In the recent decision of Quaker Chemical (Australasia) Pty ltd v Fuchs Lubricants (Australasia) Pty Ltd (No 2) [2020] FCA 306 (Quaker Chemical) the Federal Court of Australia decided that a company had indirectly infringed two (2) patents by supplying its customers with a product, because its use by customers would have infringed the methods of the patents.
The relevant law
Section 117 of the Patents Act 1990 (Cth) (Act) states:
“If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.”
Section 117(2) of the Act provides some requisite requirements for the ‘use of a product by a person’, including:
“(a) if the product is capable of only one reasonable use, having regard to its nature or design—that use; or
(b) if the product is not a staple commercial product–any use of the product, if the supplier had reason to believe that the person would put it to that use; or
(c) in any case–the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier.”
Background of the Quaker Chemical case
Quaker Chemical (Australasia) Pty Ltd ACN 000 465 949 (Quaker) is the owner of a standard patent and an innovation patent relating to a method for detecting high-pressure fluid injection (HPFI) injuries. HPFI injuries can occur when a leak in machinery (for example, mining equipment) causes a thin jet of hydraulic fluid to escape and puncture a person’s skin. The injuries can be difficult to detect and can be serious.
Quaker’s patents involved the addition of a fluorescent dye into the hydraulic fluid, in order to assist in diagnosing an HPFI injury. If a HPFI injury is suspected, a UV light can be used to detect fluid in the skin.
Fuchs Lubricants (Australasia) Pty Ltd ACN 005 681 916 (Fuchs) is a supplier of various fluids for use in hydraulic machinery. This included hydraulic fluid mixed with a fluorescent dye, which was suitable for use in Quaker’s patents.
Fuchs sourced and sold products containing dye manufactured by Quaker, in accordance with an implied licence or authorisation to do so. However, between the years 2015 and 2016 Fuchs also sourced dye from a third party to use in its hydraulic fluid, and subsequently provided this to customers in a lower concentration form.
The parties arguments
Quaker submitted that Fuchs’ supply of the low concentration fluid indirectly infringed their method patents as customers’ use of the dye would inevitably breach the patented method.
Fuchs argued that the sole purpose for their supply of the low concentration product was for leak detection in tubes carrying hydraulic fluid, compared with Quaker’s higher concentration product for detecting HPFI injuries. Therefore, Fuchs argued it had no reason to believe its low concentration products would be used for HPFI injury detection. Quaker disagreed, and argued that any supply of a hydraulic fluid containing dye was an infringement.
Did Fuchs have reason to believe the dye would be put to infringing use?
Quaker submitted that Fuchs had reason to believe that its dyed fluid would be used as part of the claimed method, and would subsequently infringe the patents.
Justice Robertson said that each individual supply of the third party product needed to be considered separately with consideration of the surrounding facts. His Honour upheld Fuchs’ argument that where the dye concentration was low, Fuchs did not have reason to believe it would be used for HPFI injury detection.
However, there was one instance where Fuchs had reason to believe the fluid would be put to infringing use. This involved the supply of the hydraulic fluid mixture to a mine operated by the BHP Mitsubishi Alliance (BMA). Fuchs had been notified by the mine operator that the hydraulic fluid mixture would be used for HPFI injury detection, and accordingly used the third party’s dye to formulate the fluid at similar concentrations to Quakers product.
Fuchs argued that because HPFI injuries were rare, there was no real or likely prospect that the patented method would be performed. However, in interpreting the law Justice Robertson said that section 117(2)(b) applies where a supplier has reason to believe that if the occasion arose, the product would be put to that use. Therefore, if a suspected HPFI injury occurred, Fuchs had a reason to believe the product would have been used in the claimed methods.
Was the hydraulic fluid with dye a staple commercial product?
In order to apply section 117(2)(b), the product supplied cannot be a staple commercial product. A “staple commercial product” is defined as a product which is supplied commercially for different uses, for example a commodity or raw material.
Fuchs had attempted to convince the Court that the luminescent dye contained in the supplied fluid was a staple commercial product. However, as Fuchs didn’t supply the luminescent dye on its own, and instead supplied the hydraulic fluid containing the dye, the Court considered the fluid as a whole.
Justice Robertson found that the fluid was a special-purpose fluid designed for particular uses in hydraulic machinery. As a result, the dyed hydraulic fluid was not a staple commercial product.
Inducement to infringe
Justice Robertson found that Fuchs had induced BMA to utilise the product in a way that would have infringed the patents. In coming to this conclusion, His honour considered several factors. First, Fuchs had been aware that BMA wanted to use the hydraulic fluid for HPFI detection. Secondly, Fuchs had presented the BMA mine operator with a comparison between the qualities of its product and that of Quaker’s. Third, the Court found that Fuchs had offered its own dye for a lower price than Quaker’s.
Takeaways
A supplier may indirectly infringe a patent where the products could be used by the customer to infringe a patent, regardless of whether the product is actually used in that way. Accordingly a patent owner may choose to enforce his or her rights against suppliers who are merely facilitating a potential infringement.
Links and further references
Legislation
Cases
Quaker Chemical (Australasia) Pty ltd v Fuchs Lubricants (Australasia) Pty Ltd (No 2) [2020] FCA 306
Further information about indirect patent infringement
If you need assistance with protecting or enforcing your patent rights, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
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Indirect patent infringement – lessons from Quaker Chemical
Company found to have indirectly infringed two patents by supplying product to customers. Suppliers must be aware of customer use to avoid patent infringement.
