Recent Patent Cases Illustrate Why Changes to Patent Register Provisions Valuable

Wednesday 23 April 2014 @ 9.45 a.m. | IP & Media | Trade & Commerce

The decision of the Federal Court in Neobev Pty Ltd v Bacchus Distillery Pty Ltd (Administrators Appointed) (No 4) [2014] FCA 21 (4 February 2014) illustrates the importance of legislative changes in 2013 in relation to the rectification of the Register of Patents (the Register) made by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (No 35 of 2012) (the RTB Act) the main provisions of which took effect on 15 April 2013.

Background

In earlier proceedings Neobev Pty Ltd v Bacchus Distillery Pty Ltd (Administrators Appointed) (No 3) [2014] FCA 4 (16 January 2014) the facts in were established as follows:

Max Scott (the Third Cross Respondent) had agreed verbally with Damian Hajdinjak, the CEO of Bacchus (the Respondent/Cross Claimant), that Mr Scott would design and install a cream liqueur plant in Bacchus’ factory. Mr Scott also provided to Bacchus various recipes for products and various manufacturing and testing procedures which were contained within 77 documents argued to be of a confidential nature. Bacchus then asked Mr Scott to come up with a less costly base for making cream liqueur products than Bacchus’ then current spirit and ethanol base, and Mr Scott devised a staged filtration process for producing an improved Clean Wine Spirit (the CWS) invention.

Bacchus then filed a patent application for the CWS invention in its name and listed Mr Scott and Mr Hajdinjak (who wanted his name on the application) as inventors but on the parties’ understanding that Bacchus had to be the sole owner in order that it could obtain certain government grants.

In 2013, Mr Scott assigned his rights in the intellectual property developed for Bacchus, including his right to receive royalty payments in respect of the CWS patent, to Neobev Pty Limited, a company of which Mr Scott was a director. Later in 2013, Bacchus went into administration and the administrators sought to sell the Bacchus’ business, including the right to use the confidential information contained in the 77 documents.

As a result Neobev brought proceedings to determine the ownership of the CWS patent, and whether Bacchus could, in the absence of any contractual provision allowing for assignment, transfer the right to use the confidential information to a third party.

In his decision Justice Besanko found that in relation to the ownership of the invention that Mr Scott was the sole inventor, as Mr Hajdinjak had no “material effect on the final concept of the invention” and did not make any contribution entitling him to be called a co-inventor. His Honour also held that Bacchus owned the CWS patent on trust for Bacchus and Mr Scott on the basis that unlike the assignment of a patent, the assignment of rights to the invention need not be in writing and signed by Mr Scott and Bacchus. His Honour also found there was a verbal agreement between Mr Scott and Mr Hajdinjak that the CWS patent would be registered in Bacchus’ name but that Bacchus and Mr Scott would jointly own the CWS patent.

The case highlighted the need to properly document commercial relationships and illustrates the problems that can arise where parties fail to do so, especially where confidential information is involved.

In the most recent Neobev Case (No 4) two rectification applications were made. One application was to record the sole inventor and another to record a beneficial owner as a legal co-owner. While the court made an order to rectify the Register to record the sole inventor it refused to record the beneficial owner as a co-owner. However, the court made a declaration that the beneficial owner was a beneficial co-owner of the disputed patent and that the legal owner held the ownership of the patent on trust for the legal owner and the beneficial owner as co-owners in equity.

Why the RTB Act Legislation Could Aid in Cases Like Neobev?

As Patent Attorney's Spruson and Ferguson say in a recent Newsletter:

Until last year [April 2013], the courts were ordinarily the only forum for correcting such errors or omissions in inventorship/ ownership details. This is an onerous and expensive way to rectify such discrepancies in the Register, especially in non-contentious cases."

The RTB Act reforms provide a new administrative mechanism for rectifying the Register in many circumstances.

The Commissioner of Patents now has a discretionary power to rectify the Register and can do so if he is satisfied, on the balance of probabilities, of the existence of specified errors or omissions in the Register. Such errors include:

  • the omission of an entry from the Register;
  • an entry made in the Register without sufficient cause;
  • an entry wrongly existing in the Register; or
  • an error or defect in an entry in the Register.

This discretionary power in the Commissioner would include errors and omissions in inventorship and/or ownership details.

Before rectifying the Register, the Commissioner  must give relevant persons a reasonable opportunity to be heard and the Commissioner is not able to rectify the Register while relevant legal proceedings are pending in relation to a patent.

Decisions of the Commissioner relating to rectifying or not rectifying the Register can be appealed to the Federal Court.

Matters the Commissioner should consider in making a decision to rectify the Register, or not, are the error or omission, the purpose of the rectification, delays in making the rectification, consequences of making the rectification, and whether there has been a disclosure of all relevant matters.

A Simple and More Cost Effective Way

As Spruson's further say:

In appropriate circumstances, especially non-contentious ones, this new power of the Commissioner to rectify the Register will provide a simple and more cost effective mechanism to correct errors and omissions in inventorship and/or ownership details than was previously available.

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