The Federal Court of Australia has found that a patent assignee is not necessarily to be imputed with knowledge of the best method of performing the invention.
Our Patents Act requires that a complete patent specification must disclose the best method known to the applicant of performing the invention (s 40(2)(aa)). In Dometic Australia Pty Ltd v Houghton Leisure Products Pty Ltd [2018] FCA 1573 (19 October 2018), the respondent submitted that the patent specification did not comply with this requirement because it did not disclose the best method for inducing and maintaining a Coandă effect. An inventor described this as “a physical effect which causes a fluid jet to stay attached to a surface over which it is flowing” and “the tendency of a jet of fluid emerging from an orifice to follow an adjacent flat or curved surface to entrain fluid from the surroundings so that a region of low pressure develops”.
The inventor had sought to employ the Coandă effect so that air ejected by an air conditioning unit travelled some distance horizontally in close proximity to the roof of a caravan. This would enhance the dissemination of cooler air. He had experimented with various configurations of air outlets. None had achieved the air flow characteristics he was seeking. The Coandă effect had come to his attention as a possible solution.
The parties and history of the patent are convoluted. The patent in suit is certified Australian Innovation Patent 2016101949 filed on 7 November 2016, naming Dometic Sweden as the applicant (Second Applicant in this matter). The First Applicant, Dometic Australia, is a licensee of Dometic Sweden. The innovation patent is a divisional of an international (PCT) application filed on 6 March 2015. The PCT application claimed priority from a provisional patent application filed on 6 March 2014. In March 2016, the PCT application was assigned from Aircommand Australia to Dometic Sweden as a result of an acquisition of shares by Dometic Sweden.
White J. referred to various authorities in support of his statement at [204] that the disclosure of the best method known to an applicant of performing the invention is part of the quid pro quo for the grant of the patent monopoly. For example, in Firebelt Pty Ltd v Brambles Australia Ltd [2000] FCA 1689, the Full Court said that the requirement is that the patentee is required to give the “best information in his power as to how to carry out the invention.” In Pfizer Overseas Pharmaceuticals v Eli Lilly & Co [2005] FCAFC 224, it was held that the requirement safeguards against an applicant holding back information with a view to getting the benefit of the patent monopoly without conferring on the public the full consideration for the grant of that monopoly. In a venerable decision, Fletcher Moulton LJ said that it is “settled law that a patentee must act towards the public uberrima fide, and must give the best information in his power as to how to carry out the invention. He is therefore bound to tell the public all the steps that can advantageously be taken in carrying out the invention. But he is not limited to claiming only the best way of carrying it out.” (Vidal Dyes Syndicate Ltd v Levenstein Ltd (1912) 29 RPC 245).
The Full Court in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd [2017] FCAFC 138 provided a useful summary at [115] that further set out that the principles of good faith underlie this requirement. Also, the requirement is directed to the invention. The monopoly is circumscribed by the claims, but the nature of the invention is as described in the whole of the specification.
Timing is important when assessing this requirement. When should the complete specification disclose the best method of performing the invention? In Pfizer, their Honours confirmed that it is the best method known to the applicant at the filing date.
White J. was satisfied that the complete specification did not disclose the best method. There was no reference to the Coandă effect or of the means by which the invention produces it. The specification referred only to air being injected through a louvre of outlets shaped to direct the outgoing air stream substantially horizontally, adjacent to an interior roof surface. However, the shape of the outlets was not described. As a result, a person seeking to replicate the invention would have to engage in a process of trial and error similar to that undertaken by the inventor.
The Respondent submitted that the applicant, Dometica Sweden, should be found to have known of the best method because Dometica Sweden had imputed knowledge.
In White J.’s view, s 40(2)(aa) refers to the actual knowledge of the applicant of the best method. The fact that the law can deem a person to be imputed with knowledge does not alter the capacity in fact of the person to disclose matters of which he or she is unaware. Referring to Krakowski v Eurolynx Properties Ltd [1995] HCA 68, (1995) 183 CLR 563 at [582-3], he held that the attribution of knowledge of a person to a company depends on whether the person is “so closely and relevantly connected” with the company that his or her state of mind can be treated as the state of mind of the company. Such a person need not be an officer or employee of the company.
The Respondent pleaded that Dometic Sweden had actual knowledge because it had sources of that knowledge under its control. These were the files of the inventor and the files of Collison & Co., the patent attorneys. The Respondent submitted that the knowledge of the proprietor of an invention is to be imputed to the assignee. Additionally, or alternatively, the Repondent submitted that the knowledge of a subsidiary company is to be imputed to its parent.
In relation to the imputation of the knowledge of the proprietor of the invention, the Respondent relied on GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No. 2) Limited v Apotex Pty Ltd [2016] FCA 608. In that case, SmithKline Beecham PLC had applied for the patent on 12 April 2001. It was granted in 2007. SmithKline assigned the patent to GlaxoSmithKline Dunvargan on 20 September 2013. It was then assigned to GlaxoSmithKline on 20 September 2013. The Respondent submitted that this was a case in which the Court had held it appropriate for the knowledge of a proprietor of the invention to be imputed to the assignee of that invention. However, White J. did not regard GlaxoSmithKline as containing a decision to that effect. Rather, that case only supported imputation where the development of a patent was taken over. He held that in that case there appeared to have been a finding of fact relating to the knowledge of the subsequent developer of the invention. The question of whether a later assignee of the patent had acquired the knowledge of the assignor was not addressed.
The Respondent referred to Australian Securities and Investments Commission v P Dawson Nominees Pty Ltd [2008] FCAFC 123 in relation to the imputation of knowledge to the assignee, Dometic Sweden as the ultimate holding company. The passage referred to by the respondent included: “It seems inconceivable that Multiplex Ltd would not be fixed with the knowledge of its subsidiary contractor.” Thus, White J. did not regard the Full Court as “enunciating a general principle to that effect”. He said that the passage should be understood as expressed in the context that the law recognises that subsidiary companies are separate and independent legal entities (Walker v Wimborne [1976] HCA 7, (1976) 137 CLR 1 at [6‑7]). Generally, the law does not impute to a parent company the knowledge of a subsidiary by reason only of the corporate relationship (BHP Billiton Finance Ltd v Federal Commissioner of Taxation [2009] FCA 276 at [100]). The Respondent did not point to any feature of the relationship between AirCommand Australia and Dometic Sweden other than their corporate relationship to warrant the attribution of knowledge.
White J. held that there was no general principle to the effect that a person’s control of a means of access to information may be equated with knowledge of that information. It follows that there is no general principle that the assignee has knowledge of the best method of performing the invention. The question is instead a factual one, turning on the nature of the information in question and the nature of the access to it, including the surrounding circumstances. During the proceedings, Dometic discovered the inventor’s files and the Respondent tendered parts. White J. held that this material was a limited source of information and insufficient to indicate to the reader any significance in the performance of the air conditioning system. Furthermore, the files of the patent attorneys were not tendered. The Applicant claimed privilege with respect to those files. The Respondents did not identify any individual whose knowledge was to be regarded as the knowledge of Dometic Sweden.
The patentee had a reprieve in this case due to the failure of the Respondent to impute knowledge to the patentee. However, a failure to disclose the best method of performing the invention could indicate a misalignment of a patent and a commercialised product. This is an aspect of due diligence that should not be ignored by potential licensees and purchasers.