Australia's High Court rules on ISP's liability for user infringements

Author: Rebecca Giblin (Lecturer, Monash Law School, Australia)

Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16, 20 April 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps095, first published online: June 22, 2012

Australia's secondary liability law has long been broader than that of equivalent jurisdictions, but it was recently reined back when its highest court ruled that ISP iiNet was not liable for authorizing its users' copyright infringements.

Legal context

In 2009, 34 television and movie companies instituted litigation against iiNet, then Australia's third largest ISP, arguing that it had ‘authorized’ the copyright infringements of its subscribers.

Authorization liability has traditionally accrued under Australian law where a defendant has ‘sanctioned, approved or countenanced’ third-party infringement. Since a partial codification of the law was enacted in 2000, courts have also been obliged to consider:

• the extent (if any) of the defendant's power to prevent the doing of the infringement; 

• the nature of any relationship between the defendant and the infringer; and 

• whether the defendant took any reasonable steps to prevent the infringement, including whether they complied with any relevant industry codes of practice.

In the absence of any compelling ‘smoking guns’ to demonstrate that iiNet had actively encouraged infringement, the applicants' argument focused on its inactivity. Like other Australian ISPs, iiNet received thousands of notices each week alleging infringement by its subscribers, from organizations such as the Australian Federation Against Copyright Theft (‘AFACT’). The applicants argued that passing these notices on to customers and then terminating their access if further allegations were made would have been a ‘reasonable step to prevent infringement’, and that iiNet's failure to do so at least indicated that it ‘countenanced’ those infringements. This would have been a stretch even for a law that was already considerably broader than its equivalents in Canada, the USA and the UK.

Facts

At first instance, the trial judge found in favour of iiNet. Given its lack of power over the BitTorrent file-sharing technology which facilitated the infringements, Cowdroy J found that it could not ‘be incumbent on the respondent to stop the infringements’. On appeal, a majority of the three-judge Full Federal Court reached the same conclusion—but in a manner markedly less favourable to iiNet.

Jagot J, dissenting, held that iiNet had already authorized its users' infringements. She was particularly influenced by iiNet's unwillingness to negotiate with rightholders (even in the absence of any judicial authority suggesting it was obliged to do so) and by a press release it issued and made available via BitTorrent the day the litigation was instituted against it, stating its view that it was not obliged to disconnect phone lines based on unproven allegations. In these circumstances she found that it had ‘at least countenanced’ its subscribers' infringements.

Referring to iiNet's ‘contumelious disregard’ for the rights of copyright owners, Emmett J appeared inclined to reach the same conclusion. Ultimately, however, he decided that the notices were simply too flawed for iiNet's failure to act upon them to be unreasonable. Nonetheless, he went on create a ‘roadmap’ for the future: where rightholders had provided sufficient evidence of infringement, undertaken to reimburse the ISP for the reasonable cost of verifying infringement allegations and indemnified it in respect of liability for any mistaken terminations, and where the ISP has still not passed allegations of infringement to its subscribers (and suspended or terminated their access as appropriate), they may well be liable for authorization. Nicholas J had more sympathy for iiNet than his colleagues, but he too left the door open to future ISPs being held liable for similar conduct.

The consensus among academics and practitioners was that this judgment effectively created an unprecedented common law graduated response regime that sharply tilted the playing field in favour of rightholders. In a surprising move however, the applicants looked the gift horse in the mouth and made an ultimate appeal to the High Court.

The strategy backfired. In two separate opinions, the High Court unanimously held that iiNet had not authorized its users' infringements. In the process, it reined back what proved to be an overly-expansive interpretation of the law by the Full Federal Court.

Analysis

This decision considerably reduces the breadth of the Australian authorization law and makes it less attractive to major rightholders as a vehicle for obtaining expansive precedents useful for pushing their enforcement agendas abroad.

Both opinions indicate that ‘countenancing’ can have a broader meaning than ‘authorizing’, finally bringing the Australian view on this point in line with longstanding UK and Canadian authorities. Indeed, the French opinion downplayed the significance of ‘sanctioning and approving’ as well, saying that attention must first be given to the statutory factors rather than the old common law definition.

Applying the statutory factors, French, Crennan and Kiefel CJJ (in ‘the French opinion’) found that iiNet had no technical power to prevent primary infringement since it had no involvement with the BitTorrent technology or power to control or alter it, and because it did not host infringing material or sites that linked to torrent files associated with infringing content. It only had an indirect power to prevent primary infringement by terminating its contractual relationship with subscribers. The notices issued by AFACT ‘did not provide iiNet with a reasonable basis for sending warning notices’ threatening suspension or termination of subscriber accounts. Accordingly, its failure to do so did not amount to authorization of any primary infringement.

The reasoning of Gummow and Hayne JJ (in ‘the Gummow opinion’) was similar. They found that the ‘only disputably practical course of action’ was for iiNet to terminate user accounts after allegations of infringement. This, however, was not a reasonable step, since it would also prevent subscribers from taking advantage of non-infringing internet uses. And, in the absence of any industry code, there was nothing stopping disconnected users from signing up to another ISP and continuing as before, so it was unlikely to bring about any significant reduction of infringement. The Gummow opinion found that it was simply ‘too long a march’ from ‘indifference’, to ‘countenancing’, and so to ‘authorization’.

Practical significance

This decision certainly does not mean that an ISP can never be liable for authorization under Australian law. Indeed, in Cooper v Universal Music Australia [2006] FCAFC 187 an ISP was held liable for its direct involvement with a subscriber's website which was set up to provide links to infringing mp3s of popular songs. If an Australian ISP similarly encouraged or engaged in active involvement with its users' infringements, it certainly could and should be held secondarily liable for doing so. However, the decision does give ISPs some welcome certainty as to their rights and obligations. ISPs will not be liable for opting not to pass on infringement notices to subscribers when they have no involvement in the infringements or any effective power to prevent them.

The court acknowledged the problems copyright owners face as a result of widespread infringement, but made it clear that the common law is not an appropriate source of a graduated response law. This was the correct decision and consistent with the approach taken in other jurisdictions. Given the complexities involved, particularly the costs of enforcement, the need for appropriate safeguards and the potential impact of such a regime on individual consumers, the proper place for development of a graduated response law (if any) is the legislature.

A principle of general application?

Author: Darren Smyth (EIP, London)

Regeneron Pharmaceuticals Inc v Genentech Inc [2012] EWHC 657 (Pat), Patents Court, England and Wales, 22 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps087, first published online: June 19, 2012

The Patents Court, England and Wales, has upheld the validity of a claim expressed in broad functional terms and, in relation to sufficiency, has, unusually, considered that the invention relates to a ‘principle of general application’ as set out by the House of Lords in Biogen Inc v Medeva plc [1997] RPC 49.

Legal context

In European patent law, there is no specific prohibition on claiming an invention in broad terms. The closest legal provision, that the claims must be ‘supported by the description’ (Article 84 of the European Patent Convention, EPC) is not a ground of invalidity of a patent. However, a claim that is expressed in broad terms will frequently be found either to lack inventive step (because it encompasses obvious subject matter) or to be insufficient.

The requirement for sufficiency is expressed in Article 83 EPC: ‘The European patent application shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art.’ Within this broad requirement, UK jurisprudence has established three ways in which insufficiency can arise: classical insufficiency, ‘Biogen insufficiency’ or insufficiency by excessive claim breadth, and insufficiency by ambiguity.

In Biogen the leading judgment stated: ‘If the invention discloses a principle capable of general application, the claims may be in correspondingly general terms’. Therefore, the criterion to be satisfied for a claim which is framed in broad terms to be found sufficient according to Biogen is that it involves ‘a principle capable of general application’.

Accordingly, patentees frequently argue that their invention discloses a principle capable of general application, but cases where this has been accepted are rare. It was recently acknowledged in H. Lundbeck A/S v Norpharma SpA [2011] EWHC 907 (Pat), where the following claim was held not to be insufficient (although the patent was held invalid on other grounds): A process for the synthesis of citalopram, in which a process for the synthesis of [intermediate] according to claim 1 is contained. However, in that case, the part of the claim that was expressed broadly was that part that was peripheral to the actual invention.

Facts

The Genentech patent at issue is EP 1238986 and relates to VEGF. VEGF was known at the priority date as one of a number of angiogenic growth factors (others included FGF, PD-ECGF, EGF, TGF-ß, TNF-α, angiogenin and angiotropin). Because angiogenesis (or neo-vascularisation—the process of new blood vessel growth by outgrowth from pre-existing vessels) is implicated in a large number of diseases, including cancer, rheumatoid arthritis, macular degeneration, and atherosclerosis, a growth factor whose activity could be targeted to control angiogenesis would have been therapeutically highly desirable. However, it was not known that VEGF was such a growth factor.

The main claim of the patent was in the following terms:

Use of a hVEGF antagonist in the preparation of a medicament for the treatment of a non-neoplastic disease or disorder characterised by undesirable excessive neovascularisation, wherein the hVEGF antagonist is:

(a) an anti-VEGF antibody or antibody fragment;

(b) an anti-VEGF receptor antibody or antibody fragment; or

(c) an isolated hVEGF receptor.

Regeneron and Bayer sought revocation of the patent, and also a declaration that a product to be marketed by Regeneron under licence from Bayer called VEGF Trap Eye (VTE) did not infringe.

VTE was found to infringe the patent on the basis that it satisfied the definition of (c) in the claim, even though it did not include the whole of the hVEGF receptor sequence.

The claim was found to involve an inventive step over the pleaded closest prior art, a paper entitled ‘The vascular endothelial growth factor proteins: identification of biologically relevant regions by neutralizing monoclonal antibodies’, which disclosed an anti-VEGF antibody (ie an antibody satisfying the definition of (a) of the claim). The judge accepted that, although the paper stated that the antibody ‘may have therapeutic potential’, it did not render it obvious to use anti-VEGF antibodies in therapy, because of ‘the fact that VEGF was only one of many factors and other agents which could be investigated, the commonly accepted view that there was no single factor responsible, the confusing picture presented by the common general knowledge and the view that achieving anti-angiogenesis therapy would be difficult’.

The judge acknowledged secondary indicia of non-obviousness, including a prestigious award given to one of the inventors, and other accolades in the literature.

A number of insufficiency attacks were made on the patent, and the judge rejected them all. On the matter of Biogen insufficiency, the judgment states:

I consider that the patent discloses a principle of general application within the meaning of the authorities insofar as it claims anti-VEGF antagonism as a treatment for all non-neoplastic diseases. The tumour data in the patent establish that VEGF blockade is likely to be a successful strategy for treatment in cancer. The skilled reader would appreciate that the reason it is likely to be successful is because blocking VEGF is a sufficient intervention to prevent angiogenesis, at least in models of cancer. It is common ground that it is possible to extrapolate that reasoning to at least some non-neoplastic diseases.

Thus the judge placed the invention squarely within the situation where, according to Biogen, it can be claimed in broad terms.

The judge rejected sufficiency attacks based on the time and effort that would be necessary to develop treatments according to the claims, in particular the definition in (c) of the claim, not least VTE itself which was accepted to be ‘very clever’. In this regard, the judgment states:

The fact that a claim may extend to further inventions which make use of the principle disclosed in a patent does not necessarily render the patent insufficient. I do not consider that the fact that the claim extends to VTE makes the present patent insufficient, even in the light of the evidence which I have accepted. Finally, therefore, the judge concluded: ‘The patent is not invalid on any ground alleged. The patent is infringed by VEGF Trap Eye.’

Analysis

Biogen insufficiency in UK jurisprudence relating to broad claims is mirrored by EPO jurisprudence which, however, generally considers the matter as an issue of inventive step. The leading case is AGREVO/T 939/92 according to which, if the technical problem is not solved across the breadth of the claim, the claim lacks inventive step. Lack of inventive step according to AGREVO was separately pleaded, but the judge understandably stated that ‘in the present case this argument traverses the identical ground to that raised by insufficiency’, and so dealt with it accordingly under the insufficiency heading.

Whether expressed as a matter of inventive step or insufficiency, both approaches are intended, in their way, to ensure that the monopoly granted by the patent is commensurate with the contribution to the art. This is still a precept of patent law in Europe.

‘Fair basis’ (that the claims must be fairly based on the description) was a requirement of the Patents Act 1949 in the UK, and is still a requirement in, for example, Australia, but does not survive in that form in current European patent law. Moreover, ‘support’ (that the claims be supported by the description) is not a ground of opposition or revocation. Nevertheless, jurisprudence has been developed in Europe under the current law in relation to inventive step and sufficiency to maintain the balance between contribution to the art and the scope of allowable claim.

In the present case, the claim was unusually broadly defined in that both of the key features were defined in broad functional terms—the medical indication (any disease other than cancer in which undesirable excessive blood vessel growth occurs) and the treatment agent (any antibody or fragment against VEGF or a VEGF receptor, or a VEGF receptor [or, as construed by the judge, part thereof]). Further, VEGF was, as such, already known as an angiogenic growth factor at the priority date of the patent: what was unknown was that VEGF is necessary for pathological angiogenesis, and therefore it was not known what would be the therapeutic effect, if any, of a VEGF antagonist. This might therefore have seemed an unpromising case to successfully argue sufficiency under the Biogen jurisprudence.

The decision rests on a number of findings, key among which are the following: that the patent disclosed a principle of general application; that it was reasonable at the time to predict that anti-VEGF therapy would be effective in relation to non-neoplastic diseases generally; and that allegations of classical insufficiency that specific diseases could not be treated as claimed were not made out. In relation to the ability to make the claimed antagonists, there was no real attack in relation to the antibodies defined in (a) and (b) of the claim, and the objection in relation to the receptor defined in (c) of the claim was only in relation to an antagonist with less than the full extracellular domain of the VEGF receptor. This objection was rejected on the basis that in this industry ‘careful experimentation with a degree of trial and error, sometimes extending over months and years, is entirely normal’, and because:

A patent is not insufficient because it may take much work to develop the most elegant or refined embodiment of its inventive concept. If one were to carry on with the refinement, one would still be making use of the principle disclosed in the patent, working towards an improved embodiment of it.

Practical significance

Because the UK courts since Biogen have so rarely acknowledged that an invention involves a principle of general application, practitioners may have come to believe that such cases would be purely theoretical. This decision should give assurance that in appropriate cases broad protection can be validly obtained.

Prometheus fails to steal fire from the Gods

Author: Jonathan Moss (Hogarth Chambers)

Mayo Collaborative Services v Prometheus Laboratories (US Supreme Court), 566 U.S. __ (2012), 20 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps086, first published online: June 15, 2012

The US Supreme Court has held that a medical process involving the determination of metabolite levels in relation to the toxicity or efficacy of a drug is unpatentable on the grounds that it amounts to patenting a law of nature.

Legal context

Under section 101 of the US Patent Act, ‘whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent’. This positive definition of what constitutes patentable subject matter differs from the position in Europe, where art 52 of the EPC defines patentability in the negative.

Nevertheless, the US Supreme Court has previously decided that ‘laws of nature, natural phenomena, and abstract ideas’ are non-patentable subject matter under s 101. To move an invention from being classed as a law of nature into patent-eligible subject matter, the patent must limit its reach to a particular inventive application of the law. The US Supreme Court visited this dividing line in this case in relation to medical diagnostics.

Facts

Prometheus is the sole and exclusive licensee of the two patents at issue. These patents cover the use of thiopurine drugs to treat certain autoimmune diseases. The problem to which the patent is addressed is that different people metabolize thiopurine to different extents. Thus, depending on this rate of metabolization, the provision of further doses to a patient may have an effect ranging from being too low and therefore having no medical effect, to too high which can be toxic.

The patents claimed a set of processes by which a doctor (1) administered the drug, (2) determined the metabolite levels in the blood, and (3) a ‘wherein’ step which described the likely effects of a dose and respectively indicated a need to increase or decrease the dosage.

The District Court at first instance held that the patent was invalid on the grounds that the processes claimed were natural laws or phenomena, ie the correlations between thiopurine metabolite levels and the toxicity/efficacy of thiopurine drugs. The Court of Appeals for the Federal Circuit (CAFC) reversed this decision, essentially on the grounds that, by limiting the application to use in and on the human body, the patent claims were confined to definite bounds and thus in compliance with section 101.

The CAFC based this decision on the ‘machine or transformation test’. The Supreme Court had recently held in Bilski that the ‘machine or transformation test’ was not a definitive test for patent eligibility and after Bilski had remanded the Prometheus case for reconsideration. The CAFC reaffirmed its earlier decision.

Analysis

The decision of the Supreme Court was unanimous (9–0), with the opinion of the court being written by Justice Breyer. The court regarded the key question as being ‘whether the claims do significantly more than simply describe these natural relations’.

Having held that the relationship between thiopurine metabolite levels and the likelihood that it either causes harm or is medically beneficial was merely a natural phenomenon or law, the court proceeded to find that the additional features did not stop the claims from monopolizing a law of nature. The court viewed the discovery of this metabolic relationship as akin to Newton's laws of gravity or E = mc2.

The court stated that ‘the steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity engaged in by researchers in the field’. While this conclusion is not controversial, it appears that, in coming to its conclusion under s 101, the court factored in questions of obviousness and novelty. Such questions are arguably not relevant under s 101 because they are addressed by other provisions of the Patent Act (eg, s 103 deals with obviousness). Even though the court made heavy reference to its previously decided case law, the court did not rely on legal analysis alone. A facet of US Supreme Court jurisprudence is that the court often makes recourse to wider policy issues, and in this case the court relied on the underlying justification for the granting of patent monopolies. The court recognized that rewarding those who discover ‘new’ laws of nature might encourage people to discover them in the first place. However, the court also recognized the flip side of this, which is that scientific laws and principles are the ‘basic tools’ of scientific research, meaning that future research might be inhibited if a patent is granted.

Practical significance

The case has caused a stir among certain parts of the medical research and patent communities on the ground that it appears that diagnostic medicine treatments are now going to be inherently difficult to patent. Indeed, by comparing medical drug relationships (which differ from person to person) to overarching laws of science (such as the laws of gravity which have the same effect on everybody), the court has failed to make clear where exactly the line between law of nature and medical scientific advancement is to be drawn. This leads to considerable uncertainty over similar medical advancements as, in the medical field, a new ‘discovery’ is often the very thing that ends up being embodied in a patent and subsequently put in a drug. Questions therefore arise as to what extent this area of the medical market is now going to be protected by patent law. Significantly, this case may finally preclude any chance of patenting DNA or gene sequences.

While the court could arguably be criticized for bringing in questions of obviousness to patent eligibility, this criticism can be counterbalanced by the court considering the larger picture of scientific advancement in the field being potentially inhibited. This broader consideration of the impact of the decision is to be welcomed, as it is often a factor that can get overlooked when a strict statute and case law analysis is followed. Whether they got the answer to this question of inhibition in the relevant field correct is another matter.

As an increasing number of patent cases have reached the US Supreme Court in recent years, these decisions, along with the recent US patent legislation, mean that US patent law is undergoing a significant shift. Following this decision it appears that the US will no longer be as permissive in the granting of patents as it once was. As the US is arguably the world's leading centre for scientific innovation, changes in policy in the US will certainly have an impact on companies all around the world.

Another issue arising out of this case, which is relevant for European patent lawyers and attorneys, is the difference of opinion between the CAFC and the Supreme Court. The CAFC has special jurisdiction to hear patent cases in the US, and a number of the judges on it are specialist patent judges. This has led some commentators to complain that, because of their lack of relevant experience, the Supreme Court should defer more often to those courts with specialist patent backgrounds. Such a call will almost certainly be ignored, but it does demonstrate the tensions that can arise if the European system moves towards allowing the Court of Justice of the European Union to hear patent cases.

July JIPLP: an Africa-oriented editorial

Although June is still a relatively young month, the online version of the July issue of the Journal of Intellectual Property Law & Practice (JIPLP) is already available to subscribers. The contents page for this issue can be checked out here, by subscribers and non-subscribers alike. And here's a reminder: even if you aren't a subscriber, you can purchase short-term online access to articles, current intelligence notes and reviews. This month's editorial looks at Africa, and in particular at the question whether the African IP professions are wise and mature enough to be able to decide for themselves what their shared interests are.

"IP in Africa: who controls the agenda?

Depending on how you count them, Africa has somewhere in the region of 60 countries. The continent is by no means homogeneous, whether measured by political, geographical, religious or industrial criteria, but its wildly differing jurisdictions share one common characteristic: they are not regarded as being sufficiently responsible to determine what is in their best interests in terms of intellectual property.

A year ago, following the elimination of an African Regional Session at the massively popular and highly influential International Trademark Association (INTA) Meeting in San Francisco, a group of African practitioners met and determined that it would be a valuable exercise to come together as Africans and share their experiences in dealing with IP problems that were common to them: fighting counterfeits in court, encouraging and protecting investment in innovation and technology transfer, seizures and border measures, the gulf between relatively modern substantive laws and antiquated procedural rules—these and more were to be reflected in their agenda.

Following a commendable degree of thought and planning, as well as the securing of funds from various sources to support their endeavour, an impressive programme was put together. The proposed speakers were African, as were the topics. This event, scheduled for April 2012, never took place. Following the proposal of a counter-programme, based on the so-called development agenda, the South African government withdrew its support, the venue was lost and, with it, the chance for African IP practitioners to exercise their right to come together as responsible professionals and share their expertise.

Writing at a distance from the events leading up to the cancellation of the African IP forum, but having seen both sets of programmes, I find it easy to see why African practitioners at this year's INTA Meeting came together to express so much anger and frustration. It appears as though they are not considered sufficiently mature to recognize the importance of IP in Africa, or even to form their own conclusions regarding the functions which IP rights can perform within a developing continent. It is frankly insulting to expect qualified practitioners to be made to sit and listen for three days to the importance of exceptions and defences to IP infringement where it is scarcely possible in many cases to achieve any degree of enforcement at all. It is embarrassing to expect them to listen to an audience of theoreticians from the developed world pour out their patronizing patter on the dangers of IP and its threat to traditional practices and values.

Africa is not a basket case. The continent consists of more than deserts, safari parks and colourfully-robed chieftains and painted dancers waiting to be told by NGOs what they must do and how to ask to be paid when pharmaceutical companies use the secrets of their leaves. Africa is the continent of Nollywood, of a vibrant and creative music industry, the home of prize-winning literary talent and of the branding and licensing of some of the world's finest coffees.

This is not to say that there is no place for a development debate. WIPO's development agenda is more subtle and many-faceted than many of its critics are prepared to concede. But an African IP practitioners’ forum is simply not the place for that debate. Imagine if the members of practitioner-driven organizations outside Africa, such as the AIPLA, ECTA, CIPA or GRUR, seeking to share their technical solutions to legal problems, were told by outsiders that they were mistaken to do so and that they should be concentrating instead on broader policy issues. Would they not be confused, surprised and possibly even outraged?

Within Africa there is a resolve to try again and, ideally with the benefit of more consultation and better communication between members of the practitioner community regarding its content and function, to present a refreshed version of this year's lost programme. This journal hopes fervently that its organizers will succeed".