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Australia’s Science and Research Priorities to be reviewed

The Minister for the Department of Education and Training announced on 19 February 2019 that a review will be conducted of Australia’s Science and Research Priorities as they apply to the Australian Research Council’s (ARC) National Competitive Grants Program. (NCGP)  The ARC is the peak Commonwealth entity that advises the Australian Government on research matters and administers the NCGP, a significant component of Australia’s investment in research and development.  ARC funding programs deliver on average $800 million per year to Australian researchers.

The terms of reference for the review will include considering:

  • areas in which Australia exhibits research strength, or which represent opportunities to establish Australia as a world leader in research;
  • areas of strategic priorities;
  • how ARC’s use of the priorities relates to government science, research and innovation strategies; and
  • how the ARC’s use of the priorities compares to other Commonwealth research funding programs.

Designed to increase investment in areas of immediate and critical importance to Australia, the Science and Research Priorities were established by the Australian Government in 2015 following extensive consultation across the research sector, industry and government [see here].  Central to that discussion was the recognition that not only is support for research essential to the nation’s increased productivity and economic growth, but that it is also necessary to ensure diversity of investment across the full spectrum of research disciplines, including the physical and life sciences, engineering, information and communications technology and the humanities and social sciences.

Current research priorities

The review has been widely welcomed by the country’s research and innovation sector, and will provide a timely opportunity to reflect on Australia’s research policy landscape and to re-focus the national conversation on new areas of research that are currently, or will be, of critical importance to Australia.

The review panel will also consider stakeholder consultation and feedback, and will report its findings by the end of July 2019.

Innovation drives economic growth – but what fuels innovation?

While public policy initiatives such as the establishment of the National Science and Research Priorities play an important role in shaping research and development, a driver of economic growth, another gauge of the importance a country has placed on innovation is its research and development expenditure. 

For instance, it has been reported that by industry, health care and social assistance output recorded strong growth (2.6 percent) in 2018, reflecting ongoing public investment in health care in Australia.

Since January 2018, the Australian Government has committed approximately AU$980 million in funding for research in cancers and other diseases such as epilepsy, macular disease, anxiety and depression, Parkinson’s disease, cardiovascular disease and diabetes, as well as funding support for medical projects such as:

  • $10 million to support the development of eleven cutting edge medical projects, including “the BioPen”, which is a handheld 3D printer that can be used in surgery to repair damaged cartilage;
  • $22 million to help Australian businesses move from early-stage health and medical research discoveries to commercial success, giving patients access to better treatments and medicines.
  • $240 million program giving researchers significant funds for innovative and transformational medical research. 
  • A total of 682 grants will be funded, totalling more than $526 million, through the National Health and Medical Research Council (NHMRC).
  • $185 million medical research package focused on ageing, aged care and dementia.  The 10-year Dementia, Ageing and Aged Care Mission is funded through the Medical Research Future Fund and its focus will include:
    • Dementia (diagnosis, treatment and prevention)
    • Fall prevention and avoidable hospitalisations
    • Assistive technology to support independence
  • $10 million in research that will help use a person’s DNA and their environment to help create personalised medicine for a multitude of medical conditions including obesity, autism, and type 2 diabetes.
  • $32 million boost over four years to help researchers make their medical breakthroughs a commercial success by assisting Australian researchers gain access to entrepreneurial training and experience.
Other key funding initiatives due to be rolled out over 2018/2019 include:
Project Details
Launch of the Digital Health Cooperative Research Centre $55 million cash injection to launch the new Digital Health Cooperative Research Centre (CRC) and its programs which will bring together a consortium of more than 60 health, medical technology and pharmaceutical companies, universities and research institutes operating across the health, aged care and disability sectors.  Combined with the Government’s investment, the Digital Health CRC will have more than $111 million in cash funding and $118 million in-kind contributions to invest in a range of collaborative research and development programs that are set be rolled out from July 2018. More specifically, the Centre’s research agenda will be developed to achieve three major outcomes: Improving the health, welfare, quality of life and wellbeing of citizens; Improving the efficiency and integrity of health services; and Increasing the value of every health dollar spent
Funding to increase the use of generic medicines and biosimilars Measures to increase the use of generic and biosimilar medicines. The Government estimates that the increased use of generic and biosimilar medicines will lead to a reduction in costs of $335.8 million over five years and says that the savings will be redirected by the Government to fund “health policy priorities”.
Development of a national genomics initiative Announcement of a $500m genomics initiative, the Australian Genomics Health Futures Mission, which will form the cornerstone of the $1.3 billion National Health and Medical Industry Growth Plan.  The Department of Health said the initiative would involve co-investment with businesses to support new industries.  Specifically, the initiative will involve: clinical studies / contract research into rare diseases, rare cancers and complex conditions;new clinical trials and technology applications allowing Australian patients to benefit from the latest medical research;manufacturing digital infrastructure for clinical genomics;greater community education to better understand the value of genomics; andimplementation of national standards and protocols to ensure secure data holdings, access, analysis and sharing to benefit Australians.
Reforms to the R&D tax incentive   Changes designed as a “refocusing of the R&D tax incentive” to give more support to companies that invest a higher proportion of what they spend in R&D.  Particular changes include: clinical trials exempted from a $4 million cap for the refundable component; no lifetime cap for the refunds; a coupling of the incentive to each company’s tax rate; and for larger companies, a graduating reward premium for higher intensity and an increased cap. For companies with annual turnover of less than $20 million, a $4 million cap has been imposed on the cash refund available.  In its changes to the R&D tax incentive, the Federal Government expects to save $2.4 billion over the next four years.

Thanks to Sarah-Jane Frydman for her assistance with preparing this article.

The post What is driving the future of Australia’s research and innovation sector? appeared first on IP Whiteboard | King & Wood Mallesons.

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The word ‘Bula’ translates to ‘life’. When used as a greeting by the people of Fiji, bula signifies wishes for longevity and good health.  ‘Bula’ is commonly heard in Fiji, and is usually coupled with the beaming smiles of friendly Fijian people.  However, there were less smiles in September last year when news spread that Ross Kashtan, CEO of the Bula Kava bars and cafes in Florida, USA, had registered the word ‘Bula’ as a trade mark in the USA.  

The registration drew a vast amount of criticism, largely from the people of Fiji.  In response, a Fijian anthropologist and academic, Tarisi Vunidilo, started a petition that received more than 5,000 signatures – 2,000 of which were received in a single day.  A number of individuals also posted criticism on Bula Kava’s Facebook page.

The furore captured the attention of the Fijian Government.  Attorney-General Aiyaz Sayed-Khaiyum announced the Government’s intention to lodge documents contesting the trade mark registration with the United States Patents and Trademark Office (USPTO) and to raise the matter with the World Intellectual Property Organisation.

However, Ross Kashtan is not the first person to register the term ‘Bula’ as a trade mark. A quick search of USPTO shows that the word ‘Bula’, either alone or as part of a combination of words, has been registered as a trade mark more than 16 times.  A search of the Australian trade mark register shows that ‘Bula’, in conjunction with other words, is the subject of three trade mark registrations in Australia.

Aloha from Washington

The ‘Bula Kava’ palaver isn’t the first time a US business has found itself in hot water as a result of a trade mark registration of a culturally significant greeting.  In January last year, a petition against the poke[1] chain Aloha Poke Co. (Aloha Poke) received around 170,000 signatures requesting they remove the words ‘aloha’ and ‘poke’ from their name.

The petition came shortly after attorneys from Aloha Poke issued a number of cease and desist letters to other poke restaurants, including some restaurants run by native Hawaiians.  The letters requested various establishments remove the word ‘aloha’ from their name.  The word ‘aloha’ refers to concepts such as love, affection, peace and compassion and has deep cultural significance in Hawaii.

David Jacobson, the owner of (the newly renamed) Fairhaven Poke, posted on Facebook after receiving a cease and desist notice from Aloha Poke.  He accused founder Zach Friedlander of “trying to exploit and capitalize on the recent popularity” of the Hawaiian dish. This prompted a storm of criticism on social media directed towards Aloha Poke.

While Aloha Poke issued an apologetic Facebook post of their own in response to the backlash faced, the trade mark registration remains valid and enforceable.  

Closer to home – the not so cute side to Borobi the Koala

Anyone who watched the recent Gold Coast Commonwealth Games (Commonwealth Games) will remember the presence of a board short-wearing, blue Koala called Borobi.[2]  While fond memories of our smiling marsupial mascot high-fiving lifeguards and officials might spring to mind, Borobi almost attended the Commonwealth Games without a name.

Prior to the Commonwealth Games, the Gold Coast 2018 Commonwealth Games Corporation (CGC) sought to trade mark the word ‘Borobi’.  ‘Borobi’ means ‘Koala’ in the traditional language of the Indigenous Yugambeh people. 

Jabree Ltd (Jabree), a registered cultural heritage body for the Gold Coast region, opposed the application under the Australian Trade Marks Act 1995 (Cth) (Act).[3]   

Among other arguments, Jabreeclaimed that the trade mark amounted to a misappropriation of intangible cultural heritage.  They claimed that the trade mark should be denied because:

  • the trade mark contains or consists of scandalous matter (s42(a) of the Act);
  • use of the trade mark would be contrary to law (s42(b) of the Act) and
  • the trade mark is misleading as it suggests an association with and approval by the Yugambeh community (s43 of the Act). 
Section 42(a) of the Act

Section 42(a) of the Act provides grounds to reject a trade mark if it contains or consists of scandalous matter or its use would be contrary to law. 

To be considered scandalous a trade mark must cause a degree of disgrace, shock or outrage to an ordinary person[4] or go beyond offence[5].

Jabree’s evidence included letters showing disgrace and outrage by some members of the Yugambeh community.  However, CGC’s evidence showed the opposite – that members of the indigenous community did not think that the trade mark was scandalous, but rather were proud that their indigenous language was used to promote the Commonwealth Games. 

CGC held two consultations with the Yugambeh people prior to applying for registration of the trade mark.  The hearing officer concluded that such consultations were conducted in a respectful and inclusive manner, despite there being no legal requirement to consult with the Yugambeh people.

The hearing officer cited the fact that there are approximately 170 trade marks on the register that contain or consist of Aboriginal words.  For example, Allambie Grove is a registered trade mark for soap, yet Allambie is an Aboriginal word that means “peaceful place”.  This, coupled with the fact that the word simply meant Koala in English led the hearing officer to conclude that the trade mark did not contain or consist of scandalous matter.

Section 42(b) of the Act

To establish grounds to reject a trade mark under section 42(b), Jabree must establish that use of the trade mark would be contrary to law.  Jabree argued that use of the trade mark would breach section 29(I)(h) of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) because use of the trade mark would mislead or deceive people into thinking that the Yugambeh community had approved the supply of CGC’s goods and services or that CGC was associated with the Yugambeh people.  Jabree also argued that the use of the Yugambeh language was contrary to section 18C of the Racial Discrimination Act 1975 (Cth) as use of the word would be reasonably likely to offend, insult, humiliate or intimidate the Yugambeh community. 

The hearing officer rejected both these arguments, citing the fact that the word ‘Borobi’ was already a protected word under the Commonwealth Games Arrangements Act 2011 (Qld) and thus it could not be contrary to law and the word did not offend, insult, humiliate or intimidate for the reasons provided under the hearing officer’s discussion of section 42(a) of the Act.

Section 43 of the Act

Section 43 of the Act provides that an application must be rejected if the use of the trade mark would be likely to deceive or cause confusion.  Trade marks that suggest a connection with a person or organisation (which is not the person or organisation that filed the application) in the mind of the public would typically fall under this section.

Jabree argued that the trade mark application should be denied on the basis that use of the trade mark would create a connotation between the Commonwealth Games and the Yugambeh people, including that the Yugambeh people had licensed their language in promotion of the Commonwealth Games.  The hearing officer rejected this argument citing the fact that Jabree had not provided sufficient evidence to establish that registration of the trade mark would be likely to deceive or confuse the relevant consumers.

Decision

As the hearing officer found Jabree had not established any of the grounds of opposition it nominated in its statement of grounds and particulars, the hearing officer allowed the trade mark to proceed to registration. The application for the word ‘Borobi’ was not considered scandalous or contrary to law under section 42 of the Act or confusing or deceptive under section 43 of the Act. Thus, the name of the mascot for the 2018 Commonwealth Games was confirmed!

Other important marks

Australia does protect someculturally significant signs.  Under sections 18 and 39 of the Act, certain prescribed signs are prohibited from use as a trade mark.[6]  Words such as Austrade, Returned Soldier and Olympic Champion are protected under these sections.[7] 

While the Act protects prescribed signs from being used as trade marks, there is no section under the Act that explicitly protects Indigenous words and images from being registered as trade marks.  Consultation with the Indigenous community is not legally required to trade mark a culturally significant word or phrase in Australia.

Across the seas

While Australian trade mark legislation does not provide a basis for rejecting the trade mark registration of culturally significant words, the position is different across the Tasman Sea.  In New Zealand, trade marks that are flagged as containing or being derived from any Māori words or imagery must pass through an advisory committee.  The committee then counsels whether the registration of the trade mark is likely to cause offensive to the Māori community.

Just because you can doesn’t mean you should

It is clear that many people find the use and registration of culturally significant words or phrases as trade marks offensive.  Despite this, culturally significant words continue to lack explicit legal protection in Australia.  Subject to a limited list of exclusions, companies can trade mark culturally important words and phrases without legal ramification.  But should they?  

There is a risk that if companies register culturally significant words as trade marks they could face severe public backlash.  Just a quick browse of the Bula Kava and Aloha Poke Facebook pages is enough to show that businesses don’t fare well when they upset their customer base (or entire countries).  At the end of the day, companies must consider whether it is worth testing the waters or if they should steer clear of using culturally significant words or phrases as trade marks entirely.

This article was prepared by Kate Barrett and Lucia Belchamber

[1] Poke is a Hawaiian dish of diced raw fish.

[2] For a memory refresher, check out the images at https://gc2018.com/borobi-fan-trail

[3] Jabree Ltd v Gold Coast Commonwealth Games Corporation [2017] ATMO 156.

[4] Trade mark application no. 106321 by Eric Granville Mery (1955) AOJP 938.

[5] Cosmetic, Toiletry and Fragrance Association Foundation v Fanni Barns Ltd (2003) 57 IPR 590.

[6] Regulation 4.15 of Incorporating Amendments up to the Intellectual Property Legislation Amendment (Single Economic Market and Other Measures) Regulation 2016.

[7] Schedule 2 of the Trade Marks Regulations 1995.

The post Trouble in paradise! The ‘Bula’ debate and the importance of cultural sensitivity in registering trade marks appeared first on IP Whiteboard | King & Wood Mallesons.

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Whether certain implied representations as to the clinical efficacy of deodorant products amounted to misleading or deceptive conduct for the purposes of the Australian Consumer Law (ACL) was examined by the Federal Court of Australia in its recent decision in Unilever Australia Ltd v Beiersdorf Australia Ltd [2018] FCA 2076.

A “clinical” grade deodorant?

The dispute centred on the effectiveness of “clinical” grade antiperspirant deodorants targeted, not surprisingly, at people who sweat more than others.

Justice Wigney was asked to consider whether laboratory testing alone was sufficient to prove that products described as having “clinical” grade antiperspirant properties were in fact “similar” or “superior” to other similarly marketed products in the mind of the “ordinary reasonable consumer”.

The evidence demonstrated that the Australian market for such “clinical” grade antiperspirant products consists of:

  • Unilever’s Rexona and Dove ‘Clinical Protection’ ranges,
  • Revlon’s ‘Mitchum Clinical’ range, and
  • most recently, Beiersdorf’s Nivea ‘Clinical Strength’ range (Nivea Clinical Products).

To justify its claim that the new Nivea Clinical Products were in fact “Clinical Strength”, Beiersdorf submitted evidence of scientific testing which was said to confirm that the Nivea Clinical Products where just as efficacious when compared to the competitors’ products (Other Clinical Products). By this reasoning, Beiersdorf argued that the use of the word “clinical” in the name of its own product range was appropriate, given that the competitor products were similarly marketed as having high efficacy or “clinical” grade efficacy.

(Rexona Clinical Protection Antiperspirant Deodorant)

(Nivea Clinical Strength Antiperspirant Deodorant)

However, it was argued by Unilever that in using the word “clinical” in the Nivea product name, Beiersdorf made representations that were false, misleading or deceptive, or likely to mislead or deceive.

What were the alleged representations?

Unilever pleaded eleven representations allegedly made by Beiersdorf. Justice Wigney categorised those representations into three groups:

  • representations that the Nivea Clinical Products have similar antiperspirant efficacy and characteristics to the Other Clinical Products (the Similarity Representations),
  • representations that the Nivea Clinical Products have greater antiperspirant efficacy than all other non-clinical antiperspirant deodorants (the Superiority Representations), and
  • representations that the Nivea Clinical Products have particularly strong efficacy or provides strong protection in relation to stress sweat (the Stress Sweat Representations).
Did Beiersdorf make the Similarity Representations or the Superiority Representations?

Justice Wigney found that Beiersdorf did not expressly make any of the Similarity Representations or the Superiority Representations, and therefore Unilever’s case relied upon whether such implied or inferred representations were made by Beiersdorf through the marketing, distributing and selling of the Nivea Clinical Products.

Unilever submitted that there is an established “clinical” subcategory of antiperspirant deodorants that is generally characterised by the use of the word “clinical”, packaging in a box with a leaflet, and a significantly higher price compared to that of non-clinical products. Unilever contended that Beiersdorf deliberately launched the Nivea Clinical Products with these particular characteristics to imply to the “ordinary reasonable consumer” that the products have similar antiperspirant efficacy or protection properties when compared to the existing Other Clinical Products, and also possessed greater antiperspirant efficacy or protection than all other non-clinical antiperspirant deodorants.

Justice Wigney found that while Beiersdorf had “adopted the cues” of a “clinical” subcategory of antiperspirant deodorants, it did not convey any of the Similarity Representations or Superiority Representations – rather, His Honour considered that Beiersdorf conveyed that the Nivea Clinical Products were highly efficacious with strong protection against sweat and odour.

If made, were those representations false?

While Unilever’s case in relation to the Similarity Representations or the Superiority Representations was not made out, Justice Wigney considered it necessary to determine whether such representations (had they been made) were in fact false in the event that Unilever wished to appeal against his findings.

While laboratory test results indicated that the Rexona Unilever Clinical Product was more efficacious in reducing sweat than the Nivea Clinical Products, Justice Wigney found that this could not assist Unilever’s case as the Similarity Representations and the Superiority Representations did not specifically compare the Nivea Clinical Products with the Unilever Rexona Clinical Product.
Justice Wigney noted that how the “ordinary reasonable consumer” would have understood the Similarity Representations and Superiority Representations plays an important role, and went so far as to indicate that consumer perceptions may be more important than laboratory testing.

Ultimately, the Court found on the balance of probabilities that the Similarity Representations, if made, were not false. On the other hand, the Court held that at least one of the Superiority Representations were false, given the results of the laboratory testing indicating that the Nivea Clinical Products were not necessarily of greater antiperspirant efficacy or protection than Rexona non-clinical antiperspirant deodorant products.

What about the Stress Sweat Representations?

Beiersdorf admitted that it made the Stress Sweat Representations, and thus the third issue for the Court to consider was whether or not those representations were false. Justice Wigney found that Unilever did not prove the falsity of one of the Stress Sweat Representations as Unilever had “misconceived” the representation and scientific testing and in doing so, limited the conclusions that could have been drawn from the evidence. The other Stress Sweat Representation involved a future matter and therefore was dealt with separately.

Was Beiersdorf stress sweating over future matters?

A final issue considered by the Court was whether Beiersdorf had reasonable grounds to make the Similarity Representations, Superiority Representations and Stress Sweat Representations which involved representations as to future matters (i.e. representations as to whether certain matters will occur in the future). Under the ACL, a person making a representation as to a future matter must have reasonable grounds to make that representation, otherwise the representation is taken to be misleading. There was no dispute that the Similarity Representations, Superiority Representations and Stress Sweat Representations, if made, comprised or included representations as to future matters.
Given the Similarity Representations and Superiority Representations were not proven to have been made by Beiersdorf, Justice Wigney addressed this issue on a hypothetical basis and ultimately found that Beiersdorf had not provided sufficient evidence to establish that it had reasonable grounds to make representations as to future matters in relation to the Similarity Representations and Superiority Representations.

However, the Court held that Beiersdorf had provided evidence that established reasonable grounds to make the Stress Sweat Representation in so far as they were representations as to future matters. This was based on the premise that the scientific testing submitted by Beiersdorf confirmed the product had high efficacy against stress sweat, which did not involve any comparison between the perspiration efficacy of the Nivea Clinical Product and the Other Clinical Products.

Lessons on how to stay dry in the future

The decision to dismiss Unilever’s claims as to misleading or deceptive conduct provides strong guidance for future cases of this nature involving competitor brands, particularly where established market subcategories tend to invoke certain consumer perceptions. Justice Wigney’s findings provide a timely reminder to fast-moving consumer goods, healthcare, and related industries to ensure that they are making accurate representations to consumers when marketing, distributing and selling over-the-counter products.

Interestingly, the case also suggests that consumer perception has the potential to carry more weight than scientific evidence when considering the effect of representations of this kind.

The post Let’s get clinical: Federal Court of Australia examines representations about ‘clinical’ efficacy of over-the-counter deodorants appeared first on IP Whiteboard | King & Wood Mallesons.

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Earlier this month, we reported on the Full Court’s decision in Generic Health v Bayer [2018] FCAFC 183, in which the Full Court clarified that when estimating or valuing a lost opportunity or assessing a hypothetical counterfactual for any scenario short of certainty, some discount must be made to reflect that less than certain position.  In doing so, the Full Court accepted that the trial judge, Justice Jagot, fell into error by not allowing for any such discount at first instance and proceeded to reduce the damages award by 2%.

It is interesting therefore to now read, in a decision published a little less than a month after the Full Court’s Bayer decision, that Justice Jagot has allowed a generic pharmaceutical company a 30% reduction to account for risks associated with the past hypothetical cash-flows which underlie the assessment of damages in the case.  The decision is H Lundbeck A/S v Sandoz Pty Ltd [2018] FCA 1797 and is the culmination of many years’ litigation concerning Lundbeck’s patent for the antidepressant escitalopram.

Justice Jagot found that Sandoz had infringed the patent and was liable to pay damages to H Lundbeck A/S (Lundbeck) and its Australian subsidiaries.  While Justice Jagot’s decision canvasses a number of other interesting and important issues, this post will only deal with the damages aspects of the decision.  In awarding damages, her Honour grapples with a number of interesting issues including the level of generic substitution and necessary discount to be applied, transfer pricing arrangements between the patentee and its Australian subsidiaries, and the treatment of overheads.

Procedural history

The procedural history of the dispute will be familiar to many readers.  Briefly, after Lundbeck’s patent was found to have been invalidly extended, Lundbeck applied for a second extension of term on an alternative basis, and an extension of time in which to make that application.  Lundbeck made its applications on 12 June 2009, the day prior to the expiry of the standard term of the patent, at a time when Sandoz and other generic companies were preparing to and did, after expiry of the standard term of the patent, launch their own generic escitalopram products in competition with Lundbeck.

Lundbeck’s applications for an extension of time and second extension of term were subsequently granted, over the opposition of the generic companies, in 2012 and 2014.  This allowed Lundbeck and its Australian subsidiary, Lundbeck Australia Pty Ltd, to commence proceedings in 2014 for patent infringement against four generic pharmaceutical companies in connection with their launches and subsequent sale of generic escitalopram products for a period of approximately three and a half years (from the expiry of the standard term of the patent on 13 June 2009 to the end of its extended term on 9 December 2012).

For the damages claim, it is important to note that during the relevant period of infringement:

  • Lundbeck Australia, a subsidiary of Lundbeck, marketed and sold Lexapro, a branded escitalopram product.
  • CNS Pharma, a subsidiary of Lundbeck Australia, marketed and sold Esipram, another escitalopram product sold at a discount to Lexapro.
  • Her Honour found that Lundbeck Australia was the exclusive licensee of Lundbeck Denmark, and that Lundbeck Australia had authorised CNS Pharma to exploit the patent in Australia. (These matters were contested and are dealt with in another part of the decision, not discussed in this post.)
Lundbeck’s claim for damages

Lundbeck and Lundbeck Australia sought, and were awarded, damages for patent infringement.  The Lundbeck parties’ losses included:

  • losses associated with Lundbeck Australia charging lower prices for sales of Lexapro;
  • losses associated with CNS Pharma charging lower prices for sales of Esipram;
  • lost sales of Esipram to CNS Pharma;
  • loss of gross margin on sales by Lundbeck Denmark to CNS Pharma of Esipram and a lower year-end transfer of funds from Lundbeck AU as a result of lower gross margins earned by Lundbeck AU and CNS Pharma.

These losses occurred during both an ‘initial period’ (being the period of infringement prior to the expiry of the extended term of the patent) and a ‘springboard period’ (being a period after expiry of the patent during which time it is alleged that Sandoz had an established position in the market that it would not have otherwise had).

On the issue of generic substitution, the assessment proceeded from a starting point of one-for-one lost sales: every sale of a generic escitalopram product represented a lost a sale of Esipram.  However, her Honour was prepared to make a material discount to account for the probability that some Sandoz sales would have been sales of other generics’ escitalopram products rather than Esipram.  Her Honour reached this conclusion on the evidence that the market for escitalopram was crowded, with multiple generic products and that some sales of Sandoz’s products must represent lost sales of other generic products, and not Esipram (or Lexapro).

As to the materiality of the discount, her Honour noted that there was little evidence to assist in resolving this issue.  Her Honour accepted evidence from Sandoz that generic substitution rates were increasing over time and concluded that a deduction of 25% was appropriate to account for the fact that it is likely that some sales of Sandoz’s escitalopram products must represent lost sales not of Lundbeck ’s escitalopram products but of other generics’ escitalopram products.

Other important aspects of this decision concern her Honour’s findings that Lundbeck could recover losses associated with lower year-end transfer pricing adjustments from Lundbeck Australia to Lundbeck (because of lower gross margins earned by Lundbeck Australia and CNS Pharma) and the treatment of overheads.

The crux of the issue of concerning year-end transfer pricing adjustments centred around how Lundbeck framed its case on infringement.  Lundbeck’s claim for damages was based on the profit it would have received from CNS Pharma under inter-company transfer pricing arrangements but for Sandoz’s infringements.  These transfer pricing arrangements during the relevant period were put in place to ensure that subsidiaries of Lundbeck earnt an approximate 3% return on sales.

The Court found that Lundbeck was entitled to claim damages in this manner.  In reaching this conclusion, Justice Jagot rejected Sandoz’s argument that Lundbeck could not recover damages because Lundbeck Australia was the exclusive licensee and in granting it this licence, Lundbeck had effectively excluded itself from remuneration as the patentee in Australia, her Honour commenting that:

“…it is simply inaccurate to say that Lundbeck A/S had excluded itself from remuneration as patentee in Australia.  It had excluded itself from being able to exploit the invention in Australia, but that is a different matter from excluding itself from remuneration.  It obtained remuneration from Lundbeck AU and CNS Pharma in the form of gross margins on sales and the annual adjustments to ensure that those companies retained a return on sales of approximately 3%.”

Her Honour went on to explain that:

“…the rights which Lundbeck A/S yielded to Lundbeck AU were all rights in Australia to exploit the invention claimed in the 144 patent including the right to authorise others to exploit the invention.  The yielding up of these rights does not mean that Lundbeck A/S was no longer the patentee.  It may be accepted that the arrangements between Lundbeck A/S and Lundbeck AU did not include payment of a royalty either in respect of Lundbeck AU’s own exploitation of the invention or in respect of it authorising another entity to do so (which it did in the case of CNS Pharma).  The reality is obvious.  Lundbeck A/S did not need to require payment of a royalty because all three corporations were bound by the transfer pricing policy arrangements between them which had to be (and were in fact) consistently applied so the subsidiaries retained a rate of return on all sales of approximately 3%.  This policy was continuously and consistently implemented throughout and on a year-by-year basis.”

Her Honour also found that loss flowing from such arrangements was reasonably foreseeable, later commenting, “the circumstances are analogous to an arrangement for the payment of an annual royalty for the right to be exclusive licensee, despite not taking that form.”

Another issue between the parties concerned the treatment of overheads in the assessment of loss.  Ultimately, based on the evidence before her Honour and how the trial was conducted, Justice Jagot accepted the evidence of Lundbeck’s expert.

Further damages-related matters

In addition to its claim for damages, the Lundbeck parties also made a claim for additional damages.  The Court refused to award such additional damages finding that although Sandoz had made a calculated commercial decision, “the circumstances in which Sandoz’s infringements occurred are unusual, perhaps even unprecedented” and importantly, that there was no particular conduct of Sandoz to justify an award of additional damages.

Sandoz also argued that no damages should be awarded against it because it was an innocent infringer.  The Court rejected this argument.  As noted, her Honour found that Sandoz made a calculated commercial decision to launch its products at risk.  This was the factor to be given determinative weight, regardless of the unusual circumstances of the dispute and any arguments available to Sandoz concerning whether it might have been licensed under an earlier settlement agreement with Lundbeck.

Finally, while discussing what her Honour describes as some “non-issues”, Justice Jagot commented that the approach taken in the case to calculating damages meant that it was far easier for Lundbeck (and Lundbeck Australia) to prove the value of their loss than it was, by way of comparison, for the generic claimants to prove the value of their losses on a claim on an undertaking as to damages in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556.  This presents both originators and generics in pharmaceutical patent disputes with a difficult choice.  Justice Jagot’s comments – and indeed now, her Honour’s experiences in both cases – are at odds with what had been the accepted position, namely, that calculating damages for infringement would be far more difficult that calculating damages for being held out of a market due to the grant of an interlocutory injunction.  It will be interesting to see if this comment is picked up and given any traction in subsequent interlocutory injunction disputes, particularly in relation to patents in the pharmaceutical field.

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Whether inventions relating to the use of a computer are patentable according to the ‘manner of manufacture’ test has for many years been unclear in Australia.  This uncertainty, together with inconsistencies in how the law has been applied by the courts and the Australian Patent Office (APO), were just some of the contentious issues recently considered by a full bench of five judges from the Federal Court in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd (NSD 734/2018). Such was the significance of this hearing that the Commissioner of Patents and the Institute of Patent and Trademark Attorneys of Australia (IPTA) both applied to intervene and sought leave to be represented and make submissions at the hearing.

Decision at first instance

Central to the dispute between the parties are Encompass’ two innovation patents, both entitled “Information displaying method and apparatus” (Patents). The Patents relate to methods for an electronic processing device to access information from different databases (such as Land Titles Office, ASIC and a motor vehicle registry) in a seamless manner. Users are required to pay for reports obtained from the searches conducted of the various databases.  Encompass claimed that InfoTrack infringed the Patents by making available a computer platform entitled ‘Reveal’.

InfoTrack admitted infringement of the Patents, but asserted that the Patents were invalid on a number of grounds, including that the invention claimed in each of the Patents was not a manner of manufacture.

At first instance, Justice Perram found that the invention claimed in each of the Patents was novel and involved an innovative step, but was not a manner of manufacture. With respect to the ‘manner of manufacture’ requirement, Justice Perram adopted the two-limb test established by the High Court in National Research Development Corporation v Commissioner of Patents [1959] HCA 67; (1959) 102 CLR 252 (NRDC), which involves asking whether the invention consists of an artificially created state of affairs and whether it could be said to have economic significance.  The inventions according to the Patents were said by Justice Perram to pass both limbs of the NRDC test.

Nonetheless, Justice Perram noted that the two-limb test is not sufficient to establish a manner of manufacture, as emphasised in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150; (2014) 227 FCR 378 (Research Affiliates).  It was found by the court in Research Affiliates that the invention must result in “an improvement in the computer” for it to be a manner of manufacture. Justice Perram also referred to Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177; (2015) 238 FCR 27, in determining that a computer implemented method would not be for a manner of manufacture if it “merely requires generic computer implementation”.

Justice Perram therefore concluded that the inventions of the Patents did not involve any improvement in the functionality of the computer nor the computer itself.  As a result, the inventions were not for a manner of manufacture.  Justice Perram acknowledged that the Patents described a method that resulted in the computer being used to do something it had not been used to do before – by using a network representation and querying remote data sources – and that requiring the users to purchase the search results provided an innovative step.  These also enhanced the experience for the user of the computer.  However, these matters did not improve the functionality of the computer because, after the consideration of the prior art, the methods, individually, were not new and were well-known.

Full Court Appeal

Encompass sought to appeal against Justice Perram’s decision, and the appeal was heard by a full 5 member bench of the Full Federal Court on 8 – 9 November 2018.  It is likely that the outcome of that hearing will be known by mid-2019.

One of the key questions for determination by the Full Court is whether the approach taken by Justice Perram sets an unreasonably high threshold for computer-implemented inventions, by requiring the inventions to make improvements to the computer for the inventions to be patentable.

Australian Patent Office decisions

Since 2016, there has been an increase in hearings before the APO resulting from objections raised during examination against applications for computer or software-related inventions that were deemed not to be directed to patent-eligible subject matter.  Over the course of 2018, there were 17 such hearings. 16 of these matters resulted in the patent applications being rejected on the basis that the invention claimed was not for a manner of manufacture.  Notably, as with the inventions of the Encompass Patents, many of those inventions were found to be novel and involved an inventive step. However, the inventions involved the combined use of well-known computing mechanisms, and therefore were said to be not patentable.

Which inventions passed the ‘manner of manufacture’ test in 2018?
Case Invention claimed Manner of manufacture?
1                    Patent Investment & Licensing Company [2018] APO 1 (3 January 2018) Networked gaming machines – an apparatus and method for communicating information about networked gaming machines to players and prospective players.  The information provided to the player is based on data collected from the networked gaming machine. No.
2                    Google LLC [2018] APO 13 (21 February 2018) A method for discounting costs for conversions to advertisement purchasers based on a level at which the advertisement purchasers would have received the same advertising distribution results associated with the conversions. No.
3                    Eris Innovations, LLC [2018] APO 17 (8 March 2018) Financial instruments and the electronic clearing and settling of financial instruments – a computer-based system designed to offer tools to trade futures electronically. No.
4                    Bio-Rad Laboratories, Inc. [2018] APO 24 (28 March 2018) System and method for optimising a testing regime for testing of diagnostic devices for immediate release results. Yes.
5                    BGC Partners, Inc [2018] APO 27 (23 April 2018) A system for automatically distributing a trading order over a range of prices.  The method allows a trader (such as a market maker or other trader) to efficiently populate a trading system with bids and offers in a risk efficient manner. No.
6                    AirService Digital Pty Ltd [2018] APO 39 (19 June 2018) An ordering system and method for a retail establishment such as those which sell food and drink. No.
7                    Mine RP Holdings (Pty) Limited [2018] APO 41 (27 June 2018) A method of translating depletable natural resources and reserves, such as mineral deposits, into inventory and stock items. These items, once translated are then manageable within an inventory management system. No.
8                    Repipe Pty Ltd [2018] APO 42 (28 June 2018) A method and systems for providing and receiving information for risk management from field workers. No.
9                    Google LLC [2018] APO 44 (4 July 2018) A system for managing contactless transactions. No.
10                 Aristocrat Technologies Australia Pty Limited [2018] APO 45 (5 July 2018) A system and method for providing a “feature game”. No.
11                 Academisch Ziekenhuis Leiden and Biomarin Technologies B.V. [2018] APO 49 (31 July 2018) Method for efficient exon skipping in Duchenne Muscular Dystrophy and associated means. Yes.
12                 Volbroker.com Limited [2018] APO 53 (20 August 2018) System and method for trading options (Credit Filters and Two Stage Updating). No.
13                 Apple Inc. [2018] APO 54 (20 August 2018) Computer user interfaces, and more specifically to context specific user interfaces for indicating time that allow users of portable multifunction devices to access information through a single user interface and allowing the user to customise the user interface and the types of information provided through the user interface. No.
14                 Amplero, Inc. [2018] APO 5 (5 September 2018) Automated marketing offer decisioning – method allows decisions to be made as to when marketing messages are offered to customers. No.
15                 Lempco Industries, Inc. [2018] APO 61 (12 September 2018) Computer implemented method and apparatus for establishing and executing a dynamic equity instrument. No.
16                 HRB Innovations, Inc. [2018] APO 63 (14 September 2018) System for simplified tax interview – accurately predicting the information that is necessary and relevant for the purpose of determining the relevant questions for a tax interview. No.
17                 Joy Global Surface Mining Inc [2018] APO 68 (5 October 2018) Methods and systems for training operators of industrial machines – computer-based training simulators. No.

This article was prepared by Veg Tran and Esme Wong.

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Last year, Bayer was awarded more than $25 million (plus interest and indemnity costs) against Generic Health in the first Federal Court award of damages for pharmaceutical patent infringement.  In the appeal by Generic Health, the Full Court of the Federal Court allowed Generic Health a 2% discount to the $25 million damages originally awarded. What made the FCFCA give Generic Health such a modest discount?

Procedural history Patent infringement

In 2013, the Federal Court found that Generic Health had infringed Bayer’s patent for a pharmaceutical combination of ethinylestradiol and drospirenone for use as an oral contraceptive (OC).  The Bayer product for this combination is known as ‘Yasmin’.  Yasmin had been sold in Australia since August 2002 and is a third generation OC. It has never been listed on the Australian PBS Schedule and was priced at a premium to first and second generation OCs listed on the PBS, at a cost to the patient of $71 to $84 for a three month supply (compared with $19 to $24 for a fourth month supply of a PBS-listed prescription OC).

In January 2012, Generic Health manufactured and supplied an OC under the name, ‘Isabelle’, which was bioequivalent to Yasmin (and was registered on the Australian Register of Therapeutic Goods (ARTG) as such).  Before Isabelle entered the market in January 2012, Yasmin had been the only product of its kind registered on the ARTG.  At the relevant time, Isabelle was priced at around $60 to $61 for a three month supply.

Generic Health’s appeal was dismissed and as a consequence, it was required to withdraw Isabelle from the Australian market on 19 June 2014.  Bayer launched a generic version of Yasmin, called ‘Petibelle’, the following week.  Petibelle was priced at around $66 for a three month supply, which was cheaper than Yasmin.

Damages

Bayer’s damages case proceeded on the basis that every sale of Yasmin was a lost sale of Isabelle and Petibelle.

Generic Health argued that any damages should be lowered or discounted because:

  1. Bayer’s patent was amended during the infringement proceedings and after Isabelle’s market launch and when assessing damages, that period should not encompass the period prior to the amendments to the patent; and
  2. It is not certain that every sale of Isabelle or Petibelle was a lost sale of Yasmin.

In 2017, the Federal Court awarded Bayer more than $25 million (plus interest and indemnity costs).

In relation to whether the damages should be assessed prior to the amendments to the patent, the Court found that Bayer had established that the unamended specification had been framed in good faith and with reasonable skill and knowledge and that damages were therefore available for pre-amendment infringement under section 115(1) of the Patents Act 1990 (Cth).  The evidence established that Bayer had taken an opportunity to amend the claims because their validity had been challenged in other jurisdictions and they had consequently been amended in those jurisdictions.

In relation to whether every sale of Isabelle or Petibelle was a lost sale of Yasmin, the Court accepted the “one for one” basis of lost sales advanced by Bayer.  The Court found that the OC market was not one of consumer choice and substitutability because OC products could only be obtained on prescription.  Bayer provided evidence that doctors prescribed on the basis of the originator brand, and therefore continued to prescribe Yasmin after Isabelle was introduced.  A pharmacist could then sell the customer Isabelle, if the prescription for Yasmin did not exclude brand substitution.  Accordingly, a woman could only purchase Isabelle if she held a prescription for Yasmin or the pharmaceutical by name.

The Court also found that no discount should be made to Bayer’s  damages in order to allow for the possibility that some women who bought Isabelle would not have bought Yasmin if Isabelle had not been on the market.  The Court accepted evidence that this class of women was likely to be very small, to the point of immateriality, given that women who were purchasing third generation OC’s were likely to be the least price sensitive consumers in the OC market.  The Court also gave weight to the principle that the assessment of damages ought to be liberal and that any doubts in this regard ought to be resolved in favour of Bayer.  Similarly, the Court accepted evidence that, but for the launch of Isabelle and its subsequent withdrawal after the finding of infringement, Bayer would not have introduced Petibelle.  Bayer launched Petibelle to mitigate any reputational damage that may have resulted from Isabelle’s entry into the market, where women who had paid a discounted price for Isabelle but would later have felt aggrieved by having to pay the full price for Yasmin again.  The Court found that it was a reasonable response to redress the effects of the infringement, and that the claimed period of damages for two years after the withdrawal of Isabelle and consequent introduction of Petibelle was reasonable.

Appeal

Generic Health appealed the Court’s decision and argued that the damages to Bayer should be lower because (among other things):

  1. the trial judge was wrong in concluding that Bayer had discharged its onus of proof under section 115(1)(a) of the Act by demonstrating that the original specification had been framed with reasonable skill and knowledge; and
  2. the trial judge was wrong in concluding that every sale of Isabelle was a loss of a sale of Yasmin and Petibelle.
Amended specification: good faith

Generic Health argued that the pre-amendment specification was not framed in good faith and with reasonable skill and knowledge in relation to the dosage range of drospirenone.  The pre-amendment specification disclosed a dosage range of 2 mg to 4 mg of drospirenone.  The amendment restricted the dosage to 3 mg. In determining the dosage range, Generic Health argued that Bayer did not prove that a report that found the appropriate maximum dose to be 4 mg (9274 Report) was actually before its patent attorneys that drafted the specification.

The Full Court rejected Generic Health’s argument and held that when assessing whether reasonable skill was exercised, section 115(1)(a) of the Act allows the assessment to proceed on reasonable knowledge, which is not limited to documents actually before the drafter of the specification.  The Full Court further observed that Generic Health did not allege at any time that the patent was obtained by fraud, false suggestion or misrepresentation, or that there was no proper scientific support for the selection of a dosage range of 2 mg to 4 mg of drospirenone.

Lost sales of Yasmin

Generic Health argued that the trial judge ought to have applied a discount to the damages awarded to Bayer to account for the “completely speculative” “mere possibility” that “a very, very small” and / or “immaterial” number of women who purchased Isabelle and would not have purchased Yasmin if Isabelle had not been available.

The Full Court accepted Generic Health’s argument and held that some very small and modest discount should have been made to reflect the uncertainty.  In the Full Court view, it was not in doubt that on the balance of probabilities, for all sales of Isabelle there was a loss of an opportunity to make a sale of Yasmin.  The question was what the value of the lost opportunity was.  Although the Full Court found that the trial judge was entitled to fix damages on a liberal scale, when a court is valuing a loss of opportunity, there still needs to be a discount if the relevant probabilities or possibilities reflect doubt concerning the relevant counterfactual.  The Full Court also noted that the purpose of the award of damages for patent infringement was compensatory, not punitive.  When assessing the evidence that was before the FC, the Full Court held that it was apparent that there would have been a small number of women who, if Isabelle had not been available, would have purchased another OC other than Yasmin or would not have purchased an OC at all.

Generic Health sought a 10% to 15% discount but the Full Court held that there was no evidence to justify a discount at this level.  The Full Court looked at the number of women likely not to purchase Yasmin if Isabelle had not been available and determined that the number was likely within a range of one to three women in a hundred (1% to 3%).  Accordingly, the Full Court found that the appropriate discount was 2%.

Lost sales of Petibelle

Generic Health argued that it was not reasonably foreseeable for Bayer to respond to the infringement by introducing a generic version of Yasmin, especially after Isabelle had been removed from the market.  The Full Court rejected this argument and found that it was open for the trial judge to find that it was reasonably foreseeable.  The Full Court agreed with the findings of the FC, that “the introduction of Petibelle to rectify the damage, to the extent it could be rectified, was a reasonable response to the difficult commercial position in which Generic Health’s infringing conduct had placed Bayer”.

Generic Health also argued that the trial judge was wrong to calculate the loss caused by the continued presence of Petibelle on the market for two years, as opposed to three months, being the maximum multicycle purchase.  The Full Court rejected this argument and found that the trial judge was entitled to award Bayer the amount they would have earned in the two-year period immediately following Isabelle’s withdrawal, as if every sale of Petibelle during that period would otherwise have been a sale of Yasmin, subject to a 2% discount (for the same reasons as above).

Interest and indemnity costs

In a short passage, the Full Court also dismissed Generic Health’s challenges to the trial judge’s decision to calculate pre-judgment interest on a pre-tax loss, and to award indemnity costs.  As to the question of calculating interest on a pre-tax as opposed to post-tax loss basis, the Full Court referred to earlier decisions (to the effect that interest should be approached in a broad and practical way) and noted the limited ability of a court to estimate tax liability, as reasons for rejecting Generic Health’s appeal on this issue.

All in all, Generic Health had a very modest win.  Although 2% may seem very small, Generic Health still managed to reduce the amount of damages payable by more than $500,000!

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Remember Naruto, the monkey that took a selfie?  Courts in the United States determined that human authorship was a requirement for copyright protection.  So, if we can’t award monkey copyright, what about AI?

We have already seen AI produce all different types of content: photos, music, articles, poetry and novels.  And just last month, Christie’s auctioned off a piece of art created by AI (pictured below).

Image © Obvious

The “Portrait of Edmond Belamy” looks like something out of the 18th or 19th century, perhaps a Manet or a Renoir. The slightly blurred features of Mr Belamy are a signature element of the impressionists.

What gives away the fact that this painting was not created by a human is the signature in the bottom right of the painting (pictured below).  The signature is a reference to the core component of the algorithm that produced the work.

Image © Obvious

The painting sold for USD$432,500, 45 times higher than its estimated value of USD$7,000 – USD$10,000.[1]

How was the painting created?

The AI was programmed by Obvious, a ‘Paris-based collective of artists, Machine Learning researchers and friends interested in AI for Art’.  The method used by Obvious is known as Generative Adversarial Networks, aka GAN for short.

GAN is a machine learning algorithm that is comprised of two parts, the Generator and the Discriminator.  To create the images, Obvious fed over 15,000 paintings from the 14th to 20th century into the algorithm.  A new image is then created by the Generator and shown to the Discriminator.  The Discriminator tests the image to see if it can tell if the painting was made by a human or by a machine.  If the Discriminator cannot tell that the painting was made by a machine, the painting passes the test.  The two parts of the algorithm compete, essentially training each other.

The algorithm learns from data fed into it by humans, generating new content by making independent creative decisions.  The question then is who created the painting?

If the creator is the one who produces the art, then the algorithm is the painter and has appropriately signed the painting.  Or does the inspiration come from the person who created the algorithm and fed it the data, making this person the true artist? Some may argue that the algorithm is simply the tool the artist used to create the work.  But does this argument hold when these systems are capable of making independent decisions about the artwork without human intervention?

So who owns the intellectual property?

If we accept that the creator of the work is the AI then this poses a problem when establishing intellectual property in the painting.  Most jurisdictions around the world require a human author to warrant copyright protection (remember the monkey selfie).

In the US, the Copyright Office has declared that it will “register an original work of authorship, provided that the work was created by a human being.”[2]  The same position has been taken in Europe by the Court of Justice of the European Union.[3]

The UK has taken a different approach. Section 9(3) of the Copyright, Designs and Patents Act 1998 (UK) states that “[i]n the case of a literary, dramatic, musical or artistic work which is computer-generated, the author shall be taken to be the person by whom the arrangements necessary for the creation of the work are undertaken.”  This wording opens the door for copyright protection to be extended to works created by AI.

In Australia, section 32 of the Copyright Act 1968 (Australia) (Act) states that copyright subsists in original works of which the author was “a qualified person at the time when the work was made” or “if the work extended over a period – was a qualified person for a substantial part of that period”.  Section 32(4) of the Act clarifies that a “qualified person” means an Australian citizen or person resident in Australia.

This concept has been expanded on through case law in which the courts held that the exertion of independent intellectual effort by a human was necessary for copyright to subsist in work.[4]  In Acohs Pty Ltd v Ucorp Pty Ltd[5] the Full Federal Court of Australia declared that copyright did not subsist in HTML source code of material safety data sheets generated by a computer because the work had no human author.

If the Portrait of Edmond Belamy was created in Australia, no copyright would subsist in the painting.  This fact exposes the gap in the copyright laws of Australia and many other jurisdiction in relation to AI-generated content.

AI and machine learning will only continue to develop and improve, promising great benefits in creative fields, science and technology.  These issues around ownership and protection of copyright need to be resolved soon – so that clever people and cutting edge organisations are incentivised to invest in the creation of AI.

[1] https://www.christies.com/features/A-collaboration-between-two-artists-one-human-one-a-machine-9332-1.aspx?sc_lang=en.

[2] The latest edition of the Compendium of U.S. Copyright Office Practices, Third Edition. https://copyright.gov/comp3/chap300/ch300-copyrightable-authorship.pdf

[3] Infopaq International A/S v Danske Dagblades Forening C-5/08.

[4] Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCAFC 149.

[5] [2012] FCAFC 16.

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This recent Federal Court decision concerns two appeals by Trident Seafoods Corporation (Trident Seafoods) from decisions made by delegates of the Registrar of Trade Marks. Trident Food Pty Ltd (Trident Foods) is the respondent to both appeals.

Trident Seafoods

Trident Seafoods was founded in 1973 and is one of the largest vertically integrated seafood distributors in the world. “TRIDENT SEAFOODS” is its house brand used with respect to the provision of fresh, tinned and frozen seafood products which it distributes globally:

(Trident Seafoods Logo).

Trident Seafoods has not sold seafood products in Australia but now wishes to enter the market and commence selling “TRIDENT SEAFOODS” branded seafood products.

Trident Foods

TRIDENT” is an Australian brand that has been used on a variety of food products since the early 1970s. Historically, the “TRIDENT” brand is closely connected with Asian flavours and ingredients. Nowadays, the “TRIDENT” brand has such a high penetration in Australian households that it is probably in most households at some point during the year.

Trident Foods is a wholly owned subsidiary of Manassen Foods Australia Pty Ltd (Manassen). Since Manassen acquired Trident Foods in about 2000, the sales of “TRIDENT” branded products have been undertaken by Manassen and not Trident Foods itself.

What led to the appeals? First Appeal

On 7 May 2013, Trident Seafoods filed trade mark application no. 1555536 (Trident Seafoods TM Application) for the Trident Seafoods Logo in relation to the following goods:

Class 29: Seafood; processed seafood; edible oils; edible fish oils; nutritional oils for food purposes; edible oils and edible fish oils for use as ingredients in foods and beverages.

Registration of the Trident Seafoods TM Application was blocked by the following three trade mark registrations for ‘TRIDENT’ held by Trident Foods:

  1. TM266625 which had been registered since 15 March 1973 for goods specified as:

Class 29: Fish and fish products.

  1. TM400953 which had been registered since 8 December 1981 for goods specified as:

Class 29: Meat, fish, poultry and game, including sardines, mackerel, pilchards, crab, oysters, mussels, and prawns; meat extracts, preserved, dried and cooked fruits and vegetables, jellies, jams, eggs, preservatives and pickles.

  1. TM400955 which at the time had been registered since 8 December 1983 for goods specified as:

Class 31: Grains not included in other classes; living animals; fresh fruits and vegetables, seeds; live plants and flowers; malt.

When Trident Seafoods approached Trident Foods seeking consent to register the Trident Seafoods TM Application, Trident Foods refused. Trident Seafoods then filed applications for the removal of the three Trident trade marks for non-use. Trident Foods opposed those applications and the matter was heard by a delegate of the Registrar.

The delegate found there were grounds for removal established by Trident Seafoods. The delegate removed TM400955 but exercised her discretion to not remove TM266625 and TM400953 from the Register. Trident Seafoods appealed the decision in relation to those marks still on the Register.

Second Appeal

On 18 July 2014, Trident Foods filed trade mark application no. 1635410 (Trident Foods TM Application) for the word ‘TRIDENT’ in relation to:

Class 29: Coconut oil; Cooked meals consisting principally of fish; Edible oils; Fish products; Fish paste; Fish (not live); Food products made of fish; Food made from fish; Pastes containing fish; Tinned fish.

Class 30: Fish sauce (condiments); Flavourings made from fish.

Trident Seafoods oppoed the Trident Foods TM application but failed to establish any grounds of opposition at the hearing. Trident Seafoods appealed the decision.

Issues for Determination

The parties agreed that the following issues arose in the first appeal:

  1. What goods fell within the description of “fish and fish products”?
  2. Did Trident Foods use the trade marks during the Non-Use Period for the relevant goods?
  3. If the answer to question 2 is “no”, should the Court exercise its discretion to not remove the trade mark from the Register?

The findings made in the first appeal contributed to the determination of the outcome of the second appeal.

Is that a fish, or some fin else?

Justice Gleeson constructed the words “fish products” by reference to the relevant editions of the Nice Classification as at the time of registration, which indicated that “fish products” referred to seafoods, including mussels and oysters (molluscs) and prawns and crabs (crustaceans), and foods prepared from seafoods.

Trident Foods contended that the application of a trade mark to goods containing an ingredient is (or at least might be) a use of the trademark “in relation to” that ingredient.

Ultimately, it was held that the application of a trade mark to a particular food product is use of the trade mark in relation to those goods only, and generally not to the ingredients from which the goods are made. Nonetheless, a fish sauce product or a flavouring made from fish could be a fish product, particularly where the main ingredient is fish or seafood.

Troubled waters

The relevant period for the purposes of the non-use applications was from 7 January 2011 to 7 January 2014 (Non-Use Period).

Her Honour found that Trident Foods did not use either TM266625 nor TM400953 in relation to “fish” or “fish products” during the Non-Use Period.

Trident Foods attempted to establish that Manassen had been an authorised user of the ‘TRIDENT’ marks.

However, her Honour found that:

  • the corporate relationship between Trident Foods and Manassen did not place Trident Foods in a relationship of control over Manassen – rather, the converse was the case;
  • the fact that the companies shared the same directors, without more, did not permit Trident Foods to exercise control over Manassen;
  • the identification of Trident Foods as trade mark owner on products supplied by Manassen did not prove use of the trade mark under the control of Trident Foods; and
  • even though the parties signed an agreement in 2017 to ‘formalise’ an unwritten licence arrangement between Trident Foods and Manassen to use the trade marks, the affidavit evidence did not support the existence of such an arrangement.

Accordingly, Trident Foods had not used either TM266625 nor TM400953 for the relevant goods during the Non-Use Period and Trident Seafoods had established grounds of non-use.

Hook, line and sinker?

Not quite.

Even though grounds for removal were established, Justice Gleeson exercised the discretion afforded the Court in deciding that the two marks should not be removed from the Register. In doing so, she considered that:

  • there had been recent use of the trade marks as Trident Foods reintroduced fish products (tuna, smoked oysters and smoked mussels) in Australia. Whilst this was a reaction to the non-use application, it did not lack good faith and was not colourable;
  • Trident Foods had developed an intention to use the mark on tinned seafood products which was consistent with the changing use of the trade marks from time to time reflecting circumstances in the marketplace;
  • Trident Foods and Manassen had entered into an agreement to formalise their relationship concerning the trade marks with a view to ensuring Manassen uses the trade marks under the control of Trident Foods;
  • historically, the portfolio has included fish and fish products and the public are likely to identify products using the “TRIDENT” trade mark as emanating from a single source; and
  • there is a relevant prospect of confusion in the minds of confusion in the minds of consumers arising because of the longstanding and significant use of the “TRIDENT” mark on a wide range of food products.

The first appeal was dismissed. TM266625 and TM400953 remain on the Register.

Was Trident Foods also off the hook for the second appeal?

No. Notwithstanding Trident Foods’ success on the first appeal, Justice Gleeson found in Trident Seafoods’ favour in the second appeal which concerned Trident Seafoods’ opposition to the Trident Foods TM Application. The opposition covered most of the goods claimed in class 29, but not the goods in class 30.

Despite the fact that the Trident Seafoods TM Application remained pending and may ultimately never achieve registration, the priority date for that application was earlier than the priority date for the Trident Foods TM Application. Accordingly, Trident Foods was required to show prior use, honest concurrent use or other circumstances to justify acceptance under section 44 of the Act. Justice Gleeson found that the evidence supported neither prior use nor honest concurrent use (particularly given the issues surrounding the relationship between Trident Foods and Manassen) and further, that there were no “other circumstances” which warranted acceptance of the application.

Her Honour also upheld the opposition on the alternative ground advanced by Trident Seafoods, namely that Trident Foods did not intend to use the ‘TRIDENT’ trade mark for the relevant goods as at the priority date. Perhaps surprisingly, her Honour found that Trident Foods’ failure to adduce evidence demonstrating an actual intention to use, coupled with the issues surrounding Manassen’s use of the TRIDENT mark, supported the conclusion that the requisite intention to use was not present.

Her Honour therefore allowed the second appeal and upheld Trident Seafoods’ opposition to the Trident Foods TM Application.

The small win is hardly comforting. Trident Seafoods may not be able to sell fish products in Australia under the “TRIDENT SEAFOODS” brand any time soon, though we think there are plenty of fish in the sea.

The post Smells fishy: Trident Seafoods Corporation v Trident Foods Pty Limited appeared first on IP Whiteboard | King & Wood Mallesons.

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The Intellectual Property Owners Association’s 46th Annual Meeting took place in Chicago from 23 to 25 September 2018.  Suzy Madar from the Sydney IP team reports on the conference highlights.

After a night of whisky tasting and networking, the Hon. Andrei Iancu, Director of the US Patent Office, kicked off the IP Owners Annual Conference in Chicago with invaluable insight into the future of patentable subject matter in the United States. Director Iancu passionately stressed the need to “get out of the rut” and “keep objections in their own lanes” as well as a real concern that the question of patentable subject matter invites grounds of objection to be “commingled”, leading to distorted legal conclusions and arbitrary results. The USPTO is working tirelessly to develop further guidance that will synthesise (from the caselaw) categories of subject matter that are not eligible for patent protection so that they can be addressed on their own.

Interestingly, at another patent session on patentable subject matter the following day, the question “where is Congress?” was raised – a suggestion that rather than relying on the USPTO to draft guidances, Congress really needs to provide a strong statement about where the US patent system is heading to give the Court something to “latch onto” when looking at patentable subject matter. A live poll showed that 50% of the audience thought legislative action is required and a further 41% thought legislative action combined with further judicial interpretation is the answer.

Currently in the US, the exceptions to patentable subject matter encompass natural phenomena, laws of nature and abstract ideas (that are harder to define but include mathematical concepts, methods of organising human interactions and commercial practices, and mental processes). Director Iancu stressed the importance of addressing these categories without questions of novelty or inventiveness infecting the analysis.

The Patents Year in Review session wrestled with the question of permitting recovery of overseas damages and lost profit in US proceedings for infringement and recognised that other jurisdictions may well “retaliate“ by moving to catch US infringements in overseas cases. The review session also looked at the doctrine of a equivalents in the United Kingdom, and in particular, whether a variant that does not infringe as a matter of normal claim interpretation nevertheless infringes because it varies from the invention in a manner that is “immaterial”, in the sense that it is obvious that the variant will achieve the desired result in the same way and the person skilled in the art would not think the inventor intended strict compliance with the words of the claims so as to exclude the variant.

Regis Quelavoine, Director of Mobility and Mechatronics at the European Patent Office, then struck fear in the hearts of the audience, by indicating the danger of using words in a claim relating to computer implemented inventions that will put one of the 45,000 examiners (that will almost certainly have a PhD) into a frame of mind – within five minutes of considering the claims – that “this is a business method patent, how do I kill it?” instead of “this is a technical solution to a technical problem – how do I grant this application?”  He said that claiming the “how“ rather than the “what“ will increase the likelihood of the application falling into the 15% or so of computer implemented invention applications that are granted. The following heated discussion from the audience suggests that great minds will differ in relation to which side of the line a claim will fall, which US attorneys seemed to think was an unsatisfactory position.

Delegates of the conference were also treated to a timely discussion of whether likely tendencies of Supreme Court Judges in relation to IP can be predicted by their political appointments. In a very entertaining presentation, Judge O’Malley stayed clear of abortion rights and affirmative action, only caring about IP – just for the day.  Judge O’Malley thought it was impossible to predict the likely persuasion of a Judge based on political lines so far as IP is concerned but did think that new technology will divide opinions as to what will lead to the promotion of greater innovation. Her Honour indicated that the fact “Digital natives”, generations X, Y and millennials  are now coming onto the bench to intermingle with “digital immigrants”, those born before 1980, is going to provide for an interesting melting pot. In any case, clarity will seemingly appeal to immigrants and natives from  both sides of the political divide.

The tip? Stay safe by drafting claims as you would a contract or a settlement deed. Close loopholes and clarify ambiguities!

The Intellectual Property Owners Association (IPO), established in 1972, is a trade association for owners of patents, trademarks, copyrights and trade secrets.  IPO serves all intellectual property owners in all industries and all fields of technology.

IPO advocates for effective and affordable IP ownership rights and provides a wide array of services to members, including: supporting member interests relating to legislative and international issues; analyzing current IP issues; information and educational services; and disseminating information to the general public on the importance of intellectual property rights.

The post IPO 2018: Insights from the USPTO, EPO and the bench (when digital natives meet digital immigrants) appeared first on IP Whiteboard | King & Wood Mallesons.

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Regents of the University of California & Ors v Broad Institute, Inc. & Ors (10 September 2018)

The interference action between the University of California (UC) and Broad Institute (Broad) has seemingly come to an end, with the United States Court of Appeals for the Federal Circuit Court (CAFC) affirming that the patent claims that had been granted to Broad in relation to its CRISPR/Cas9 gene editing patents are separately patentable from the claims of a patent application made by UC.  Unless UC can find a basis to request a re-hearing or petition to the Supreme Court, the CAFC’s decision draws to a close this heated battle between the two US educational institutions over the question of who was the first to invent the use of the CRISPR/Cas9 platform in eukaryotic cells.

Prokaryotic v Eukaryotic – the question of ‘reasonable expectation of success’

In its decision, the CAFC considered whether the work of Broad’s scientists in applying the CRISPR/Cas9 system to mammalian cells was obvious in light of what UC’s scientists were able to accomplish previously in vitro in a non-cellular experimental environment.  The work of UC’s researchers (led by Dr Jennifer Doudna) was published in 2012 but did not report the results of experiments using CRISPR/Cas9 in a eukaryotic cell.  It was noted that the claims in UC’s patent application were similarly silent as to the application of CRISPR/Cas9 in any particular cell type or environment.

The interference claim that initially came before the US Patent Trial and Appeal Board (PTAB) for determination therefore turned on the question of whether a person of ordinary skill in the art, in light of the work reported by UC, would have had a reasonable expectation of success in applying the CRISPR-Cas9 system in eukaryotes cells.  PTAB published its decision in February 2017, finding that given the differences between prokaryotic and eukaryotic systems, the person of ordinary skill in the art would not have had such an expectation.  Accordingly, it was determined that there was no interference-in-fact, because both the UC and the Broad patents were unique in their own right and therefore, both valid.

As noted in the CAFC decision, ‘reasonable expectation of success’ is a question of fact.  The Court therefore took into account evidence such as:

  • Broad’s expert testimony that there are fundamental differences between prokaryotic and eukaryotic cellular conditions that would make the effectiveness of CRISPR/Cas9 in eukaryotes unpredictable.
  • In a September 2012 article, UC’s expert witness (Dr Doudna) stated that whether the CRISPR/Cas9 system would work in eukaryotes “remains to be seen” and “only attempts to apply the system in eukaryotes will address these concerns”.
  • Dr Doudna, one of the named inventors of the UC patent, acknowledged the “huge bottleneck” in making genetic modifications in animals and humans. Further, following the publication of the initial UC research, Dr Doudna stated “[o]ur 2012 paper was a big success, but there was a problem. We weren’t sure if CRISPR/Cas9 would work in eukaryotes”.  She further explained that she had “many frustrations” in getting CRISPR/Cas9 to work in human cells, and that she thought success in doing so would be “a profound discovery”.
  • Broad presented evidence of three other systems derived from prokaryotes that had been adapted for use in eukaryotes, and the PTAB found that in each instance, there was either limited efficacy or the technology required a specific strategy to adapt it for use in eukaryotic cells.
Whether prior art needs to provide ‘specific instructions’

UC also argued before the CAFC that the PTAB erred in adopting a test requiring that there be specific instructions in the prior art to establish a reasonable likelihood of success.

The CAFC determined that the PTAB did not adopt that strict test nor was there an error in the PTAB’s analysis.  While the PTAB noted in its decision that specific instructions in prior art have directed findings of a reasonable expectation of success, it also made clear that other considerations must also be accounted for in determining whether there was a reasonable expectation of success, such as whether there were examples in the prior art of the success or failure of similar systems.  It was noted by the CAFC that the PTAB did not suggest that its conclusions were based solely on the fact that there were no specific instructions in the art describing how to apply CRISPR/Cas9 in eukaryotes.

Simultaneous inventions

Lastly, UC argued that the PTAB erred in dismissing evidence of simultaneous inventions as irrelevant. As submitted by UC, simultaneous invention could be compelling evidence of obviousness, because it would show that the claimed invention was the result of ordinary skill, rather than a genuine invention.  UC noted that there were six research groups that independently applied CRISPR/Cas9 in eukaryotic cells within months of its disclosures.

This argument was also rejected by the CAFC, which noted that the PTAB expressly recognised UC’s evidence of simultaneous invention and concluded that while such evidence was evidence of the motivation to combine the prior art references, it did not necessarily indicate an expectation of success. Given the specific context of the prior art at the time, the PTAB determined that in this instance, the evidence of simultaneous invention did not establish a reasonable expectation of success.

What next?

As a result of this decision, the relevant UC and Broad patents each remain valid in the United States.  It remains to be seen whether UC will find a viable avenue by which it can seek to appeal the CAFC’s decision.

Thanks to Esme Wong for her assistance in preparing this article.

The post United States Court of Appeals upholds PTAB decision on CRISPR Patent Interference appeared first on IP Whiteboard | King & Wood Mallesons.

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