Conor Medsystems, Inc. v The University of British Columbia

REASONS FOR JUDGMENT 1 A point has arisen on the pleadings that can conveniently be disposed of under O 29. It is an interesting point which, I think I am correct in saying, has not previously come before an Australian court. The issue arises in the following way. The patents in suit (which correspond with several United States patents) were granted jointly to Angiotech Pharmaceuticals, Inc. and the University of British Columbia. Each patentee claims title to the inventions by assignment from the US inventors. In the case of UBC, it claims title from two only of several persons claiming to be inventors namely Helen Burt and John Jackson. The applicant alleges, however, that neither Burt nor Jackson was one of the inventors. So it argues that the patents must be revoked for they could only have been granted to the actual inventors or those claiming under them. 2 Assuming it can make out the facts, the resolution of the applicant's contention depends not so much on the effect of s 138(3) of the Patents Act 1990 (Cth), which permits the revocation of a patent granted to a person not entitled, but upon the proper construction of s 15, which specifies to whom a patent may be granted. Section 15 provides: (1) Subject to this Act, a patent for an invention may only be granted to a person who: (a) is the inventor; or (b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or (c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or (d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c). (2) A patent may be granted to a person whether or not he or she is an Australian citizen. The question in issue is this: If a patent is granted to several persons, must each of them be, or claim through, an inventor? The answer to that question is, I think, to be gathered from the history of the section. 3 The patent system in England had its origins in the royal grants by which monopolies in trade and manufacture were conferred by the Crown in the exercise of the prerogative. These monopolies were granted to "any man [who] by his own charge and industry, or by his own wit or invention, doth bring any new trade into the realm": Darcy v Allin (1602) Noy 173, 182. In his Institutes, Sir Edward Coke said: "The reason wherefore such a privilege is good in law is because the inventor bringeth to and for the common wealth a new manufacture by his invention, costs and charges, and therefore it is reason, that he should have a privilege for his reward (and the encouragement of others in the like) for a convenient time": 3 Coke's Institutes 184. The monopoly could be granted not only to the inventor but also to the person who first brought the new invention into England: The Clothworkers of Ipswich Case (1615) 1 Godb 252; Shepherd's Abridgment, Pt III, Prerog, 61; Hawkins Pleas of the Crown, vol 1, c 29, s 20. 4 The first statute which regulated the grant and sole use and exercise of an invention was the now famous Statute of Monopolies, 21 Jac 1, c 3. By this statute, which was declaratory of the common law, it was provided, in the sixth section, that a patent could be granted to the "true and first inventor or inventors" of any new manufacture. The inventor was the person who made the discovery; that is, the idea for it originated in his own mind: Jones v Pearce (1831) 1 WPC 121, 124. The inventor was also the person who first introduced the invention into the realm: Edgeberry v Stephens (1693) 2 Salk 447. It sometimes was said that the grant to a person not the inventor but the importer of the invention should be regarded "as a sort of anomalous decision": Marsden v Saville Street Foundry and Engineering Co, Ltd (1878) 3 Ex D 203, 205 per Jessel MR. 5 Until 1883 a patent could only be granted upon the application of the "true and first inventor". This was changed by the Patents, Designs, and Trade Marks Act 1883, 46 & 47 Vict, c 57, ss 4 and 5. According to those sections, which appeared in subsequent enactments, any person could make application for a patent (s 4(1)) or two or more persons could make joint application for a patent (s 4(2)). Moreover, a patent granted to several persons was valid even if only one of them was the "true and first inventor": s 5(2). Consequently, "a capitalist [could] advance money to a needy inventor and obtain an interest in the patent from the beginning": Frost, Patent Law and Practice, 3rd ed, vol 1 (1906) 4. 6 Shortly after the passage of the 1883 Act doubt was expressed concerning the identity of the persons to whom a patent could be granted. For example, in Brice, Patents, Designs, and Trade Marks (1885) it was suggested that under s 5(2) a person who brought an invention into the realm might not now be granted a patent. Brice wrote (at 3): "If this section were construed strictly, an importer, merely as such, plainly cannot apply for, and therefore cannot receive a grant of letters patent." He suggested ways of getting around the problem. Some also suggested that s 5(2) had removed the ability of several persons to obtain a grant jointly if any one of them was not the inventor. 7 These doubts were removed by the Patents, Designs, and Trade Marks (Amendment) Act 1885, 48 & 49 Vict, c 63. Section 1 provided that the Act was to be construed together with the 1883 Act. Section 5 provided that: "Whereas doubts have arisen whether under the principal Act a patent may lawfully be granted to several persons jointly, some or one of whom only are or is the true and first inventors or inventor; be it therefore enacted and declared that it has been and is lawful under the principal Act to grant such a patent." 8 Most, but not all, of the Australian colonies adopted the English patent legislation with few modifications. The exceptions were Victoria and Western Australia where the legislation was different in significant respects. Relevant for present purposes is the Victorian statute, the Patents Act 1889 (Vic). That Act provided that the only person who could apply for a patent was the "actual inventor" or his assigns or legal representatives (if deceased) or a person to whom the invention had been communicated by the "actual inventor" or his representatives or assigns: s 7(3). The application for the patent was required to declare that the applicant, or, if more than one, the applicants, claimed to be the "true and first inventor or inventors": s 8(2). "True and first inventor" was defined in s 3 to mean "the actual inventor of any invention" or his assigns or legal representatives, "but shall not include a person importing an invention from any other colony or country without the authority of the actual inventor". No provision was made for the grant of a patent jointly to several persons if not all were the "actual inventor". As we shall see, this approach followed the pattern of the patents legislation in the United States. 9 The first Commonwealth statute dealing with patents was the Patents Act 1903 (Cth). That enactment contained provisions concerning applications for patents that were in part modelled on the Victorian Act. In particular, ss 32 and 33 provided: 32 (1) Any person whether a British subject or not may make an application for a patent. (2) Two or more persons may make joint application for a patent and a patent may be granted to them jointly. (3) Any of the following persons may make application for a patent - (a) The actual inventor; or (b) his assignee agent attorney or nominee; or (c) the actual inventor or his nominee jointly with the assignee of a part interest in the invention; or (d) the legal representative of a deceased actual inventor or of his assignee; or (e) any person to whom the invention has been communicated by the actual inventor his legal representative or assignee (if the actual inventor, his legal representative or assignee is not resident in the Commonwealth). 33 (1) An application for a patent shall be for one invention only, and must be made in the form prescribed and must be lodged by being left at or sent by post to the Patent Office in the prescribed manner, and must be accompanied by either a provisional specification or a complete specification. (2) The application must contain a declaration in the form prescribed setting out the facts relied on to support the application and must be signed by the applicant and attested by a witness. (3) Subject to this Act the application shall date from the time when it is lodged in the Patent Office. The reason for adopting these provisions instead of following the English legislation was explained during the second reading of the Bill in the Senate, where the Bill had originated. Senator Drake, the Postmaster-General, said: "The Bill differs from the English law, and from the law of all the Australian States, with the exception of Victoria and Western Australia. In England, and in four of the Australian States, it is held, following an old decision under the Statute of Monopolies, that a person who introduces an invention is entitled to a patent. We say that that may have been a correct thing to provide at a time when the difficulty of communication between countries was very great, and when it was a matter of almost equal importance for a man to introduce the invention of another, as to discover the invention himself. We think that now that the world has grown so much smaller, because communication has been rendered so much more easy, this particular right of monopoly should be granted to the inventor, and to the inventor only." (Commonwealth, Parliamentary Debates, Senate, 15 July 1903, 2081-2082.) During the debate in the House of Representatives there was discussion about the use of the word "actual" in the expression "actual inventor" appearing in cl 28, which later became s 32(3)(a). On this point Mr (later Mr Justice) Higgins said: "In the statute of James concerning monopolies and patents, the words 'true and first inventor' are used, and the phrase has always been held to include those who import articles from abroad. The object in using the word 'actual' is to get the benefit of the decisions in the United States. 'Actual inventor' is the phase [sic] used in the Act of Congress. It has a definite meaning, which it would be a pity for us to attempt to qualify. It means the person who has discovered a thing. The phrase 'true and first inventor' is held to include those who import. 'Actual' is the best word to use." (Commonwealth, Parliamentary Debates, House of Representatives, 29 September 1903, 5508-5509.) Later, when asked whether the expression "actual inventor" would include assignees, Mr Higgins said (at 5509): "In clause 28, a distinction is drawn between the actual inventor, and the assignee or his nominee. 'Actual inventor' means the person whose brains have performed the work." 10 In one form or another ss 32 and 33 appear in all subsequent Patents Acts with no change that is significant for present purposes. In the 1990 Act the principal difference is that the adjective "actual" has been dropped. This is likely to have been the result of Parliament's intention to enact legislation that is easy to read. Mr Jones, the Minister for Science, Customs and Small Business, who had introduced the Bill into the House, said in relation to its drafting: "The drafting style in the Bill breaks some new ground. The definitions in the back are in the form of a dictionary in a schedule … It is a splendid piece of drafting and a Bill that is notably easy to read. … [L]anguage seems to have two simultaneous but contrary habits, and they are both evident in old Acts of Parliament. First, it tends to atrophy, so you find a plethora of archaic expressions. Second, and paradoxically, language seems to proliferate without cause at times. … I am delighted with the way this Bill attempts to counter the degenerative linguistic evolution of both kinds which has been characteristic of much legislative drafting in the past." (Commonwealth, Parliamentary Debates, House of Representatives, 1 June 1989, 3481-3482.) Be that as it may, as regards the intended effect of cl 15 the Explanatory Memorandum stated (at 6) that: "This clause lists the categories of persons to whom a patent may be granted, and provides that a patent may be granted to a person whether or not he or she is an Australian citizen. Broadly, a patent may be granted only to the inventor of the invention concerned or to a person deriving rights from the inventor." 11 In light of what was said by Mr Higgins during the debate on the 1903 Act, to ascertain the meaning of "inventor", as well as the intended effect of s 32, it is necessary to look at the "decisions in the United States" that Mr Higgins most likely had in mind. They are decisions which consider the Patents clause of the US Constitution, Art I s 8, cl 8 (giving Congress the power to secure to "inventors" the "exclusive right to their discoveries") and, in some instances, the early US patent statutes (under which a patent could be granted to the person who "hath or have invented or discovered" (1790), or had "invented" (1793), or had "discovered or invented" (1836), a new and useful art). There are three decisions of the US Supreme Court that are likely candidates. The first is Gibbons v Ogden, 22 US 1 (1824). This was not a patent case but it did discuss the Patents clause in the following passage from the judgment of the court (at 58-59) delivered by Chief Justice Marshall: "The power, as granted in the constitution, is a limited power. It is a clear principle, that when the means of executing any given power are specified in the grant, Congress cannot take, by implication, any other means, as being necessary and proper to carry that power into execution. This power, then, is limited: (1) As to the persons and objects in regard to which it may be exercised: these are, 'authors and inventors, writings and discoveries.' This enumeration excludes all right in Congress to legislate on the subject of any improvement, which is not an 'invention', either domestic or foreign. It excludes also all right to legislate for the benefit of any person who is not himself 'the inventor'. (2) As to the means of executing the power, and the time during which those means may be exercised. They are by 'securing the exclusive right for limited times.'" 12 The second case is Kennedy v Hazelton, 128 US 667 (1888). This was an action for the specific performance of an agreement to assign a patent. The defendant, however, was not the true inventor. The action failed. Justice Gray delivered the opinion of the court. He said (at 672): "The patent law makes it essential to the validity of a patent, that it shall be granted on the application, supported by the oath, of the original and first inventor, (or of his executor or administrator,) whether the patent is issued to him or to his assignee. A patent which is not supported by the oath of the inventor, but applied for by one who is not the inventor, is unauthorized by law, and void, and, whether taken out of the name of the applicant or of any assignee of his, confers no rights as against the public." 13 The final case from the Supreme Court is Agawam Company v Jordan, 74 US 583 (1868). It is a leading case. There is a passage in the judgment of Justice Clifford which is regarded as a classic statement of the applicable principle. It reads (at 602-603): "No one is entitled to a patent for that which he did not invent unless he can show a legal title to the same from the inventor or by operation of law; but where a person has discovered an improved principle in a machine, manufacture, or composition of matter, and employs other persons to assist him in carrying out that principle, and they, in the course of experiments arising from that employment, make valuable discoveries ancillary to the plan and preconceived design of the employer, such suggested improvements are in general to be regarded as the property of the party who discovered the original improved principle, and may be embodied in his patent as a part of his invention. Suggestions from another, made during the progress of such experiments, in order that they may be sufficient to defeat a patent subsequently issued, must have embraced the plan of the improvement, and must have furnished such information to the person to whom the communication was made that it would have enabled an ordinary mechanic, without the exercise of any ingenuity and special skill on his part, to construct and put the improvement in successful operation." 14 The application of these principles leads inevitably to the following rules which, I am entitled to assume, were likely known to Mr Higgins. First, a valid patent can only be granted to the real inventor and if there be more than one inventor it must be granted to all: Thomas v Weeks, 2 Paine 92 (1827); Barrett v Hall, 2 F Cas 914 (1818); Carter v Perry, 8 OG 518 (1875). Second, in the case of a joint invention, a patent issued to only one of the inventors is void: Ex parte Barsaloux, James and Lyon, 16 OG 233 (1878); American Electrical Novelty & Manufacturing Co v Newgold, 108 F 957 (1901) aff'd 113 F 877 (1902). Third, a patent issued in the names of joint patentees will, unless all of them are the inventors, also be void: Stewart v Tenk, 32 F 665 (1887); Hotchkiss v Greenwood, 12 F Cas 551 (1848); Welsbach Light Co v Cosmopolitan Incandescent Gaslight Co,100 F 648 (1900). See also W Robinson, The Law of Patents, vol 1 (1890) 570-573. 15 It might fairly be said, and it often was said, that this last rule had the potential to cause injustice, particularly if there was a bona fide mistake in, say, an applicant incorrectly nominating himself as the sole inventor or inadvertently including another as one of the inventors. The potential for injustice has been overcome by the Patents Act 1951 (US), 35 USC s 256. The section provided: Whenever a patent is issued on the application of persons as joint inventors and it appears that one of such persons was not in fact a joint inventor, and that he was included as a joint inventor by error and without any deceptive intention, the Commissioner may, on application of all the parties and assignees, with proof of the facts and such other requirements as may be imposed, issue a certificate deleting the name of the erroneously joined person from the patent. In its current form, the provision is to the same effect. 16 Now it is clear that when Parliament enacted s 32 of the 1903 Act it intended that a patent would be granted only to the true (Parliament used the word "actual") inventor or a person claiming under him. In particular, "capitalists" could no longer take an interest in a patent, save as assignee. Nor could a patent be granted to the "importer" of an invention unless he had the consent of the inventor. Moreover, one necessary consequence of the adoption (with the limited exception of the importer with consent) of the US model was that a patent that was granted to one of two inventors was not granted to the "actual inventor". Nor was a patent granted to the "actual inventor" if it was granted jointly to two or more persons one of whom was not the inventor. The position must be the same under the 1990 Act for there is no material difference in language. This conclusion accords with the result in Davies Shephard Pty Ltd v Stack (2001) 51 IPR 513, although I have reached it by a different process of reasoning. 17 The respondents say that even if the grant be contrary to s 15, the patents in suit cannot be revoked. They put the argument as follows. First, the power to revoke is to be found in s 138(3). That sub-section provides that the court may revoke a patent on any of the following grounds: (a) that the patentee is not entitled to the patent; (b) that the invention is not a patentable invention; (c) that the patentee has contravened a condition in the patent; (d) that the patent was obtained by fraud, false suggestion or misrepresentation; (e) that an amendment of the patent request or the complete specification was made or obtained by fraud, false suggestion or misrepresentation; (f) that the specification does not comply with subsection 40(2) or (3). The next step is that, seeing that it is permissible to issue a patent to joint inventors, the words "the patentee is" in s 138(3)(a) must, in the case of a joint grant, be read as "the patentees are" (see also s 23 of the Acts Interpretation Act 1901 (Cth)). The conclusion that is then said to follow is that a patent can only be revoked under paragraph (a) if all "the patentees [are] not entitled to the patent." 18 I do not agree with this construction of s 138(3)(a). I accept, as I obviously must, that in the case of a joint patent it is proper to read s 138(3)(a) as covering joint patentees. Nonetheless, such a reading does not carry the respondents' argument. If one of several patentees is not entitled to the patent, then it is still correct to say (as it would be in the case where none of the patentees were entitled) that "the patentees are not entitled to the patent". 19 The respondents also contend that, having regard to the use of the present tense in s 138(3)(a), a condition precedent to a revocation order is a finding that the patentees were not entitled to the patent at the time of the application for revocation (or perhaps at the time of the hearing). I am far from persuaded that this construction is correct and it seems to be contrary to the views of Cooper J in Stack v Brisbane City Council (1999) 47 IPR 525, 536 and Crennan J in JMBV Enterprises Pty Ltd v Camoflag Pty Ltd [2005] FCA 1474, [130]-[131]. But even if this construction were correct, the way in which I would read the section is that if a person were not entitled to the patent at the time of grant then, at least in most cases, that non-entitlement would be (as here) a continuing state of affairs. So there is really nothing in the point. 20 In any event, if s 138(3)(a) were not available to the applicant, it might rely on s 138(3)(d) and contend that if its assertions of fact are proven at trial the grant was obtained by "false suggestion or misrepresentation". As to the availability of false suggestion in the circumstances see Minter v Wells (1834) 1 WPC 127; R v Mussary (1834) 1 WPC 41; Earl of Devonshire's Case (1687) 11 Co 90. 21 The result is that the question raised under O 29 (slightly reworded) - "If the facts particularised under paragraph 7 of the further amended first, second and third particulars of invalidity are established by evidence, does the Court have power to revoke the first, second and third patents pursuant to s 138(3)(a) of the Patents Act 1990 (Cth)?" - should be answered "Yes". 22 This answer leaves open for further consideration (if that consideration becomes necessary) the following questions: (1) If the ground of revocation is made out, is the making of a revocation order discretionary and, if so, should that discretion be exercised; (2) Is Angiotech able to seek a declaration under s 34(1) that it is an "eligible person" in relation to the claimed inventions so that it may then take steps to obtain a grant of the patents for itself; and (3) Is the power of rectification under s 192 available in lieu of a revocation order. 23 In the meantime, it will be necessary for the respondents to pay the costs of this application. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.