Hood v Down Under Enterprises International Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Hood v Down Under Enterprises International Pty Limited [2022] FCAFC 69

Appeal from:

Hood v Bush Pharmacy Pty Ltd [2020] FCA 1686

Hood v Bush Pharmacy Pty Ltd (No 2) [2021] FCA 138
File numbers: NSD 265 of 2021
NSD 266 of 2021
NSD 267 of 2021
Judgment of: YATES, MOSHINSKY AND ROFE JJ
Date of judgment: 4 May 2022
Catchwords:

PATENTS – alleged infringement by supply of products – s 117 of the Patents Act 1990 (Cth) – staple commercial product – whether essential oil derived from the shrub Kunzea ambigua was a staple commercial product – where the primary judge found that the oil was a staple commercial product – whether the primary judge erred in so finding – held: no error in primary judge’s conclusion

PATENTS – inventive step – method of treatment claims – where primary judge found that the claims did not lack an inventive step – whether the primary judge erred in so finding – held: no error in primary judge’s conclusion

CONSUMER LAW – misleading or deceptive conduct – where the respondent’s website conveyed that the goods offered for sale were registered or listed on the Australian Register of Therapeutic Goods – where the website was not owned or maintained by the respondent – whether the primary judge erred in concluding that the respondent had engaged in misleading or deceptive conduct – held: primary judge erred

PRACTICE AND PROCEDURE – costs – where the primary judge ordered each respondent to pay a fixed portion of the applicant’s costs of the cross-claims – whether the primary judge erred in making such a costs order – held: no error in primary judge’s costs order

Legislation:

Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, ss 18, 29

Federal Court of Australia Act 1976 (Cth), s 43

Patents Act 1990 (Cth), ss 7, 13, 14, 18, 117, 118, 119, 123, 168, 210

Therapeutic Goods Act 1989 (Cth), s 3

Cases cited:

Apotex Pty Ltd v AstraZeneca AB (No 4) (2013) 100 IPR 285

AstraZeneca AB v Apotex Pty Ltd (2014) 226 FCR 324

Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391

Collins v Northern Territory of Australia (2007) 161 FCR 549

Garford Pty Ltd v DYWIDAG Systems International Pty Ltd (2015) 110 IPR 30

Jumbunna Coal Mine, NL v Victorian Coal Miners’ Association (1908) 6 CLR 309

Northern Territory of Australia v Collins (2008) 235 CLR 619

Division: General Division
Registry: New South Wales
National Practice Area: Intellectual Property
Sub-area: Patents and associated Statutes
Number of paragraphs: 158
Date of hearing: 26 and 27 August 2021
Counsel for the Appellant NSD265/2021
NSD266/2021
NSD267/2021: 		Mr M Green SC with Ms BA Oliak and Dr G O’Shea
Solicitor for the Appellant NSD265/2021
NSD266/2021
NSD267/2021: 		HWL Ebsworth Lawyers
Counsel for the Respondent
NSD265/2021
NSD267/2021: 		Mr ADB Fox with Ms SJ Hallahan
Solicitor for the Respondent
NSD265/2021
NSD267/2021: 		Gadens Lawyers
Counsel for the Respondent
NSD266/2021: 		Mr SY Reuben with Ms…
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Details
Case
[2022] FCAFC 69
Decision Date

CaseChat Overview and Summary

In Hood v Down Under Enterprises International Pty Ltd, the appellant, Mr Hood, challenged the primary judge’s determination that essential oil derived from the shrub Kunzea ambigua was not a staple commercial product within the meaning of s 117(2)(b) of the Patents Act 1990 (Cth). Mr Hood argued that the primary judge erred in his conclusion that the oil was a staple commercial product. This was part of a broader appeal regarding the validity of certain patent claims, the determination of infringement, and compliance with the Australian Consumer Law. Down Under Enterprises and New Directions filed a cross-appeal, challenging the primary judge’s conclusions on inventive step and additional damages. The central legal issues in this appeal revolved around the classification of the oil as a staple commercial product, the validity of the patent claims, the inventive step of the claims, the infringement of the patent, and the alleged contravention of the Australian Consumer Law.

The Federal Court of Australia found that the primary judge did not err in concluding that the oil derived from Kunzea ambigua was a staple commercial product. The Court noted that the primary judge had considered and appropriately weighed the evidence and arguments presented by both parties. The Court also found no error in the primary judge’s conclusion that the patent claims did not lack an inventive step, nor in the dismissal of claims for additional damages. However, the Court held that the primary judge erred in concluding that Down Under Enterprises contravened the Australian Consumer Law by falsely representing that the oil was registered or listed on the Australian Register of Therapeutic Goods. The Court found that while the website in question did convey this misleading information, it was not owned or maintained by Down Under Enterprises, and therefore, the respondent could not be held liable for the misleading conduct.

The Court upheld the primary judge's costs order, which required each respondent to pay a fixed portion of Mr Hood’s costs of the cross-claims. The Court found no error in the primary judge’s decision on costs. Therefore, the appeal was dismissed, the cross-appeal was dismissed, and the costs orders as determined by the primary judge were upheld. If either party sought a variation of the costs orders, they could file and serve written submissions and any supporting affidavits within a specified timeframe, after which the issue of costs would be determined on the papers.

Orders

Orders of the court

1. The appeal be dismissed.

2. The cross-appeal be dismissed.

3. The appellant pay the respondent’s costs of the appeal, as agreed or taxed.

4. The cross-appellant pay the cross-respondent’s costs of the cross-appeal, as agreed or taxed.

5. If either party seeks a variation of the costs orders in paragraphs 3 and 4 above, it may, within seven days, file and serve a written submission (of no more than two pages) and any affidavit in support. In that event, the other party may file and serve a responding written submission (of no more than two pages) and any affidavit in support within a further seven days, and the issue of costs will be determined on the papers.

[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The primary judge’s principal judgment is Hood v Bush Pharmacy Pty Ltd [2020] FCA 1686. The primary judge also published separate reasons for judgment on costs: Hood v Bush Pharmacy Pty Ltd (No 2) [2021] FCA 138 (Costs Judgment). Unless otherwise indicated, references to the primary judge’s reasons for judgment are to the principal judgment. The primary judge found that Bush Pharmacy and Heritage Oils had infringed the Patent based on s 117 of the Patents Act 1990 (Cth). There is no appeal in relation to those proceedings. In the proceedings involving Down Under Enterprises, New Directions and Native Oils, the primary judge:(a)held that each of claims 5, 6, 7, 9, 10, 11, 12 and 13 was valid; and(b)dismissed Mr Hood’s claims of infringement (being claims based on s 117 of the Patents Act). Mr Hood appeals from the judgment of the primary judge in the proceedings involving Down Under Enterprises, New Directions and Native Oils. Down Under Enterprises and New Directions have filed a cross-appeal, but Native Oils has not. The key conclusions of the primary judge (and whether or not they are subject to appeal or cross-appeal) can be summarised as follows. The primary judge held that:(a)claims 1 to 4, 8 and 14 to 18 of the Patent should be revoked (there is no appeal from these parts of the judgment);(b)claims 5 to 7 and 9 to 13 should be amended to correct obvious errors and to adjust the drafting in light of the revocation of claims 1 to 4 (there is no appeal or cross-appeal regarding the amendment issue);(c)claims 5 to 7 and 9 to 13 were not invalid for lack of inventive step (Down Under Enterprises and New Directions cross-appeal from this part of the judgment);(d)Down Under Enterprises, Native Oils and New Directions did not infringe the Patent under s 117 of the Patents Act (Mr Hood appeals from this part of the judgment);(e)there should be no award of additional damages (Mr Hood appeals from this part of the judgment);(f)Mr Hood’s claim under the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), against Down Under Enterprises was made out, resulting in the making of a declaration and an injunction; however, the primary judge held that there was no loss and therefore no compensation was payable (Down Under Enterprises cross-appeals from the conclusion that it contravened the Australian Consumer Law; Mr Hood does not appeal from the conclusion that no compensation was payable); and(g)each respondent should pay a fixed portion (14%) of Mr Hood’s total costs of the cross-claims in the five proceedings at first instance (Mr Hood appeals from this part of the judgment, contending that the respondents should have been jointly and severally liable for these costs). The issues raised by the appeals and cross-appeals can be summarised as follows:(a)whether the primary judge erred in concluding that Down Under Enterprises, Native Oils and New Directions did not infringe the Patent. In particular:(i)whether the primary judge erred in his conclusion that the Oil was a “staple commercial product” within the meaning of s 117(2)(b) of the Patents Act (the Staple Commercial Product issue); and(ii)whether the primary judge otherwise erred in his conclusion that the respondents did not infringe under s 117;(b)whether the primary judge erred in his conclusion that the Patent did not lack an inventive step (the Inventive Step issue);(c)whether the primary judge erred in concluding that the respondents were not liable for additional damages (the Additional Damages issue);(d)whether the primary judge erred in concluding that Down Under Enterprises had contravened the Australian Consumer Law (the Australian Consumer Law issue); and(e)whether the primary judge erred in ordering each respondent to pay a fixed portion of Mr Hood’s costs of the cross-claims (the Costs issue).

Ratio Decidendi

Legal Principle Established

Mr Hood also challenges his Honour’s finding that the proper classification of the relevant product for the purposes of s 117(2)(b) is all essential oils derived from native shrubs.Consideration It is convenient to start with Mr Hood’s challenge to the primary judge’s factual findings before addressing his principal contention that the Oil is not a staple commercial product. Mr Hood identified eight matters from Dr Narkowicz’s evidence that he says were not taken into account, or afforded sufficient weight, by the primary judge. Of these, six matters were expressly noted by the primary judge when discussing Dr Narkowicz’s evidence at [175]-[181] and referred to in the four reasons given by his Honour for his conclusion at [184]-[188]. The eight matters identified by Mr Hood are:(a)the Oil has antibacterial and antifungal properties and may assist in healing and reducing bruising. Consumers with knowledge of these properties usually seek out the Oil because of them;(b)the Oil is considered a niche product in the essential oil market due to its therapeutic properties and exclusivity to Tasmania;(c)the most common commercial use of the Oil is therapeutic use (which includes aromatherapy). Dr Narkowicz was not aware of any other actual commercial uses but if there are any other uses they are uncommon;(d)the Oil is usually incorporated into other goods (such as soaps, lotions, and topical creams) for therapeutic properties and not for its smell;(e)the Oil cannot be used for internal human use or animal uses because of regulatory requirements;(f)because the Oil is not high yielding, it is very expensive. The high cost of producing the Oil makes other potential uses not commercial or practical, such as in household and industrial applications (for example, cleaning agents and disinfectants);(g)the Oil is not a commodity or raw material as, inter alia, it is not readily available and is typically sold to persons who seek it out for its particular properties; and(h)the Oil is not a “raw material” but is rather a “manufactured product, ready for distribution and use as is, or for incorporation into other manufactured products”. At the outset it must be noted that despite not making any challenge to the primary judge’s construction of the claims, Mr Hood’s appeal grounds and his written and oral submissions largely proceed to ignore his Honour’s construction of the claims. Mr Hood’s submissions conflate any asserted “therapeutic use” of the Oil, whatever the method of administration or condition, with a method of treatment falling within the scope of the claims. On Mr Hood’s case, any “therapeutic use” of the Oil is to be excluded from the consideration of whether the Oil is a staple commercial product as it is a use falling within the Patent monopoly. Mr Hood submits that the manner in which the primary judge characterised topical application ignored that the use of the Oil in a bath, for example, involves a topical application to the skin, and that administration by inhalation involves a topical application to the lungs. The primary judge’s contrary construction of topical application is not challenged in the notices of appeal.