Patent Infringement in Australia: Results from a Survey

AuthorKimberlee Weatherall,Elizabeth Webster
Published date01 March 2010
Date01 March 2010
Subject MatterArticle
Kimberlee Weatherall and Elizabeth Webster
Enforcement of patents is a pivotal factor in determining whether or not the patent
system performs its public role of stimulating innovation.1 Without the means to
exclude imitators, the party who pays for the original idea or invention will, in many
cases, not be able to recoup their outlays, with the result that such parties are likely to
direct their investment elsewhere and invest less in research and development.
Enforceability matters even if the invention embodied in a patent is not being directly
commercialised by the inventing organisation. Intellectual property ('IP') owners will
not, for example, be able to license, cross-license, or sell their IP rights, or enter into
joint ventures based on those rights, if the licensee, buyer or joint venture partner has
no confidence that their IP rights confer effective exclusivity over brands, ideas or
Intellectual Property Research Institute of Australia; TC Beirne School of Law, University
of Queensland.
Intellectual Property Research Institute of Australia; Melbourne Institute of Applied
Economic and Social Research, University of Melbourne. The authors are grateful to Sean
Applegate, Kay Collins, Chris Bird, Alfons Palangkaraya, Paul Jensen and Jongsay Yong
for assistance with the questionnaire, and Anne Leahy, Annabelle O'Bryan, Clara Jordan-
Baird and Caitlin Walsh for undertaking the telephone survey. We has also benefited from
discussions with Rhonda Smith, David Starkoff, and William Van Caenegem, attendees at
several public seminars where preliminary results have been reported, and from the
comments of two anonymous referees. This project has been funded by ARC project
LP0667467 and IP Australia. We would like to thank Phil Ruthven and Rob Bryant from
IBISWorld for the use of their database.
1 The natural rights argument — that is whether small investors should have equal access to
the patent system on essentially moral grounds or on the basis of their rights as a human
being — raises larger and more complicated questions. From the perspective of prevailing
custom and practice, economic rights are far more circumscribed than human rights. That
is, there is a fairly low minimum level of rights accorded to individuals in the economic
system on purely moral grounds or on the basis of natural rights. Individuals, impecunious
or otherwise, do not have a natural right to get a bank loan, float a company on the share
market, to operate in licensed professions and trades, to dig a hole anywhere they desire or
build anything on their land etc. Whether these existing practices are desirable is of course
a large issue. Hence, we avoid the question of whether a cheap and efficient patent
enforcement system is desirable from a natural rights perspective or on the basis of
inventors' moral claims, and limit ourselves to the economic issues.
22 Federal Law Review Volume 38
creations. Furthermore, IP owners will be reticent to disclose their ideas to prospective
partners if they have doubts about their ability to prevent the other party from
expropriating their proposal. Direct enforcement of each and every patent does not
have to occur for the patent system to be effective. All that is required for incentives to
work is that people believe that infringement will be stopped if necessary.
Ideally, an innovation system should encourage the creation and development of
the most valuable ideas regardless of who creates them. From this perspective, IP
rights should serve both small economic players and large corporations equally. If the
decision to grant a patent and the ability of the owner to enforce their rights depend
solely on the calibre of the invention, then the patent system will disperse monopoly
power and promote competition. However, if access to enforcement depends on the
economic power of the parties, then patent laws will perpetuate rather than counter
the concentration of market power: patents will strengthen the already strong.
There are few studies or systematic records offering objective data on how much
infringement occurs, or how inventors and owners respond to incidents of possible
infringement, particularly in those cases where parties do not proceed to legal action.
Existing data do not represent the experience of all innovators. To take one example, a
currently popular data source on the extent of infringement is extrapolations drawn
from customs seizures of infringing goods.2 These data give estimates of copyright and
trade mark counterfeiting in international trade. However, because we do not know
whether these seizures represent 1 or 99 per cent of all infringements, nor whether they
over-represent certain products or locations, these data cannot be generalised to the
whole sector or to other kinds of IP rights. Other data are sourced from industry
associations, many of which conduct surveys of members in order to produce reports
on piracy rates. However, few address patent infringement, and the reports themselves
are suspect for being self-serving: they tend to rely on estimates from industry
participants, and there is, after all, no incentive for industry players or peak bodies to
underestimate rates of infringement.3
Another source of information is surveys of lawyers who advise inventors.4 If these
surveys comprise respondents who are representative of the whole population of legal
advisors, they should produce reasonable estimates of overall enforcement activity and
costs for incidents where external lawyers are involved.5 Nevertheless, no matter how
2 Organisation for Economic Co-operation and Development ('OECD'), The Economic Impact
of Counterfeiting and Piracy (2008) .
3 Australian Institute of Criminology, Intellectual Property Crime and Enforcement in Australia,
Research and Public Policy Series No 94 (2008) .
4 Advisory Council on Industrial Property, Review of Enforcement of Industrial Property Rights
(1999) <> at 30 March 2010;
Chris Dent and Kimberlee Weatherall, 'Lawyers' decisions in Australian patent dispute
settlements: an empirical perspective' (2006) 17 Australian Intellectual Property Journal 255;
American Intellectual Property Law Association, Report of the Economic Survey 2007 (2007).
5 For example, lawyers may be able to estimate the number of cases where a patentee comes
to them having noticed copying, and the proportion where court proceedings are filed. If a
sufficiently representative set of estimates can be obtained, this information could be
combined with information about filed legal proceedings to get some sense of the amount
of copying going on outside formal legal proceedings. There are difficulties, however, in
framing such a study: for example, in identifying the appropriate sample of lawyers. If
patent litigation specialists are surveyed, the data may not capture information about
2010 Patent Infringement in Australia 23
well executed, these estimates will only be partial since rights-holders will not always
consult their lawyers when they detect copying.6 The number of infringement cases
filed with the courts is another common source of information on enforcement
activity,7 but these data are even more partial, as many cases of apparent infringement
will never reach a court registry. Litigation data captures only one extreme part of the
enforcement picture.
A preferred means of obtaining information on the whole story of infringement is
to conduct a statistically representative survey of firms or inventors directly. Prior to
our survey, the best documented source of information was from William Kingston
who conducted a representative survey of 3660 Small and Medium Enterprises
('SMEs') with EU-originating patents granted at the United States Patent and
Trademark Office ('USPTO') or European Patent Office ('EPO').8 He received 549
replies (15 per cent response rate) and found that 67 per cent of SMEs believed that
another party had copied their inventions despite being patented. Two
unrepresentative surveys also exist. The first is a year 2000 survey of 98 Japanese-
owned subsidiaries in China by You and Katayama. They estimated that 30 per cent of
companies believed their patents were being infringed locally.9 The second is a survey
of 143 firms, with an undisclosed bias and response rate, which was undertaken for the
EU Directorate-General for Enterprise and Industry.10 The study, which only included
complaints from small businesses, which are likely to turn at least in the first instance to
their patent attorney or general commercial lawyer rather than a patent litigation specialist.
6 A 'back of the envelope' calculation supports this hypothesis. Dent and Weatherall, above
n 4 note that a majority of respondents to a survey of lawyers (78 per cent) responded that
between 0 and 20 per cent of cases of copying that came to lawyers resulted in court
proceedings being filed. This however was a small survey, and did not involve detailed
review of lawyers' files. The 'filing rate' for patent cases for the period 1995–2005 found by
an earlier study was an average of 22 contentious proceedings filed per year in Australian
Federal Courts, or 242 cases over the course of 11 years: Fiona Rotstein and Kimberlee
Weatherall, 'Filing and Settlement of Patent Disputes in the Federal Court 1995–2005' (2007)
68 Intellectual Property Forum, 65. If that represents, say, 10 per cent of all cases notified to
lawyers (which may be a high estimate or a low one, given that lawyers reported only
within a range of 0-20 per cent), that would mean 2 420 cases of 'copying' notified to
lawyers over that period. As will be seen, this number seems lower than the number we
have found in this study.
7 See, eg, Rotstein and Weatherall, above n 6 for Australian figures. Many such studies have
been undertaken in the United States: see, eg, Jean Lanjouw and Mark Schankerman,
'Enforcement of Patent Rights in the United States' in Wesley Cohen and Stephen Merrill
(eds), Patents in the Knowledge-Based Economy (2003) 149; Glynn Lunney, 'Patent Law, The
Federal Circuit, and the Supreme Court: A Quiet Revolution' (2004) 11 Supreme Court
Economic Review 1; James Bessen and Michael Meurer, Patent Failure: How Judges,
Bureaucrats, and Lawyers Put Innovators at Risk (2008); Jay Kesan and Gwendolyn Ball, 'How
are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement
of Patent Disputes' (2006) 84 Washington University Law Review 237; for a similar study in
Germany see Katrin Cremers, Determinants of Patent Litigation in Germany, ZEW Discussion
Paper No 04-72 (2004).
8 William Kingston, Enforcing Small Firms' Patent Rights (2000).
9 Kegang You and Seiichi Katayama, 'Intellectual Property Rights Protection and Imitation:
An Empirical Examination of Japanese FDI in China' (2005) 10 Pacific Economic Review 591.
10 Simon Rodwell et al, Study: Effects of Counterfeiting on EU SMEs and a Review of Various
Public and Private IPR Enforcement Initiatives and Resources (2007).

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