Could your behind the scenes chat with a business partner about your new technology lead to the loss of your future patent rights? We explore some of the risks and case law you should be aware of.
You are the CEO of a new start-up technology company with a product about to hit the consumer market. You’ve been juggling research and development, wearing every hat possible while preparing for the launch. You’ve just had a productive meeting with some business partners about commercialisation and licensing which will help fund future patent protection. Despite your hard work and preparation however, you might have just invalidated your patent application before it was even filed.
Activities which result in a public disclosure of an invention may invalidate a future patent application. Such disclosures are likely to be considered prior art which is relevant to the novelty and inventive step of any future claims. However, even private use of an invention can have an effect on patent validity.
Activities such as discussions relating to the sale of a product or licensing of specific technology have the potential to impact the validity of a patent application filed for that product or technology. Specifically, if those discussions fall within the scope of “secret use” under the Patents Act 1990 (the Act), then any subsequent complete patent application could be rendered invalid by the secret use.
The Act does not define secret use, but it does define certain activities that are not considered secret use for the purposes of the Act. These include:
Let’s consider some of the more pertinent of these categories in more detail.
If discussions relate to reasonable trial or experiment of the technology, these discussions might not be considered secret use, even when a commercial benefit is involved. In SNF (Australia) Pty Limited v BASF Australia Ltd (2019) FCA 425, the court found that it was important to look to the “true purpose” of any use to determine whether it was for a trial or experimentation. The case related to a patent for the treatment of waste mineral slurries. Although the applicant had received a commercial benefit from using their invention at a number of field sites prior to filing any patent application, the court ultimately found there was no secret use of the invention, as the use was primarily performed to collect further data. This data could only be collected by testing the invention in the field. It was also noted that:
it may be significant that although there have been negotiations for the supply and manufacture of the invention, the negotiations were not concluded until after the priority date. If they have been concluded beforehand, that may support an invalidating secret use (emphasis added).
If the activities or discussions are solely confidential disclosures of the invention then they will not be considered secret use of that invention. While the Act does not provide a specific definition for confidential disclosure, it is usually understood to include disclosures where confidentiality is either imposed by contract or if the situation satisfies the requirements for the equitable doctrine of breach of confidence. It may also apply to situations where confidentiality is implied by circumstances. However, if the discussions involve making agreements for commercialisation of the invention, then those discussions may be considered secret use as they would not occur solely in the course of a confidential disclosure.
Unfortunately, not only is there no specific definition for secret use, there is also no definitive test for whether an activity counts as secret use. Pleasingly, case law does provide some guidance to determine if an activity is a secret use.
The majority in Azuko Pty Ltd v Old Digger Pty Ltd (2001) 52 IPR 75 indicated the following practical test:
[H]as what occurred amounted to a de facto extension of the patent term? The answer to this will usually depend upon whether the patentee reaped commercial benefit from what was done before the priority date (emphasis added).
In Southern Cross Mining Services Pty Ltd v Mickala Mining Maintenance Pty Ltd (2020) FCA 1064, the Federal Court addressed the question of whether advertising an invention for sale before the priority date counted as secret use. The decision by Greenwood J found that for the activities to amount to secret use, they must be both a de facto patent term extension and kept secret intentionally. It would not have been enough that the use was accidentally kept secret.
When assessing secret use, it is clear that the courts tend to be primarily concerned with the main or true purpose of any activities performed prior to the filing of a patent application. If the main or primary purpose of the activities is to receive a commercial benefit, which amounts to a de facto extension of the patent term, and those activities are intentionally kept secret, then the activities will be considered secret use.
Whether commercial discussions prior to filing a patent application will be considered secret use will largely depend on what goes on in these discussions. If a tangible benefit is realised before the priority date of a patent application, this will be indicative of the invention being secretly used. If the realisation of this benefit was the primary purpose of the discussions, it is highly likely that secret use has occurred.
If you are concerned that your closed-door activities might endanger a future patent application, you should check your calendar. Applicants may benefit from the grace periods available in Australia relating to public disclosure, the most common of which is a public disclosure in circumstances by or with consent of the nominated person or patentee. In such cases, an Australian complete patent application or PCT application must be filed within 12 months of the public use, provided that use occurred on or after 1 April 2002.
However, potential applicants seeking to make use of grace periods for public disclosure for the purposes of a reasonable trial of the invention should take care. Australian courts have tightened the scope of what activities qualify for grace periods around public trials of inventions. In our article Grace Periods in Australian Patent Law we discuss the application of the so-called grace period as a means of protecting the validity of a self-disclosed invention.
Before you dig into the technical and commercial details of your invention in your meetings with business partners, you should be mindful of the content of those discussions and what impact they might have on the patentability of your invention. Ensuring that the discussions are conducted under confidentiality is highly recommended.