Do Australian Patents have Extra-Territorial Reach?

Patent rights are historically considered to be national in scope. That is, a patent will only be infringed if an infringing act occurs in the territory, typically a sovereign nation, for which it is granted. This universal principle has also been a principle of Australian law for over a hundred years.

Yet, a recent court decision, Occupational and Medical Innovations Ltd v Retractable Technologies Inc [2008] FCA 1102 (“OMI’), concerning a patented syringe – and decided in the Federal Court of Australia -suggests that Australian courts see potential for expansion of the relevant territory for considering infringement of Australian patent rights and perhaps, by extension, other IP rights as well. Importantly, the decision indicates that such territorial expansion may occur even in a non-internet situation, extra-territorial reach for IP rights being an all but settled issue where commercial exploitation through the internet is concerned. Therefore, commercial re-valuation of Australian IP rights, including those exploited outside the ICT sector and by non-“web” means, may be appropriate in view of the OMI decision.

In the case of patents, infringement clearly occurs, under Australian law, where a patented invention has been "exploited" in the patent area of Australia and the OMI case was primarily concerned with that question. However, it also emerged from the decision that one of the parties, one of which was an Australian registered business and the other a US company, had decided to have its syringes manufactured in China; manufacture in China being a common situation for Australian manufacturers who wish to access low cost production. The question therefore arose as to whether the Australian patent could be enforced to deal with the manufacture of the syringes in China if such manufacture fell within the scope of the Australian patent. One party argued that an Australian patent could not be enforceable in China because an Australian patent is limited, in effect, to the patent area of Australia. The judge disagreed and observed that "causing manufacture to occur in China is….an exploitation of the…[Australian]..patent regardless of the legal position in China". The judge effectively decided that a commercial decision, made in Australia, “causing manufacture” of the patented retractable syringes in China could constitute exploitation of the patent which would amount to patent infringement under Australian law.

If correct as a principle, Australian patents may be used to restrain activities of a competitor who has made a decision, in Australia, to exploit the Australian patent in another jurisdiction where there may or may not be patent rights. Jurisdictions and regions of particular interest here include Africa, South America, China, India, Malaysia and New Zealand though this list is by no means exhaustive. Industries most likely to be affected by the principle are manufacturing and mining though again this is not an exhaustive list. Although the principle might seem to be most relevant where patentee and competitor are both Australian, and making commercial decisions in Australia, the potential reach of the principle is broader. Australia is often selected as a site for Asia-Pacific regional headquarters of global companies. If then the decision to exploit technology, protected by Australian patent, in another part of the region is made by the regional headquarters in Australia then the Australian patent will potentially be infringed. This is most significant since Australia has good systems for enforcement of patents, and other IP rights as well, and an expanded reach for an Australian patent or IP right offers the attractive option of suing an infringer for Australian patent infringement, particularly if exploitation occurs in a region where enforcement systems are less effective.

The same situation would also seem to apply for other IP rights such as designs and trade marks. If the decision to exploit or use Australian registered designs and trade marks in another jurisdiction is made in Australia, then the Australian IP rights will potentially be infringed.

There are several possible implications from the decision which include:

1. conducting freedom to operate investigations may be appropriate in Australia where commercial decisions to exploit intellectual property in jurisdictions outside Australia are, or are likely, to be made in Australia. Perhaps, such freedom to operate searches should even be conducted where an businesses have an agent in Australia with awareness of, and sufficient authority to stop, activity in another jurisdiction which would constitute infringement of an Australian IP right if it occurred in Australia; and
2. reviewing situations where Australian companies, or companies with regional headquarters in Australia, are commercializing intellectual property protected by Australian patent, design or trade mark rights outside Australia – and in a jurisdiction where there are no IP rights – to assess whether a remedy may be available. Such a remedy could include injunction restraining an infringer – having sufficient authority in Australia to cause IP infringement in a jurisdiction outside Australia to stop – from continuing the infringing activity overseas. In such cases, it is possible that damages or account of profits could be ordered even for activity not related to the Australian market.

The principle from the OMI case takes account of the practical realities of business between Australia, its region and its trading partners and will likely be a welcome development for those holding or considering the commercial value of Australian IP rights.