Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd

[2009] HCATrans 328

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S178 of 2009

B e t w e e n -

DURA-POST (AUST) PTY LTD (ACN 101 287 512)

Applicant

and

DELNORTH PTY LTD (ACN 051 954 977)

Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 DECEMBER 2009, AT 2.21 PM

Copyright in the High Court of Australia

MR S.C.G.BURLEY, SC:   May it please the Court, I appear with my learned friend, MS P.L. ARCUS, for the applicant.  (instructed by Norman Waterhouse Lawyers)

MR R. COBDEN, SC:   May it please the Court, I appear with my learned friend, MR C. DIMITRIADIS, for the respondent.  (instructed by Spruson & Ferguson Lawyers)

GUMMOW J:   Yes, Mr Burley.

MR BURLEY:   Your Honours, this is the first time an application concerning the construction of what is an innovative step has been before this Court.  The innovation step arises as part of the introduction of innovation patents in the 1990 Patents Act brought about by amendments which came into effect in May 2001.  Our research shows that over 1,000 innovation patents are filed each year.  Many businesses structure their affairs around them and the innovation patent confers a potent right for a patent of eight years duration.  It has five claims and infringement remedies are just the same as for a standard patent.

However, a substantial difference exists between the test for validity of a standard patent and an innovation patent.  The latter replaces the test for validity requiring an inventive step with the requirement that there be an innovative step.  Section 18(1A) of the Patents Act introduces the requirement providing:

Subject to subsections (2) and (3), an invention is a patentable invention for the purposes of an innovation patent if the invention, so far as claimed in any claim:

. . . 

(b)when compared with the prior art base as it existed before the priority date of that claim:

 . . . 

(ii)involves an innovative step –

A further description of an innovative step is contained in section 7(4).  That provides:

For the purposes of this Act, an invention is to be taken to involve an innovative step when compared with the prior art base unless the invention would, to a person skilled in the relevant art, in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, only vary from the kinds of information set out in subsection (5) in ways that make no substantial contribution to the working of the invention.

The types of information in subsection (5), compendiously, if I can describe them in this way, concern prior art information, and for the present proceedings the relevant prior art was a patent referred to in the judgments as the Pellowski patent.  The test in section 7(4) calls for a comparison between that prior art and the invention as claimed in the patent.  The question which is central to this application is what sort of evaluation is required in a comparison between the disclosure of the prior art document and the invention as claimed.  It is our submission ‑ ‑ ‑

GUMMOW J:   There is a limit to the number of claims, is there not?

MR BURLEY:   Yes, the claims are limited in number to five.  That is provided for in section 40.  Another difference, your Honour, is that an innovation patent is granted after a formalities check under section 52 of the Act.  A party may sue after the innovation patent has been certified, by which a screening process on the basis of validity is undertaken.  So the question of the test for innovative step comes up both at the screening point, when the Commissioner considers the validity of the patent, and also at the revocation point under section 138 and through section 18.

At the heart of this application, of course, is the question of what the proper evaluation is under section 7(4) and the nature of the evaluation that is required.  In our respectful submission, the error of the primary judge and of the Full Court lay in viewing the phrase “substantial contribution to the working of the invention” as requiring a simple functional comparison between the way the invention as claimed in its embodiment worked and the way that the thing disclosed in the prior art worked.  This might be seen from application book page 70, paragraph 83, where in the final sentence in the paragraph, which appears at the top of the page, Justices Kenny and Stone, with whom Justice Perram relevantly agreed, said:

We consider that the comparison requires a functional inquiry between the invention as claimed – the claimed device or process – and the relevant prior disclosure, here Pellowski ‑ ‑ ‑

GUMMOW J:   How did the primary judge approach this?

MR BURLEY:   In very much the same way, your Honours.

GUMMOW J:   Where is the relevant portion of Justice Gyles ‑ ‑ ‑

MR BURLEY:   In application book page 16 his Honour summarises at paragraph 52, the first sentence:

There is no need to search for some particular advance in the art to be described as an innovative step which governs the consideration of each claim.  The first step is to compare the invention as claimed in each claim with the prior art base and determine the difference or differences.  The next step is to look at those differences through the eyes of a person skilled in the relevant art in the light of common general knowledge as it existed in Australia before the priority date of the relevant claim and ask whether the invention as claimed only varies from the kinds of information set out in s 7(5) in ways that make no substantial contribution to the working of the invention.

The error in approach becomes most apparent when one looks at the way his Honour Justice Gyles dealt with the factual position, which I might return to in a moment, but his analysis is one which required and focused on the question of whether there was a functional difference between the way an embodiment within the claim works and the way that the disclosure of the prior art works.

In our submission, that approach did not adequately address the legislative history or the policy which underlies the section as introduced into the Act.  In that regard, the revised explanatory memorandum is to be found at page 62 of the application book, or relevantly quoted in the decision of the majority of the Full Court, as set out at paragraph 64.

In paragraph 63 it is observed that the ACIP report, which preceded the legislation, drew for the origins of the test from Griffin v Isaacs, but the secondary materials lie in the revised explanatory memorandum, which in paragraph ‑ ‑ ‑

GUMMOW J:   Justice Gyles pointed out that relying on Griffin v Isaacs is not to rest yourself on a very sound basis, but that is what happened.

MR BURLEY:   Yes, your Honour.  The approach, we would submit, emerges from paragraph 6 of the revised explanatory memorandum:

This item adds new provisions which set out the test for innovative step.  This is not a mere novelty test.  It requires a level of inventiveness that is greater than the invention simply being “new”.  The test requires that the invention is not only new but that it also differs from what was already known in a way that is not merely superficial or peripheral to the invention.  The variation must be of practical significance to the way the invention works.  However, in contrast to a standard patent there is no requirement that an invention claimed in an innovation patent must be non-obvious.  Therefore the test for innovative step will require an inventive contribution lower than that required to meet the inventive step threshold set for standard patents.

7.        Innovative step is determined taking into account the prior art base.  The prior art base is the same as that used to determine inventive step in relation to standard patents.  The person assessing the innovative step is a person skilled in the art who assesses the invention in the light of common general knowledge in the field of the invention as it existed before the priority date.

In our respectful submission, this points squarely to an evaluation being conducted, an evaluation of the invention as claimed as against the prior art document that is asserted.  The origins in Griffin v Isaacs, in our respectful submission, point to the fact that a mechanical test which is quantitative in its style is not being adopted, but rather, that a test, having regard to the way the person skilled in the art would understand the invention and the inventive merit that underlies it, as being material.

The passage in Griffin v Isaacs - your Honours, we provided a bundle of authorities - went up to the Court yesterday.  Behind tab 1, Griffin v Isaacs (1938) 12 ALJ 169, the first column on page 170 at the bottom of the page, Justice Dixon, about eight lines up:

Where variations from a device previously published consisted in matters which make no substantial contribution to the working of the thing or involved no ingenuity or inventive step and the merit, if any, of the two things, considered as inventions, was the same, it was, his Honour thought, impossible to treat the differences as giving novelty.

Your Honours, of course that test, which was subsequently referred to as the Griffin v Isaacs test, was a hybrid novelty and obviousness approach which was discounted as relevant under the 1952 Patents Act because of the clear separation between novelty and obviousness.  Justice Gummow, in the decision of R D Werner & Co Inc v Bailey Aluminium Products Pty Ltd, which appears behind tab 3 of the bundle, summarised the test as it came to be understood at page 601, which is the second-last page of Werner v Bailey.

Justice Gummow in that passage, under the heading “Griffin v Isaacs and the present Act”, discussed why it was that the test in Griffin v Isaacs was inapposite in a novelty context and said - and I am reading the last paragraph on that page:

In my view, in construing the grounds of opposition under the present Act it is not an element in the objection on the ground of lack of novelty that whilst there was no anticipation in the necessary sense, nevertheless the difference in the two is to be disregarded because to come from the alleged anticipation to the alleged invention would not have involved the exercise of inventive ingenuity in the light of common general knowledge.

Your Honours, the reason why we refer to those matters as such matters of importance is that, when considering the statutory phrase “substantial contribution to the working of the invention”, the question is:  what do the words “working of the invention” refer to?

GUMMOW J:   What do you say then about paragraph 24 of Mr Cobden’s submissions on page 102?  He says:

no complaint is made by the applicant that Gyles J or the Full Court erred in their construction of the phrase “substantial contribution” ‑ ‑ ‑

MR BURLEY:   Your Honour, that is not the case.  Is your Honour looking at paragraph 24 of my learned friend’s submissions?

GUMMOW J:   Page 102.

MR BURLEY:   Thank you.  The error, we say, is not in the construction of the word “substantial” but in the construction of the phrase “substantial contribution to the working of the invention”.  That very much was front and centre in the appeal.  That the word “substantial” means “weighty” or “of substance” is not to the point.  The question is what is the nature of the test for “substantial contribution to the working of the invention”?  In our respectful submission, what lies at the heart of this application is that we would like to agitate for the proposition that it is an evaluative test based on an understanding of the person skilled in the art of the common general knowledge and of the invention and of the variants between the piece of prior art and the invention as claimed.

GUMMOW J:   Would that produce a different result?

MR BURLEY:   Yes, your Honour, in our submission, it would.  The facts, in our submission, demonstrate that, despite having regard to the claims – if I could invite your Honours to turn to the claims which are extracted at page 74 of the application book, which is annexure A to the judgment of Justices Stone and Kenny – your Honours will have seen that at issue in this case were three patents.  The first one was initially the subject of the suit and then two others were later divided out, each of which had very similar claims.  Claim 1 of patent 1 is set out on page 30 as being:

A roadside post comprising an elongate body (2) formed of sheet spring steel and (3) having a longitudinal access, (4) a transverse axis transverse to said longitudinal axis, (5) a front face and (6) a rear face, (7) said front and rear faces transversely extending generally parallel to said transverse axis, (8) wherein:  said body is elastically bendable through 90 degrees from an unbent state about said transverse axis; (9) said body has a substantially arcuate transverse cross‑section; and (10) said body is provided with a marker hole at a position indicative of the location of the surface of the ground when said post is driven into the ground to a design depth -

That is basically a sheet spring steel roadside post which is elastically bendable through 90 degrees with a marker hole in it.  His Honour found that all of the first eight integers were the subject of the Pellowski patent.  The Pellowski patent disclosed a post which had the spring steel, had the characteristics of elastic bendability and indeed had the integer 9, the substantially arcuate cross-section.  All that was missing was the marker hole.  That was because it was put into the ground in a different way.

The question that was agitated – and this is an example; there are other integers that were relevant – was whether the addition of a marker hole to the combination was such as to confer or to deprive it of innovative step.  The evidence was – and this is from our friend’s witnesses – that they understood the key idea conveyed by the invention was the choice of spring steel as an elastically bendable roadside post.  Furthermore, there was not any dispute that for flexible roadside posts not made of spring steel, it was common general knowledge that the addition of a marker hole could occur.

So the only question really was:  as a matter of evaluation – and this is with one example, of course – would a roadside post made of sheet spring steel that had all the characteristics of that, except having a marker hole, constitute a variation between the two that would amount to a substantial contribution in the working of the invention?

The way his Honour the primary judge dealt with that is to be seen in paragraph 70 of his decision at page 25 of the application book.  I confine myself to the comment in relation to the marker hole for present purposes.  In the last sentence of paragraph 70 his Honour said:

I accept the view of Mr Dowling that the marker hole makes a real contribution which is ‑ ‑ ‑

GUMMOW J:   Who was Mr Dowling?

MR BURLEY:   Mr Dowling was my friend’s expert –

of substance to the working of the invention, as the embedding of the post in the ground is a significant aspect of the operation of a roadside post and the marker holder undoubtedly assists in that regard.

That brings into stark contrast ‑ ‑ ‑

GUMMOW J:   Where is the special leave point there?

MR BURLEY:   Your Honour, the special leave point ‑ ‑ ‑

GUMMOW J:   Someone else might have another view, but why should we become engaged?

MR BURLEY:   The fundamental question for your Honours is whether this test, which is so important to so many innovation patents, is one which can be swatted aside as a qualitative test simply on the “tick the boxes” approach, or whether it is a qualitative test which involves, as do so many other things in patent law, a proper evaluation of what the nature of the advance in the art is.

The consideration for the monopoly conferred in a patent is typically the information provided by the patentee to the public in return for the monopoly.  In the present circumstances, by drafting a patent which has an additional integer to it, a patentee can avoid a ground of lack of innovative step and requires no more.

An example might be given for that, your Honour.  Imagine a patent which discloses an internal combustion engine.  The patent describes the internal combustion engine and says, “Claim 1, the combustion engine; claim 2, combustion engine when attached to a car with four wheels”.  The same internal combustion engine is disclosed in a piece of prior art, only the prior art does not refer to the car with four wheels.  The question is whether the patentee having drafted the patent to add the integer of the four wheels, somehow manages to obtain the benefit of the monopoly over the statutory period for that reason.

In our respectful submission, the validity assessed from the standpoint of the contribution to the invention is one which is more consonant with the background policy of the Act.  It is one which is of great significance.  The qualitative approach to it would be similar to a test familiar, for instance, in copyright law, as to what is a substantial reproduction.  Substantiality is not something which is purely mechanical. 

It enables some balance to be made in the social contract between the patentee and the Crown which has substance and lies at the heart of the patent in the sense that the importance of the information conferred, the thing that is new and arises beyond that which was already known to the public, is properly the subject matter of the patent.

It also avoids a problem which arises as a result of the operation of innovation patents and which is apparent from the three patents that are in suit here.  An innovation patent can be divided out from a standard patent.  Because of the ability of a patentee to divide out patents at short notice, a patent can be drafted such that it addresses a ground of invalidity by adding additional integers to the particular claims.  That is precisely what happened in the present case, when patent No 2 was created in broader form to address and catch an infringement argument and patent No 3 added an integer to the claims in order to avoid a piece of prior art – namely, the Kennedy patent.

By doing so, the only addition of knowledge, in our submission, that was conferred as a result of the patent drafting was that there was a patentee who was clever enough to draft an additional integer of a combination claim.  By having a functional approach which simply looks to the difference between the working of the invention as an embodiment and how it works, as compared to an evaluative approach which has some regard to the way the person skilled in the art would regard it, the Full Court in the court below and the learned primary judge eschewed taking an evaluation which would be more appropriate given the nature of the monopoly.

In our respectful submission, there has been a diminution in the role and value of common general knowledge and the role that the person skilled in the art plays in assessing the invention.  May it please the Court.

GUMMOW J:   Yes, Mr Cobden.

MR COBDEN:   Your Honour, with respect, our learned friend’s approach fails to pay attention carefully to the words of the statute and adds to the statute, or the approach to the words of the statute, a number of unnecessary glosses.  My learned friend took your Honours to the statutory provisions, but the important starting point in section 18(1A), which is the subsection relating to innovation patents, is to read the opening words:

an invention is a patentable invention for the purposes of an innovation patent if the invention, so far as claimed in any claim –

and then on to (b)(ii):

involves an innovative step –

That then takes one to subsection 7(4) to see what is the meaning of the phrase “involve an innovative step”.  In our respectful submission, the Full Court and Justice Gyles stepped carefully through the statutory provision, subsection 7(4), and identified a series of clear steps mandated by the statutory provision and then applied them.  First of all, the question is whether it involves an innovative step and it is deemed in effect – it is a deeming provision:

an invention is to be taken to involve an innovative step when compared with the prior art base –

My learned friend has told your Honours what that is.  That is more like novelty than like obviousness.  It can be a single document, and here it was a single document:

unless the invention would, to a person skilled in the relevant art, in the light of the common general knowledge . . . only vary from the kinds of information –

et cetera.  The first point to make is that the role of the skilled addressee – skilled in the light of the common general knowledge – is, as the language says, to assess the variation.  That is the role that the skilled addressee was in fact given in this case, and that was Mr Dowling – the example your Honour was just taken to.

As their Honours have said below there are a number of steps.  The first one is simply to identify, on a claim-by-claim basis, what the invention is; secondly, to identify what the prior art base is; thirdly, to identify the differences and then look at those differences through the eyes of the person skilled in the art.  That is what their Honours did here and that is all that is required by the statutory test which we respectfully submit.

GUMMOW J:   I think in a way, and looking at the matter through old‑fashioned spectacles, you have managed to elevate integer 10 and given it some essential characteristics, as it were, that under the ordinary law it would not have.

MR COBDEN:   First of all, your Honour, in each case what ‑ ‑ ‑

GUMMOW J:   If this were not an innovation patent.

MR COBDEN:   If this were not an innovation patent?

GUMMOW J:   Yes.

MR COBDEN:   Yes.  Of course, it is an innovation patent.  Innovation patents were introduced against the background, we would say very much against the background, of saying that there would be a lower threshold of invention or innovation in circumstances where this Court has said in relation to inventive step a scintilla of inventiveness is sufficient or a very small amount of ingenuity can sustain a patent in Australia.  First of all, a priori it is not going to be particularly surprising if a relatively simple or very simple invention achieves what the legislature has set out to achieve, which is a lower threshold of invention for the lesser period in relation to an innovation patent which is a special and new variety of patent that has been set up.

The test that the skilled addressee, or the prism through which the skilled addressee has to look at the difference between the prior art and the claim is the common general knowledge.  We accepted Mr Dowling, for example, in this case did have the relevant common general knowledge.  The question before his Honour ‑ ‑ ‑

GUMMOW J:   Was he contradicted by the other side’s experts.

MR COBDEN:   Yes, your Honour, although to some extent they passed like ships in the night, because Mr Dowling had approached the task on this approach to the section and my learned friend’s expert approached it from the point of my learned friend’s construction of the section, which was, we say, to add the gloss to the section, which is to search in the prior art and in the specification for the basic invention or the advance in the art or perhaps, as my learned friend has put it, sometimes of the broadest form of the invention, which was a claim that was ultimately invalidated on the basis of a lack of innovative step.

While there was a debate between the two experts, it really was conducted on the different ground that each party had elected to fight the case.  As we have said in our written outline, your Honours, it is the adding into what is otherwise, we would submit, a straightforward series of statutory steps, as identified by working through the section, as identified by the Full Court and Justice Gyles – stepping back from that and adding a search for the advance in the art or adding a search for the real invention and inserting that into the innovative process that is contrary to the statutory terms.

Really, the difference between us is that critical issue of the approach to the construction of the section.  We submit to your Honours that Justice Gyles and all three members of the Full Court were correct, for the reasons set out, and that for our learned friends to advance the view that they do is to add a gloss onto the section.  May it please the Court.

GUMMOW J:   Thank you.

MR BURLEY:   Your Honours, this is a new hybrid test.  It is not novelty and it is not obviousness.  It has never been tested before or considered by this Court and it has fundamental significance ‑ ‑ ‑

GUMMOW J:  That is true of a whole lot of important legislation, Mr Burley.

MR BURLEY:   Yes, your Honour, and this is a ripe opportunity for it and is for the reasons my learned friend said.  There is expert evidence which is addressed to one construction and then to another one.  The question is, as a matter of philosophy, which is the correct approach to the construction of an innovation patent?  The words “substantial contribution to the working of the invention” are ambiguous, as his Honour Justice Perram acknowledged; “the working of the invention” could either refer to the particular embodiment which the claim directs itself to or to the inventive concept which underlies that claim.  It is the latter which we agitate for and would like an opportunity to persuade the Court is the correct approach.

HAYNE J:   That is intended to be captured, is it, by the last sentence in paragraph 27 at page 93 of the application book:

a direction to assess the substance of the invention as an advance in the state of knowledge –

et cetera.

MR BURLEY:   Yes.

HAYNE J:   That is the essence of the point you are wanting to advance?

MR BURLEY:   Yes, your Honours.  The substance, indeed, to have regard to what it is that the claim represents and what form of contribution is a substantial one.  We say, with respect, that the functional approach is one which has no bearing on the type of invention which is one typically afforded a patent.  The functional approach merely operates on the way something works and to add a lick of paint to something or to add a hole to something does not necessarily reflect on the inventive embodiment or the idea for which the valuable monopoly is conferred.

It is our respectful submission that this is a matter appropriate for the Court to consider because the thousands of innovation patents now around and yet to come have to be evaluated on some basis and, in our submission, the basis taken by the Full Court is one which is not consonant with the policy of the Act.  May it please the Court.

GUMMOW J:   We will take a short adjournment.

AT 2.51 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.54 PM:

GUMMOW J:   The central proposition on the construction of the legislation upon which the applicant would rely if there were to be a grant of special leave is set out in paragraph 27 of the submissions on page 93 of the application book.  This reads:

The words “only vary . . . in ways that make a substantial contribution to the working of the invention” do not mandate a test that is based on a functional comparison.  In section 7(4) the “invention” as claimed is to be seen “in the light of the common general knowledge”.  Involved is a direction to assess the substance of the invention as an advance in the state of knowledge over that which is known.

We are of opinion that an appeal to this Court based upon that proposition would fail.  Accordingly, special leave is refused with costs.

AT 2.56 PM THE MATTER WAS CONCLUDED