Introduction
The first thought that likely comes to mind when people think of IP theft is corporate espionage. This might involve a nefarious individual who has managed to join a company as a “mole” to gather information or access restricted information, which will be used by a competitor to advance their own commercial or technological interests. Alternatively, IP theft can occur through data breaches (such as hacking) in which sensitive, protected or confidential data is copied, transmitted, viewed, stolen, or used by an individual unauthorised to do so.
However, one of the biggest risks to companies and businesses when it comes to IP theft that is often neglected is a disgruntled employee who can appropriate information to advance his or her own interest, or damage the former employer. In this regard, a common theme in the field of patents is former employees filing patent applications on their own, or being listed as an inventor on a patent application filed by a competitor, based on IP generated while with their former employer.
In these situations, the former employer can challenge entitlement at the Australian Patent Office, which can be a cost-effective approach compared to challenging entitlement before a Court. These challenges can be made at any time while the application is pending and not yet granted.
The options to contest entitlement are provided under section 36 and section 59 of the Patents Act 1990 (Cth), which are explained in further detail below.
Section 36 – Other applications by eligible persons
Section 36 of the Patents Act 1990 (Cth) provides that if a patent application has been made and has not been granted (that is, pending), an application for a declaration by the Commissioner may be made by one or more persons (the section 36 applicants), and if the Commissioner is satisfied on the balance of probabilities, in relation to the invention disclosed in the application for the patent that the nominated person (i.e., the current applicant) is not an “eligible person”, but:
(i) the section 36 applicants are the eligible person(s), or
(ii) the section 36 applicants are also eligible persons,
then the Commissioner may declare the section 36 applicants as “eligible persons” to the invention.
In other words, this section provides an opportunity for the party who makes a successful section 36 application either to become the sole applicant for the patent application, or to be added as a further applicant to the patent application (ie, jointly with the pre-existing applicant).
Under section 36, the challenge to entitlement can be made based on matters of fact as well as matters of law.
For example, if there is another inventor who is not named on the application, but should be, contemporaneous records and sworn personal accounts of what happened can be advanced as evidence regarding the contribution of that inventor to the conception of the invention. or reducing it to practice. If it can be established there is another inventor who should be named, then that inventor will be added to the application and that inventor’s rights in the invention will be recognised in the ownership of the application – depending on where those rights of the inventor have flowed (eg, retained by the inventor, automatically assigned to his/her employer, assigned in writing to some third party, etc).
In these factual situations, evidence should be gathered demonstrating that the inventor(s) not named on the application had contributed to each feature as claimed in the patent application to demonstrate that they had contributed materially to the inventive concept, and therefore are either co-inventors or the only inventors of the invention.
From the legal perspective, if one or more of the inventors already named on the application assigned rights in the invention to the party making the section 36 application (e.g., under an employment or consultancy agreement), the evidence would likely focus on producing the relevant agreements and explaining broader circumstances such as why creating such an invention was within the inventor’s job description.
Both of these options are often pursued together, as alternatives.
In terms of procedure, a section 36 application is typically filed with evidence supporting the application. This evidence will typically be in the form of a declaration setting out the facts of the matter and providing documentation (such as emails, laboratory notes, internal memos and correspondence, technical documents, assignments, agreements and the like) that supports the section 36 applicant’s position. Any sensitive commercial documents can be redacted when annexed to the declaration(s) filed in support of the section 36 application as the declarations and annexed evidence are placed on the public record and accessible by any person.
Section 59 – Opposition to grant of standard patent
Entitlement to a patent application can also be challenged by opposing the application under section 59 of the Patents Act 1990 (Cth). Section 59 provides that any person may oppose the grant of a standard patent within 3 months from the date of advertisement of acceptance on one or more of the following grounds:
(a) that the nominated person (i.e., the Applicant) is either:
(i) not entitled to a grant of a patent for the invention; or
(ii) entitled to a grant of a patent for the invention but only in conjunction with some other person;
(b) that the invention is not a patentable invention (i.e., matters of novelty, inventive step, utility, and secret use); and
(c) that the specification filed in respect of the complete application does not comply with subsection 40(2), or (3) (i.e., matters of sufficiency of disclosure, support, and best method).
The grounds of entitlement under section 59(a) above are broadly equivalent to section 36.
Our earlier article details the typical procedural steps of a substantive opposition and the evidence required is similar to a section 36 challenge as discussed above.
Direct entitlement challenge (section 36) or opposition (section 59)
There are advantages and disadvantages for either route to challenge entitlement at the Australian Patent Office, and strategic considerations will dictate the route taken, which will ultimately depend on the objective and the desired result.
If the objective is to maintain the patent and seek a declaration from the Commissioner that entitlement should reside with the challenger, then either option can achieve this outcome.
The critical distinction between the two options is that a section 36 application can be made at any time prior to grant while a section 59 opposition can only be pursued within the 3 months after acceptance (still prior to grant).
Pursuing an entitlement challenge in the context of a section 59 opposition can create tension if the patent is also opposed on grounds challenging validity. A possible outcome of the entitlement challenge is that the opponent will come to own the patent application, yet the opponent may have significantly undermined the value of that patent application by putting evidence and submissions on the public record during the opposition directed towards lack of novelty, lack of inventive step, lack of manner of manufacture, secret use, inutility, or failure to meet the written description requirements (support, clarity, sufficiency, best method). For this reason, it can be advantageous filing a section 36 application before the patent application has been accepted, so that entitlement can be challenged discretely while retaining the potential to later challenge validity in a section 59 opposition if necessary.
Regardless whichever option is pursued, the decision made by the Commissioner can be appealed to the Federal Court.
Recent cases
A number of recent cases have considered section 36 and section 59 challenges for entitlement at the Australian Patent Office.
In Cleanspace IP Pty Ltd v Aimwell Holding Pty Ltd [2021] APO 45 (22 November 2021), the requestor (Cleanspace IP Pty Ltd) applied for a declaration under section 36 stating that it is an eligible person and the nominated person (Aimwell Holding Pty Ltd) is not such an eligible person. The thrust of the requestor’s grounds was that the sole named inventor for the patent application was employed by the requestor or its related entities at the relevant times when the invention was created and his duties included innovation, product development, and research and development (“R&D”). The employment agreements also stipulated that all intellectual property rights created by the inventor in the course of, and incidental, to employment with those entities were owned by the employer, and remains under obligation, to assign ownership of any such rights to the respective employer.
For one embodiment, the Commissioner found that the inventor (amongst others) contributed to the concept of the application in dispute while at the related entity of the requestor before the priority date of the patent application in question, and as such the requestor was entitled to the disputed application. However, a declaration under section 36 was not made as the Commissioner found that the requestor’s direct actions resulted in publishing the disputed concept in the public domain before the priority date. Through the publication of the subject matter embodied by the disputed concept, the Commissioner found that the requestor, by its own account and with implicit consent, forfeited its claim to eligibility in respect to that concept.
In Mine Site Technologies Pty Ltd v R F Industries Pty Limited [2021] APO 21 (2 June 2021), the requestor was found to be sole person entitled to be the “nominated person” and a declaration was made by the Commissioner under section 36. In this case, evidence was required to determine what was the “inventive concept” of the disputed application such that certain aspects were deemed relevant while other technical aspects were disregarded. The supporting evidence was considered by the Commissioner to determine the person who had contributed to the invention, and from that which party therefore had entitlement to the invention and the patent application. The Commissioner also found employment agreements (where the inventor was listed with both the requestor and the disputed applicant) identifying that rights to intellectual property created, developed or contributed to by the inventor during the course of employment were vested with the requestor.
In Dynamic Suspensions Pty Ltd v Elizabeth Anne MOLNAR [2021] APO 8 (19 February 2022), entitlement was considered under section 59 (substantive opposition proceedings). In this decision, it was alleged by the Opponent that the nominated person was not entitled to the grant of a patent for the alleged invention because the persons stated as the inventors were not the actual inventors of the alleged invention. The Commissioner was not satisfied that the Opponent was entitled to the invention because the Opponent made no effort to identify the inventive concept of the claimed invention and how the personnel of the Opponent contributed to this inventive concept. There was also no evidence that the Applicant owed any contractual or fiduciary duties to the Opponent.
Challenging entitlement to a patent application at the Australian Patent Office can have limitations due to the powers conferred to the Commissioner by the Patents Act 1990 (Cth), who is not a judge sitting in a court, depending on the circumstances of the dispute. This was recently demonstrated in the decision of Vahid Vakiloroaya v HVPS Holdings (Pty) Limited [2022] APO 10. This decision considered entitlement under section 36 as a result of alleged misrepresentation leading to execution of a deed of assignment rather than “conventional” IP theft issues. In this decision, the Applicant did not dispute that fraudulent representations were made. The Commissioner’s power under section 36 is discretionary and includes the interests of the parties involved and the public interest.
The Commissioner considered that the crucial threshold question for considering a section 36 entitlement challenge in view of contract law was, even if the Commissioner was satisfied that the Deed was fully or partially voidable as a result of misrepresentation, would the Commissioner have the power to give consequential orders to fully restore both parties to their position before the execution of the deed. The Commissioner found that where a patent application had been assigned in exchange for significant consideration, substantial restitutio is outside the scope of the Commissioner’s powers. As a result, the section 36 challenge was unsuccessful because even if the Commissioner was to be satisfied that the declaration to entitlement could be made, the Commissioner would not make it as the Commissioner does not have the power to give consequential orders to fully restore both parties to their position before the execution of the deed.
Summary
Challenges to entitlement can be complex and highly dependent on the relevant facts in dispute. This can be further complicated when issues such as contract law are involved. As such, careful consideration should be made when deciding whether to challenge entitlement at the Patent Office, which can be relatively cost effective, or whether to challenge entitlement via the courts (which can be orders of magnitude more in costs compared to an action before the Patent Office, and also involves risks of adverse costs orders for unsuccessful litigants).
If you are interested in requesting challenging entitlement of a patent application or would like further information, please contact one of our expert attorneys or patent litigation lawyers.