Differences in trans-Tasman patent law: Patents and experimental use

Patents legislation throughout the world generally provides that one party shall not exploit another’s patented invention. On the other hand, it is widely accepted at common law that experimenting with or around such an invention is permissible so long as such experimentation is not commercial in nature.

The so-called Experimental Use Exception to patent infringement (EUE) is thereby a balance between at once providing strong and exclusive rights to a patentee (ie Article 30, TRIPs), whilst at the same time serving to stimulate innovation, research and development. Naturally, the differing social, political and economic climate of individual countries necessitates a unique line in the sand as to precisely where “experimentation” ends and “exploitation” begins.

We have reported on Australia having enacted a statutory EUE; this came into force on 16 April 2012. New Zealand presently lacks such legislation – and this gives rise to what is now one of the major inconsistencies between the patent laws on both sides of the Tasman Sea.

The issue of the EUE arguably only came to prominence in Australasia around 2003, when an Australian biotechnology company sought to enforce patents in both jurisdictions relating to non-coding (so-called “junk”) DNA mapping by attempting to enter into a proprietary licensing agreement with any entity undertaking related genetic research. Given that many such researchers had unquestionably experimental motives, questions were raised as to whether the enforceability of the sought licensing agreements was justified, or indeed within the scope of the Patentee’s exclusive rights.

Given the questions raised in these cases, Government review of the EUE followed in both countries. The results of the Australian review are now reflected in section 119C of the Patents Act 1990 (Cth), as discussed in our previous article.

Government review in New Zealand has, perhaps prudently, followed one or two steps behind Australia, with the likely intention that Australia’s new laws be adapted as basis for any statutory New Zealand EUE. Indeed, the delays in enacting New Zealand’s new patents legislation have allowed the findings of Australia’s governmental review to be incorporated within the Patents Bill 2008, which is presently awaiting a second reading before Parliament. Clause 136 of the Bill presently recites:

(1)   It is not an infringement of a patent for a person to do an act for experimental purposes relating to the subject matter of an invention.(2)   In this section, act for experimental purposes relating to the subject matter of an invention includes an act for the purpose of:

(a)   determining how the invention works

(b)   determining the scope of the invention

(c)   determining the validity of the claims

(d)   seeking an improvement of the invention (for example, determining new properties, or new uses, of the invention).

The draft legislation thereby proposes a statutory definition as to subject matter, meaning that New Zealand’s unique line in the sand is more likely to fall on the side of stimulating R&D than it is providing strong and exclusive rights to a patentee. This impression is furthered by the recent deletion of the qualifier “..if the [experimental] act does not unreasonably conflict with the normal exploitation of the invention”. Economically-speaking, we find this largely appropriate; smaller countries often have greater drivers to stimulate R&D. However, we note that the Patents Bill 2008 has not yet been passed in the NZ Parliament – and there can be no guarantee that if/when it is passed, Clause 136 will remain as is.

In the interim, New Zealand researchers are forced to rely upon a common law EUE, which provides that research of an experimental nature does not infringe a patent, whereas that conducted for a commercial purpose does (eg Smith Kline, French Laboratories v AG (1991) 4 TCLR 199; Monsanto v Stauffer Chemical Co (1984) 1 TCLR 129). However, the case law fails to provide any guidance as to where the distinction between experimental and commercial research lies. Experimental use of patented subject matter is thereby something of a risky proposition in New Zealand at present. Researchers in Australia, conducting the same enquiries upon the same patented subject matter thereby have greater certainty than do their New Zealand counterparts at present.