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Navigating Patent Infringement in New Zealand

The below is a copy of the paper accompanying David Nowak’s presentation to the Legalwise Webinar on Intellectual Property on 5 March 2024.

Infringement of a patent is primarily governed by Part 4, subpart 1 of the Patents Act 2013, i.e. section 140-158.   What follows is a gallop through these provisions of the Act with a few detours into areas of interest.

1 What is an infringement?

Infringing acts

Infringement is the doing of anything that the patentee has the exclusive right to do.¹ The exclusive rights of a patentee are to exploit the invention, which, where the invention is a product includes making hiring, or otherwise disposing of the product, or offering to do so, as well as using or importing the product. Where the invention is a process, exploiting the invention includes using the process to any of the above acts in respect of a product resulting from that process.²

Location of the act

In order to be an infringement the act must occur within the “patent area”.³ The patent area is New Zealand, all waters within the outer limits of the territorial seas of New Zealand⁴ and the are airspace above New Zealand and those waters.⁵ This does not include Tokelau.⁶

However, there are some limited circumstances where an action taken outside of New Zealand may result in infringement of a New Zealand patent. One example is the doctrine of infringing importation, whereby if a product is made outside New Zealand by a process which would infringe a New Zealand patent and is subsequently imported into New Zealand, there can be infringement of the New Zealand patent.⁷

Timing of the act

The infringing act must occur when the patent is in force.⁸ Thus, it is not possible to allege infringement until a patent has been granted. Likewise it is not possible to allege infringement by an act conducted after the patent has expired or lapsed.⁹ Acts conducted after publication but before grant of the patent can be the subject of damages.¹⁰

Implied license or exhaustion of rights?

The rights granted by section 18 at face value apply to the resale (or repair) of a legitimately purchased patented product. However, this is at odds with the rights of an owner of chattel generally. Traditionally this has been resolved by a concept of implied licence, the licence which could be subject to conditions of resale.¹¹ However, the High Court of Australia has recently overruled the concept of an implied licence in favour of a doctrine of exhaustion of patent rights by first sale.¹² Which of these currently applies in New Zealand is uncertain. However, there are proposals by the Ministry of Business, Innovation and Employment to clarify the matter provided in the Act for international exhaustion of patent rights.¹³

2  Who infringes?

Direct infringement

The primary or direct infringer is the person (including a company) who does the infringing act.¹⁴

Indirect infringement

A party who supplies or offers to supply a means for putting an invention into effect may also infringe the patent as a contributory infringer.¹⁵

The means must relate to an essential element of the invention.¹⁶  Not every element of the claim will be an essential element.¹⁷ Exactly what will be a means relating to an essential element of the invention is a question of fact in each case. In Nestec S A v Dualit Ltd¹⁸ a coffee capsule was an essential element of the claim as it contributed to the technical teaching of the invention (by virtue of the flange) and was not of completely subordinate importance.

The means must also be suitable for putting the invention into effect.¹⁹ Discussion around the means for putting the invention into effect is sparse. In Terrell on the Law of Patents it is stated that this requirement:

“..depends on whether a person who obtains and uses the means in question thereby either makes a product falling with the claims of the patent or uses the means in a process falling within the claims of the patent.”²⁰

This was considered in Nestec v Dualit Ltd²¹ where it was found the purchasers of the capsules did not “make” the system.

Except so far as the means are a staple commercial product (see below), the contributory infringer must know, or ought reasonably have known that the means were suitable and intended for putting the invention into effect.²² The knowledge is that of the contributory infringer, but the intention is most likely to be that of a proportion of the users.²³

A staple commercial product has been held in Australia to be a product that is generally available and supplied commercially for a variety of uses.²⁴ Where a product is a staple commercial product then mere knowledge will not suffice - the contributory infringer must supply the means for the purpose of inducing the invention to be put into effect.²⁵

3 The scope of the invention

The claims define the scope of the invention

Section 18 allows the exclusive right to exploit ‘the invention’. The invention is the invention claimed.²⁶

Principles of claim construction

The New Zealand Supreme Court in Lucas v Peterson Portable Sawing Systems Ltd [2006] NZSC 20; [2006] 3 NZLR 721 (30 March 2006) stated the following about determining the scope of the claims:

[25] "The first and essential step therefore is to construe the claim. Construction is a matter of law for the court.

[26] A patent specification is to be read as a whole and given a purposive construction. It must be construed as it would be understood by the appropriate addressee – a person skilled in the relevant art.[27] Each part of the specification is to be read objectively in its overall context and in light of the function of that part. The claims are to be interpreted by reference to the object and description in the body of the specification.[28] The claims define the scope of the monopoly conferred by the patent. They limit what others may do. They must clearly define the protected field so others may fairly know where they cannot go. The description in the body of the specification may assist interpretation but it cannot modify the monopoly the inventor has clearly marked out. If his claim is formulated too narrowly so that imitators do not infringe, that cannot be rectified by reference to the description. If it is too wide, consequent invalidity cannot be saved by reading in limitations appearing in the description. The description of a preferred embodiment of the invention is just that and plainly will not confine the scope of an invention claimed more broadly. All of this is well established.”

Purposive construction

New Zealand cases have consistently followed the principle of “purposive construction” from Catnic Components Ltd v Hill & Smith Ltd:²⁷

“A patent specification should be given a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge.”

This means that a purely literal interpretation of the claims may not (or indeed is unlikely to) be correct. A good example of how a literal interpretation can differ from a purposive interpretation can be found in Hammar Maskin AB v Steelbro New Zealand Ltd [2010] NZCA 83.

Doctrine of Equivalents

In Actavis v Eli Lilly [2017] UKSC 48²⁸ the Supreme Court found that claims which recited the use of permetrexed disodium were infringed by the use of permetrexed dipotassium. This established what is known as a Doctrine of Equivalents in the United Kingdom. Given that New Zealand has historically followed the United Kingdom, the question arises whether a doctrine of equivalents applies here. Given the clear statement of the role of the claims in clearly defining the scope of the monopoly by the New Zealand Supreme Court in Lucas v Peterson, this seems unlikely at this time.

4 What defences to infringement are there?

Experimental use

Doing an act for experimental purposes relating to the subject matter of an invention is not an infringement.²⁹ “Experimental purpose” is not defined in the Act, but includes determining how the invention works, determining the scope of the invention, determining the validity of the claims and seeking an improvement of the invention.³⁰ However, it is unclear where the line between an experimental purpose and commercial purpose is drawn.³¹ The equivalent Australian provision³² was considered in Jusand Nominees Pty Ltd v Rattlejack Innovations Pty Ltd where it was found:

“the exemption is not intended to only apply to activities solely undertaken for experimental purposes. There may be a commercial aspect or ultimate aim to the experimentation. However, the experiments should be undertaken for the predominant purposes of gaining new knowledge or testing a principal supposition about the invention.”

and

“To my mind, the reference to “experimental purposes” connotes at least some application of scientific method to the discovering of new information or testing a principle or supposition, the testing of a hypothesis, the existence of a protocol or methodology documentation of some kind setting out the purpose of the experiment and the variables to be measured or observed, the recording of results or observations, and the reporting of the results or observations.”

Use in or from foreign vessels, aircraft or vehicles

An invention which is used on board a foreign vessel, aircraft or in the construction or working of a foreign aircraft, vehicle or vessel which is only in the patent area accidentally or temporarily is not an infringement.³⁶ A foreign vessel or aircraft must be registered in a convention country, while a land vehicle must be owned by a person resident in a convention country.³⁷

Information required by law

Section 145 of the Patents Act 2013 provides that it is not an infringement to make, use, import, sell, hire, or otherwise dispose of the invention solely for uses reasonably related to the development and submission of information required under any law (whether in New Zealand or elsewhere) that regulates the manufacture, construction, use, importation, sale, hire, or disposal of any product. This provision is primarily intended to allow generic pharmaceutical manufacturers to develop the data necessary for marketing approval prior to the patent expiring, and for this reason is commonly called a “springboarding” provision.  However, the New Zealand provision goes much further than overseas counterparts in that it is not limited to pharmaceuticals but any product that requires regulatory approval.

Prior use

If an invention was being exploited, or steps had been take to exploit the invention, in the patent area before the priority of the claim in question, then it is not an infringement to continue to do so.³⁸ However, if the exploitation has stopped or the steps to exploit the invention had been abandoned (except in either case temporarily), then the defence does not apply.³⁹ The rights to exploit the invention can be assigned but not licensed.⁴⁰

Invalidity

Invalidity is a defence to infringement and can be raised as a counterclaim for revocation.⁴¹ The grounds of invalidity are set out in section 114 of the Act. However, the Court may grant relief for a patent that is only partially valid.⁴² If the invalid claim was framed in good faith and with reasonable skill and knowledge, the Court may grant damages, account of profits or costs.⁴³

5 Remedies for infringement

Interim injunction

An interim injunction may be available to prevent continued infringement. An application for an interim injunction will be determined on the basis of whether there is a serious question to be tried, where the balance of convenience lies and what is the overall justice of the case.⁴⁴ For a recent example of how the principles may be applied in the context of patent infringement, see Inguran, LLC v CRV Limited.⁴⁵

Injunction

A permanent injunction may be granted by the Court if infringement is found.⁴⁶

Damages and Account of Profits

In addition to a permanent injunction, the plaintiff may elect damages or account of profits.⁴⁷

Either damages or account of profits are available for infringing acts which occurred after publication of the complete specification, provided those acts fell both within the claims in the published complete specification and those of the patent.⁴⁸ However, the Court must consider whether it would have been reasonable to consider if a patent would have been granted which would cover the infringing act.⁴⁹ If it would not have been reasonable the Court must reduce the damages or account of profits.⁵⁰

The Court must not award damages or account of profits if the specification has been amended after acceptance except where the court is satisfied the accepted specification was framed in good faith and with reasonable skill and knowledge, or the amendment was to correct an obvious mistake.⁵¹ Similarly if a claim or claims are found invalid, damages and account of profits will only apply if the invalid claim(s) were framed with good faith and with reasonable skill and knowledge.

If a defendant proves that, at the date of infringement, they did not know and should not have reasonably known that the patent existed, then the Court must not award damages or account of profits.⁵² If a product is marked to indicate it is patented in New Zealand, and with the New Zealand patent number, and the defendant knew, or ought reasonably have known of the product, then it is presumed the defendant ought reasonably have known of the patent.⁵³

David Nowak - March 2024