Northern Territory v Collins

Northern Territory v Collins - [2008] HCA 49 - HCA 2008 case summary — Zoe

[13]

The title given to the invention in the Patent is "Methods of producing essential oils from species of the genus callitris" and there are 20 claims. All but claim 12 are claims to a method; claim 12 is a claim to a blue oil containing guaiazulene when produced by a method according to any of claims 1‑11. The statement of claim did not identify any particular claim or claims which ACOC was said to have infringed.
The primary judge (Mansfield J) on 6 February 2006 directed that there be a separate trial on certain issues. His Honour later explained that the order was made to deal with the alleged contributory infringement by the Territory without extending the hearing into issues of validity of the Patent and infringement by ACOC. The validity of the Patent and infringement by the alleged actions of ACOC were assumed at the separate trial.
In many cases the formulation of specific questions to be tried separately from, and in advance of, other issues assists in the more efficient resolution of litigation, but where, as appears to have been the case here, preliminary questions are of mixed fact and law there is a particular need for precision both in formulating the questions and in specifying the facts upon which they are to be decided[2].
At the trial of the separate issues the parties agreed to a reformulation of issues on the footing that, if Mansfield J decided any of the issues adversely to the interests of the respondents, the action itself must be dismissed. His Honour proceeded accordingly and the upshot was that the action was dismissed on 8 December 2006.
The respondents' appeal to the Full Court was successful. The decisive holding by the majority was that there was no "staple commercial product" within the meaning of par (b) of s 117(2); French J was of the contrary view. The order of the Full Court set aside the order of the primary judge dismissing the action and remitted the matter to his Honour for such further hearing as was necessary in the light of the joint reasons of the majority of the Full Court.
In this Court the ultimate issue must be whether the decision of the Full Court is shown to be erroneous. However, the Territory, as appellant, in its written submissions and their development in oral argument, tended to obscure the matter by identifying the ultimate issue as being:

[21]

We would elaborate the analysis in the reasons of Hayne J with four observations. The first stresses what has been said in this Court on several occasions in recent years, to the effect that the fundamental duty of the Court is to give meaning to the legislative command according to the terms in which it has been expressed; legislative history and references to the pre‑existing law should not deflect the Court from its duty in resolving an issue of statutory construction which ultimately is always a text based activity[5].
The second observation is that in numerous and significant provisions of the Act, which operate in a wide range of circumstances, a distinction is drawn between an invention which is a product and an invention which is a method or process. Examples include s 13 and the definition of "exploit" (content of patent monopoly), s 16 (co‑ownership of patents), s 18(4) (microbiological processes and products), s 70 (pharmaceutical substance claims), s 119 (prior use), s 121A (burden of proof of infringement of a process patent), s 123(2) (innocent infringement), s 133 and the definition of "work" (compulsory licences), s 135 (reasonable requirements of the public), ss 144 and 146 (void licence conditions) and ss 167 and 168 (Crown use).
The third observation is that the drawing of the present legislation in this way reflects the understanding of the principles of patent law expounded by this Court in National Research Development Corporation v Commissioner of Patents ("NRDC")[6]. The Court emphasised that over time the expression "manner of manufacture" in the Statute of Monopolies of 1623[7] had been construed so as to include a practice of making, as well as the means of making and the product of making; there was, however, no necessity for the derivation of a "vendible product" in the literal sense, so that an artificially created state of affairs, such as (in NRDC itself) the inhibition in the growth of weeds by application of a selective herbicide, would suffice. Hence the distinction now drawn in the definition of "exploit" in the Act between an invention which is a product, and an invention which is a method or process which may or may not yield a product.
The definition of "exploit" in the dictionary in Sched 1 to the Act is as follows:

[52]

Section 117(1) is engaged where there is "the supply of [a] product by one person to another". At the relevant time, the dictionary in Sched 1 to the Act provided that "supply" includes "supply by way of sale, exchange, lease, hire or hire‑purchase". The dictionary did not (and does not) contain any definition of "product" but the dictionary's treatment of the word "exploit" distinguishes between "where the invention is a product" and "where the invention is a method or process". Read as a whole, s 117 can be seen to proceed on the footing that the word "product" has its ordinary meaning and is not confined to a patented product or a product that is itself the result of applying a patented method or process.
Although s 117(1) is engaged only where there is "the supply of [a] product by one person to another", s 117 is directed to an identified sub‑set of such transactions. That sub‑set is identified first by the introductory words of s 117(1) - "[i]f the use of a product [the product that is supplied] by a person would infringe a patent" - and second by the amplification in s 117(2) of what is meant by "the use of a product by a person". At the risk of undue abbreviation the amplification provided by s 117(2) can be described as inviting attention, in the particular cases identified in each paragraph of the sub‑section, to "only use" (s 117(2)(a)), "known use" (s 117(2)(b)) and "instructed use" (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin consideration of an issue about the application of s 117(1) will be to examine what is said to be the use of the product that is alleged to engage the provision. It is that use which must be identified as the use which would infringe the patent because the hinge about which s 117 turns is its introductory words: "[i]f the use of a product by a person would infringe a patent".
When the question is approached in that way, it will be observed that to ask whether supply of an input for a patented method or process (or resulting product) is capable of attracting s 117(1) may direct attention away from the relevant statutory questions. Those questions are: is there a supply of a product; what is the use of the product (as use is elucidated in s 117(2)); and does that use infringe the patent?
The answer that is to be given to the last of the three questions just identified will, of course, turn upon whether the use in question contravenes the patentee's exclusive rights under s 13 of the Act, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. And that requires close attention to what is meant by "exploit". In particular, it requires close attention to what is said in the dictionary in Sched 1 to the Act about "exploit", namely that:

[55]

The question which the appellant submitted arose in this matter - is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act? - was framed as it was in the expectation that it could and should be answered in the negative. When the questions presented by s 117 are identified in the manner set out earlier in these reasons it is apparent that a variety of quite different cases may arise for consideration under s 117. In particular, the different kinds of use that are identified in s 117(2) may present radically different issues about the relationship between the relevant use and the patentee's exclusive rights to exploit the relevant invention. That is reason enough not to attempt some singular answer to a general question about when s 117 may be engaged.
It is also reason enough to doubt that differences which may be identified in what was said by Gummow J in Rescare Ltd v Anaesthetic Supplies Pty Ltd[18] and Black CJ and Lehane J in Bristol‑Myers Squibb Co v F H Faulding & Co Ltd[19] are usefully expressed in terms of the kind that the appellant's first question employed. Rather, questions about the application of s 117 must be approached with a close focus upon the relevant statutory language. That will require identification of the relevant use of the product and the relevant exclusive rights of the patentee. It is not useful, and may be misleading, to proceed by first seeking to establish a singular and all‑embracing explanation of the operation of s 117 by excluding certain types of patent or certain types of product from any possible operation of the section.
For the reasons that have been given, it is convenient to deal next with the third of the questions posed by the appellant - is the timber a "staple commercial product"? That question should be examined now because it bears upon whether there was a relevant "use" within s 117(2) and, as indicated earlier in these reasons, s 117 is hinged about the identification of "the use of a product by a person [which] would infringe a patent".

[56]

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"[20], 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 Company 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.
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[21] 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.
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.
The drafting history of the provision is also important. The 1984 report of the Industrial Property Advisory Committee[22] recognised that each of patent law and competition law must, "so far as practical, accommodate the legitimate operation of the other". The need to resolve the tension between inhibiting competition and providing sufficient protection for the monopoly rights of patentees can be seen as informing the recommendation of that Committee[23] that:

[59]

It will be recalled that the Industrial Property Advisory Committee referred to "the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe" (emphasis added). The Committee's reference to the supply of goods whose only use would infringe is evidently taken up in s 117(2)(a). Likewise, the reference to supply accompanied by a positive inducement finds reflection in s 117(2)(c). But the Explanatory Memorandum to the 1990 Bill saw no incongruity between the Committee's recommendations and the addition of reference to "any use of a non-staple commercial product to which the supplier had reason to believe that the receiver would put it"[26]. And it is this reference which is reflected in s 117(2)(b).
This third kind of supply and use may not fit so easily in the class of supplies accompanied by a positive inducement as the kinds of "instructed use" with which s 117(2)(c) deals. But having regard to the text of s 117(2)(b), and to what was said in the Explanatory Memorandum, it appears that s 117(2)(b) was seen as cognate with, if not a species of, supply accompanied by "a positive inducement … to perform actions which would innocently or knowingly infringe"[27]. This points against reading s 117(2)(b) as having extended or expansive reach.
Section 117(2)(b) cannot be read as dealing only with products that have no more than one reasonable use. Section 117(2)(a) deals with those cases. It follows, therefore, that the cases with which s 117(2)(b) deals at least include the supply of a product which can have more than "one reasonable use". It is then to be observed that the supplier's having reason to believe that the product would be put to an infringing use is not sufficient to engage the provision - the product must be "not a staple commercial product". What meaning is to be given to that phrase?
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.
As the reasons of Crennan J show, this construction of the provision is not inconsistent with the desire, expressed[28] 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.
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.
Once the product in question in this case is identified as a staple commercial product, it is evident that none of the three kinds of case identified in s 117(2) is engaged. Identification of the product as a staple commercial product takes the case outside s 117(2)(b) and, because the product has more than "one reasonable use", s 117(2)(a) is not engaged. It was not suggested that the case of "instructed use", for which s 117(2)(c) provides, applies in this case.
Although the conclusion that the timber in question is a staple commercial product is determinative of the present matter, it is as well to add something shortly about the question of "supply".

[61]

For these reasons, I agree that the appeal should be allowed with costs and that consequential orders should be made in the form proposed by Crennan J.
HEYDON J. I agree with Crennan J's conclusion that the Northern Territory is protected by s 117(2)(b) of the Patents Act 1990 (Cth), and with the reasons she has given for that conclusion. That conclusion is a sufficient basis for allowing the appeal and for making the other orders she proposes. It is therefore not necessary to consider the other two bases which the Northern Territory urged in support of an order allowing its appeal.
CRENNAN J. Since 21 January 1999 the respondents, Vincent and Maryann Collins, have been the registered proprietors of standard patent No 742711 for an invention entitled "Methods of producing essential oils from species of the genus callitris" ("the patent"). The essential oil relevant to the appeal is said to be useful in aroma therapy, and in the manufacture of cosmetics and body care products; it may also possess anti‑microbial properties and preservative qualities in the treatment of wood. It appears that an appealing feature of the oil is its azure colour.
Claim 1 of the patent describes "[a] method of producing a blue, guaiazulene-containing oil comprising the step of obtaining the oil from a mixture of the bark and wood of Callitris intratropica". Claims 2 to 11 (inclusive) deal with method claims. Whilst the emphasis in the proceedings was on method claims, claim 12 was a product claim for "[a] blue, guaiazulene-containing oil when produced by a method according to any one of" the preceding claims.
This appeal from a decision of a Full Court of the Federal Court of Australia[31] (the "Full Court") concerns the allegation by Mr and Mrs Collins that the appellant, the Northern Territory of Australia (the "Northern Territory"), is liable under s 117[32] of the Patents Act 1990 (Cth) (the "Act") for infringement by supply of timber from trees of species of the genus Callitris to Australian Cypress Oil Company Pty Ltd ("ACOC"). It is alleged that ACOC, which was licensed by the Northern Territory to take timber from one of its plantations, used the bark and wood of the timber to produce infringing oil by use of one of the methods claimed in the patent. The allegedly infringing oil was also said to have been sold and offered for sale by ACOC.

[62]

Species of the genus Callitris include Callitris intratropica, commonly known as the cypress pine, which can be found in the wild and in plantations in the Northern Territory, including at the Howard Springs Plantation which is situated on Crown lands under the Crown Lands Act (NT) (the "Crown Lands Act"). The Northern Territory government invested in planting cypress pine at various sites within the Northern Territory during the 1960s in the expectation that it would be a commercial timber producing crop. The evidence disclosed that by November 1995 this expectation had been disappointed and the timber from the cypress pine plantations was no longer considered to be of suitable commercial quality for the original purposes for which the trees had been planted[33].
On 30 April 1993 Mr Collins was granted a permit from the Conservation Commission of the Northern Territory (then responsible for the administration of the Howard Springs Plantation) to undertake "Crop thinning of Callitris Intratropica" for a term of 12 months. That permit required the payment of a royalty of 20 cents per stem felled.
There was a dispute (which is not relevant to the present appeal) as to whether Mr Collins had been issued with a second permit to fell the cypress pine for the period 18 October 1994 to 17 October 1999.
At some point after 1993, the precise date of which is not clear, the Howard Springs Plantation ceased to be part of a reserve, and reverted to Crown lands within the meaning of the Crown Lands Act[34]. From 1998 until 2001 the government of the Northern Territory granted to ACOC four miscellaneous licences, pursuant to s 91 of the Crown Lands Act, to enter and take the stems of the cypress pine[35] from various areas within the Howard Springs Plantation. Those licences were subject to terms and conditions prescribed in the Crown Lands Regulations as provided by s 94(2) of the Crown Lands Act, and reg 46 provided that the Minister "may determine a royalty on the material removed from the land".
It was not in contest that although original plans for exploitation of the various cypress pine plantations were shelved, there remained several commercial uses which could be made of the timber harvested or collected from the Howard Springs Plantation. These were milling, producing woodchip mulch from surplus materials, oil extraction, and producing potting mix and firewood. A forester from the Department of Natural Resources, Environment and the Arts amplified that information by deposing that he was aware that the trees in question have been used and were still being used (at the time of swearing his affidavit) as a constituent element in poles, fence posts and rails, flooring, light construction, oil extraction, mulch and certain traditional indigenous uses. In turn, these indigenous uses were confirmed and clarified in an expert's report. Reasons for which licensees, other than ACOC, sought permission from the Northern Territory to harvest the trees included the production of sawdust, woodchipping and making golf club poles.

[87]

The appeal of Mr and Mrs Collins to the Full Court was allowed by a majority (Branson and Sundberg JJ, French J dissenting).
The majority considered that the primary judge had erred in characterising the licences to ACOC as merely "permissive". Condition 14 of the first licence, and its successors in subsequent licences, were considered by the majority as plainly requiring that all plantation trees be removed, and that ACOC was obliged to harvest the trees and remove the timber from the land[49]. In all the circumstances their Honours concluded that the Northern Territory had supplied the timber to ACOC, and the "timber so supplied was felled but unmilled trees of the species Callitris Intratropicus"[50].
Whilst not attempting to state a comprehensive test for determining what constitutes a "staple commercial product", Branson and Sundberg JJ considered "that a quality of such a product is that it is an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product"[51]. On all the evidence, including that of the difficulty of obtaining licences for harvesting cypress pine from the Department of Lands, Planning and Environment, their Honours were satisfied that the timber in question was not a staple commercial product[52].
In dissent, French J considered that the concept of "supply of a product" in s 117 did not extend to "the conveyance of interests in land"[53] such as grants in the nature of a profit à prendre[54] which his Honour considered described the licences.
After construing the collocation "staple commercial product", his Honour also held that the timber, being millable timber in the form of standing trees, was such a product and accordingly Mr and Mrs Collins could not rely upon s 117(2)(b) to establish infringement by supply[55].
All members of the Full Court rejected the Northern Territory's contention (by way of a notice of contention) that the supplied product (the timber) and the product said to have been used for infringement (the milled wood and stripped bark) were relevantly different for the purposes of s 117[56].

[96]

It is convenient to consider the legislative history of s 117 of the Act and comparative provisions in the United States of America and the United Kingdom before turning to competing submissions on the construction of s 117 which raised both historical and comparative considerations. Section 117 covers infringement by supplying another person with a product, the other person being the direct infringer. Such an act has been referred to over time as "indirect", "contributory", "participatory" or "secondary" infringement.
Indirect infringement was referred to in the Royal Grant[67], once part of the words of grant of Letters Patent deriving from the Statute of Monopolies. The patentee received the "especial licence, full power, sole privilege, and authority … [to] make, use, exercise and vend the … invention". It was for the patentee alone to "have and enjoy the sole use and exercise and the full benefit of the … invention"; relevantly, others were commanded "that they do not … either directly or indirectly make use of or put in practice the … invention, nor in anywise imitate the same" (emphasis added).
Notwithstanding that reference, the precise boundaries of "indirect" infringement at common law proved elusive. In particular, the sale or supply of an article, including material "produced by nature" (such as timber), which could in any way be used in the making of an article covered by a patent was not an infringement[68]. There were, however, some acts of indirect infringement which could give rise to remedies at the patentee's suit. These included the separate tort of knowingly inducing or persuading another to infringe[69], acting as a joint tortfeasor in a conspiracy or common design to directly infringe[70] and ordering another, for example an agent, to do an infringing act[71]. In each of these examples the availability of remedies turned on the indirect infringer being a "contributor" or "party" to the direct infringement[72].
The limitations of the common law position are stated in Blanco White, Patents for Inventions[73]:

[122]

Relying on Gummow J in Rescare and s 13 of the Act, the Northern Territory urged that the expression "use of a product [which] would infringe" in s 117(1) must be limited to the circumstance where the product supplied results from the use of the patented method. The argument assumes that Gummow J's reasoning in Rescare applied to exploitation "by use of the method or process". This argument was also supported by a detailed comparison of s 117 with cognate provisions in the United States of America and the United Kingdom set out above. It was submitted that the words used in each of the cognate provisions were substantially different and apt to include products supplied preparatory to the use of a patented method, whereas the words used in s 117 were not apt to include such products.
Adopting the reasoning of Black CJ and Lehane J in Bristol‑Myers[97], Mr and Mrs Collins countered that such a construction of s 117 would give it a very limited operation and result in considerable overlap between "infringement by supply" covered by s 117 and acts of direct infringement. They supported the construction of s 117 advanced by Ann Monotti[98], which found favour with Black CJ and Lehane J in Bristol‑Myers[99]. Their Honours rejected the proposition that where an invention is a method or process, use of a product exploits the invention only if the product is one which results from use of the method or process[100].
Section 13, and the definition of "exploit" in Sched 1, were intended to define the exclusive rights to exploit the invention, given by a patent, in clear terms, so as to avoid any obscurities in the previous language of "make, use, exercise and vend" in s 69 of the Patents Act 1952 (Cth)[101]. However, there is nothing in the new text or elsewhere in the Act to suggest that the monopoly in respect of an invention is more restricted than it was before.
Paragraph (b) of the definition of "exploit", critical to the reasoning of Gummow J in Rescare, defines two aspects of the exclusive rights to exploit a method or process patent, only one of which was explicated by his Honour.
The first aspect is the exclusive right to "use the method or process" per se. Nothing significant was said about this expression in Rescare because it was put to one side by the primary judge and it was not overtly considered in the appeal to the Full Court. There was never any doubt that carrying out a patented method or process was an exercise of the invention: "[w]here the claim is for a process, any carrying out of the process is, of course, an exercise of the invention, unless purely experimental" (emphasis added)[102]. Accordingly, carrying out a patented method or process could constitute infringement of a patented method.
The second aspect of the exclusive right to exploit a method or process patent is the exclusive right to do all the acts listed in par (a) of the definition of "exploit" in respect of "a product resulting from … use" of "a method or process". In the absence of a product claim coupled with a method claim, there was often far less certainty about whether such acts would constitute an infringement of a patented method[103]. The insertion of the second aspect into the statutory definition of "exploit" resolves such uncertainty[104]. In this case, unlike Rescare, there is a product, the oil (alleged to infringe the product claim), which is a product for the purposes of the second aspect of the monopoly in respect of a method or process patent.
As a practical matter, it may often be easier to prove acts of infringement of a patented method by leading evidence of acts in respect of a product which results from use of a patented method, rather than seeking to prove use of the method per se[105].
Leaving aside practicalities of proof, if a product is in fact used for carrying out the patented process, an infringement occurs[106]. In terms of s 6 of the Statute of Monopolies referred to in the Act's definition of "invention" in Sched 1, such an act is a "working" of the invention[107]; in terms of the definition of "exploit" in Sched 1 to the Act, the conduct is a "use [of] the method or process". Although acts in respect of a product resulting from a patented method which infringe the monopoly will commonly be acts of direct infringement, there is no reason to doubt that s 117(1) applies to a product resulting from a use of a patented method. However, equally, a consideration of the complete definition of "exploit" in respect of a method or process indicates that there is no reason to deny the application of s 117 to a product (including, as here, an unpatented product) supplied by the supplier, preparatory to any carrying out of the patented method by a person to whom the product is supplied. The secondary materials referred to above show that the latter type of product was the main target of the legislation. The word "product" in s 117 is not confined to a product resulting from the use of a patented method or process[108].
Furthermore, a consideration of the whole of s 117, including s 117(2), indicates that the expression "the use of a product by a person" in s 117(1) refers to a use of a product by a person to whom the product is supplied; the use of the word "supply" suggests a third party[109]. The precondition to engagement of s 117 in relation to a patented method is not a use of a product by the supplier of the product, but rather a use of the product by the person to whom the product is supplied[110].
Section 117(2) follows and qualifies s 117(1). It contains a set of limitations which clarify and limit the availability of remedies for a patentee in respect of an "infringement by supply". Section 117(2)(a) expressly provides that facts resembling those of Dawson[111] constitute an infringement by supply. Section 117(2)(b) is a limitation which operates to protect suppliers of "staple commercial products" from liability even if a use of a staple commercial product by a person supplied "would infringe" in terms of s 117(1). Section 117(2)(c) provides that contributory infringement by inducement (considered a separate tort at common law) is an infringement by supply.
It is clear from the limitations on "use" in s 117(2) that the product supplied may be unpatented and may include raw materials. The limitations in s 117(2) can be understood as operating to ensure that infringement by supply does not inhibit lawful competition in unpatented products.
Consideration of the entire definition of "exploit" in respect of a method or process patent and of the whole of s 117 confirms that s 117 can be engaged in respect of a supply of a raw material for carrying out a patented method. That construction applies s 117 according to its terms and promotes the objectives of the legislation which can be gleaned from the secondary materials. Whether a particular use of an input into a method (or an input into a resulting product) "would infringe" in terms of s 117 will turn on the claims.
In terms of the claims in this case, and the assumption made by the primary judge that ACOC infringed the patent, the alleged use which ACOC makes of the bark and wood of the trees (the "supplied" product) is making, selling and offering for sale, the oil (the "infringing" product) extracted from the supplied product by steam distillation (the patented method). Nothing more needs to be said in the context of determining separate issues other than that the Northern Territory fails in respect of its submission on the first question that s 117 has no application to the timber supplied to ACOC.

[124]

On the second question, it was submitted for the Northern Territory that the licences were, in form and substance, grants of permission to enter Crown lands, enforceable by forfeiture, and subject to royalty obligations and therefore not a "supply" as defined in the Act. Mr and Mrs Collins contended that the statutory licence in essence amounted to sale of the timber.
It was not disputed that the definition of "supply" in Sched 1 to the Act is not exhaustive and in its ordinary meaning it encompasses any means by which something is passed from one person to another. It is therefore not necessary to characterise the relevant royalty payments as equivalent to payments pursuant to a contract for the sale of the timber.
The licences to ACOC were undoubtedly in the form of statutory permissions to take timber, as contended by the Northern Territory. As the judgment of French J demonstrates, through the comprehensive consideration of numerous authorities, whether a contract to take timber is a sale of goods, or an interest in realty, depends on the context in which the characterisation is considered, then on a number of factors[112]. Relevant statutory provisions affect the characterisation of an interest[113]. Some simple distinctions which affected rights as between a life tenant and a remainderman are not without interest. A tree severed from the land was personalty[114], whereas a tree attached to the land was realty[115]. Trees containing a useable quantity of wood were "timber" trees, distinguishable from trees which do not bear timber[116]. However, as part of a statutory regime concerning Crown land, the licences need to be characterised "in the light of the relevant statutory provisions without attaching too much significance to similarities … with the creation of particular interests by the common law owner of land"[117].
The licences, when considered in the light of the provisions of the Crown Lands Act and the Crown Lands Regulations referred to above[118], grant to licensees a personal rather than a proprietary interest in the timber of the plantation.
It has already been explained that the intention of the Northern Territory when setting up the Howard Springs Plantation was cultivation of the trees for the production of commercial (ie saleable) timber. In the context of argument concerning the expression "staple commercial product" the Northern Territory relies, correctly, on numerous commercial uses of the timber in question. The licences are a means of passing, to ACOC, for commercial exploitation by ACOC, quantities of timber from trees cultivated by the Northern Territory to produce timber. The fact that an ad valorem royalty is charged in respect of the timber taken only serves to emphasise the fact that the interest granted under the licences involved commercial terms. The licences constitute a "supply" of raw materials for commercial use; this is a "supply" for the purposes of s 117. Accordingly, the Northern Territory fails in respect of its submissions on the second question.

[126]

Because, contrary to the Northern Territory's submissions on questions 1 and 2, s 117(1) is capable of applying to the supply of the product here, it is necessary to answer question 3.
On that question, the Northern Territory contended that the expression "staple commercial product" in s 117(2)(b) should be construed as referring to any product supplied commercially which has substantial (ie not de minimis) non‑infringing uses, this being an exception to contributory infringement recognised in both the United States of America and the United Kingdom.
Mr and Mrs Collins sought to uphold the decision of the majority in the Full Court that a "staple commercial product" is "an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product"[119]. In particular, it was submitted that the Australian legislature has not incorporated the United States provisions with their reference to "substantial noninfringing use". It was contended that the conception of "staple commercial product" favoured in the United Kingdom and Europe, namely that such products were "generally available"[120], should be preferred as the correct construction of the expression in s 117(2)(b).
Timber is a naturally occurring raw material whether deliberately cultivated or not. Timber of Callitris intratropica has a number of commercial uses. The primary judge was correct in his conclusion that the abandonment of original plans for the commercial exploitation of the plantation did not alter the character of the timber. The phrase "staple commercial product" derives from the statutory language in the United Kingdom. The cognate provisions in the United States of America refer to "a staple article or commodity of commerce suitable for substantial noninfringing use".
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[121]. 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[122]. 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.
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"[123].
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[124]. 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"[125]. 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[126]

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Cases Cited (54)