Mackay and Commissioner of Patents

[2005] AATA 1185

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1185

ADMINISTRATIVE APPEALS TRIBUNAL          № V2004/1315

GENERAL  ADMINISTRATIVE DIVISION

Re:            DALE VICTOR MACKAY

Applicant

And:         COMMISSIONER OF PATENTS

Respondent

DECISION

Tribunal:       Dr Gordon Hughes, Member

Date:2 December 2005

Place:Melbourne

Decision:The Tribunal sets aside the decision under review and in substitution decides that, in respect of Australian Patent application number 71586/00, Dale Victor Mackay is the sole inventor for the purposes of section 15(1)(a) of the Patents Act 1990 (Cth) (the Act) and that Paul Taylor Mackay has not derived a joint entitlement pursuant to section 15(1)(b) of the Act.

The Tribunal certifies that proceedings have terminated in a manner favourable to the Applicant.

(sgd) Gordon Hughes

Member

PATENTS – application - sole or joint inventor – delegate's finding with respect to operation of s 15(1)(b) of the Patents Act 1990 - collaborative relationship –-derivation of entitlement to invention by way of relationship – breach of agreement – whether obligation met under agreement

Patents Act 1990 (Cth) ss 15, 32

Vrubel and Another v Upham [1997] APO 51

Mackay v McKay [2004] APO 29

Encoret Limited v Dexterity Inc. [2001] APO 12

Carroll and Harper [1983] APO 47

REASONS FOR DECISION

2 December 2005  Dr Gordon Hughes, Member

1.      This matter was heard by the Tribunal on 21 November 2005.  The applicant was represented by Mr Glick SC, appearing with Mr Horack.  The respondent elected to be unrepresented.

2.      The applicant will hereafter be referred to by his given name, Dale, for two reasons.  First, the term "applicant" has a dual application, describing not only a party to these proceedings but also an applicant for a patent pursuant to the Patents Act 1990 (Cth) (the Act). Secondly, there is a similarity in surnames between the applicant, Dale Victor Mackay, and a third party, Paul Taylor McKay. For consistency, McKay will be referred to by his given name, Paul.

3.      These proceedings relate to a decision by a delegate of the respondent ("the delegate") on 5 November 2004 under section 32 of the Act, directing that Dale was the sole inventor of an invention but that Paul had a joint entitlement to the grant of a patent by virtue of a collaborative arrangement with Dale.

4. Section 32 of the Act states:

If a dispute arises between any 2 or more interested parties in relation to a patent application whether, or in what manner, the application should proceed, the Commissioner may, on request made in accordance with the regulations by any of those parties, make any determinations the Commissioner thinks fit for enabling the application to proceed in the name of one or more of the parties alone, or for regulating the manner in which it is to proceed, or both, as the case requires.

5. A patent application, number 71586/00, was filed with the Australian Patent Office on 15 November 2000. The invention involved an electrosurgical instrument. Dale and Paul were named as joint applicant. On 1 November 2002, Dale filed a request under section 32, claiming that he was sole inventor and that the application should proceed in his name alone.

6.      The delegate concluded that Dale was the sole inventor of the invention.  That finding was adopted by Dale in the proceedings before the Tribunal.  There is no need to consider that aspect further.

7.      Notwithstanding the finding that Dale was the sole inventor, the delegate further concluded that Paul had a "collaborative relationship" with Dale for the purposes of section 15(1)(b) of the Act.

8. Section 15(1)(b) provides:

(1)          Subject to this Act, a patent for an invention may only be granted to a person who

(a)is the inventor; or

(b)would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person;

…

9.      As it was not in contention that Dale was the sole inventor, the issue to be decided in these proceedings is whether Paul was "entitled to have the patent assigned" to him for the purposes of section 15(1)(b).

10.     Paul elected not to attend the proceedings and was not called to give evidence.

11.     In Vrubel and Another v Upham [1997] APO 51, the delegate considered that the only way in which a party who was not an inventor could gain entitlement was via an arrangement, an employer-employee relationship or a collaboration whereby a party derived a share of the title to the invention from the inventor.

12.     The delegate concluded that there was no assignment and no relevant employer-employee relationship, but that there was evidence of a collaboration:

…The fact that the parties had or were intending to file joint applications in accordance with their common intention to share future rights was clear evidence of a relationship amounting to a co-partnership in respect of developments arising from or incidental to the relationship, whereby any rights to inventions from individual developments rested with the partnership rather than the individual party responsible for such inventions.

13.     Dale asserts that the delegate misinterpreted the commercial arrangements between the parties.

14.     Dale's evidence is that he realised the potential of his invention in or about June 2000.  He approached Paul to enter into a joint venture pursuant to which they would manufacture and sell the product.  On 23 June 2000, Dale and Paul entered a verbal agreement to the following effect:

·   they form a separate company;

·   the company would manufacture the product at cost;

·   Paul would be in charge of manufacturing, packaging and labelling;

·   the Dale would be in charge of marketing and wholesaling; and

·   profits would be shared equally.

15.     Dale asserts that the verbal agreement did not create a co-partnership for development.  It was intended to create a joint venture for manufacturing and sale.  Paul's name had been listed in anticipation of the joint venture being formed, but the joint venture never eventuated. 

16.     Dale further asserts that Paul failed to comply with the terms of the agreement in almost every respect.  He was listed as a co-inventor and co‑applicant but provided nothing in exchange.  The separate joint venture company had been formed but had never manufactured the product – instead, the product was manufactured through Paul's own company.  Furthermore, Paul commenced negotiations with Dale's employer to manufacture and sell the product to the employer without reference to the proposed joint venture involving Dale.  Paul also charged in excess of cost price for manufacturing the product.  No profits were ever remitted to Dale.  Paul refused to put the contract in writing, as arranged previously between the parties, and subsequently advised Dale that he did not wish to form the joint venture. 

17.     The delegate, in his decision, referred to Encoret Limited v Dexterity Inc [2001] APO 12, in which it was considered that the filing of joint applications in accordance with a "gentleman's agreement" was clear evidence of a co-partnership. 

18.     The delegate considered that it was "abundantly clear from the evidence that it was agreed between Dale and Paul that they would share any future patent rights" It was not, according to the delegate, of relevance that Dale did not regard Paul as a co-inventor, as this was an argument more applicable to inventorship under section 15(1)(a) rather than entitlement under section 15(1)(b). There was evidence that Dale had knowingly taken steps to include Paul as a joint inventor and consistently referred to him as a "business partner".  It was, according to the delegate, not relevant that the parties were now in dispute as "the dispute occurred after the invention was developed".

19.     The delegate concluded on the facts that there "can be no doubt that it was commonly understood by Paul and Dale that the effect of the agreement of 23 June 2000 was that any rights to inventions arising from, or incidental to, their relationship would rest with them jointly".

20.     Dale asserts that the delegate erroneously relied upon a number of matters in finding that there was a co-partnership or collaborative arrangement with Paul.  These matters included the following:

·   the joint venture never eventuated;

·   although Dale referred to Paul as his "business partner", the "partnership" never eventuated;

·   Paul was only listed on the patent application because of the proposed joint venture which never proceeded;

·   Dale only kept Paul informed of the progress of the patent application in anticipation that the joint venture would commence;

·   although Paul paid fees of $345 for the patent application, this was paid as a token for the many thousands of dollars of business and general business assistance given to Paul over the years.

21.     Dale further asserts he asked Paul to manufacture and sell the product because of their friendship.  The agreement between them emanated from the telephone conversation on 23 June 2000.  Dale told Paul on 23 June 2000 that he would share the invention with him, and would put his name on the patent, on the basis that a joint venture was formed.  Paul undertook to formalise the joint venture agreement by putting it in writing and forming a new company.  The only part of the agreement which Paul fulfilled was to form a separate company, after which Paul announced that he did not wish to continue with the proposed joint venture.

22.     Subsequent to this telephone discussion, on 15 November 2000, Dale included Paul's name on the patent application because he still expected Paul to fulfil his obligations under the 23 June 2000 agreement.  The application was subsequently amended and the amendments were lodged on 23 February 2001 – again, Paul's name was included in the patent application.  Paul announced he did not wish to proceed with the joint venture on 22 March 2002.

23.     Mr Glick submitted that the delegate had erred in his reliance upon Encoret. He said each case depends on its facts.  Citing from the abstract of the decision, he emphasised that Encoret turned on the fact that there was

…clear evidence of a relationship that was of such nature that it amounted to a co-partnership in respect of developments arising from the relationship, whereby any rights to inventions from individual developments rested with the partnership rather than the individual party responsible for such inventions..

24.     Mr Glick contrasted the findings of fact in Encoret with the findings of fact in Carroll and Harper [1983] APO 47. Citing the case as an example only of a factual finding in support of an applicant, Mr Glick observed that the case involved a pre‑application agreement in which a co-applicant failed to honour his obligations, and as a consequence had been found not to be entitled to continue to be joined as a co-applicant.

25.     The Tribunal considers that the delegate erred in assessing the legal implications of the relationship between Dale and Paul. As a consequence, he erred in assessing Paul's entitlement under section 15(1)(b) of the Act. Central to Paul's entitlement was the verbal agreement reached with Dale on 23 June 2000. The Tribunal accepts that Dale agreed to list Paul as a co-inventor on condition that Paul fulfilled his obligations under that agreement. The Tribunal further accepts that Dale was led by Paul to believe that Paul would meet those obligations, and that Paul has not complied with a majority of those obligations. To the extent that a contractual relationship arose out of the discussion on 23 June 2000, it was subject to a series of conditions precedent, most of which were not met.

26.     The delegate considered it relevant that "Dale not only knowingly took steps to include Paul as a joint inventor, but also formally acknowledged him as such for example by signing the patent request form filed with the present application".  The delegate also considered it significant that Dale "consistently referred to Paul as his 'business partner'" and that he "kept Paul informed of developments and indeed actively sought his input before instructing the US patent agent".  The delegate regarded these as "examples of the constant cooperation between Dale and Paul, at that time, in fulfilling their agreement of 23 June 2000"P and he noted further that a close business relationship was evidenced by the fact that Dale and Paul "both contributed to the preparation of the draft specification that was to form the basis of joint applications in Australia and the United States".

27.     The essence of the agreement on 23 June 2000 was that Dale and Paul would create a joint venture to commercialise the invention.  The delegate acknowledged that "the proposed joint venture did not eventuate due to a deterioration in the relationship between them".

28.     The shortcomings in the delegate's reasoning in relation to Paul's entitlement under section 15(1)(b) are twofold. First, the evidence suggests that Paul’s input was minimal. Secondly, Paul's obligations under the agreement of 23 June 2000 included specific conditions precedent and were fundamental to Dale's decision to include Paul as a co-applicant. Paul's conduct, far from evincing a collaborative arrangement, amounted to a breach of his contractual obligations. Paul's apparent displays of intermittent interest are not sufficient to overcome his failure to comply with the undertakings he provided to Dale on 23 June 2000. To the extent that Dale acted in a manner consistent with a collaborative arrangement, this was in anticipation that Paul would ultimately discharge his contractual responsibilities. The Tribunal does not consider it plausible that Dale would have named Paul as a co‑applicant had Dale not been led to believe that Paul would contribute in the agreed manner.

29. For the above reasons, the Tribunal sets aside the decision of the delegate that Paul was entitled to continue to remain as a co-applicant in Australian Patent Application Number 71586/00. In substitution the Tribunal decides that Dale was the sole inventor for the purposes of section 15(1)(a) of the Act and that Paul does not have a joint entitlement to the grant of a patent under section 15(1)(b) of the Act.

I certify that the twenty‑nine [29] preceding paragraphs are a true copy of the reasons for the decision herein of

Dr G. Hughes, Member

(sgd)     Catherine Thomas

Clerk

Date of Hearing:  21 November 2005

Date of Decision:  2 December 2005
Counsel for the applicant:         Mr L. Glick QC with Mr I. Horack
Solicitors for the applicant:        Schetzer Brott & Appel
Solicitors for the respondent:     No appearance