An Empirical Investigation into Patent Enforcement in Australian Courts‡

Published date01 June 2005
Date01 June 2005
DOI10.22145/flr.33.2.3
Subject MatterArticle
AN EMPIRICAL INVESTIGATION INTO PATENT
ENFORCEMENT IN AUSTRALIAN COURTS
Kimberlee G Weatherall and Paul H Jensen
I INTRODUCTION
Patents are growing in importance. Patenting rates worldwide have increased
significantly in recent years: between 1992 and 2002, the number of patent applications
in Europe, Japan and the US increased by more than 40 per cent.1 Patent coverage has
also been extended to include new kinds of inventions, like genetic technologies,2
software,3 and business methods. 4 A wider range of participants are also using
patents, with universities being encouraged to increase their patenting activity.5 And
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This paper presents results from the IP Enforcement Project at the Intellectual Property
Research Institute of Australia ('IPRIA'), at the University of Melbourne. This project was
commenced in 2003 by Ms Glenys Fraser and both this paper, and the research which it
reports, owe much to the work she did in establishing the project. It also owes much to Mr
Paul Bernath, formerly a researcher at IPRIA and now a solicitor at Allens Arthur
Robinson, who set up the Database. We thank them both — this project would not have
happened without them. Thanks also to our researchers: Ms Nitsa Karahalios, Ms Sarah
Moritz, Ms Sally Pryor and Mr Edward Sexton. Reading hundreds of cases and coding
them is highly skilled and not easy work. More general thanks to the many from the bar
and profession who were consulted in setting up the project and to the Federal Court for its
assistance on various matters. We also thank those who attended seminars at ANU and at
IP Australia, where presentations on this research were given, for their feedback. Two
anonymous referees also provided extensive and useful suggestions. All errors remain the
authors' own.
Associate Director (Law), IPRIA, Lecturer in Law, University of Melbourne.
Research Fellow, IPRIA and Melbourne Institute of Applied Economic and Social Research,
University of Melbourne.
1 Organisation for Economic Co-operation and Development ('OECD'), Patents and
Innovation: Trends and Policy Challenges (2004).
2 Diamond v Chakrabarty, 447 US 303 (1980); IP Australia, Australian Patents for Biological
Inventions (2005) /patents/specific/biotech.pdf> at
29 May 2005; Kiren-Amgen Incorporated v Board of Regents of University of Washington (1995)
33 IPR 557.
3 Diamond v Diehr, 450 US 175 (1981); CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260.
4 State Street Bank & Trust Co v Signature Financial Group, 149 F 3d 1368 (Fed Cir, 1998); see
also Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110; Application by Grant (2004) 62
IPR 143.
5 See, eg, Bayh-Dole Act of 1980, 35 USC § 200 (1980) et seq.
240 Federal Law Review Volume 33
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there has been a dramatic increase in patent litigation, at least in the US.6 These facts
have given rise to international debate on the costs and benefits of the patent system
and how its effectiveness in encouraging innovation might be improved.7
To inform these debates, policymakers have called for more hard data on how the
system is actually working in practice.8 Enforcement forms an important part of how
the patent system 'works'. Patents are designed to encourage innovation by providing
innovators with legal protection against expropriation of their innovative products and
processes by third parties. The effectiveness of this legal protection depends not only
on the existence of patent laws 'on the books' but also on the ability to enforce the
rights granted in the courts. Historically, however, there has been a relative dearth of
information on how the enforcement 'side' of the patent equation is working.
This historical lack of information is being addressed overseas, particularly in the
US, by a burgeoning empirical literature.9 However, to date, there has been only
limited empirical work in Australia. The purpose of our study is to begin to plug that
gap, by examining the use of the Australian court system as a mechanism for enforcing
patent rights. We have conducted an empirical study of patent enforcement
outcomes10 in Australian courts during the period 1997–2003. In this paper, we
provide some results of that study, giving a broad picture of what is happening in
patent disputes before the courts. We intend that this study will provide a solid factual
foundation for policy debates and serve as a basis for further research.
There is at present an ongoing debate in IP circles in Australia with regard to the
performance of Australia's IP system. One common perception often voiced in this
debate is that patent owners have received inadequate protection in Australian
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6 James Bessen and Michael J Meurer, 'The Patent Litigation Explosion' (Unpublished
mimeograph, Boston University School of Law, 2005). At this stage, there is little evidence
to suggest that a similar trend has occurred in other countries.
7 In Australia, the Advisory Council on Industrial Property — now renamed the Advisory
Council on Intellectual Property ('ACIP') — which is a specialist independent body
constituted to advise the federal government on IP matters, has conducted three recent
reviews of IP enforcement: ACIP, Review of Enforcement of Industrial Property Rights (1999);
ACIP, Review of Trade Mark Enforcement (2004); ACIP, Should the Jurisdiction of the Federal
Magistrates Service be Extended to Include Patent, Trade Mark and Design Matters? (2003). See
also House of Representatives Standing Committee on Legal and Constitutional Affairs,
Parliament of Australia, Cracking Down on Copycats: Enforcement of Copyright in Australia
(2000). At the international level, the World Intellectual Property Organization ('WIPO') has
also developed cooperative mechanisms to address enforcement issues: see WIPO,
Respecting Intellectual Property Rights
at 29 May 2005. The OECD has also become interested in the issue: OECD, above n 1. In the
US, the Federal Trade Commission ('FTC') and the National Research Council are both
evaluating the patent system: see FTC, To Promote Innovation: The Proper Balance of
Competition and Patent Law and Policy (2003)
cpreport.htm> at 29 May 2005; National Research Council Committee on Intellectual
Property Rights in the Knowledge-Based Economy, A Patent System for the 21st Century
(2004) at 29 May 2005.
8 OECD, above n 1, 26; National Research Council, above n 7, 1–2.
9 See further below Part II(d).
10 That is, judgments rather than court filings (or other measures of litigation) which occur
earlier in the dispute resolution process.
2005 Patent Enforcement in Australian Courts 241
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courts.11 We argue that there are two fundamental problems with the debate as it
currently stands. The first problem is that although it is essentially an empirical issue,
there is little objective data on the outcomes of the patent litigation process — the
debate has largely been based on anecdotal evidence provided by groups with a vested
interest in the issue. Empirical research on litigation outcomes is relatively rare in legal
research in Australia. 12 This paper makes an important contribution to the
development of empirical research on patent litigation outcomes. Second, there is a
poor understanding of what actually constitutes the optimal level of enforcement.
Many existing studies are critical of the observed low levels of success for patent
owners in patent litigation disputes without properly recognising that patent rights are
probabilistic in nature — a patent does not provide any guarantee of validity if
challenged in a court of law — and that this has implications for what an appropriate
'win rate' for patent owners might be.
To remedy these two problems, we present this paper in two parts. In the first part,
we review the literature on litigation, with particular reference to patent litigation. We
examine the rationale for the creation of patents, discuss some recent criticisms of the
Australian courts with regard to patent protection and analyse in more detail why we
need a framework for evaluating the optimal level of enforcement in the courts. Our
aim is to highlight the extreme care with which any statistics in this area must be
treated.13 In the second part, we undertake a broad empirical study of patent litigation
outcomes in Australia using a newly-created database which contains data on all
judgments in civil IP enforcement actions in courts of superior jurisdiction over the
period 1997–2003.14 We set out the methodology used in the construction of the
database and the analysis of the data and then we report the results of recent patent
enforcement cases in Australia in terms of both validity and infringement. Finally,
some conclusions are drawn and consideration is given to the use of this data set in
other research projects.
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11 Working Group on Managing Intellectual Property, 'Framework Paper' (National
Innovation Summit, 1999) dustry.gov.au/archive/summit/scwg/IP/
mipwgFullReport.pdf> at 29 May 2005.
12 One exception is the work of Ian Ramsay in relation to litigation in corporate law: see, eg,
Paul James, Ian Ramsay and Polat Siva, Insolvent Trading: An Empirical Report (Clayton Utz
and the Centre for Corporate Law and Securities Regulation, 2004)
ownloads/InsolventTradingReport.pdf> at 29 May 2005.
13 Justice Drummond's paper also addresses this issue: see Justice Douglas Drummond, 'Are
the Courts Down Under Properly Handling Patent Disputes?' (2000) 42 Intellectual Property
Forum 10. Since Justice Drummond's article, there have been considerable advances in the
literature, especially in the US. An update on the debate is therefore timely.
14 In this paper, we are only presenting analysis on the outcomes of patent litigation disputes,
but the database also includes data on the resolution of all copyright, trade mark and
design disputes over the same period. This includes: 108 copyright judgments; 87 trade
mark judgments; and 15 design judgments. In the near future, we will be publishing
further papers on outcomes in both copyright and trade mark litigation.

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