Wednesday, 27th February, 2013

No presence in Australia? You may still be liable for patent infringement

Acts occurring outside Australia can constitute an infringement of Australian patents after a ruling by the Australian Federal Court in Bayer Pharma v Genentech. 

The Court ruled that a party can be liable for patent infringement despite having no presence in Australia, and not carrying out any activity that is a direct infringement of an Australian patent.

To succeed in such an action the patent owner must show that the overseas entity engaged in "common design" with a direct infringer located in Australia.  Common design includes acts such as sharing in the profits from the infringing activity.

In this case an Australian company, Bayer Pharma, was the direct infringer of Genetech's patent and an overseas entity, US-based Regeneron Pharmaceuticals was held to be party to the infringement of Genetech's patent. 

Regeneron Pharmaceuticals manufactured and sold a compound to Bayer Pharma through Bayer Pharma's parent company: US-based Bayer HealthCare.  Bayer Pharma then marketed that compound for treatment of a degenerative eye condition in Australia, an act that was held to be a direct infringement of Genentech's patent. Regeneron benefited from a 50% share in the profits from the sale of Bayer's product.

The Court inferred from the relationship between Regeneron and Bayer that Regeneron was essentially commercialising their compound through the Australian activities of Bayer.  The Court then found that the evidence was sufficient to establish a case of joint infringement against Regeneron. 

What does this mean?

If product is sold to an entity that has a presence in Australia, who then uses that product in a way that infringes an Australian patent, the overseas seller may be held liable as a joint infringer if it can be shown that a "common design" exists, such as a close collaborative relationship with the infringing company.

The breadth of acts that might constitute "common design" is not clear.  In this case the sharing of profits was sufficient.  The decision does not explore what other forms of collaboration would be considered a common design.  For example, would a royalty based licence from the overseas entity to the Australian entity be sufficient to establish common design?

In summary, being in a different country won't avoid a successful infringement action where the activity of an entity located outside Australia assists a business collaborator to infringe a patent in Australia.