combination was a combustion stoker switch which was not itself patented. Royalties payable under a licence agreement to manufacture and sell the heater were based upon sales of the combustion stoker switch. Mercoid made such switches. There was no use for them other than in the combination patent. The patentee sued for contributory infringement. The Supreme Court held that misuse of the patent to protect an unpatented element from competition was a defence available to a contributory infringer. The Court assumed for the purposes of its case, that Mercoid was a contributory infringer and that the patentee could have enjoined the infringement but for its misuse of the patent for the purpose of monopolising unpatented material. Douglas J said (at 669):
The result of this decision, together with those which have preceded it, is to limit substantially the doctrine of contributory infringement. What residuum may be left we need not stop to consider. It is sufficient to say that in whatever posture the issue may be tendered courts of equity will withhold relief where the patentee and those claiming under him are using the patent privilege contrary to the public interest.
This dictum was said to have “[cast] doubt on the vitality of the whole doctrine of contributory infringement”: Contributory Infringement and Misuse - The Effect of Section 271 of the Patent Act of 1952, 66 Harv L Rev (1952-1953) at 913. The decision left uncertainty in the lower courts. Some took the view that the doctrine of contributory infringement had been abolished. In Dawson 448 US 176 (1980) Blackmun J described the Mercoid decisions as dealing a serious blow to the view that “control of nonstaple items capable only of infringing use might not bar patent protection against contributory infringement” (at 195).
The history of the United States jurisprudence prior to the enactment of § 271 of the Patents Act 1952 (Title 35 Ch 38) is a history of the ebb and flow between contributory infringement and patent misuse. The Court in Dawson 448 US 176 (1980) recognised their “antithetical underpinnings”. The capacity to suppress competition in an unpatented article was “an inevitable concomitant of the right to enjoin another from contributory infringement”. (at 197):
Contributory infringement in the USA – s 271 US Code Title 35 Chapter 27
Section 271 was enacted to overcome the uncertainty that followed Mercoid. At hearings conducted by the House Judiciary Committee, one of its members described the purpose of the section as being to “… remove the question of confusion as to whether contributory infringement existed at all, and stating positive law that there is such a thing as contributory infringement, or at least it be in the sense of Congress by enactment of this law that if you have in the Mercoid case done away with contributory infringement, then we reinstate it as a matter of substantive law of the United States …”. Judge Rich, a witness before the committee who was one of the principal authors of § 271 and much quoted in Dawson 448 US 176 (1980), described that as “a very excellent statement”. See: op cit 66 Harv L Rev 909 at 914. A history of the congressional process leading to the enactment of s 271 and its amendments prior to 1994 appeared in Arnold T and Riley L, Contributory Infringement and Patent Misuse: The Enactment of § 271 and its Subsequent Amendments (1994) 76 J Pat & Trademark Off Soc’y 357. It commenced with a quotation from Judge Rich which may elicit a sympathetic reaction from those called on to advise in this area of the law:
They call patent law the metaphysics of law, and I would say that this contributory infringement business is the metaphysics of patent law.
Section 271 of the United States Code Title 35 Chapter 28, as originally enacted in 1952, provided:
(a)       Except as otherwise provided in this title, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.
(b)      Whoever actively induces infringement of a patent shall be liable as an infringer.
(c)       Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practising a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial non-infringing use, shall be liable as a contributory infringer.
Paragraph (d) excluded certain conduct from the scope of any patent misuse doctrine. It is not material for present purposes. Paragraphs (e) to (i) were added by later amendments. Paragraphs (a) to (c) were also amended. The amendments commenced in 1984.
In Dawson 448 US 176 (1980) the Court characterised the section as a “codification of contributory infringement and patent misuse” compromising between those two doctrines to permit patentees to exercise control over non-staple articles used in their invention. (at 200). The exclusion from s 271(c) of “staple article or commodity of commerce suitable for substantial non-infringing use” was explained in academic commentary of the time in the Harvard Law Review:
This restriction to non-staple components signifies restoration of the patentee’s power over those commodities he was thought to control prior to Mercoid. Those responsible for introducing the bill excluded staple parts probably because they feared that such an enlargement might jeopardize congressional approval of the bill. Indeed during the hearings several members of the House Committee evinced concern lest a burden be placed upon the vendors of ordinary commercial products to decide whether or not the purchaser would use the article in an infringing manner. Although there would seem to be little difference between a person who sells a staple article knowing that it is going to be used in an infringing device, and one who sells a component having substantially no other use than in the combination, Congress evidently believed that the interest in the free flow of commercial goods justified a flat exclusion of staple articles.
66 Harv L Rev 909 at 915
The Court in Dawson 448 US 176 (1980) described the operation of s 271(c) (at 200):
Section 271(c) identifies the basic dividing line between contributory infringement and patent misuse. It adopts a restrictive definition of contributory infringement that distinguishes between staple and nonstaple articles of commerce. It also defines the class of nonstaple items narrowly. In essence, this provision places materials like the dry ice of the Carbice case outside the scope of the contributory infringement doctrine. As a result, it is no longer necessary to resort to the doctrine of patent misuse in order to deny patentees control over staple goods used in their inventions.
Section 271 still allowed a supplier of staple parts to be liable under para (b) on a principle analogous to the joint tortfeasor doctrine applicable in England and Australia.
The courts in the United States have also long had a judge made doctrine of contributory infringement in copyright law: eg Kalen Co v Harper Bros 222 US 55 (1911). That doctrine was considered by the Supreme Court in Sony Corporation of America v Universal City Studios, Inc 464 US 417 (1984). In its opinion, which was delivered by Stevens J, the Court described the concept of contributory infringement as “merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another” (at 435). The question before the Court was whether Sony’s sale of home video tape recorders (VTR) to the public rendered it liable for contributory infringement of copyright in films recorded using the VTRs. The Supreme Court held Sony not liable. In so doing it considered contributory infringement in patent law. Where the sale of an article of commerce used by the purchaser to infringe a patent involved contributory infringement, the public interest was necessarily implicated. A finding of contributory infringement was the functional equivalent of finding the article to lie within the patentee’s monopoly.The Court continued (at 441):
For that reason, in contributory infringement cases arising under the patent laws the Court has always recognized the critical importance of not allowing the patentee to extend his monopoly beyond the limits of his specific grant. These cases deny the patentee any right to control the distribution of unpatented articles unless they are “unsuited for any commercial noninfringing use.” Dawson Chemical Co v Rohm & Hass Co 448 US 176, 198 (1980). Unless a commodity “has no use except through practice of the patented method”, id, at 199, the patentee has no right to claim that its distribution constitutes contributory infringement.
And further, quoting Henry v AB Dick Co, 224 US 1, 48 (1912) (at 441):
[A] sale of an article which though adapted to an infringing use is also adapted to other and lawful uses, is not enough to make the seller a contributory infringer.
The Court acknowledged the substantial differences between patent and copyright laws but found common ground for the contributory infringement doctrine in both in the recognition that protection of a monopoly may require the courts to look beyond the actual duplication of a device or publication to the products or activities that make duplication possible. Relevantly for present purposes, the Court said (at 442):
The staple article of commerce doctrine must strike a balance between a copyright holder’s legitimate demand for effective – not merely symbolic – protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce. Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.
A substantial non-infringing use of the VTRs in that case was private, non-commercial, time shifting in the home.
Characterisation of file sharing software used in peer to peer networks as falling within the staple article of commerce doctrine was rejected as an answer to a claim for contributory infringement of copyright in Metro-Goldwyn-Mayer Studios Inc v Grokster Ltd 545 US 913 (2005). The Supreme Court referred back to its Sony decision and said, in the opinion of Souter J, on behalf of the Court:
This analysis reflected patent law’s traditional staple article of commerce doctrine, now codified, that distribution of a component of a patented device will not violate the patent if it is suitable for use in other ways … The doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe another’s patent and so may justly be held liable for that infringement.
The Court then quoted the dictum which has other resonances in Australian jurisprudence:
One who makes and sells articles which are only adapted to be used in a patented combination will be presumed to intend the natural consequences of his acts; he will be presumed to intend that they shall be used in the combination of the patent - citing New York Scaffolding Co v Whitney 224 F 452, 459 (CA8 1915).
The Court summed up the rationale of the staple article of commerce doctrine thus:
In sum, where an article is “good for nothing else” but infringement … there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe … Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute fault than the mere understanding that some of one’s products will be misused. It leaves breathing room for innovation and a vigorous commerce.
Grokster was a distributor of free software enabling computer users to share files through peer to peer networks. The software had lawful applications but was used to share copyrighted music and video files without authorisation. Grokster did not fall within the copyright safe harbour which the Sony case had modelled on the staple article doctrine of patent law. That was because, on the evidence, it was found to have promoted the use of its software to infringe copyright.
Contributory infringement in the United Kingdom and Europe
The American jurisprudence and its codification in § 271 of the Patents Act 1952 (US) appears to be the source of the staple commercial products limitation found in the statute law of the United Kingdom and Australia, most member States of the European Community and a number of other countries. The limitation reflects a legislative concern that creation of liability for contributory infringement should not result in unwarranted extension of the patentee’s monopoly. That has implications for the approach to the construction of s 117 of the Act both as to the extent of the liability it creates and the boundaries of that liability. Before considering s 117, it is helpful to look briefly to the legislative history and background of the like provision in the United Kingdom and its relationship to the Community Patent Convention of the European Community which along with like provisions in other countries inspired the enactment of s 117.
The Patents Act 1952 (UK) contained no definition of infringement nor was there any provision in the Act for indirect or contributory infringement. In 1970 the Banks Committee reported on the British patent system: Report of the Committee to Examine the Patent System and Patent Law Cmnd 4407 (1970). The committee recommended that a definition of infringement should be contained in the Act and also made a recommendation in the following terms (at p 77):
The sale of a known substance with clear instructions for its use in a manner which is patented, and the sale of the components of a patented apparatus with the intention that the components be assembled by others in the United Kingdom to form the patented apparatus, should be actionable as infringement.
The committee noted the limitations of the existing law and said that the rights of the patentee should be strengthened with power to restrain cases of contributory infringement. It was “most difficult” to frame a definition of contributory infringement which would extend beyond the cases mentioned in its recommendation. It considered the United States law and also the provisions of the 1962 Draft Convention relating to a European Patent Law. Article 20(2) of that Draft Convention provided:
The proprietor of the patent may also invoke his exclusive right against any other person who supplies or offers to supply an authorised person with the means of carrying out a patented process relating to an essential element of the invention:
(a) when these means are selected solely for carrying out such process; or
(b)when the other person knows or ought to have known that those means are suitable and intended for carrying out the process.
The committee regarded the United States provision as “broader than we consider desirable” and noted that the European draft provision appeared to be limited to process patents. The Report made no mention of a staple commercial product limitation. The new Patents Act was not introduced until 7 years later. It followed a Department of Trade White Paper published in 1975 entitled “Patent Law Reform”. That indicated a government intention to go further than the Banks Committee so that a patentee could take action if an essential element of the patent were supplied with the intention that it should be used to carry out the patented invention. The White Paper itself made no reference to staple commercial products.

Events in Europe also affected the reform process. A Community Patent Convention (CPC) was signed by Member States of the European Community in 1975. It provided for a unitary patent to be granted by a central European patent authority. The Convention was not ratified by all Member States and therefore never entered into force. However, by a Declaration on the Adjustment of National Patent Law annexed to the CPC and effective upon its signature (independent of ratification), Community Member States were required to align their laws so far as practicable with corresponding provisions of the CPC, the European Patent Convention and the Patent Cooperation Treaty.
Article 26 of the CPC provided:
1. A Community patent shall also confer on its proprietor the right to prevent all third parties not having his consent from supplying or offering to supply within the territories of the Contracting States a person, other than a party entitled to exploit the patented invention, with means, relating to an essential element of that invention, for putting it into effect therein, when the third party knows, or it is obvious in the circumstances, that these means are suitable, and intended for putting that invention into effect.
2. Paragraph 1 shall not apply when the means are staple commercial products except when the third party induces the person supplied to commit acts prohibited by Article 25.
The limitation in Art 26(2) was no doubt inspired by§ 271(c) of the Patents Act 1952 (US). Like that provision it has been said to reflect “… a compromise which takes into consideration the rights of the patentee on the one hand and the public interest in free trade of staples on the other”: Benyamini A, Patent infringement in the European Community, IIC Studies, VCH Publishers Inc (1993) at 220-221.
Section 130(7) of the Patents Act 1977 (UK) declared s 60, inter alia, among other sections, to be “... so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the European Patent Convention, the Community Patent Convention and the Patent Cooperation Treaty have in the territories to which those Conventions apply”.
Section 60(2) of the Patents Act 1977 treats as infringement the supply of:
... the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances that those means are suitable for putting, and are intended to put, the invention into effect in the United Kingdom…
where that supply is without the consent or authority of the proprietor of the patent. The staple commercial product limitation appears in s 60(3):
Subsection (2) above shall not apply to the supply or offer of a staple commercial product unless the supply or offer is made for the purpose of inducing the person supplied or, as the case may be, the person to whom the offer is made to do an act which constitutes an infringement of the patent by virtue of subsection (1) above.
A textbook published at about the time of the enactment of the Patents Act 1977 reproduced its terms and offered brief commentary on the Act. It equated the term “staple commercial product” in s 60(3) with the term “commonly used products”: Brett H, The United Kingdom’s Patent Act 1977, (ESC Publishing, 1978) at 47.
The term “staple commercial product” has not been the subject of any substantial judicial exegesis in the United Kingdom. In an unreported decision of the Patents County Court in 1993, Pavel v Sony [1993] 20 FSR 177 it was construed as “a product of the kind needed every day and generally obtainable”. However in The Modern Law of Patents, Fysh, Roughton, Cook and Spence (eds) (LexisNexis, Butterworths, 2005) at 2.11 the following comment was offered on that decision and the constructional question:
The difficulty which section 60(3) PA 1977 intends to deal with is situations where putative infringers purchase products off the shelf or from pre-prepared catalogues. Suppliers in such circumstances should be not impugned merely for operating in the usual channels of trade in a usual manner. The problem is that if Parliament had intended the exception to cover only this situation, then it would have said so – it did not. There was no corresponding question under the Patents Act 1949, where such indirect infringers were not liable at all, although, because of the way that the 1949 Act worked, primary infringement was not defined either. Although this question has never been the subject of scrutiny by the courts, it is submitted that whatever the wording of section 60(3) PA 1977, the intention is to stop material particularly adapted to the use of an invention being made available to a putative infringer, but that material which has and, importantly, had, a general purpose of more than de minimis utility, falls within the exception contained in section 60(3) PA 1977.
The latter observation seems, with respect, to accord with the language of s 60(3) bearing in mind that it is the supply of staple commercial products, absent a purpose of inducing infringement, that is protected.
The CPC did not come into operation because it was never ratified by any of the member States. Most of them however have incorporated into their national laws provisions for contributory infringement modelled on Art 26: eg Intellectual Property Code (France) Art L-613-4 and the Patent Act (Germany) s 10. Both adopted the staple commercial article or product limitation.
Contributory infringement enters Australian patent law
On 29 April 1984 Australia’s Industrial Property Advisory Committee (IPAC) produced a report entitled “Patents, Innovation and Competition in Australia”. It considered the question of contributory infringement under the heading “ENFORCEMENT OF PATENTS”. It identified as the most common example of what it called indirect or secondary or contributory infringement the case in which (at 67):
... goods, materials or parts are supplied to a consumer with the intention that they be used, consumed or assembled in a way which constitutes an infringement of a patent.
Its recommendation, numbered 33, was in the following terms:
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 mischief said to be addressed by the recommendation was the serious difficulty of enforcing a patent infringed by consumers supplied by an unauthorised third party with the means to infringe. IPAC took the view that it was unreasonable and wasteful for a patentee to have to sue all of the direct infringers when the supplier was in a real sense far more responsible for the commission of the infringing acts. The mischief addressed in the Report was a long way from the present fact situation in which there was only one recipient of the materials allegedly supplied.
IPAC qualified its recommendation by excluding the supply of “staple commodities” from the proposed prohibition of contributory infringement. It said (at 67):
It would be an unwarranted interference with commercial activities if a patentee were to be able to prevent another person from selling a staple commodity with a wide variety of possible uses simply on the grounds that it might be used for an infringing purpose.
It proposed that no action should be allowed against the supplier of a staple product absent a positive inducement by that supplier to the recipient to perform acts which would infringe the patent.
The discussion in the IPAC Report, relevant to “staple commercial product” was relatively brief. It was, however, informed by a comprehensive expert study commissioned by Monash University Law School. In a paper prepared by Ms Ann Dufty, which comprised Vol 1 of the Study, there was an extensive discussion of “indirect infringement”. The discussion gave considerable attention to the United States jurisprudence. The author recommended a new section defining infringement, including indirect infringement, with a distinction between circumstances attaching liability for the supply of staple on the one hand and non-staple goods or goods which have no substantial non-infringing use, on the other. The proposed classifications of staple and non-staple goods were clearly inspired by the United States jurisprudence.
The IPAC Report and the government response to it were tabled together in the House of Representatives on 28 November 1986. The government response accepted Recommendation 33 and stated:
The introduction of provisions to deal with contributory infringement will remove an area of uncertainty under Australian patent law and harmonise it with the laws of Australia’s major trading partners.
Government Response to the Report of the Industrial Property Advisory Committee, 18 December 1986, Official Journal of Patents, Trade Marks and Design Vol 56 p 1416 at 1477.
On 1 June 1989 the Patents Bill 1989 was introduced into the House by the Minister for Science, Customs and Small Business. The Bill was described in his Second Reading Speech as “a complete redraft of the Patents Act 1952”. It was said to implement “a number of policy changes flowing from an expert report reviewing the Australian patent system from an economic perspective”. The expert report was that of IPAC. In the event the 1989 Bill lapsed when parliament was prorogued for the Federal election. It was reintroduced on 29 May 1990 with some changes made in response to submissions received in the interim.
The Explanatory Memorandum for the Patents Bill 1990 stated that the intention of s 117 was “… to implement the Government’s response to recommendation 33 of the Industrial Property Advisory Committee relating to indirect or contributory infringement...”: Explanatory Memorandum par 170. It stated (at [171]):
The clause will result in the supplier of a product being liable for infringement, where use by the person to whom the product is supplied would be an infringement, if the use is:
-the only reasonable use of the product, having regard to its nature or design;
- any use of a non-staple commercial product to which the supplier had reason to believe that the receiver would put it; or
-use in accordance with any instructions, inducement or advertisement given or published by the supplier.
The construction of s 117
In the construction of statutes the Court begins with the ordinary sense of the words used. Where constructional choices are made they will be made in accordance with the context in which the word or words to be construed appear and the purpose of the legislation. In ascertaining legislative purpose it is necessary to bear in mind, particularly but not only in the field of intellectual property law, the cautionary observation in the joint majority judgment in Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193 at [34]; 221 ALR 448 at [34] that in some cases, to fix upon one purpose and then bend the terms of the definition to that end risks “picking a winner” when the legislature has stayed its hand from doing so. The Court was there concerned with “technological protection measures” under the Copyright Act 1968 (Cth) where the extrinsic materials were replete with “shifting and contradictory positions taken by a range of interest holders in the legislative outcomes”. It seemed “that the legislative purpose was to express an inarticulate (or at least not publicly disclosed) compromise”.
In this case the legislative purpose in enacting s 117 was to give effect to the policy behind Recommendation 33 of the IPAC Report and the desire, set out in the government’s response to that Report, to harmonise the laws of Australia with those of its major trading partners. Although not a compromise of the kind identified by the High Court in Stevens there is a tension recognised in s 117 between the rights of patentees and the public interest in not extending those rights to the detriment of legitimate commercial activity. That tension is antithetical to a narrow technical view of either the protection afforded to patentees or the limitations on their rights defined by reference to the supply of staple commercial products.
Section 117(1) extends the definition of infringement of a patent to cover the supply of a product by one person to another where the use of that product by “a person” would infringe the patent. It is the act of supply that is the infringement. Infringement is complete upon completion of that act. The section does not require that the product supplied actually be put to an infringing use. The class of products to which the section applies is defined by the attribute that “the use of [the] product by a person would infringe a patent”. The range of uses covered by the term “use of a product by a person” is defined in s 117(2).
Section 117(2)(a) defines one class of such uses by reference to the case in which a product is capable of only one reasonable use having regard to its nature or design. Section 117(1) read with s 117(2)(a) extends the definition of infringement to the supply of a product “capable of only one reasonable use” which “would infringe a patent”. That is to say, when a product is capable of only one reasonable use, having regard to its nature or design, and that use would infringe a patent, the unauthorised supply of that product to a person is an infringement of the patent. Supply of a single use product within the meaning of s 117(2)(a) is infringing only if that use is infringing. If a product is capable of at least one reasonable non-infringing use then it is not caught by s 117(2)(a). The term “reasonable” would appear to exclude commercially irrelevant or de minimis uses. This is consistent with US jurisprudence which indicates that suggested non-infringing uses “… must not be far fetched, illusory, impractical or merely experimental”: Chisum on patents: a treatise on the law of patentability, validity, and infringement 17.03 [3]. The question whether the product was a staple commercial product would not arise. The policy of s 117(1) read with s 117(2)(a) is akin to that identified by the US Supreme Court in Grokster in respect of articles “good for nothing else … but infringement” where there “ is no injustice in presuming or implying an intent to infringe”. Section 117(2)(a) covers what might be called a species of per se contributory infringement.
Section 117(1) read with s 117(2)(b) deals with a case in which the person supplying a product to another person had reason to believe that the person supplied would put the product to an infringing use. Where the product is a non-staple commercial product then its supply in that circumstance is an infringement.
The words “reason to believe” in s 117(2)(b) have long standing statutory antecedents. They and similar formulae frequently condition the exercise of statutory powers and require at least, an objective basis for the relevant belief and, according to context, require actual belief: WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559 at 571 and authorities there cited. On the other hand the formula may be taken, according to its statutory context, to convey a requirement for an objective basis for belief without the necessity of actual belief: eg George v Rockett (1990) 170 CLR 104 at 112.
Where the words “reason to believe” condition a power they are used to ensure that the exercise of the power is justified by reference to objective facts and is not to be exercised simply upon unsupported belief. The same term in s 117(2)(b) defines a necessary condition of liability for contributory infringement in relation to the supply of non-staple commercial products. It could be construed as purely objective in the sense that there were factual matters known to the supplier which would lead a reasonable person to believe that the product would be put to an infringing use. An alternative construction would additionally require the supplier to actually believe that the person supplied would put the product to such a use. The analogous provision in § 271(c) of the Patents Act 1952 (US) is satisfied by actual knowledge without requiring reasonable grounds for the knowledge. Section 60(2) of the Patents Act 1977 (UK) would also be satisfied by actual knowledge without reasonable grounds. But it provides an alternative basis for liability, namely that “… it is obvious to a reasonable person in the circumstances that those means are suitable for putting, and are intended to put, the invention into effect in the United Kingdom”.
To construe s 117(2)(b) as requiring actual knowledge supported by reasonable grounds would render the scope of liability for contributory infringement under Australian law narrower than that under US or UK law. Unlike those jurisdictions, it would require both subjective belief and the objective basis for it to be proven. The better construction, consistent with the harmonisation purpose of the legislation, would appear to be objective. In the present case his Honour’s finding as to the Northern Territory’s reason to believe that ACOC would use the timber from the trees for the purpose of producing cypress oil appears to have been supported by reference to purely objective criteria. His finding in that respect is not in issue in this appeal. The preceding observations about the proper construction of the “reason to believe” requirement are therefore strictly obiter.
The first constructional point directly relevant to the appeal is of the term “staple commercial product”.There is virtually no judicial exegesis on this question in Australia. In Theta Developments Pty Ltd v Leonardis (2002) 59 IPR 368 the Full Court held that spacers used in building foundation form work were staple commercial products but did so without exposition apart from a reference to the fact that they had more than one use. In Hexal Australia Pty Ltd v Roche Therapeutics Inc (2005) 66 IPR 325, Stone J referred to the dearth of authority on the topic in Australia. Her Honour was concerned with an interlocutory application which she properly viewed as not an appropriate occasion on which to decide that question of law. As appears below, the construction of this term is not straightforward.
Comparison of s 117(2)(a) and (b) indicates that the class of products described as “not a staple commercial product” is wider than the class described as “product capable of only one reasonable use”. For the purposes of s 117(2)(b) a staple commercial product is necessarily a subset of the class of products which have more than one reasonable use. How that subset is defined depends upon the meaning to be given to the words “staple commercial product”. The US exclusion of “staple articles or commodities of commerce suitable for substantial non-infringing use” in its s 271(c) raises the same issue. On the face of it, s 271(c) requires that an excluded product be “a staple article or commodity of commerce” and “suitable for substantial non-infringing use”. The element of commerciality was emphasised in Sony which spoke of contributory infringement cases under patent law as denying the patentee “ … any right to control the distribution of unpatented articles unless they are “unsuited for any commercial non-infringing use””. (Emphasis added)
The US jurisprudence is an important background to the enactment of s 117. It clearly inspired the adoption of the staple commercial product concept. Nevertheless it does not govern the construction of the section. That begins as always with the ordinary meaning of the words construed according to context and purpose. The relevant ordinary meanings of “staple”, when used in relation to commodities, are set out in the Shorter Oxford English Dictionary thus. For the noun, used elliptically, it is:
A staple commodity, the principal or an important item of diet, production, trade, etc; a major component or element; a raw material.
And as an adjective:
(of a commodity etc) foremost among the products exported, manufactured, etc by a country or place, that is a main component (most) important, leading, principal; …

The expression ‘staple commercial product’ is found in s 60(3) of the Patent Act 1977 (UK) which corresponds with the European Economic Community Council Agreement Relating to Community Patents Article 26 (‘ARCP art 26’). It is convenient to set out that article:
‘Article 26
Prohibition of indirect use of the invention
1.A Community patent shall also confer on its proprietor the right to prevent all third parties not having his consent from supplying or offering to supply within the territories of the Contracting States a person, other than a party entitled to exploit the patented invention, with means, relating to an essential element of that invention, for putting it into effect therein, when the third party knows, or it is obvious in the circumstances, that these means are suitable and intended for putting that invention into effect.
2.Paragraph 1 shall not apply when the means are staple commercial products, except when the third party induces the person supplied to commit acts prohibited by Article 25 [which prohibits direct use of invention]’. (emphasis added)
The wording of ARCP art 26 reflects an aspect of the definition of infringement in the patent law of the United States of America. United States Code Title 35 – Patents, which was enacted in 1952, relevantly provides in s 271(c):
‘Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.’ (emphasis added)
In Theta Developments Pty Ltd v Leonardis (2002) 59 IPR 368 at 388 Wilcox and French JJ held that a ‘bottom cover spacer’ used in connection with the construction of building foundation frameworks was a ‘staple commercial product’. However, their Honours did not set out the process of reasoning that led them to this conclusion. In Hexal Australia Pty Ltd v Roche Therapeutics Inc (2005) 66 IPR 325 at 331 at [30] Stone J noted that there is a dearth of authority in Australia on the meaning of ‘staple commercial product’ in s 117(1)(c) of the Act.
In the United Kingdom there has been limited judicial consideration of the phrase ‘staple commercial product’. In Pavel v Sony Corporation (Patents County Court, 13 January 1993, unreported) Judge Ford at 6.4-6.5 observed:
‘In ordinary language, a staple commercial product is a commodity or raw material, not a manufactured article like a tape cassette player with headphones. Since the language of Section 60 has been framed to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the Community Patents Convention …, guidance may be obtained, in the absence of English authority in case law, from the parallel French and German texts of the Convention and commentary thereon.
…
The German text has been interpreted to mean products that are of a kind which is needed every day and can be generally obtained, such as nails, screws, bolts, wire, chemicals, plastics etc (“Denkschrift zu Art. 30 GPU” in Blatt für Patent – Muster – und Zeichenwesen, Vol. 79 p 333).’
The learned authors of Terrell on the Law of Patents (London, Sweet & Maxwell 2006), in giving consideration to s 60(2) of the Patents Act 1977 (UK), at para 8.37 state:
‘The use of the word “staple” is presumably a reference to raw materials or other basic products commonly available and with a multitude of possible applications, and the purpose of the subsection is to protect the supplier of such products even if he has knowledge that they were to be put to an infringing purpose. The scope of the words is far from clear and the dividing line between protecting the supplier of raw materials on the one hand and giving a fair monopoly to the patentee must be a question of fact in each case.’
Examination of United States authorities similarly provides little guidance on the precise distinction between staple and non-staple products. In Aro Manufacturing Co Inc v Convertible Top Replacement Co Inc (1964) 377 US 476 the Supreme Court was concerned with a combination patent covering a top-structure for convertible automobiles. Mr Justice Brennan, delivering the judgment of the Supreme Court, at 487-488 described the language of s 271(c) as fitting perfectly the conduct of Aro in selling replacement fabrics for the top-structures. His Honour observed that the fabric components were hardly suitable for any non-infringing use. However, although clearly satisfied that the fabric components were not a staple article or commodity of commerce suitable for substantial non-infringing use, his Honour gave no consideration to the defining characteristics of a staple article of commerce.
In the earlier case of Carbice Corporation of America v American Patents Development Corporation (1931) 283 US 27, which preceded the codification in the United States of the law of contributory infringement, the Supreme Court had denied relief to a patentee who sought to enjoin a manufacturer of dry ice from supplying its product for use in a manner which allegedly infringed the patent. While not using the phrase ‘staple article of commerce’, the Court noted at 29-30 that dry ice was an unpatented article of commerce whose properties had long been known to the public.
The Product
By their amended statement of claim the appellants allege that the Northern Territory supplied to ACOC:
‘a product within the meaning of s 117(1) of the Patents Act, namely timber, from trees of species of the genus callitris.’
The particulars of supply provided in the amended statement of claim refer particularly to one species of the genus callitris, namely Callitris Intratropicus. As indicated above, we conclude that the Northern Territory supplied felled but unmilled trees of the species Callitris Intratropicus to ACOC.
The Northern Territory adduced evidence at trial from Paul Kingston Wharam, Director – Land Administration of the Northern Territory Department of Planning and Infrastructure. Mr Wharam gave evidence as follows:
‘6.Callitris intratropica is a specie of tree which has been cultivated in certain areas within the Northern Territory. The Howard Springs Pine Plantation (“the Howard Springs Plantation”) is one area in which these trees were established by cultivation by a previous Northern Territory Government department in or about the late 1960’s. The Howard Springs Plantation is located on those parcels of Crown Land known as Portions 2818, 2819, 2820, 2821 and 2822 Hundred of Bagot.
7.At times between in or about 1993 – 2001, responsibility for issuing permits or licences in respect of the Howard Springs Plantation rested with either the former Conservation Commission of the Northern Territory (“the Commission”) or the DPI (and its predecessor departments).
8.Permits or licences for the removal of trees from Crown Land are issued for a wide range of purposes. On occasions, they are issued at the request of an applicant for purposes particular to that applicant and with no specific complimentary reason for removal by the Northern Territory. On other occasions, the Northern Territory has a particular desire for the removal of trees and actively invites applications for permits or licences for this purpose, sometimes through a competitive tender process.’
Mr Wharam annexed to his affidavit a copy of each permit and licence issued in the period 1993 – 2001 for the thinning or harvesting of Callitris Intratropica from the Howard Springs Plantation. Those permits and licences reveal the following.
On the 30 April 1993 a permit was issued to Mr Collins under By-law 13 of the Territory Parks and Wildlife Conservation By-Laws. That permit authorised ‘crop thinning of Callitris Intratropica’. The permit was subject to the execution of an operational agreement between the Conservation Commission of the Northern Territory and Mr Collins which recorded agreement reached –
‘as to the manner in which the activities permitted under the permit are to be conducted, the manner in which … royalties payable in respect of the permit are to be paid, and the rights and obligations of the parties in respect of the Operation.’
One of the obligations of Mr Collins under the operational agreement was to effect public liability insurance in respect of the crop thinning or harvesting operation and to insure all property owned by the Commission used in the course of the operation. Another obligation of Mr Collins under the operational agreement was to ‘promote the principle of environmental protection’ and to ensure that ‘minimal environmental impact’ was caused by the operation.
On 16 April 1996 a Miscellaneous Licence was issued to Blue Cypress Holdings Pty Ltd under the Crown Lands Act (NT) authorising it to go upon Crown Land at Howard Springs and harvest timber. The licence was subject to special conditions pursuant to which the licencee was to pay royalties of $2.50 per tree collected from the licence area and maintain public risk insurance in respect of the licenced area. The special conditions also controlled the manner in which trees were to be harvested, the site managed and the land was to be rehabilitated. The Department of Lands, Planning and Environment undertook not to issue any other licence for harvesting of Callitris Intratropica for oil extraction on land under its control for the period of the licence.
On 3 July 1998, 10 May 1999, 29 March 2000 and 15 May 2001 Miscellaneous Licences under the Crown Land Act were issued to ACOC in comparable terms to that earlier issued to Blue Cypress Holdings but without the undertaking not to issue other licences for harvesting Callitris Intratropica for oil extraction.
Evidence was also adduced from Mr Wharam concerning other applications for licences or permits concerning Callitris Intratropica. On 13 December 1999 a Mr Trow of Trojon Fencing & Fabrication Pty Ltd was granted approval to remove timber from the windrows on Section 67 Hundred of Bagot for the purpose of wood chipping. The approval was subject to a number of conditions including that the woodchips were only to be supplied to a nominated party and were not to be supplied to any other business or person. Another application from Mr Trow to remove ‘Cyprus pine’ trees was refused because there was currently a Miscellaneous Lease over the area. In April 2001 Trojon Fencing & Fabrication also expressed interest in utilising ‘local timber resources’ to produce sawdust for cattle boats and potentially other markets. This expression of interest was not restricted to the species of the genus callitris. There is no evidence that it resulted in an agreement to grant Trojon Fencing & Fabrication access to any timber resources. The proprietor of Soon Lee Enterprises was granted a Miscellaneous Licence dated 13 April 1994 to take 500 cypress pine trees and dead timber from Sections 67, 70 and 71 Hundred of Bagot for export to Taiwan subject to the provision of the Crown Lands Act and the Regulations thereunder. A request was made by Leslie Allaway on 18 April 2001 for a miscellaneous lease to harvest cypress pine for horticultural and landscaping purposes but it appears that no such licence was granted. Gimbells Pty Ltd, a company concerned with landscaping and irrigation, expressed interest in March 1994, and again in August 1994 and March 1995, in putting a proposal to the Northern Territory for the clearing of the Howard Springs Plantation and the use of pine forest resources to produce landscape supplies. There is no evidence that this proposal was accepted.
The Northern Territory also adduced evidence at trial from Peter Spafford Brocklehurst, forester, of the Northern Territory Department of Natural Resources, Environment and the Arts. Mr Brocklehurst gave evidence of pure and mixed stands of Callitris Intratropica at four sites in the Northern Territory. He stated that Callitris Intratropica was a commonly occurring but minor component of most of the native eucalyptus forests in the Top End region. His evidence was that, while in some instances it forms pure stands, it is generally of more scattered or patchy occurrence and was probably more common thirty years ago. Mr Brocklehurst was aware of Callitris Intratropica being used for the following applications:
(a)poles, fence posts and rails;
(b)flooring;
(c)light construction;
(d)oil extraction;
(e)mulch; and
(f)traditional indigenous uses.
Mr Brocklehurst also gave evidence that sporadic salvage logging had occurred through most Top End forests in the past including Maccasan utilisation of Callitris Intratropica from coastal stands some centuries ago. He said that Callitris Intratropica had also been milled at Maningrida, Melville Island and Murganella in the past. Other evidence before his Honour indicated that Callitris Intratropica was virtually abandoned by the Northern Territory as a plantation species in about 1977 because such plantations did not prove economic.
Mr Brocklehurst’s evidence was broadly supported by the evidence of Dr Jeremy Russell-Smith, a fire management and ecological consultant.
No witness gave evidence that there is presently an established wholesale or retail market for unmilled trees of species of the genus callitris, and in particular Callitris Intratropica. That is, it does not seem that such trees are a commodity or raw material that is commonly or readily available in the sense that a person who wished to obtain it could purchase it from a supplier without difficulty. This conclusion gains support from the fact that none of the licences and permits of which Mr Wharam gave evidence authorised the harvesting of Callitris Intratropica trees for the purpose of wholesale or retail sale.
Rather, the evidence before his Honour suggests that a person wishing to obtain unmilled Callitris Intratropica trees, at least in the Northern Territory, must apply to the Crown for a licence or permit to harvest the trees from Crown Land. For such a licence or permit to be granted, it appears that the applicant must assume significant obligations, including insurance and operational obligations, in respect of the harvesting process.
It would be unhelpful for this Court to hazard a comprehensive test for the purpose of determining whether any particular product is a ‘staple commercial product’ within the meaning of s 117(2)(b) of the Act. However, it seems to us that a quality of such a product is that it is an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product. In our view, having regard to the evidence reviewed above, unmilled Callitris Intratropica trees, at least in the Northern Territory, are not a ‘staple commercial product’ within the meaning of s 117(2)(b) of the Act.
On the approach we consider it appropriate to adopt, it is immaterial that timber, generally, or millable timber in the form of standing trees, is a staple commercial product. ACOC did not want, and the Northern Territory did not supply to it, the generic product timber or generic standing trees. The terms of the licences, and particularly the requirement of the licences (other than the first licence) for a royalty payment calculated by reference to the essential oil produced from the timber harvested, make clear that the supply was of unmilled trees of a particular species. The critical issue, in our view, is whether unmilled trees of the species Callitris Intratropica are a staple commercial product within the meaning of the section. As indicated above, we conclude that, at least in the Northern Territory, they are not. The undertaking given by the Department of Lands, Planning and Environment in the licence discussed in [150] above is persuasive in this regard.
NOTICE OF CONTENTION
The Territory’s notice of contention seeks to uphold the primary judge’s decision on two grounds not relied on by his Honour. The first is:
‘That the “product” said to be supplied, however described, was not a “product” the use of which would infringe the subject patent for the purposes of section 117 of the Act.’
In its written submissions the Territory contended that ‘while the trees may contain the requisite bark and wood, the provision on the one hand of “Tree at Stump” and on the other of milled wood and stripped bark are sufficiently different so as to preclude the purported supply of the Trees from constituting a supply of the requisite “bark and wood”’.
The primary judge recorded the Territory’s submission, but did not express an opinion on it.
As we understood the submission, it was directed to the opening part of s 117(1), and was in substance that what was used by ACOC was milled wood and stripped bark and what was supplied was trees, so that the product that was used was not the product that was supplied. What actually happened was that ACOC came onto the Territory’s land and with its permission cut down the trees and took possession of the severed parts. Accordingly, what was supplied was felled trees or, for practical purposes, severed tree trunks. ACOC then stripped the bark from the timber and milled the remaining wood and subjected the bark and wood to its process in order to produce the oil. In the ordinary use of words ACOC used the tree trunks by stripping off the bark and milling the wood and using both in its process. That is plainly a use of the tree trunks. What was supplied and what was used are the same thing.
The second ground in the notice of contention is
‘That the product that could be relevantly described as an input into the process in the subject patent was:
(i)the bark and wood of Callitris Intratropica; and/or
(ii)the bark and wood of one or more species of the genus Callitris;
whereas what was purportedly ‘supplied’ in the present case was Trees of the species Callitris Intratropica.’
In the Territory’s written submissions it was said that the two contentions in its notice were considered at [23] and [24] of his Honour’s reasons, but that he made no finding one way or the other. The paragraphs in question are in fact [22] and [23] of the reasons. Paragraph 23 deals with the first ground that we have rejected. At [22] his Honour said:
‘If I were to accept the Territory’s contention, it would follow that s 117(1) did not apply to the “supply” of the timber to ACOC by the Territory in any event, because ACOC’s use of the product supplied (the timber) did not itself infringe the patent.’
The ‘Territory’s contention’ was based on s 13(1) of the Patents Act:
‘Subject to this Act, a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention.’
The word ‘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.’
The argument was that where a patent is in respect of a method or process, the only means by which the use of a product could infringe is if the use constitutes the making, hiring, selling etc of a product resulting from the use of the patented process. It was said to follow from this that the word ‘product’ in s 117 could never apply to an input into a process.
This submission was founded on Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 111 ALR 205. So far as relevant to the present case, Rescare concerned claim 9 of a patent over an invention entitled ‘Device for treating snoring sickness’. The device provided a means of overcoming obstructive sleep apnoea, and involved treatment with continuous positive airway pressure applied via a nose mask. Most of the claims of the patent were apparatus claims. Claim 9, as notionally amended for presently immaterial reasons, was a method claim:
‘A method of treating … obstructive sleep apnoea in a patient comprising: applying air through a nose piece at a pressure maintained slightly greater than atmospheric substantially continuously throughout the breathing cycle.’
The applicant patentee complained that the respondent had promoted, displayed and offered for sale at two hospitals apparatus for administering continuous positive airway pressure to treat obstructive sleep apnoea. It relied on s 117(2)(c). Gummow J said:
‘the applicant urges … that there is a relevant use if the respondent's devices are used in accordance with any instructions for use or in accordance with any inducement to use them, in either case given by the supplier or contained in an advertisement published by or with the authority of the supplier. Therefore, it is submitted, the supply of the allegedly infringing devices by the respondent, with instructions for use, is itself an infringement of claim 9, a method claim, by the respondent as supplier.
The difficulty with that proposition is that a pre-condition to the operation of s 117 in relation to a method claim such as claim 9, is that there is a product the use of which by the respondent would infringe claim 9. In other words, that user would have to amount to an “exploitation” within the monopoly conferred by s 13, which is to be read with par (b) of the definition of “exploit”.
As I have indicated, where the invention relevantly claims a method or process, exploitation occurs, other than by use of the method or process, only by the doing of an act mentioned in para (a) of the definition of “exploit”. There must be an act done “in respect of a product resulting from such use”. Here … there is no such product with the result that, in a case such as the present, s 117 has no operation.’

On appeal to the Full Court, Lockhart J, with whom Wilcox J agreed, upheld Gummow J’s construction of s 117, namely that it is a precondition to the operation of the section in relation to a method claim that there be a product the use of which would infringe that method claim: Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 at 24.
In Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 at 495 Gummow J repeated what he had said in Rescare.
Doubt was cast on the Rescare approach in Bristol‑Myers Squibb Co v FH Faulding & Co Ltd (2000) 97 FCR 524. The appellant was the proprietor of two petty patents for methods of administering taxol, a drug having anti‑carcinogenic properties. The claims of both patents involved a method of administering a certain dosage of taxol over a specified period of time. The respondent sold and supplied taxol to doctors and hospitals, together with a product information guide which included recommendations that the drug be used for the treatment of cancer, in the same dosage amounts and over the same period of time as specified in the patents. The primary judge upheld the respondent’s cross claim for revocation on the grounds that the invention lacked novelty, the claims were not fairly based, and there was no inventive step. His Honour was of the view that had the patents been valid, they would not have been infringed. In rejecting the appellant’s reliance on s 117 his Honour applied Rescare. The Full Court affirmed the decision as to revocation on the ground of lack of novelty. Black CJ and Lehane J nevertheless went on to consider infringement. At [84] their Honours said that the use of taxol in accordance with the method recommended in the respondent’s guide would be an infringement by the doctors and hospitals. But did the respondent infringe? That depended on s 117.
After noting that the Full Court’s observations in Rescare about s 117 were obiter, and that the approach adopted in that case resulted in s 117 having a very limited operation, if any, Black CJ and Lehane J continued at [95]:
‘it is perhaps a pity that the drafter chose to use the phrase ‘use of a product’, which contains such a clear reference to the terminology of par (a) of the definition of “exploit”. But s 117 provides its own dictionary, in subs (2). And our paraphrase of s 117(1), incorporating subs (2)(c), shows, in our view, that the construction urged by the appellant is not only a possible construction but a literal one. That literal construction being consistent with the apparent purpose of the provision, it is, in our view, plainly to be preferred.’
The ‘paraphrase’ referred to, which appears at [87] of Bristol‑Myers, is in fact the appellant’s (the patentee’s):
‘If the use of [taxol] by a [medical practitioner], in accordance with any instructions for the use of taxol ... given to the [medical practitioner] by the [respondent] ..., would infringe [either of the petty patents], the supply of that [taxol] by [the respondent] to [the medical practitioner] is an infringement of the [petty patent] by the [the respondent] ….’
Put shortly, the joint judgment in Bristol‑Myers involves putting aside the definition of ‘exploit’ and resorting instead to the uses referred to in s 117(2). For the purposes of the present case a paraphrase of s 117(1), incorporating sub‑s (2)(b), would read:
‘If:
(a)ACOC’s use of the product would infringe the patent, and
(b)the Territory, as supplier of the product to ACOC, had reason to believe that ACOC would so use the product,
then, the supply of the product is an infringement of the patent by the Territory.’
If the product used in (a) and supplied in (b) is the same thing, namely the timber, infringement by the Territory is established (assuming the Territory had reason to believe). If, as contended by the Territory, it was not the timber that was used by ACOC but the selected bark and wood from the timber, then assuming the timber and its bark and wood are different products, infringement by the Territory will not be established. ACOC will not have used the product that the Territory supplied to it. As appears from [163], we have concluded that the product used and that supplied are the same thing.
Because the primary judge decided the separate question against the appellants on ‘supply’ and ‘staple commercial product’, he did not need to choose between Rescare and Bristol‑Myers. His Honour did at [22] of his reasons say that, had there been no other obstacle in the appellants’ way, and if he were to apply Rescare, he would have held that s 117(1) did not apply to the Territory’s assumed supply of timber, because ACOC’s use of the timber did not infringe the patent. But his Honour did not say what, on the same assumptions, he would have held had he decided to adopt what had been said in Bristol‑Myers. He simply recorded at [23] the Territory’s contention that it was the trees or timber that was supplied to ACOC, but the product used by ACOC was not the trees or the timber but the selected bark and wood from the timber.
It is not necessary for us to express a preference in relation to the approaches adopted in Rescare and Bristol‑Myers. That is because the submission based on Rescare is directed to whether ACOC has infringed the patent. That enquiry is outside the scope of the separate questions. We will explain why.
The appellants’ statement of claim alleges that ACOC used the timber acquired from the Territory to produce a blue coloured oil by means of a process protected by the patent, and has sold and offered it for sale within Australia. The Territory does not admit the allegation. It also puts in issue the validity of the patent.
The first of the issues in the separate question is whether the Territory had supplied a product to ACOC its use of which would infringe the patent. The ambit of the question was squarely raised at the beginning of argument before the primary judge. Counsel for the Territory said:
‘And it’s those last words, “the use of which would infringe the patent”, which I wish to raise now, because plainly … the determination of that part of the question would involve questions of ultimate or primary infringement by ACOC and we would simply wish to clarify that that would not be a matter that your Honour could determine today, there being no evidence of end use by ACOC in any event.’
HIS HONOUR: So the emphasis is on the question of supply?
MS GODDARD: The question, we say, is on the question of supply, on the question of what is the product supplied and whether or not that product is a staple commercial product ….
…
And its those ultimate questions which we wish to make pellucidly clear, including the question of end use or primary infringement by ACOC that are not in issue today.
HIS HONOUR: Yes. All right ….’
In his reasons, immediately after setting out the separate questions, the primary judge said:
‘That order was made to address the alleged contributory infringement of the patent by the Territory without extending the hearing into issues as to the validity of the patent, and its infringement by ACOC. As I have said, for present purposes I have assumed the validity of the patent, and that ACOC’s alleged actions have infringed it.’
CONCLUSION
Having regard to our above conclusions, the orders made by the primary judge should be set aside and the matter remitted to his Honour to be further heard and determined in the light of these reasons for judgment.

I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Branson and Sundberg.
Associate:
Dated: 20 September 2007

The applicants appeared in person

Counsel for the Respondent: Mr M Grant and Ms A Cameron

Solicitor for the Respondent: Clayton Utz

Date of Hearing: 24 May 2007

Date of Judgment: 20 September 2007

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY	NTD 2 OF 2007

BETWEEN:	VINCENT COLLINS AND MARYANN COLLINS Appellant
AND:	NORTHERN TERRITORY OF AUSTRALIA Respondent

JUDGES:	FRENCH, BRANSON AND SUNDBERG JJ
DATE OF ORDER:	20 SEPTEMBER 2007
WHERE MADE:	PERTH (HEARD IN DARWIN)

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY	NTD 2 OF 2007

JUDGES:	FRENCH, BRANSON AND SUNDBERG JJ
DATE:	20 SEPTEMBER 2007
PLACE:	PERTH (HEARD IN DARWIN)

The applicants appeared in person
Counsel for the Respondent:	Mr M Grant and Ms A Cameron
Solicitor for the Respondent:	Clayton Utz
Date of Hearing:	24 May 2007
Date of Judgment:	20 September 2007