Experimenting… at your peril?

By Cynthia Sargent.

Key Points:
Without a licence from the patent owner, it is likely that commercially oriented testing or fieldwork would be found to be outside any such exception/defence.

At present, experimenting with a third party's patented technology carries considerable legal risk. This is because, currently, Australian patent law does not include an express general experimental use exception to patent infringement. Instead, only a limited exception is currently expressly provided for in relation to experiments undertaken during the extended term of a pharmaceutical patent in order to obtain regulatory approval of a pharmaceutical product ("springboarding exception").

This article highlights:

• experimental use activities that might put an organisation at risk of infringing a patent;
• whether liability for patent infringement might be avoided if experimental use is "non commercial";
• potential consequences of patent infringement;
• what you should do if you are experimenting or considering experimenting with patented technology.

This article will not discuss the springboarding exception or experimental use falling within its scope.

Beware - your experiments may infringe a patent

Currently, there is no explicit provision in the Patents Act 1990 that clearly states that experimental use of a third party's patented invention does not constitute infringement. Under that Act, a patentee is given the exclusive right to "exploit" the patented invention. Although "exploit" is defined, that definition does not clearly exclude experimental use. Nor does the Act explicitly set forth a general exception for experimental use of patented inventions. To date, no Australian court has considered whether a general experimental use exception exists under Australian law. Consequently, the existence of a general experimental use exception under Australian patent law is uncertain. As a result, experimental use of a patented invention in Australia is risky business. Infringement might occur even if no profit is generated from the use.

However, in its report "Patents and Experimental Use" released on 9November2005, the Australian Government's Advisory Council on Intellectual Property recommends that the Patents Act be amended to include an explicit exception for acts done for experimental purposes relating to the subject matter of the invention that do not unreasonably conflict with the normal exploitation of a patent. The report lists examples such as seeking an improvement to the invention, determining how the invention works, determining the scope of the invention and determining the validity of the claims of the patent.

When to worry

Currently, an owner of a patented technology in Australia may allege that its statutory rights are being infringed by another's conduct of experimenting with the patented technology, even if those experiments are being conducted:

• for the purpose of considering using the patented technology;
• to develop new ideas;
• to make improvements to a patented technology;
• to test the validity of a patent; or
• to determine whether a new technology falls within the scope of an existing patent.

Can liability be avoided by- "non commercial" experimental use?

If they were to follow decisions of the courts of England and New Zealand, courts in Australia may hold that there is an implied exception or defence to infringement for experimental use where that use does not have a commercial purpose. However, demonstrating that an experiment does not have a commercial purpose may be difficult. This is because the line between an experiment with a non-commercial purpose and a commercial purpose is unclear.

Courts in England and New Zealand have considered the following questions when assessing whether experiments have a commercial purpose:

• Are the experiments carried out and used for profit or with the objective of obtaining even a small profit? (Frearson v Loe (1878) 9 Ch.D. 48)
• Are the experiments a stepping stone towards a commercial launch of the product? (Monsanto Company v Stauffer Chemical Company [1984] FSR 559)
• Is any invention derived from the experiments being used or made available to others in a way that advances the unlicensed experimenter in the market place? (Smith Kline & French Laboratories Ltd and Anor v The Attorney-General (NZ) and Anor (NZ) (1991) 22 IPR 143)

Consequences of infringement

The consequences of patent infringement are typically orders by the court for:

• an injunction restraining the infringing conduct; and
• payment of damages to the owner of the patent (generally in the amount of what a reasonable royalty payment would be) or an account of profits to be given to the owner of the patent; and
• payment of the patent owner's legal costs of the infringement proceedings.

Additionally, a company director may be personally liable for infringement: British Thomson-Houston Co Ltd v Irradiant Lamp Works Ltd (1924) 41 RPC 338; Martin Engineering Co & Anor v Nicaro Holdings Pty Ltd & Ors (No 2) (1991) AIPC ¶90-800.

What should you do?

It is risky to experiment with patented technology in Australia without a licence to do so from the owner of the patent. While a court in Australia may find that some laboratory experiments fall within the scope of an implied exception/defence to patent infringement, it is likely that commercially oriented testing or fieldwork would be found to be outside any such exception/defence.

If you are experimenting or considering experimenting with patented technology you should seek the advice of intellectual property lawyers.