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Grace periods - not always what they seem

Date: 01 July 2009
Author: Chris Owens
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In 2002, the Australian Government of the day introduced an American style Grace Period into the Australian Patents Act, giving applicants a degree of protection against loss of rights due to disclosure before their patent application is filed.

Since this new Grace period is unconditional, it essentially overrides the existing provisions of the Paris Convention.

There are no statistics regarding the reliance placed on the new Grace Period provision as there is no requirement to advise of the prior disclosure or request that the Grace Period be invoked until the validity of the patent or application in question is challenged.  However it is believed that use is minimal and prudent practitioners caution clients to use the Grace Period only when disclosure was inadvertent or a decision to file is made after the disclosure has already occurred.  We would not usually recommend that applicants deliberately disclose before filing.

One particularly disturbing issue that has arisen in the recent past in relation to the Grace Period is the potential inapplicability to divisional applications.  In a judgement issued last year by Federal Court of Australia (heard by a single judge) in Mont Adventure Equipment Pty Ltd v Phoenix Leisure Group Pty Ltd, it was held that a divisional application filed outside the grace period did not qualify for the benefit of a Grace Period, even if the parent from which it was divided was filed within the Grace Period.  This decision came as a bit of a shock to all concerned as it had been assumed that a divisional application would have the same status as its parent, as is the case with priority claims.

While this case specifically dealt with an Innovation Patent, the same sections of the Australian Patents Act and in particular Regulation 2.2 (1A) also apply to Standard Patents.  This case was therefore seen to be important to the usefulness of the broader grace period provisions.

The first judgement was appealed and a judgement of the Full Federal Court of Australia was handed down in relation to this matter on 7 July 2009.

Fortunately, the Full Federal Court unanimously disagreed with the interpretation of reg 2.2(1A) taken by the court of first instance and reversed the earlier decision.  This returns the situation to that which was generally felt to be the true intention of the grace period provision of the legislation.  For the time being at least this aspect of grace periods in Australia seems to be back on track; although it is always open for this matter to be referred to the High Court of Australia to further test the law.

However things are never simple and there are other aspects of the Grace Period Provisions that should be mentioned.

First of all, to benefit from the Grace Period provisions a complete application (which includes a PCT application designating Australia) must be filed in Australia within the grace period.  It is not enough to file a provisional application or establish a priority date by foreign filing within the Grace Period.  That is to say, the disclosure upon which the Grace Period is based does not itself establish any kind of priority for the applicant who relies on this provision.  It merely removes from the list of art that can be cited against an application, those disclosures originating directly or indirectly from the applicant.  Therefore in Australia, a second inventor who can show that he did not derive the invention from a disclosure by a first inventor and who files a patent application before the first inventor, may prevail regardless of the first inventor's access to the Grace Period, even if the second inventor actually made the invention subsequently to the making of the invention by the first inventor.

It must also be remembered that the grace period dates from the first disclosure and to benefit from the Grace Period, a complete application must be filed within 1 year of the disclosure (i.e. by one day prior to the anniversary). Further, no account is taken of public holidays.

A significant intention of the legislators in framing the Grace Period amendment was to provide a saving provision for academics and others who routinely publish their work and who might on occasion inadvertently overlook the patentability of an invention before publishing its details.  But the changes to the legislation are not so specific, and this leads to an uncertainty as to the types of disclosure that might be used to invoke the grace period.  Under Australian law, if an invention is used commercially, even if there is no public disclosure of the actual invention, such use can prevent the grant of a valid patent.  A classic example of this is where there is an offer for sale or an actual sale of the product embodying the invention prior to the priority date (but where either there is no delivery of the product before filing, or the invention cannot be readily discerned from the product).

There is now a tension between the old law and the new Grace Period which has not been tested in any court.  What happens if an inventor places goods into the market and makes actual sales?  Is a subsequent application invalid?  Taking this further, what if a third party copies the article that was sold, and sells their version of the product, before a patent application is filed by the original inventor.  Is the third party protected from infringement because they had taken steps to use the invention before the patent application was filed?  There are arguments for either side of this scenario (which has occurred at least once to the writer's personal knowledge) and until a court has had an opportunity to rule we will not know with any certainty what the entire effect of the Australian Grace Period will be.

In the mean time practitioners will continue to advise caution.

The Full Federal Court decision in Mont Adventure Equipment Pty Ltd v Phoenix Leisure Group Pty Ltd can be found at http://www.austlii.edu.au/au/cases/cth/FCAFC/2009/84.html.

Tags:  Employee inventions
 
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