Hood v Down Under Enterprises International Pty Limited

Hood v Down Under Enterprises International Pty Limited - [2022] FCAFC 69 - FCAFC 2022 case summary — Zoe

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Introduction 1 There are three appeals before the Court in relation to Standard Patent 721156, which is entitled "Essential oil and methods of use" and which expired on 20 October 2017 (the Patent). The invention the subject of the Patent is methods of treatment involving the topical application of an essential oil derived from the shrub Kunzea ambigua (the Oil). The priority date is 23 October 1996. 2 There were five proceedings at first instance, but only three of those proceedings are subject to appeal. In the proceedings at first instance, Mr Hood, the patentee, alleged infringement of the Patent against: Bush Pharmacy Pty Ltd (Bush Pharmacy); Down Under Enterprises International Pty Ltd (Down Under Enterprises); New Directions Australia Pty Ltd (New Directions); Native Oils Australia Pty Ltd (Native Oils); and Heritage Oils Pty Ltd (Heritage Oils). The respondents filed cross-claims seeking revocation of the Patent. 3 The primary judge's principal judgment is Hood v Bush Pharmacy Pty Ltd [2020] FCA 1686. The primary judge also published separate reasons for judgment on costs: Hood v Bush Pharmacy Pty Ltd (No 2) [2021] FCA 138 (Costs Judgment). Unless otherwise indicated, references to the primary judge's reasons for judgment are to the principal judgment. 4 The primary judge found that Bush Pharmacy and Heritage Oils had infringed the Patent based on s 117 of the Patents Act 1990 (Cth). There is no appeal in relation to those proceedings. 5 In the proceedings involving Down Under Enterprises, New Directions and Native Oils, the primary judge: (a) held that each of claims 5, 6, 7, 9, 10, 11, 12 and 13 was valid; and (b) dismissed Mr Hood's claims of infringement (being claims based on s 117 of the Patents Act). 6 Mr Hood appeals from the judgment of the primary judge in the proceedings involving Down Under Enterprises, New Directions and Native Oils. Down Under Enterprises and New Directions have filed a cross-appeal, but Native Oils has not. 7 The key conclusions of the primary judge (and whether or not they are subject to appeal or cross-appeal) can be summarised as follows. The primary judge held that: (a) claims 1 to 4, 8 and 14 to 18 of the Patent should be revoked (there is no appeal from these parts of the judgment); (b) claims 5 to 7 and 9 to 13 should be amended to correct obvious errors and to adjust the drafting in light of the revocation of claims 1 to 4 (there is no appeal or cross-appeal regarding the amendment issue); (c) claims 5 to 7 and 9 to 13 were not invalid for lack of inventive step (Down Under Enterprises and New Directions cross-appeal from this part of the judgment); (d) Down Under Enterprises, Native Oils and New Directions did not infringe the Patent under s 117 of the Patents Act (Mr Hood appeals from this part of the judgment); (e) there should be no award of additional damages (Mr Hood appeals from this part of the judgment); (f) Mr Hood's claim under the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), against Down Under Enterprises was made out, resulting in the making of a declaration and an injunction; however, the primary judge held that there was no loss and therefore no compensation was payable (Down Under Enterprises cross-appeals from the conclusion that it contravened the Australian Consumer Law; Mr Hood does not appeal from the conclusion that no compensation was payable); and (g) each respondent should pay a fixed portion (14%) of Mr Hood's total costs of the cross-claims in the five proceedings at first instance (Mr Hood appeals from this part of the judgment, contending that the respondents should have been jointly and severally liable for these costs). 8 The issues raised by the appeals and cross-appeals can be summarised as follows: (a) whether the primary judge erred in concluding that Down Under Enterprises, Native Oils and New Directions did not infringe the Patent. In particular: (i) whether the primary judge erred in his conclusion that the Oil was a "staple commercial product" within the meaning of s 117(2)(b) of the Patents Act (the Staple Commercial Product issue); and (ii) whether the primary judge otherwise erred in his conclusion that the respondents did not infringe under s 117; (b) whether the primary judge erred in his conclusion that the Patent did not lack an inventive step (the Inventive Step issue); (c) whether the primary judge erred in concluding that the respondents were not liable for additional damages (the Additional Damages issue); (d) whether the primary judge erred in concluding that Down Under Enterprises had contravened the Australian Consumer Law (the Australian Consumer Law issue); and (e) whether the primary judge erred in ordering each respondent to pay a fixed portion of Mr Hood's costs of the cross-claims (the Costs issue). 9 For the reasons set out below, we have concluded, in summary, as follows: (a) The primary judge did not err in concluding that Down Under Enterprises, Native Oils and New Directions did not infringe the Patent. In particular: (i) the primary judge did not err in concluding that the Oil was a "staple commercial product"; and (ii) the primary judge did not otherwise err in concluding that the respondents did not infringe under s 117. (b) The primary judge did not err in relation to the Inventive Step issue. (c) In light of our conclusion regarding infringement, it is unnecessary to determine the Additional Damages issue. (d) The primary judge erred in concluding that Down Under Enterprises contravened the Australian Consumer Law. (e) The primary judge did not err in ordering each respondent to pay a fixed portion of Mr Hood's costs of the cross-claim.

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The Patent 10 The Patent is entitled "Essential oil and methods of use". The object of the invention is said to be to provide a new essential oil which has beneficial properties. The invention in its broadest sense includes an essential oil derived from plants of the genus Kunzea, and more specifically essential oil derived from the shrub Kunzea ambigua. 11 The essential oil is said to be adapted for treatment of ailments of the human body, and is applied topically to relieve pain, minimise bruising and to assist in healing. It may be used either pure or in a carrier. 12 At page 2, the specification notes that the shrub from which the oil is obtained is a member of the Myrtaceae family, genus Kunzea, species ambigua. 13 As the primary judge noted at [27], the specification does not suggest that Mr Hood was the first to "discover" Kunzea ambigua. At the time the specification, and the provisional specification, were prepared, Kunzea ambigua was a known plant species that had already been classified as a member of a known family (the Myrtaceae family) and a known genus (the Kunzea genus). 14 At page 3, the inventor describes "trials done with the oil in a number of therapeutic applications" and notes that although full trials have not been completed: I have found, qualitatively, that the oil has the ability to reduce pain caused by muscle and tendon strain and impact trauma, and it also has been found to reduce pain from gout, headache and bites, particularly insect and spider bites. The oil has also had positive results in the treatment of rashes, skin irritations and acne. 15 At page 4, the Patent notes that one area which has provided a surprising reaction is in the treatment of bruising. 16 The specification also includes a discussion of the chemical composition of the oil obtained from Kunzea ambigua based on gas chromatograph analysis with reference to examples. 17 As at the trial there were 18 claims. Claims 1 to 4, 8 and 14 to 17 were subsequently revoked by the primary judge. 18 Claim 1 (now revoked) claimed an essential oil derived from shrubs of the genus Kunzea. Post revocation, the remaining claims are all to methods of treatment. 19 Following amendment to incorporate the dependency from claim 1, claim 5, the only independent claim, claims: A method of treatment in which an essential oil derived from the shrub Kunzea ambigua, obtained by steam distillation of the green matter of the shrub, is applied topically as a treatment to relieve pain, minimize bruising, or to assist in healing. 20 Claim 6 (as amended) claims a method of treatment as claimed in claim 5 wherein the pain relieved is pain from muscle and tendon strain, impact trauma, gout, headaches and insect and other bites. 21 Claim 7 (as amended) claims a method of treatment as claimed in claim 5 wherein the use of the essential oil relieves sinus congestion. 22 The primary judge at [65] construed claim 7 as claiming a method of treatment in which the essential oil is applied topically to relieve sinus congestion. It is clear that the primary judge considered that other methods of treatment, such as those involving the inhalation of emitted vapours from the essential oil in order to relieve sinus congestion, were not methods of treatment involving topical application within the scope of claim 7 (or any of the claims). 23 Claim 10 (as amended) claims a method as claimed in any of claims 5 to 9 wherein the essential oil is applied in a carrier. 24 At [71], the primary judge noted that there was no expert evidence aimed at elucidating the meaning of the words "applied in a carrier" in claim 10. At [73], the primary judge stated that it was clear from what is said in the specification that the function of the carrier is to enable the oil to be topically applied at less than full strength. He noted that there was no suggestion in the body of the specification that the carrier may consist of a formulation including other ingredients that cannot be sensibly understood to act as a carrier for the oil. 25 It is apparent from his later findings of non-infringement that the primary judge did not regard other oils blended with the Kunzea ambigua oils to be carriers for the purposes of claim 10 (at [285] and [287]). Similarly, the primary judge did not regard the other ingredients in shampoo or conditioner to be carriers for the purposes of claim 10 (at [289], [290]). 26 Claim 11 (as amended) claims a method as claimed in claim 10 wherein the carrier is a vegetable oil. 27 Claim 12 (as amended) claims a method as claimed in claim 10 wherein the carrier is a lotion. 28 Claim 13 (as amended) claims a method as claimed in claim 10 wherein the carrier is an ointment. 29 There is no challenge to the primary judge's construction of the claims.

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Statutory provisions 33 Section 117 of the Patents Act extends the concept of infringement to "contributory infringement". It provides (and at the relevant times provided): 117 Infringement by supply of products (1) If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent. (2) A reference in subsection (1) to the use of a product by a person is a reference to: (a) if the product is capable of only one reasonable use, having regard to its nature or design - that use; or (b) if the product is not a staple commercial product - any use of the product, if the supplier had reason to believe that the person would put it to that use; or (c) in any case - the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier. 34 The question whether "use of a product … would infringe a patent", raised in s 117(1), turns on whether such use would infringe the exclusive rights given to the patentee. Those rights are defined in s 13, which relevantly provides: 13 Exclusive rights given by patent (1) Subject to this Act, a patent gives the patentee exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. … (3) A patent has effect throughout the patent area. 35 Schedule 1 to the Patents Act contains the following relevant definitions: exploit, in relation to an invention, includes: (a) where the invention is a product - make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process - use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use. … patent means a standard patent or an innovation patent. … patent area means: (a) Australia; and (b) the Australian continental shelf; and (c) the waters above the Australian continental shelf; and (d) the airspace above Australia and the Australian continental shelf. … supply includes: (a) supply by way of sale, exchange, lease, hire or hire-purchase; and (b) offer to supply (including supply by way of sale, exchange, lease, hire or hire-purchase). 36 At the hearing before the primary judge, Mr Hood did not place any reliance on s 117(2)(a). It can therefore be put to one side.

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Primary judge's reasons 37 The primary judge conducted a review of the case law concerning s 117 in considering whether the Oil is a staple commercial product, commencing at [159] with the High Court of Australia's judgment in Northern Territory of Australia v Collins (2008) 235 CLR 619 (Collins) and moving to the Full Court's judgment in AstraZeneca AB v Apotex Pty Ltd (2014) 226 FCR 324 (AstraZeneca) at [171]. 38 The primary judge noted at [160] that one question that arose in Collins was whether standing cypress pine trees (of the Callitris intratropica species) were a staple commercial product within the meaning of s 117(2)(b) of the Patents Act. The question was answered by the High Court in the affirmative. 39 Before considering Collins in detail, the primary judge referred to the dissenting judgment of French J (as his Honour then was) in the Full Court of this Court on the question of whether the trees were a staple commercial product: Collins v Northern Territory of Australia (2007) 161 FCR 549 (French, Branson and Sundberg JJ). French J held at [99] that millable timber in the form of standing trees is not a product manufactured to a particular use. 40 The primary judge noted that one matter raised by French J's judgment concerned the proper characterisation of the relevant product for the purposes of determining whether or not it is a staple commercial product. He observed that French J said at [97]-[98]: 97 … There is a preliminary question about the classification of what was supplied for the purpose of determining whether it was, at the time of supply, a staple commercial product. That translates, in the present case, to the question whether the relevant class is unmilled timber or unmilled timber of the species Callitris Intratropica. If the product class were rightly described as unmilled timber there would be no debate. The Court could take judicial notice of the fact that unmilled timber is a staple commercial product. 98 A different example may illustrate the point. No one would doubt that nails, bolts or screws are staple commercial products. These were examples offered in Pavel v Sony Corporation [1993] FSR 177. It may be that the bulk of nails, bolts and screws which are sold fall within a particular range of sizes. There may be some of unusual size or dimension or composition for which there is very little demand comparatively speaking. They are still part of the class of staple commercial products comprised by nails, bolts or screws as the case may be. Of course a nail, bolt or screw built to specification for an infringing use, like the top structure for convertible automobiles which was considered in Aro Manufacturing Company v Convertible Top Replacement Company Inc 377 US 476 (1964) would not be a staple article or commodity of commerce. In any event, it would be caught by s 117(2)(a) and the question of its character as a staple commercial product would be irrelevant. 41 The primary judge noted that in Collins (before the High Court), Gummow ACJ and Kirby J expressly agreed with the reasoning of French J extracted above. He noted in particular that their Honours quoted with approval French J's statement that the relevant product class to which Callitris intratropica timber belonged, for the purpose of s 117(2)(b), was "millable" timber. 42 The primary judge recognised that a similar question arose in the present case: is the relevant product an essential oil derived from native shrubs, or should it be defined more specifically as an oil derived only from shrubs of the genus Kunzea or, alternatively, shrubs of the Kunzea ambigua species? 43 The primary judge noted at [165] that none of the other judgments in Collins addressed the question raised by French J, and said that the other members of the High Court referred to the "timber in question" without finding it necessary to distinguish millable timber and millable timber of the relevant species. All other members of the High Court found that the timber in question was a staple commercial product within the meaning of s 117(2)(b). 44 At [166], the primary judge considered the reasons of Hayne J and Crennan J in Collins, commencing by extracting [34]-[38] from Hayne J's reasons. 45 At [167], the primary judge noted that at [41]-[43] and [48]-[50], Hayne J discussed the expression "staple commercial product": 41 I agree with Crennan J that a staple commercial product is one that is supplied commercially for various uses. While I agree with her Honour that this does not mandate an inquiry into whether there is "an established wholesale or retail market", I greatly doubt that a product could be described as a "staple commercial product" if there were not some market for its sale for various uses. The doubt lies in the fact that the product must be a commercial product and that, to be a "staple commercial product", it must be an article of commerce that not only can be used in a variety of ways but also is traded for use in various ways. But no question of that kind arises here. As Crennan J points out, leaving aside any supply to Australian Cypress Oil Co Pty Ltd (ACOC), timber of the kind at issue in this case was supplied to various licensees for a variety of uses. Those transactions were not so few or infrequent as to deny the existence of a market for the supply of that kind of timber for a variety of different uses. 42 The phrase "staple commercial product" must be read as a whole and it must take its meaning from the context in which it sits. In particular, it is to be recalled that s 117 creates a liability in a supplier of a product where the act of supply would otherwise not infringe a patentee's rights. Section 117 imposes liability on the supplier if use of the product supplied by the person to whom it is supplied would infringe. 43 In this setting "staple commercial product" should not be given a narrow meaning. To do so would expand the classes of supply which are reached by s 117, thus expanding the rights of the patentee where, by hypothesis, the act of supply is not otherwise an infringement of the patentee's monopoly. Further, the meaning given to "staple commercial product" must recognise that the central focus of s 117 falls upon the use of a product. The construction of the section must be approached with these two matters at the forefront of consideration. … 48 To read "staple commercial product" as identifying a product that is supplied commercially for various uses does not reflect the notion of principal or chief importance sometimes conveyed by the adjective "staple". But as Crennan J concludes, "staple", used adjectivally in the compound expression "staple commercial product", should not be read as directing attention to the economic significance of the product concerned. Rather, it should be read as inviting attention to the variety of uses to which the product both can be, and is in fact, put. It is that variety of uses which, when the product is supplied commercially, makes the product a staple commercial product. 49 As the reasons of Crennan J show, this construction of the provision is not inconsistent with the desire, expressed in the government's published response to the report of the Industrial Property Advisory Committee, to harmonise Australian patent law with the laws of Australia's major trading partners. But, as those reasons also show, the laws of the United States of America and the United Kingdom relating to indirect infringement are each expressed in terms that differ in important respects from s 117. There is, therefore, only limited assistance to be gained from considering the expressed desire for harmony with major trading partners. 50 It may be thought that to read "staple commercial product" as identifying a product that is supplied commercially for various uses leaves little effective work to be done by s 117(2)(b). In particular it can be observed that cases of "only one reasonable use" are dealt with in s 117(2)(a), and yet many cases in which a product has various uses will not fall within s 117(2)(b). The resolution of this apparent tension between the two provisions lies in the recognition that s 117(2)(a) is concerned with a product capable of only one reasonable use, whereas "staple commercial product" takes its operation from what is seen to occur in the market-place. The two paragraphs pose radically different questions. The question posed in s 117(2)(a) is: For what can the product be used? By contrast, the question posed in s 117(2)(b) is: To what uses is the product in fact put? If it is in fact supplied commercially for various uses, it is a staple commercial product and the supplier of such a product is not to be held liable as an infringer because the person to whom the product is supplied uses it in a way that infringes, even if the supplier has reason to believe that it may be used in that way. Reading the provision on this basis would bring within the reach of s 117(2)(b) the supply, for example, of a product previously traded for only one use where the supplier has reason to believe that it will be used for a new and infringing use. It would leave beyond the reach of s 117 the supply of a product that has previously been traded for various uses unless the supply falls within s 117(2)(c) - where the supplier instructs or induces a particular use which infringes, or advertises the product for that use. (Footnotes omitted; emphasis in original.) 46 Next, at [169], the primary judge set out the reasoning of Crennan J at [142]-[145] of Collins: 142 The precise scope of the expression "staple commercial product" is not clear. One ordinary adjectival use of "staple", applied to raw materials, conveys the meaning that the material is capable of being used as a constituent element in a number of other products. That focuses on the inherent qualities of the product. Another equally well-known ordinary adjectival use of "staple" conveys the meaning that a product has a foremost place among products, for example, in a particular location. That focuses on the distribution of a product rather than upon its inherent capacity to be a constituent in a number of other products and overlaps with the idea that the product be a "commercial" product. 143 It has been suggested by at least one writer in respect of European rights that a "staple commercial product" has two main qualities: first, it must be "[a] basic product commonly used for various purposes", and secondly, it must be "[g]enerally available on the market". 144 Raw materials such as wool or timber undoubtedly have the first quality. As to the second quality, it is necessary to recognise that s 117(2)(b) operates to limit liability for contributory infringement. Policy arguments in favour of imposing liability for contributory infringement are much weaker with a product that has significant non-infringing uses. The legislative intention evinced in the statutory language, and apparent also from the relevant secondary materials, is to except from liability, the supply of products with significant non-infringing uses, or as it has been put in relation to the American provisions, products with "lawful as well as unlawful uses". A preference for such a construction has also been essayed in respect of s 60(3) of the Patents Act 1977 (UK) by a writer who states "the intention is to stop material particularly adapted to the use of an invention being made available to a putative infringer, but that material which has and, importantly, had, a general purpose of more than de minimis utility, falls within the [UK] exception." 145 The phrase "staple commercial product" means a product supplied commercially for various uses. This does not mandate an inquiry into whether there is "an established wholesale or retail market" or into whether the product is "generally available" even though evidence of such matters may well be sufficient to show that a product is a "staple commercial product". The relevant inquiry is into whether the supply of the product is commercial and whether the product has various uses. Leaving aside the supply to ACOC, the timber here was supplied on commercial terms to various licensees for a variety of non-infringing uses. Accordingly, the Northern Territory is protected by the limitation in s 117(2)(b). (Footnotes omitted.) 47 After noting at [170] that Heydon J agreed with Crennan J's reasons with respect to the operation of s 117(2)(b) of the Patents Act, the primary judge moved on to consider AstraZeneca. 48 At [171], the primary judge observed that the plurality in AstraZeneca (with whom Jessup J agreed) noted that the considerations relevant to the question of whether a product is a staple commercial product include how widely the product is used and for what range of purposes. In AstraZeneca, the Court was concerned with the question of whether a pharmaceutical compound known as rosuvastatin was a staple commercial product within the meaning of s 117(2)(b). At first instance (Apotex Pty Ltd v AstraZeneca AB (No 4) (2013) 100 IPR 285) the trial judge had rejected such an argument at [511]: Despite the fact that I accept that rosuvastatin has a number of medical uses, not just the treatment of hypercholesterolemia, I cannot accept that it should be characterised as a "staple commercial product". The difficulty I have arises from the word "staple", which does indicate something more than merely a "commercial product". The reasoning in Collins does not lead me to the view that the fact that a product can be used in one or even a number of non-infringing ways is itself sufficient to make the product a staple commercial product. While "staple" is not concerned with the economic significance of uses, it is concerned with the variety of uses. The variety of uses in this case is confined by the nature of the product to a limited class, being the treatment of diseases of a particular kind or class (albeit different diseases) in humans. Rosuvastatin, despite its usefulness for a variety of disease conditions, is not able to be compared to timber (as in Collins) or, for example, types of pharmaceutical products which might be useful for many human conditions. It is for these reasons I conclude that the rosuvastatin products proposed to be supplied by the generic parties are not staple commercial products. 49 At [172], the primary judge set out the Full Court's reasoning in AstraZeneca at [429]-[431] and observed that the Full Court had focused on the range of uses to which rosuvastatin could be put, which appeared to be limited to the prevention or treatment of a particular disease contributing to its progression. The primary judge noted that in the present case the therapeutic uses to which the Oil may be put are very broad indeed and extend to the treatment of a wide range of conditions including bruising, sinus congestion, cold sores, dermatitis, rashes and acne. The Oil may also provide relief from the symptoms of influenza, relief from the pain of arthritis and relief of nervous tension, stress and anxiety. 50 At [174]-[181], the primary judge summarised the evidence of Dr Christian Narkowicz relied on by Mr Hood as to why the Oil is not a staple commercial product. 51 At [179], the primary judge accepted that the Oil is commonly used for its perceived therapeutic properties. The primary judge found that the evidence showed that the Oil is considered to be a commodity or a raw material, rejecting the evidence of Dr Narkowicz to the contrary. He also found that the Oil is supplied in its raw state for use as an ingredient to manufacture various consumer products, noting that Dr Narkowicz did not suggest that this use was an uncommon or de minimis use. 52 At [180], the primary judge referred to Dr Narkowicz's internet searches for products containing Kunzea ambigua oil, and that the products found contained either the Oil by itself, or in combination with other oils, or in a lotion, soap or similar. The primary judge noted that although Dr Narkowicz did not mention products advertised for use in aromatherapy, he found that it was clear from the evidence that Kunzea ambigua oil is also used for aromatherapy and in a variety of personal care products used for hair and skin care. 53 At [183], the primary judge accepted the respondents' submission that the Oil is a staple commercial product. The primary judge gave four reasons for his conclusion. 54 First, at [185], the Oil is a raw material that is supplied commercially for use in either its raw form or as an ingredient in a range of hair and skin products. It is a basic product with a wide variety of possible uses. 55 Secondly, at [186], the Oil may be used for a range of therapeutic purposes due to its anti-inflammatory and antimicrobial properties. Although the method of treatment claims are extremely broad, they do not extend to many of the uses for which the oil is supplied. For example, none of the relevant claims cover the inhalation of vapours produced from the Oil (i.e. aromatherapy) or the use of the Oil in a blend of essential oils. Use of the Oil in these ways would not infringe any of the method of treatment claims of the Patent. In this regard, the primary judge noted that he was satisfied that the Oil can be, and in fact is, used for a range of different non-infringing purposes. 56 Thirdly, at [187], the Oil has been registered on the Australian Register of Therapeutic Goods (ARTG) since 2002 for a wide range of indications. Not all of these indications are within the scope of the claims. For example the Oil is registered for use in the relief of nervous tension, stress and mild anxiety. None of the claims cover the use of the Oil for that purpose. Even the wide language of claim 5 ("to assist in healing") would not extend to the use of the Oil for the relief of nervous tension, stress or mild anxiety. The primary judge highlighted the "irony" of the applicant's ARTG registration showing the route of administration as "inhalation" in circumstances where he found that none of the relevant claims covered the inhalation of vapours produced from the Oil. 57 Fourthly, at [188], the primary judge noted that the crucial question was whether the relevant product is supplied commercially for various uses: see Crennan J in Collins at [145]. The primary judge observed that the fact that the Oil is not widely available and is supplied by a comparatively small number of wholesalers and retailers, or that it is expensive when compared to some other essential oils, is beside the point. The primary judge found that the evidence establishes that Kunzea ambigua oil is commercially supplied and used for various purposes. 58 The primary judge concluded at [189] by noting that even if the relevant class of products is narrowly defined as consisting of essential oils derived from shrubs of the Kunzea genus or, alternatively, the Kunzea ambigua species, the products within the class are still to be treated as staple commercial products. His Honour continued: That said, I am inclined to think that the proper classification of the product for the purpose of s 117(2)(b) is not so confined but encompasses all essential oils derived from native shrubs. It seems to me that these are all members of a homogeneous class of products comprising essential oils derived from various native plant species many of which have well known antimicrobial and anti-inflammatory properties. While some essential oils may be more effective in the treatment of various conditions than others (just as certain species of timber are likely to be more suitable for building than others) they are nevertheless within the same class of products. On that basis each member of that class (which would include kunzea, tea tree, eucalyptus, lavender and sandalwood oils) can be regarded as a staple commercial product within the meaning of s 117(2)(b) of the Act. 59 At [224], the primary judge held that the infringement case based on s 117(2)(b) against Down Under Enterprises failed by reason of the finding that Kunzea ambigua oil is a staple commercial product. For the same reason the primary judge held at [256] that the infringement case against New Directions and at [270] the infringement case against Native Oils based on s 117(2)(b) must also fail.

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Consideration 64 It is convenient to start with Mr Hood's challenge to the primary judge's factual findings before addressing his principal contention that the Oil is not a staple commercial product. 65 Mr Hood identified eight matters from Dr Narkowicz's evidence that he says were not taken into account, or afforded sufficient weight, by the primary judge. Of these, six matters were expressly noted by the primary judge when discussing Dr Narkowicz's evidence at [175]-[181] and referred to in the four reasons given by his Honour for his conclusion at [184]-[188]. The eight matters identified by Mr Hood are: (a) the Oil has antibacterial and antifungal properties and may assist in healing and reducing bruising. Consumers with knowledge of these properties usually seek out the Oil because of them; (b) the Oil is considered a niche product in the essential oil market due to its therapeutic properties and exclusivity to Tasmania; (c) the most common commercial use of the Oil is therapeutic use (which includes aromatherapy). Dr Narkowicz was not aware of any other actual commercial uses but if there are any other uses they are uncommon; (d) the Oil is usually incorporated into other goods (such as soaps, lotions, and topical creams) for therapeutic properties and not for its smell; (e) the Oil cannot be used for internal human use or animal uses because of regulatory requirements; (f) because the Oil is not high yielding, it is very expensive. The high cost of producing the Oil makes other potential uses not commercial or practical, such as in household and industrial applications (for example, cleaning agents and disinfectants); (g) the Oil is not a commodity or raw material as, inter alia, it is not readily available and is typically sold to persons who seek it out for its particular properties; and (h) the Oil is not a "raw material" but is rather a "manufactured product, ready for distribution and use as is, or for incorporation into other manufactured products". 66 At the outset it must be noted that despite not making any challenge to the primary judge's construction of the claims, Mr Hood's appeal grounds and his written and oral submissions largely proceed to ignore his Honour's construction of the claims. 67 Mr Hood's submissions conflate any asserted "therapeutic use" of the Oil, whatever the method of administration or condition, with a method of treatment falling within the scope of the claims. On Mr Hood's case, any "therapeutic use" of the Oil is to be excluded from the consideration of whether the Oil is a staple commercial product as it is a use falling within the Patent monopoly. 68 Mr Hood submits that the manner in which the primary judge characterised topical application ignored that the use of the Oil in a bath, for example, involves a topical application to the skin, and that administration by inhalation involves a topical application to the lungs. The primary judge's contrary construction of topical application is not challenged in the notices of appeal. 69 Mr Hood also submits that whether or not the Oil is a component of another product fails to recognise that it is still an infringement of the Patent to use the Oil to treat a particular condition even if the Oil is combined with other ingredients. Moreover, he submits that the Patent covers circumstances where the Oil is applied in a carrier. 70 These submissions fail to take into account the primary judge's construction of the limited scope of the claims. 71 The method of treatment claims of the Patent are limited in scope. The primary judge at [65] construed the method of treatment claimed as being limited to a method of treatment in which the essential oil is applied topically. Methods of treatment, such as those involving the inhalation of emitted vapours from the essential oil are not methods of treatment within the scope of the claims. 72 At [186], the primary judge held that the method of treatment claims do not extend to many of the uses for which the Oil is supplied. The examples given by the primary judge of uses outside the claims were the inhalation of vapours produced from the Oil (i.e. aromatherapy) and the use of the Oil in a blend of essential oils. These were not the only examples of non-infringing use in the reasons. The primary judge made a number of express findings of non-infringement in respect of various examples from the range of products containing the Oil offered for sale by Heritage Oils which were the subject of Mr Hood's infringement allegations. The examples were taken from the evidence of sale and supply relied upon by Mr Hood for his infringement case against Heritage Oils. 73 At [282], the primary judge discussed Heritage Oils' Kunzea Oil (10mL), the label of which reads "use with a vaporiser as it can relieve respiratory complaints and a wonderful relaxing bath", holding that the label refers not to topical application but to use of the oil with a vaporiser and as a bath oil. 74 At [285], his Honour discussed Heritage Oils' product "Smitten", a blend of Calendula, Arnica, Sandalwood Nut oil, Almond oil and Kunzea oil, finding that a blended oil does not fall within any of the relevant claims. 75 At [286], the primary judge noted that what he had said in relation to "Smitten" applied equally to another Heritage Oils product called "Joint and Muscle Massage Oil", which was also a blend of oils including Rosehip, Sandalwood Nut and Kunzea ambigua oil. His Honour also observed at [287] that the use of the "Joint and Muscle Massage Oil" could only be within claims 10 to 13 if all the other oils included in the blend could be regarded as a carrier of the Kunzea ambigua oil, noting that there was no evidence to support such a characterisation and concluding that the other oils did not constitute, either individually or collectively, a carrier within the meaning of claims 10 to 13. 76 At [288], the primary judge referred to various shampoos, conditioners and soaps supplied by Heritage Oils which included amongst their ingredients Kunzea ambigua oil, finding none of those products to fall within any of the claims relied on by Mr Hood. The primary judge set out his reasons for the finding at [289] for the shampoo, [290] for the conditioner, and [292] for the soap. 77 None of the non-infringement findings mentioned above are challenged in the appeals. Rather, Mr Hood makes the novel submission that, as the findings related to Heritage Oils' products, and as Heritage Oils was not a party to any of the appeals, the findings could not be relied upon by the Court to uphold the primary judge's findings as to staple commercial product on appeal. 78 This submission must be rejected. Orders were made in each of the first instance proceedings that evidence in one proceeding was evidence in another. In the absence of a challenge to the factual findings as to non-infringement referred to above, the findings stand and may be relevant to the Staple Commercial Product issue. The findings cannot be ignored, or put to one side, simply because they appear in a part of the judgment dealing with the case of a respondent below which is not a party to any of the appeals. 79 Mr Hood further submits that, even if the Heritage Oils products are relevant to the appeal proceedings, in each example, contrary to his Honour's findings, the Oil was used for a therapeutic use that fell within the claims and the example was therefore not a commercial use for the purposes of considering whether Kunzea oil is a staple commercial product. Again, the primary judge's construction and the factual findings referred to above are not challenged on appeal. 80 The Court was taken by Mr Hood's counsel to the "Smitten" product, the "Joint and Muscle Massage Oil" and the various shampoos, conditioners and soaps discussed by the primary judge at [283]-[292]. Ignoring his Honour's construction of the claims and relevant non-infringement findings, Mr Hood submitted that each was a therapeutic topical use of the Oil and "they would all be infringing uses of the patent". For the reasons discussed above, this submission is not correct and is contrary to the primary judge's unchallenged non-infringement findings referred to above. 81 In addition to the evidence of the variety of uses to which the Oil is put, there was evidence as to the commercial supply of the Oil by Bush Pharmacy and Down Under Enterprises. Mr Hood submits that all the evidence other than the "well-reasoned and considered evidence of Dr Narkowicz" comprised "inadmissible evidence that should be given little weight". As the respondents note, Mr Hood does not challenge any of the primary judge's evidentiary rulings. 82 Dr Narkowicz accepted that Kunzea oil is supplied not only in its pure form but also incorporated into soaps, lotions and topical creams. 83 Against the backdrop of the evidence of commercial supply and the various uses discussed above, the primary judge was justified in his decision not to accept the evidence of Dr Narkowicz that the Oil is not properly considered a commodity or raw material, and to make his own finding to the contrary effect. 84 As the primary judge correctly identified at [188], the critical question is whether the relevant product is supplied commercially for various uses: Collins per Crennan J at [145]. Having identified various uses for which the Oil is supplied commercially, it is not to the point to consider which of those uses is the most common or uncommon. 85 The primary judge's reference to Mr Hood's ARTG registration at [187] was confirmatory of the variety of uses that he had considered and not determinative of the issue of whether the Oil is supplied commercially for various uses. As his Honour correctly identified, the uses contemplated in the ARTG registration, which included administration via inhalation, are broader than the methods of treatment claimed in the Patent. 86 It is clear from the primary judge's reasons from [174]-[182], leading up to his express conclusion at [184], that his finding as to staple commercial product was made in relation to the narrowest product class: Kunzea ambigua oil. 87 The evidence which supported the primary judge's four reasons comprised example uses of Kunzea ambigua oil. The evidence showed that Kunzea ambigua oil has a variety of uses and those uses are not limited to therapeutic uses, or confined to therapeutic use for the treatment of one condition (cf AstraZeneca). 88 There was ample evidence before the primary judge on which to make the findings he made, which were the basis of his conclusion that Kunzea ambigua oil is a staple commercial product. Accordingly, no error is shown in the primary judge's conclusion that Kunzea ambigua is a staple commercial product. 89 Having found that the narrow product class, Kunzea ambigua oil, is a staple commercial product, his Honour turned his mind to the proper product classification for his consideration of s 117(2)(b). At [189] the primary judge observed that he thought the relevant product class is not narrowly defined as consisting of Kunzea ambigua oil, or even essential oils derived from shrubs of the genus Kunzea. Rather, he was inclined to consider that the proper product classification for the purposes of s 117(2)(b) encompasses all essential oils derived from native shrubs. Such a classification is consistent with that of French J in Collins; the general class of "millable timber", rather than the narrowly defined class of millable timber from the particular species Callitris intratropica. 90 Having upheld the primary judge's conclusion as to staple commercial product on the narrowest view of the product (namely, Kunzea ambigua oil), it is unnecessary for us to consider whether the correct class of product for the consideration should have been the broader class (namely, all essential oils from native shrubs). 91 For the above reasons, we reject the grounds of appeal relating to the Staple Commercial Product issue.

[39]

Primary judge's reasons 94 The primary judge stated at [190] that the respondents contended that s 117 does not apply to export sales, that is, sales of product by the respondents to customers situated outside the patent area. 95 Applying the presumption that general words used in a statute are interpreted to apply within territorial limits, the primary judge held at [192] that the act of supply or offering to supply, upon which liability under s 117 hinges, must be an act that occurs with the territorial limits which, for present purposes, corresponds to what is defined in the Patents Act as the "patent area", citing Jumbunna Coal Mine, NL v Victorian Coal Miners' Association (1908) 6 CLR 309 at 363 per O'Connor J and Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 423-428 per Dixon J. In these appeals, Mr Hood's counsel made clear during oral submissions that Mr Hood does not challenge [192] of the primary judge's reasons (T27-28, T67). In other words, Mr Hood accepts that the act of supply or offering to supply must take place in the patent area. 96 The primary judge then identified, at [193], a further issue, namely: can s 117 apply in circumstances where a person supplies a product to another person for use outside the patent area? The primary judge noted, at [197], that there are two ways to interpret the opening words of s 117(1): (a) The first is to treat the words "infringe the patent" as if they refer to nothing more than using the product in a way that is within the scope of a claim. (b) The second is to ask whether use of the product would constitute an act of infringement. On this interpretation, if the product is to be used outside the patent area, then the supplier would not be liable under s 117. 97 The primary judge reasoned as follows: 200 Section 117(2)(a) focuses on the nature or design of the product. In circumstances where subpara (a) applies, the state of mind of the supplier is irrelevant. Liability will arise under s 117(1) when read with s 117(2)(a) simply because the supplier has supplied a product within the patent area which is capable of only one reasonable use. The fact that the product was supplied for use outside the patent area would not spare the supplier from liability if the product was, by reason of its design, only capable of infringing use. 201 The position under s 117(2)(b) and (c) is different. 202 Subparagraph (b) of s 117(2) refers to "the person". This is a reference to the same person referred to in the opening words of s 117(1). It is this person's postulated use of the product that is to be considered when determining whether s 117(2)(b) applies. In circumstances where s 117(2)(b) applies, the use of the product must be a use to which the supplier had reason to believe the person would put the product. 203 But even if the supplier has reason to believe that the product will be put to a use within the scope of a claim of the patent, it does not necessarily follow that such use would infringe the patent. An obvious situation in which the use of a product by the user would not infringe the patent is where the use takes place outside the patent area. 204 It seems to me that it would not be in keeping with the purpose or policy underlying s 117 to apply s 117(2)(b) in situations where the supplier has no reason to believe that the product will be used in the patent area. Use of a product outside the patent area is not a use that would infringe a patent granted under the Act. That is not to say that for s 117(2)(b) to apply, it is necessary for the supplier to have reason to believe that the person would infringe. That would depend on a number of considerations including an awareness of the existence of the patent and a correct understanding of the scope of the relevant claims. But it seems to me that in requiring that the supplier have reason to believe that the person would put the product to a use that would infringe a patent, the words "the use of a product" in s 117(1) are necessarily referring to a use of the product in the patent area. Hence, s 117(2)(b) should be understood as referring to a use of the product in the patent area. 205 Subparagraph (c) of s 117(2) raises different considerations. Like subpara (a), it is not concerned with the supplier's state of mind. 206 The way in which subpara (c) is expressed is slightly awkward but I think the intention is clear enough. It is directed at instructions or inducements for use either given to the user of the product or contained in an advertisement published by or with the authority of the supplier of the product which must occur (by implication) in the patent area. Liability can arise under s 117(1) when read with s 117(2)(c) even if the supplier has no reason to believe that the person who had been given the relevant instruction or inducement will follow that instruction or act in accordance with that inducement. (Emphasis added.) 98 The primary judge considered the infringement claim against Down Under Enterprises at [224]-[254]. The key findings or conclusions of the primary judge were as follows: (a) In circumstances where the primary judge had found that Kunzea ambigua oil is a staple commercial product, the case based on s 117(2)(b) failed: at [224]. (b) The primary judge was not persuaded that any Kunzea ambigua oil supplied or offered for supply by Down Under Enterprises prior to late 2016 was oil produced by anyone other than Mr Hood: at [243]. (c) In respect of 2017, the primary judge concluded that the evidence did not establish that Down Under Enterprises supplied Down Under Enterprises, Inc (Down Under USA), or any other person, in the patent area: at [246]. (d) Further, the primary judge was not persuaded that in 2017, or at any material time thereafter, Down Under Enterprises offered to supply Kunzea ambigua oil in the patent area: at [253].

[41]

Consideration 104 As noted above, Mr Hood does not challenge [192] of the primary judge's reasons. That is, Mr Hood accepts that, for the purposes of s 117, it is necessary to show that the supply, or offer to supply, occurs in the patent area. 105 Section 117 has been set out at [33] above. The legislative history of s 117, and comparative provisions, were considered by Crennan J in Collins at [100]-[115]. As is apparent from the text of s 117, subsection (1) is qualified by subsection (2): see Collins at [129] per Crennan J. 106 Insofar as Mr Hood challenges the primary judge's construction of s 117(2)(b) at [204] of his Honour's judgment, it does not appear to be necessary to determine whether that construction is correct. For the reasons given above, we have concluded that no error is shown in the primary judge's conclusion that the Oil is a staple commercial product. It follows that, regardless of the construction of s 117(2)(b) found by the primary judge, the claim of infringement based on s 117(1) fails. 107 The notice of appeal does not challenge the primary judge's construction of s 117(2)(c). It is therefore unnecessary to consider whether this construction is correct. 108 We note for completeness that, insofar as the primary judge expressed the view that s 117 was not directed to situations where the use of the product is to take place outside of the patent area, we see no error in his Honour's approach. The text, purpose and context (including the legislative history) of s 117 indicate that it is concerned to affix liability for infringement on a supplier in circumstances where the use of the product would infringe the patent. As the primary judge observed, use of a product outside the patent area does not constitute infringement. Accordingly, the provision is not directed to such situations. 109 Insofar as Mr Hood contends that the primary judge erred in concluding that Mr Hood had not established any relevant supply by Down Under Enterprises in the patent area, we are not persuaded that any error has been shown in his Honour's factual findings in relation to this matter. It was for the applicant, Mr Hood, to establish that Down Under Enterprises had supplied (or offered to supply) the relevant product in the patent area. For the reasons given by the primary judge, Mr Hood failed to do so. At [243], the primary judge concluded that he was not persuaded that any Kunzea ambigua oil supplied by Down Under Enterprises prior to late 2016 was oil produced by anyone other than Mr Hood. It was open to the primary judge to make this finding, for the reasons he gave. At [246], the primary judge concluded that it was not open to him (on the evidence) to find that any supply of product by Down Under Enterprises to Down Under USA, or any other person, took place within the patent area. It was open to the primary judge to make this finding, for the reasons he gave. It has not been demonstrated that there was any error in the primary judge's finding. The mere fact that Down Under Enterprises (an Australian entity) supplied Down Under USA does not establish that the act of supply (or offering to supply) took place in the patent area. At [253], the primary judge concluded that he was not persuaded that in 2017 or any material time thereafter Down Under Enterprises offered to supply Kunzea ambigua essential oil in the patent area. Again, it was open to the primary judge to make this finding, for the reasons he gave at [247]-[252]. 110 For these reasons, we reject ground 3 in the appeal relating to Down Under Enterprises.

[47]

Statutory provisions 117 We refer to the statutory provisions relating to inventive step as they stood at the priority date (23 October 1996). 118 Section 18 of the Patents Act relevantly provided that a patentable invention is an invention that, so far as claimed in any claim, "when compared with the prior art base as it existed before the priority date of that claim … involves an inventive step": s 18(1)(b)(ii). 119 Section 7 relevantly provided: (2) For the purposes of this Act, an invention is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, whether that knowledge is considered separately or together with either of the kinds of information mentioned in subsection (3), each of which must be considered separately. (3) For the purposes of subsection (2), the kinds of information are: (a) prior art information made publicly available in a single document or through doing a single act; and (b) prior art information made publicly available in 2 or more related documents, or through doing 2 or more related acts, if the relationship between the documents or acts is such that a person skilled in the relevant art in the patent area would treat them as a single source of that information; being information that the skilled person mentioned in subsection (2) could, before the priority date of the relevant claim, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant art in the patent area. 120 The expression "prior art information" was relevantly defined in Sch 1 to the Patents Act as meaning "information that is part of the prior art base in relation to deciding whether an invention does or does not involve an inventive step". The expression "prior art base" was relevantly defined as meaning: prior art base means: (a) in relation to deciding whether an invention does or does not involve an inventive step: (i) information in a document, being a document publicly available anywhere in the patent area; and (ii) information made publicly available through doing an act anywhere in the patent area; and (iii) where the invention is the subject of a standard patent or an application for a standard patent - information in a document publicly available outside the patent area; …

[48]

Primary judge's reasons 121 The primary judge summarised the relevant principles regarding inventive step at [116]-[117]: 116 Section 7(2) of the Act uses the word "obvious" in the course of describing what must be established before an invention can be held not to involve an inventive step. Something may be "obvious" in light of the common general knowledge, or the common general knowledge coupled with relevant s 7(3) information, if it is "plain or open to the eye or mind, something which is perfectly evident to the person thinking on the subject" (Olin Mathieson Chemical Corp v Biorex Laboratories Ltd [1970] RPC 157 at 188) or something which "would at once occur to anyone acquainted with the subject and desirous of accomplishing the end" (Vickers, Sons & Co Ltd v Siddell (1890) 15 App Cas 496 at 502). 117 An invention may also be obvious in light of the common general knowledge if the person skilled in the art faced with the same problem as the inventor would have taken as a matter of routine whatever steps might have led from the prior art to the invention, whether they be the steps of the inventor or not (Wellcome at 286 per Aickin J) or (using the language of the "modified Cripps question") if the person skilled in the art would be directly led as a matter of course to take such steps in the expectation that doing so might well produce a useful or better alternative to the prior art (Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 212 CLR 411 at [50]-[53]). However, a claimed invention is not obvious merely because the person skilled in the art would consider that it was "worthwhile to try". 122 At [118], the primary judge stated that much of the evidence adduced by the respondents in support of their contentions that the relevant claims were invalid for lack of inventive step took as its starting point the Dragar Thesis, a document annexed to the affidavit of Dr Christine Carson. This was said to be a document containing s 7(3) information that the person skilled in the art could, before the priority date, be reasonably expected to have ascertained. However, as the primary judge noted, ultimately, the respondents abandoned their reliance upon the Dragar Thesis. As a result, the question whether the claimed invention was invalid for lack of inventive step was to be determined solely by reference to the common general knowledge as it existed at the priority date. 123 The primary judge set out his findings as to the common general knowledge at [121]-[142]. As noted above, these findings are not challenged on appeal or cross-appeal. 124 The primary judge summarised the respondents' contentions at [143]-[144]. In summary, the respondents submitted that it would have been "very plain" to the person skilled in the art that an essential oil derived from Kunzea ambigua would be likely to be suitable for use in the treatment of a range of conditions described in the method of treatment claims. 125 The primary judge stated at [144] that, according to the respondents' submissions, the question whether the method of treatment claims were obvious should be assessed by reference to the evidence of Dr Carson, a microbiologist, to the effect that, if someone brought her a sample of Kunzea ambigua before the priority date to determine whether it would yield a useful essential oil, she would have first ascertained its biological heritage and then arranged for tests to be done, including GC-MS tests to determine its chemical profile. The respondents submitted to the primary judge that, armed with details of the plant's chemical profile, Dr Carson would have immediately observed the high quantity (around 63%) of alpha-pinene and 1,8-cineole (known as monoterpenes with antimicrobial activity) and concluded that the essential oil would reasonably be expected to be useful in the treatments of the ailments disclosed in the claims. The respondents submitted to the primary judge that the evidence of Dr Southwell, a plant research chemist, was to the same general effect, except in relation to the use of the essential oil as a treatment for gout. 126 The primary judge rejected these submissions. His Honour's core reasoning on this issue was at [145]-[151]: 145 The difficulty with the respondents' submissions in relation to inventive step is that they take as their starting point a hypothetical situation in which the person skilled in the art was provided with a sample of Kunzea ambigua for evaluation in much the same way that Mr Hood provided to Professor Menary the sample of Kunzea ambigua found by Mr Hood on his property. Approached in that way, Mr Hood's decision to send Professor Menary a sample of Kunzea ambigua for the purpose of testing it to determine whether it might yield a useful essential oil is excluded from the inventive step analysis even though the idea of undertaking such testing was the first step along the road that led to the claimed invention. 146 There is nothing in the evidence that would indicate that, as at the Priority Date, a person skilled in the art would have had any reason to test Kunzea ambigua for the purpose of determining whether it might yield an essential oil derived from the plant that could be useful as a method of treatment. 147 The evidence showed that essential oil extracted from a number of plant species have been used to [treat] various conditions. It was well-known at the Priority Date that tea tree oil products produced from Melaleuca alternifolia could be used for therapeutic purposes and as a treatment for cuts and bruises, congestion, insect bites and various other ailments. But that does not provide a sufficient basis for concluding that a person skilled in the art would be sufficiently motivated to analyse the essential oil derived from Kunzea ambigua in the expectation that it might well provide a useful treatment for such ailments. 148 The respondents' evidence on the question of inventive step shows that as at the Priority Date there were a number of researchers who were investigating essential oils extracted from native plants with a view to supplying a growing market for such products. However, there is no evidence to suggest that it occurred to any person other than Mr Hood to investigate the possibility of using the essential oil derived from Kunzea ambigua as a treatment for any one or more of the various ailments described in the claims. 149 The idea that it would have been obvious to a person skilled in the art, at the Priority Date, to do what Mr Hood did relies on an ex post facto analysis that assumes that the person skilled in the art would have been asked to analyse a sample of Kunzea ambigua for the purpose of ascertaining whether it might be a promising candidate for evaluation in clinical trials aimed at determining whether it would provide an effective method of treatment of one or more such ailments. 150 There is a gap in this ex post facto analysis in that it does not adequately explain how Kunzea ambigua would have presented itself as a candidate to begin with. To say that it was a natural choice because it has a chemical profile which would be likely to have antimicrobial activity does not explain why the person skilled in the art would have been drawn to consider Kunzea ambigua as a potential therapeutic agent in the first place. 151 In my view the evidence does not show that any of the methods for treatment claims lacks an inventive step. 127 The primary judge also referred, at [152]-[153], to the judgment of the plurality in AstraZeneca at [201]-[203].

[50]

Consideration 130 The cross-appellants do not challenge the primary judge's statement of the applicable principles. The challenge is, rather, to the way in which the primary judge applied those principles to the facts and circumstances of this case. 131 In considering the challenge to the primary judge's conclusion as to inventive step, it is important to keep in mind the primary judge's finding, at [107], that the evidence did not establish that the essential oil from Kunzea ambigua had been used for therapeutic purposes before the priority date. That finding is not challenged on appeal or cross-appeal. 132 The primary judge's essential reasoning in relation to inventive step (set out above) needs to be understood in the context of the way that the case was presented by the respondents below. The primary judge's essential reasons responded to the way the case had been presented. In our view, it was open to the primary judge to reject the respondents' submissions on the basis that he did, namely that the respondents took as their starting point a hypothetical situation in which the person skilled in the art was provided with a sample of Kunzea ambigua for evaluation. As the primary judge found, there was nothing in the evidence that would indicate that, as at the priority date, a person skilled in the art would have had any reason to test Kunzea ambigua for the purpose of determining whether it might yield an essential oil that could be useful as a method of treatment. This was a difficulty with the respondents' case below. 133 Insofar as the primary judge referred at [152]-[153] to AstraZeneca, this was to support the conclusion that his Honour had already reached. We do not see the reference to AstraZeneca in that way as demonstrating error. Further, while it is true that the passage in AstraZeneca at [202]-[203] refers to a problem that the invention is explicitly or implicitly directed at solving, the passage is nevertheless generally supportive of the primary judge's approach. 134 Accordingly, we reject the cross-appellants' challenge to the primary judge's conclusion regarding inventive step.

[53]

Primary Judge's reasons 137 The primary judge dealt with the Australian Consumer Law claim against the respondents generally at [332]-[346] and Down Under Enterprises in particular at [360]-[366]. It is also relevant to refer to factual findings made earlier in the judgment, in the section dealing with the infringement claim against Down Under Enterprises (at [224]-[254]). 138 In the earlier part of the judgment, the primary judge made the following relevant findings or statements: (a) In 2001, Down Under USA was founded. Dee-Ann Prather, who gave evidence at trial, is the President of Down Under USA: at [229]. (b) Ms Prather said that Down Under USA was formed in 2001 while she and her husband, Phillip Prather, were living in the United States: at [229]. (c) According to Ms Prather, since 2001, the domain name www.downunderenterprises. com (the Down Under website) has been owned by Down Under USA: at [229]. (d) According to Ms Prather, the Down Under website is maintained by Down Under USA: at [229]. (e) Ms Prather said that, since about mid-2007, Down Under USA has been wholly owned by Mr Prather (who is a citizen of the United States): at [229]. (f) In September 2007, Down Under Enterprises was established. This occurred when Ms Prather and her husband moved from the United States to live in Australia: at [230]. (g) The Kunzea ambigua oil acquired by Down Under Enterprises between 2006 and 2016 was produced by Mr Hood: at [236]. (h) In 2017, Down Under Enterprises commenced sourcing Kunzea ambigua oil from Bush Pharmacy. This was not oil produced by Mr Hood: at [242]. 139 The primary judge described Mr Hood's pleadings relating to the alleged contraventions of the Australian Consumer Law as "problematic" because he did not plead any of the representations that he sought to rely on in closing submissions: see [333]. The primary judge stated, at [336], that although the case based on the Australian Consumer Law was not clearly pleaded, the central issue would not have taken the respondents by surprise. This was the allegation that at least some of the respondents had represented that their Kunzea ambigua oil products were listed on the ARTG (i.e. "listed goods") or registered on the ARTG (i.e. "registered goods") when in fact they were not. 140 The primary judge described the relevant provisions of the Therapeutic Goods Act 1989 (Cth) at [338]-[346]. At [342], the primary judge noted that Mr Hood's goods were listed in the ARTG as a medicine, i.e. they were goods that met both the definition of therapeutic goods and the definition of medicine that appear in s 3 of the Therapeutic Goods Act. 141 As noted above, the primary judge dealt with the Australian Consumer Law claim against Down Under Enterprises at [360]-[366]. His Honour noted, at [360], that the pleading was essentially identical to that filed in the proceeding against Bush Pharmacy (see [349] of the primary judge's judgment). The primary judge set out Mr Hood's closing submissions on this part of the case at [362], which were as follows: 76. The Down Under Website therefore represents that: (a) Down Under's Kunzea ambigua oil products are "registered with the Australian Therapeutic Goods Administration"; (b) Down Under's Kunzea ambigua oil products are listed on the ARTG with ARTG listing number "AUSTL 72143", being the number of the TGA Listing; (c) Down Under's Kunzea ambigua oil products were able to be used for the ARTG indications for which Mr Hood's Kunzea ambigua oil products are listed. 142 The primary judge found, at [363], that the Down Under website includes the express statement "Kunzea oil is registered with the Australian Therapeutic Goods Administration (AUSTL 72143)". The primary judge considered that this statement clearly indicated that the relevant goods offered for sale by Down Under Enterprises were registered goods or (at least) listed goods included in the ARTG. (In fact, the goods offered for sale by Down Under Enterprises were not so registered.) 143 The primary judge concluded, at [364], that he was satisfied that the first and second representations referred to in paragraph 76 of Mr Hood's closing submissions were conveyed by the relevant entity on the Down Under website, and that they were false. 144 In relation to the third representation relied on by Mr Hood in paragraph 76 of his closing submissions, the primary judge concluded at [365] that Mr Hood's case based on that representation failed. It is not necessary for present purposes to discuss this conclusion. 145 The primary judge concluded, at [366], that he was satisfied that there should be a declaration and an injunction based on the misleading and deceptive representations that he had found to have been made by Down Under Enterprises in contravention of ss 18 and 29(1)(a) of the Australian Consumer Law. In the orders made on 26 February 2021 in the Down Under Enterprises matter, paragraph 1 is a declaration of contravention and paragraph 5 is an injunction. The declaration and order were in the following terms: THE COURT DECLARES THAT: 1. By publishing the text "Kunzea oil is registered with the Australian Therapeutic Goods Administration (AUST L 72143)" on the website hosted at http://www.downunderenterprises.com, the respondent/cross-claimant has represented that its Kunzea ambigua oil products are: (a) "registered with the Australian Therapeutic Goods Administration"; and (b) listed on the Australian Register of Therapeutic Goods with ARTG listing number "AUSTL 72143"; which representations were: (c) misleading or deceptive, or likely to mislead or deceive, in contravention of section 18 of the Australian Consumer Law; and (d) false, in contravention of section 29(1)(a) of the Australian Consumer Law. THE COURT ORDERS THAT: … 5. The respondent/cross-claimant be permanently restrained from: (a) falsely representing that its Kunzea ambigua oil products are "registered with the Australian Therapeutic Goods Administration"; and (b) falsely representing that the Kunzea ambigua oil products sold by it are listed on the Australian Register of Therapeutic Goods with ARTG listing number "AUSTL 72143".

[56]

Costs issue 150 This issue may be stated as: whether the primary judge erred in ordering each respondent to pay a fixed portion of Mr Hood's costs of the cross-claims. This issue is raised by ground 5 of Mr Hood's appeal relating to Down Under Enterprises, ground 8 of Mr Hood's appeal relating to New Directions, and ground 5 of Mr Hood's appeal relating to Native Oils. The grounds are expressed in substantially the same terms. By way of example, ground 5 of Mr Hood's notice of appeal relating to Down Under Enterprises is as follows: The primary judge erred in finding in [38] of the Costs/Final Judgment that the Respondent is only liable to pay 14% of the Appellant's costs in defending the cross-claim, and ought to have found that the Respondent and the respondents in the other proceedings are each jointly and severally liable for 70% of such costs. 151 The primary judge dealt with issues of costs in the Costs Judgment. The primary judge referred to s 43 of the Federal Court of Australia Act 1976 (Cth) and applicable principles at [6]-[10] of the Costs Judgment. The primary judge discussed features of the proceedings before him at [13]-[27]. The primary judge referred to certain offers of compromise at [29]-[33]. 152 The key relevant part of the primary judge's reasoning for present purposes is at [34]-[39] of the Costs Judgment: 34 One of the challenges in making costs orders in these proceedings arises out of the multiplicity of proceedings and parties. There were five sets of proceedings, and five cross-claims. Ms Levinson did not file a cross-claim. The only cross-claim in the proceeding against Ms Levinson and Heritage Oils was filed by Heritage Oils. 35 There is in my view a need when dealing with costs in this case to ensure that the applicant does not recover more than what I think he is reasonably entitled to recover from the any of the cross-claimants in respect of the five proceedings. For example, it would be unjust to make a costs order which entitled the applicant to recover all of his party/party costs in respect of the issue of obviousness from any one of the five cross-claimants when the challenge to validity based on obviousness was relied on by all of them. Similarly, I think it would also be unjust to make any costs order that made any respondent in any one of the five proceedings jointly or severally liable for the costs of any respondent in any of the other proceedings. 36 I think the interests of justice are best served if each cross-claimant's potential exposure to an order for costs in respect of its cross-claim is limited to one fifth, or 20%, of the total party/party costs incurred by the cross-respondent in the five proceedings. The proportion of that 20% that each cross-claimant may be required to pay will then need to be ascertained after taking into account the cross-respondent's lack of success in relation to claims 1-4 and 8. I see no reason why the figure that is ultimately arrived at should not be the same for all five cross-claimants. 37 The cross-claimants were successful in obtaining orders for the revocation of claims 1-4 and claim 8. However, most of the focus of the evidence and the closing submissions directed to issues arising on the cross-claims was concerned with manner of manufacture and inventive step. I think those issues should be regarded as sufficiently [discrete] to justify the making of orders requiring the cross-claimants to pay the cross-respondent's costs in respect of those issues: PAC Mining Pty Ltd v Esco Corporation (No 2) [2009] FCAFC 52 at [11]-[12]. On that basis I propose to order that the cross-claimants collectively pay 70% of the cross-respondent's party/party costs of defending the cross-claims. 38 It follows that in each proceeding the cross-claimant must pay 14% of the cross-respondent's party/party costs of defending the cross-claims. 39 Having regard to the time spent on the inventive step issue and the manner of manufacture issue, this outcome reflects what I consider to be a fair and just result in relation to the cross-claims that takes account of the invalidity findings I made and those that I decline to make. 153 Mr Hood submits that: as a general rule, when a court orders that costs be paid by two or more persons, the costs liability is joint and several; not having a joint and several costs order will entail Mr Hood going to the trouble and expense of having to recover his costs of defending the cross-claim from each of the respondents/cross-claimants. Mr Hood notes that the primary judge observed that there was a need to ensure that Mr Hood did not recover more than he was reasonably entitled to recover. Mr Hood submits that an order that the five cross-claimants jointly and severally pay 70% would have had the same effect. Mr Hood refers to the respondents/cross-claimants' joint interest in the cross-claims and the extent to which they had common representation. 154 A procedural difficulty for Mr Hood is that two of the respondents below (Bush Pharmacy and Heritage Oils) have not been joined as respondents to the appeals, but the order Mr Hood seeks would affect them. 155 In any event, we are not satisfied that any error has been shown in the costs order made by the primary judge. It was within the power conferred by s 43 of the Federal Court of Australia Act to make such an order. The primary judge considered all relevant facts and matters. No basis to disturb the costs order has been shown.

At a glance

Court

Decision date

Before

Source

Judgment (57 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (11)

Cited By (3)