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First Use of the new “Objects Clause”

/ Martin Pannall / Articles

On 27 February 2020, amendments to the Australian Patents Act 1990 introduced, among other things, a new objects clause, providing a framework within which the provisions of the Patents Act are to be considered.

Section 2A states that:

“The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.”

For the first time since its introduction, the objects clause has been referenced in a decision of Australia’s High Court, no less.

In Calidad Pty Ltd v Seiko Epson Corporation [2020] HCA 41, the question of whether the sale of a patented product exhausts the patentee’s exclusive rights in that product was considered.

The product in question was a printer ink cartridge, the subject of patent protection, and the question being considered was whether the resale of a refurbished and refilled cartridge by a third party was an infringement of the patent.

The High Court held (in a 4-3 majority) that the patentee’s rights in the specific cartridge are exhausted upon the first sale of that cartridge and that there was, in this case, no infringement1.

In reaching this decision, reference was made to this new objects clause.

The Decision at [92] states that:

[92]” It may be taken from the object stated in s 2A that one component of that object is to ensure the efficiency of the market economy. This topic has been dealt with earlier in these reasons[132]. Another is to encourage innovation. This latter objective is achieved by ensuring that a patentee is rewarded for the often considerable efforts and expense which have contributed to a useful invention. That reward is obtained on the sale of a product on terms for which the patentee has negotiated. There is nothing in the Patents Act 1990 to suggest that a patentee is to be rewarded more than once.”

 The Explanatory Memorandum2 in reference to the proposed introduction of the objects clause stated in paragraph 10 that:

 “10.  The introduction of an objects clause will clarify the underlying purpose of the patent system and over time will reduce uncertainty in the operation of the Patents Act. It will also provide broad guiding principles that will help ensure that the patent system remains adaptable and fit-for-purpose as new innovations are developed in the future.”

However, when the objects clause was being considered for introduction into the Patents Act, a number of parties, including the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) expressed concerns that the introduction of an objects clause as proposed would have the potential to be used to restrict the scope of patents and patentable subject matter. In particular, it stated that:

“… despite comments suggesting the contrary in the Explanatory Memorandum, it is clearly intended to significantly change the manner in which judicial patent decisions are made in relation to many aspects of patent validity, including the assessment of patent eligible subject matter and inventive step. In particular, the introduction of the word ‘technological’ to qualify the term “innovation” has the potential to cause significant misunderstandings and significant harm.” 3

While many of these concerns were raised in the context of patentability issues, the principle extends to the general application of the objects clause and in particular, to its judicial application in patent decisions.

Now that specific reference to Section 2A has been made by the High Court, It will be interesting to see how this is used by other courts in the future to shape their decisions, and whether the concerns raised against the introduction of the objects clause of acting to dilute patent rights will come to be realised.

 

1. For more on this aspect of the case, refer to this article written by Madderns’ Dr Kin Seong Leong.

2. Explanatory Memorandum, Intellectual Property Laws Amendment (productivity commission response part 2 and other measures) Bill 2019.

3. Institute of Patent and Trade Mark Attorneys of Australia (IPTA), Submission to the Senate Economics Legislation Committee, Inquiry into the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019, [Submission no. 50], 15 August 2019, p. 8.