The detailed judgment in BlueScope Steel Limited v Dongkuk Steel Mill Co., Ltd (No 2) [2019] FCA 2117 covers many validity issues relating to Australian Patent No. 2009225257 (the 257 Patent) and Australian Patent No. 2009225258 (the 258 Patent), both in the name of BlueScope Steel Limited (‘BlueScope’). This article relates to the attack by Dongkuk Steel Mill Co., Ltd (‘Dongkuk’) on the best method requirement of the 257 Patent, and the allowability of the post-grant amendment sought by BlueScope to remedy the best method deficiency.

The 257 Patent relates to a hot dip coating method for coating steel strips with an alloy coating of aluminium, zinc, silicon and magnesium where variations in the thickness of the coating are controlled such that there is only a small proportion of magnesium silicide particles or substantially no magnesium silicide particles in the surface of the coating. The alloy coating of the invention provides corrosion resistance and lowers the risk of mottling. Moreover, short range coating thickness variations had to be controlled to a maximum variation of 40% in any 5 mm diameter so that the desired distribution of magnesium silicide could be obtained and, thereby, lower the risk of mottling.

Dongkuk alleged that the 257 Patent is invalid as BlueScope did not disclose the best method of performing the invention fully as required under s40(2)(a) of the Patents Act 1990 (‘the Act’).

The basis of Dongkuk’s contention is that the specification fails to describe the “special operational measures” to be applied to minimise short range coating thickness variations, which is required for the alloy coating method. Furthermore, at the filing date, BlueScope was aware of the “special operational measures” but erred in failing to detail these measures in the specification as a person of skill in the art would not readily ascertain the nature of these measures. In its defence, BlueScope contended that a skilled addressee at the filing date would have known what was meant by “special operational measures” and would have known that short range coating thickness variations could be controlled by various parameters.

Justice Beach agreed with Dongkuk and held that BlueScope did not disclose the best method known to it at the filing date. The technical issues surrounding this finding are somewhat involved. Briefly, according to his Honour, a skilled addressee would not understand the meaning of “special operational measures” in the context of the specification. Moreover, if these measures formed part of the common general knowledge, a skilled addressee would not understand that those measures were being referred to because of the use of the word “special” in the phrase “special operational measures”. In addition, a skilled addressee would not have understood “special operational measures” to be the particular four operating measures known by BlueScope.

According to jurisprudence from the Federal Court, a failure to disclose the best method at the filing date can, theoretically, be cured by later amendment whether before or after grant of the patent. Any amendment must, as a threshold issue, comply with s102 of the Act. In this instance, this threshold was met. BlueScope sought leave from the Court under s105 of the Act to amend the 275 patent specification to introduce significant additional detail regarding the “special operational measures”. In short, the amendment application was denied by Justice Beach.

S105 of the Act provides that: “In any relevant proceedings in relation to a patent, the court may, on the application of the patentee, by order direct the amendment of the patent request or the complete specification in the manner specified in the order.”

This is a discretionary power to the Court and there are a number of factors that should be fulfilled to the satisfaction of the Court before the discretion is exercised. The decision in Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27 (‘Servier’) at paragraph 243 sets out the guiding principles, namely:

• The discretion exists for the benefit of the patentee.
• The onus to establish that amendment should be allowed is on the patentee.
• The focus of the Court is on the patentee’s conduct, not the merit of the invention.

Servier set out the following factors that would to lead to refusal of the amendment:

1. Lack of full and frank disclosure.
2. Unreasonable delay.
3. An unfair advantage of the unamended patent gained by the patentee.

BlueScope failed on all three factors and the amendment application was refused.

Lack of full and frank disclosure

The public interest element in exercising the Court’s discretion seemed to weigh significantly into Justice Beach’s consideration. Underpinning this approach is the position that the amendment application is brought by the patentee who can only have the knowledge of all the relevant facts and thus has an obligation to put forward correct reasons for the amendment and must disclose all documents explaining those reasons.

BlueScope’s external patent attorney, Mr Munt, provided evidence on various issues, including the circumstances pertaining to the phrase “special operational circumstances” including prosecution of the corresponding overseas family members of the 257 Patent. In his affidavit, Mr Munt failed to disclose that the USPTO Examiner had rejected the corresponding application for at least the following reason:

“Applicant cites Page 14-Page 15 of the specification, arguing that “the special operational measures had to be applied to keep variation under control” and that one skilled in the art understands that parameters can be varied to control the line and these special operational measures are not the usual measures employed to control a metal alloy line. This is not persuasive because the claims are substantially broader than argued and the applicant has failed to establish with specificity the special measures that are controlled for the entire breadth of the claim.”

Despite the fact that this rejection is a different aspect of invalidity made under U.S. law, his Honour adopted the view that the failure to refer to the US application in this regard by Mr Munt weighs against exercise of the discretion in BlueScope’s favour.

Unfair advantage

His Honour found that for several reasons, BlueScope obtained an unfair advantage by failing to disclose the best method of performing the invention to the disadvantage to the public. The amendment sought would be made almost 10 years after the filing date and two years after the commencement of the present proceedings. In addition, BlueScope has been using the best method commercially since 2013.

In his Honour’s view, by failing to disclose the best method to perform the invention, BlueScope gained an unfair advantage by protecting an invalid monopoly, and impeding persons from lawfully exploiting a patent during its term such as for experimental purposes or improving the invention.

A further unfair advantage is that the invention was secretly used by BlueScope from 2009 to 2013. During this period, BlueScope applied and optimised the best method known to it of performing the invention whilst depriving the public of that knowledge.

Lastly, BlueScope threatened Dongkuk with infringement proceedings based on the unamended patent even though BlueScope had constructive notice that it had not disclosed the best method. A final nail in the coffin is that BlueScope commenced infringement proceedings on the basis of the unamended 257 Patent about four months before filing the amendment application.

Unreasonable delay in seeking the amendment

From as early as 2012, the inclusion or use of the phrase “special operational measures” formed the basis of differing objections by examiners during prosecution of the Australian, South Korean, Japanese, Chinese, and US applications. In some of those jurisdictions, the objections were resolved with argument alone and no Patent Office required an amendment to be made to the specification.

BlueScope submitted that there had no unreasonable delay in making the amendment application. BlueScope contended that it was reasonable not to amend the 257 Patent earlier than the subject application date.

In the second examination report dated 4 September 2014 for the 257 Patent, the Australian examiner raised an objection for failure to disclose the best method. Despite this notification, BlueScope did not amend the specification at the time to insert the text detailing the “special operational measures”. This pattern of objection and response thereto was followed in other jurisdictions under different laws. Justice Beach found that BlueScope needed to explain this expression by reference to matters beyond the specification to satisfy the examiner and that this was sufficient to determine that BlueScope had “constructive knowledge of the need to amend the specification well before it did so and simply made a calculated decision to take its chances with the disclosure it had made, whilst simultaneously benefiting commercially from the best method to the detriment of the public.”

The amendment application failed and the 257 Patent found incurably invalid for a failure to the disclose the best method of performing the invention at the filing date.

It may be somewhat trite to state that the exercise of the Court’s discretion under s105(1) can act either in favour of the patentee or otherwise. The discretion is broad and in the right circumstances can be a saving grace to a patentee, but only if the patentee’s conduct does not contravene the principles set out in Servier. This case also underscores that any small hint of a lack of full and frank disclosure will likely lose the confidence of the Court and result in a refusal of the amendment application.