9.33 Patent protection is generally sought in order to secure and preserve the competitive and commercial advantage that may result from an invention, as well as to recoup the cost incurred in developing an invention. Patent rights are of limited value unless they are enforced to deter potential infringers and to provide a remedy for a person whose rights have been infringed. Nonetheless, a patent holder typically makes strategic decisions about the best use of its resources in enforcing its rights.
Factors affecting the decision to enforce a patent
9.34 Several factors might affect the decision of an Australian patent holder as to whether to enforce its patent rights. Enforcement of a patent is dependent on a patent holder identifying individuals or entities that are infringing its patent rights. In the case of gene patents, infringement may be difficult to detect. Many biotechnology companies may not yet have commercial products that could lead a patent holder to suspect that products have been developed using patented research tools. The procedures for monitoring the use of Australian patents, and the difficulties that Australian gene patent holders may face in discovering infringement, are discussed later in this chapter.
9.35 Apart from the difficulties of detection, a patent holder may decide not to instigate action to prevent infringement of its gene patents, even though such measures are warranted. Patent protection is frequently obtained in more than one jurisdiction and an Australian patent holder may choose to enforce its rights in those jurisdictions that represent the largest markets for a patented product. Even if the Australian market for a patented product is significant, a patent holder may decide that pursuing certain infringers is not financially viable, or could attract too much adverse publicity.
9.36 A patent holder may also select particular defendants for tactical reasons. For example, a patent holder might pursue alleged infringers with limited financial resources, who are therefore unlikely to challenge the patent holder’s rights, before seeking to enforce the patent against better-resourced entities.
9.37 Infringement proceedings also expose the validity of a patent to attack. As discussed above, a defendant may file a counter-claim for revocation so that a patent holder seeking to enforce its rights may be required to prove both that the rights are valid and that they have been infringed. There has been relatively limited consideration of the application of Australian patent law to genetic materials and technologies to date. In the absence of judicial decisions delineating the scope of rights conferred by a gene patent, infringement proceedings may be thought to entail too great a risk.
9.38 Finally, patent litigation is generally a complex, time-consuming and costly process. In Australia, it has been estimated that the cost to a patent holder of litigating a patent infringement action at first instance may be $750,000 or more. This figure may be conservative. In light of the fact that the Australian biotechnology sector is dominated by small and medium sized enterprises (SMEs) and publicly funded research organisations, such amounts are significant.
Commercial responses to infringement
9.39 If a patent holder decides to enforce its patent, it may employ a variety of means to do so, including commercial actions and legal proceedings. A patent holder may notify a potential infringer of the existence of a patent and indicate that the use of the invention claimed in the patent should be terminated—often referred to as a ‘cease and desist letter’. Alternatively, a patent holder may notify a potential infringer of the existence of a patent and request that activities covered by the patent claims be conducted only pursuant to a licence—commonly termed an ‘offer to license’. If these approaches are not successful, a patent holder may need to consider initiating civil proceedings to enforce the patent.
Legal responses to patent infringement
9.40 A patent holder (or its exclusive licensee) may take legal action to prevent the infringement of the exclusive rights granted pursuant to a patent. Patent infringement may be either direct or contributory. The infringement is direct if a person, without authorisation, exercises any of the exclusive rights conferred on the patent holder. Infringement is contributory if a person who is not the patent holder or a licensee supplies a product the use of which would constitute an infringement of the patent.
9.41 A patent will be infringed if the defendant has taken all of the essential features (or ‘integers’) of the patent holder’s claim. Thus, a court must determine whether or not the substantial idea of an invention disclosed in a patent specification (and subject to a definite claim) has been taken and embodied in an item alleged to infringe the patent. Australian courts have found that omitting an inessential part of a patent claim, or replacing it with an equivalent, will not necessarily prevent a finding of infringement. What constitutes an ‘essential integer’ is a matter of construction of the patent specification. In general, it has been held that such construction must be purposive rather than purely literal.
9.42 Infringement may occur any time after the date of publication of the complete specification, although proceedings may not be commenced until the patent has been granted.
Defences to patent infringement
9.43 The Patents Act establishes a limited number of defences, which may be asserted in answer to a claim of patent infringement. General defences to a claim of patent infringement include:
use of a patented invention on board a foreign vessel, aircraft or vehicle that only comes within the patent area of Australia temporarily or accidentally;
prior use of an invention, provided the alleged infringer did not obtain the subject matter of the invention from the patent holder (or its predecessor in title);
use of a patented invention that is subject to a contractual condition prohibited under s 144 of the Patents Act (such as a ‘tie-in’ arrangement); and
use of a patented invention pursuant to, and within the scope of the grant of, a ‘declaration of non-infringement’ granted by a prescribed court.
9.44 The Patents Act also provides a defence to the infringement of a patent covering a pharmaceutical substance for therapeutic purposes if the term of the patent has been extended under the Act. This defence is limited to circumstances in which the pharmaceutical substance claimed in the patent was used: (a) after the extension of the patent term has been granted, for the purpose of registering a product on the Australian Register of Therapeutic Goods (or any foreign equivalent thereof); or (b) during the extended portion of the patent term, for a non-therapeutic purpose.
9.45 In addition to these defences, it has been suggested that general equitable defences may be available against a claim of patent infringement. The circumstances in which such defences may be available were outlined in DP 68, but there is little case law on this issue and the effect of pleading such a defence is unclear. It should also be noted that Chapter 13 of this Report recommends that the Patents Act be amended to enact a new exemption based on the experimental use of a patented invention.
9.46 If a patent holder successfully proves that its patent has been infringed, remedies are available to prevent further infringement and to compensate the patent holder for any loss incurred. These remedies include an injunction and either compensation in the form of damages or an account of profits, at the patent holder’s option. A court may also make orders for the inspection and delivery up of infringing materials.
9.47 Provisional relief is available to prevent an alleged infringement from occurring and to prevent infringing goods from entering the channels of trade, pending the resolution of litigation. Provisional relief may also be available to preserve relevant evidence relating to an alleged infringement.
Enforcement of gene patents in Australia
Submissions and consultations
9.48 During the Inquiry, the ALRC sought information about the enforcement of Australian gene patents, the factors affecting Australian entities’ decisions to enforce gene patents, and the type of action such entities initiate in this regard.
9.49 Submissions that addressed this issue reflected different views as to what amounts to ‘enforcement’ of a gene patent. A number of submissions used the term to refer only to infringement proceedings. Others adopted a broader view and regarded ‘offers to license’ a patent as also amounting to enforcement action. A few submissions considered that the term encompassed an even wider range of actions. For example, a multi-national pharmaceutical company, GlaxoSmithKline, commented that patents may be effective on a number of levels, including:
(a) providing a deterrent against infringement, (b) giving rise to licensing or cross-licensing arrangements, (c) being the subject of letters of demand, and (d) being the subject of full scale patent infringement litigation.
9.50 A number of submissions commented on the apparently low level of enforcement activity that is occurring in Australia with respect to gene patents. AusBiotech Ltd indicated that ‘so far there has been very little actual litigation’. However, the low level of patent litigation does not take into account disputes that have been settled, or disputes that occur prior to a gene patent being granted (for example, opposition proceedings). Other submissions agreed that the level of enforcement of gene patents is difficult to gauge, particularly because communications about such matters are generally confidential unless infringement proceedings are initiated.
9.51 The factors that may influence a patent holder’s decision as to how to enforce a gene patent were addressed in a number of submissions. The Department of Industry, Tourism and Resources suggested that the cost of gene patent litigation is ‘a major factor influencing the capacity to enforce gene patents’. Other submissions indicated that the costs of infringement litigation might act as a disincentive to pursue individuals or entities who are infringing Australian gene patents, particularly in the case of research institutions. Some submissions commented that the cost of infringement litigation is an issue in enforcing patents over any type of technology, not only gene patents. Submissions also suggested that the cost of gene patent litigation encouraged patent holders and potential infringers to license gene patent rights or reach some other commercial solution to potential infringement.
9.52 Submissions identified other factors as influencing a patent holder’s decision to enforce its rights. GlaxoSmithKline and Davies Collison Cave referred to the provisions in the Patents Act that provide for action to be taken against a patent holder who makes ‘unjustified threats of infringement’. It was said that, as a result, patent holders ‘will generally not make threats of initiating legal proceedings unless they are prepared to actually proceed in this manner’. Other submissions commented that the potential for adverse publicity might also affect the decision to enforce patents against particular types of entities, such as academic institutions.
9.53 A recent empirical study conducted by Dr Dianne Nicol and Jane Nielsen into patenting and technology transfer practices in the Australian medical biotechnology industry (Nicol–Nielsen Study) reported responses largely consistent with the views expressed in submissions to this Inquiry. Nicol and Nielsen concluded that there has been little enforcement of gene patents in Australia to date. Respondents to the Nicol–Nielsen Study indicated that potential patent infringement issues are most often resolved by negotiating a licence to use the patented invention. Nicol and Nielsen commented, however, that there is evidence that this situation may be changing in other jurisdictions, and that enforcement actions may become more likely in Australia. In particular, they noted that Genetic Technologies Limited’s (GTG) announcements of the steps being taken to license and enforce the company’s non-coding DNA patents occurred after responses to the study had been received.
 Organisation for Economic Co-operation and Development, Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies (2002), 47; D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 215–216, 257.
 Organisation for Economic Co-operation and Development, Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies (2002), 48; D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 147–148.
 Such factors may be particularly relevant if the alleged infringer is an academic institution: D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 220. See also Ch 12 and 13 for a discussion of gene patents in the context of genetic research.
 J Berkowitz, United States: Trends in Enforcing and Licensing Patents, Mondaq, <www.mondaq.com> at 16 June 2004.
 D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 257.
 Biotechnology Australia, Biotechnology Intellectual Property Manual (2001), 152. The cost of patent infringement actions in Australia is relatively low compared with the United States, where it has been estimated that the average cost of patent infringement litigation (including appeals) is US$1.5 million: Biotechnology Australia, Biotechnology Intellectual Property Manual (2001), 152. Others have suggested that litigation costs in biotechnology matters have ranged from US$5 million to US$7 million: United States Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy (2003), Ch 3, 22.
 See Ch 16; D Nicol and J Nielsen, ‘The Australian Medical Biotechnology Industry and Access to Intellectual Property: Issues for Patent Law Development’ (2001) 23 Sydney Law Review 347.
 An exclusive licensee who initiates infringement proceedings must join the patent holder as a party to the suit, and the licensee’s interest in the patent must be entered on the register of patents maintained by IP Australia: Patents Act 1990 (Cth) ss 120(2), 187; Patents Regulations 1991 (Cth) r 19.1. In infringement proceedings initiated by an exclusive licensee, the licensee stands in the shoes of the patent holder, subject to any additional terms relating to enforcement of patent rights in the licence agreement (for example, allocation of any damages awards, liability for the costs of any infringement proceedings, or the right to control proceedings).
 Direct infringement of a patent is not defined in the Patents Act, but can be inferred from s 13: see R Reynolds and N Stoianoff, Intellectual Property: Text and Essential Cases (2003), 318.
Patents Act 1990 (Cth) s 117.
Populin v HB Nominees Pty Ltd (1982) 41 ALR 471, 475.
Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd (1991) 103 ALR 239.
Populin v HB Nominees Pty Ltd (1982) 41 ALR 471, 476. However, at least one decision has cautioned against broadening the scope of a claim by relying on a purposive construction: Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231, 242–243.
Patents Act 1990 (Cth) s 57.
 Ibid s 118.
 Ibid s 119.
 See further Ch 24.
Patents Act 1990 (Cth) ss 124–127. A declaration of non-infringement is a court order that use of an invention does not fall within the scope of the claims of a particular patent. It may be obtained only if a person or company has previously sought an admission from the patent holder that their proposed activities are not within the scope of the relevant patent claims and the patent holder has refused, or failed to provide, such an admission. A declaration of non-infringement is not a complete defence, and may limit but not negate the award of damages.
 Ibid s 78.
 Biotechnology Australia, Biotechnology Intellectual Property Manual (2001), 155; J Bergmann and T Davies, ‘Junk DNA or Junk Debate?’, Allens Arthur Robinson Biotech News, 3 September 2003, <www.aar.com.au/pubs/bt>.
 Australian Law Reform Commission, Gene Patenting and Human Health, DP 68 (2004), [9.78]–[9.80].
 See, eg, Woodbridge Foam Corp v AFCO Automotive Foam Components Pty Ltd  FCA 883.
Patents Act 1990 (Cth) s 122(1). However, a court may decline to award damages or an account of profits in the case of ‘innocent’ infringement; that is, if the infringer was not aware, and had no reason to believe, that a patent for the invention existed: Patents Act 1990 (Cth) s 123.
Patents Act 1990 (Cth) s 122(2).
 See, eg, Roussel Uclaf v Pan Laboratories Pty Ltd (1994) 51 FCR 316.
 Interlocutory relief may also be available by means of an Anton Piller Order: Anton Piller KG v Manufacturing Processes Ltd  Ch 55. See also R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane’s Equity: Doctrine and Remedies (4th ed, 2002), [21.495]–[21.500]; B Fitzmaurice, ‘Protecting Intellectual Property with Anton Piller Orders’ (2002) 15 Australian Intellectual Property Law Bulletin 103.
 Australian Law Reform Commission, Gene Patenting and Human Health, IP 27 (2003), Question 10–4.
 GlaxoSmithKline, Submission P33, 10 October 2003. See also Davies Collison Cave, Submission P48, 24 October 2003; AusBiotech Ltd, Submission P58, 7 November 2003.
 Royal College of Pathologists of Australasia, Submission P26, 1 October 2003; G Suthers, Submission P30, 2 October 2003.
 AusBiotech Ltd, Submission P58, 7 November 2003.
 GlaxoSmithKline, Submission P33, 10 October 2003; Davies Collison Cave, Submission P48, 24 October 2003.
 AusBiotech Ltd, Submission P58, 7 November 2003.
 Department of Industry Tourism and Resources, Submission P36, 13 October 2003. See also Queensland Government, Submission P57, 5 January 2004.
 Royal College of Pathologists of Australasia, Submission P26, 1 October 2003; Genetic Technologies Limited, Submission P45, 20 October 2003; AusBiotech Ltd, Submission P58, 7 November 2003; Royal College of Pathologists of Australasia, Consultation, Sydney, 30 March 2004.
 A McBratney and others, Submission P47, 22 October 2003; AusBiotech Ltd, Submission P58, 7 November 2003. See also D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 220, 257.
 Royal College of Pathologists of Australasia, Submission P26, 1 October 2003; GlaxoSmithKline, Submission P33, 10 October 2003; A McBratney and others, Submission P47, 22 October 2003; Davies Collison Cave, Submission P48, 24 October 2003; AusBiotech Ltd, Submission P58, 7 November 2003.
 GlaxoSmithKline, Submission P33, 10 October 2003; Walter and Eliza Hall Institute of Medical Research, Submission P39, 17 October 2003; Davies Collison Cave, Submission P48, 24 October 2003; Queensland Government, Submission P57, 5 January 2004; AusBiotech Ltd, Submission P58, 7 November 2003; Royal College of Pathologists of Australasia, Submission P82, 16 April 2004.
 GlaxoSmithKline, Submission P33, 10 October 2003; Davies Collison Cave, Submission P48, 24 October 2003 (referring to ss 128–132 of the Patents Act).
 Genetic Technologies Limited, Submission P45, 20 October 2003; A McBratney and others, Submission P47, 22 October 2003.
 D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 38, 201–204, 217, 256‑257.
 Ibid, 61–63, 139–140, 199–203. Referring to studies conducted by Dr Mildred Cho and her colleagues: see, eg, M Cho and others, ‘Effects of Patents and Licenses on the Provision of Clinical Genetic Testing Services’ (2003) 5 Journal of Molecular Diagnostics 3; J Merz and others, ‘Diagnostic Testing Fails the Test’ (2002) 415 Nature 577.
 D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 106, 139–140, 202, 256. Aspects of GTG’s licensing practices and its non-coding patents are discussed in Ch 12 and 20.