Understanding contributory liability for patent infringement

In Australia, the Patent Act 1990 (Cth) provides protection for inventors by preventing others from using, making, or selling patented inventions without permission.  The Act also extends liability to parties that are not directly infringing patents but may contribute to or enable patent infringement by supplying a product.

Infringement by supply: section 117 of the Patent Act 1990 (Cth)  

Section 117 of the Patent Act 1990 (Cth) (Act) addresses contributory infringement, to hold suppliers accountable when they sell products to another that infringe a patent.  This section states that supplying a product to another person constitutes infringement if the product is intended for use in a manner that would infringe a patent.

Specifically, section 117 of the Act states:

“(1) 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.

(2) A reference in subsection (1) to the use of a product by a person is a reference to:

(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.“

[Bold is our emphasis]

The definition of “supply“found in schedule 1 of the Act includes the sale, exchange, lease, hire, or hire-purchase of a product, as well as any offer to supply such products.

Legal tests for infringement by supply

Section 117 can be broken down into three (3) elements:

Element 1 – supply of a product:

The defendant (supplier) must have supplied the product to another party.

Element 2 – intended infringing use:

The product must be intended for use in a manner that would infringe a patent.  This involves an understanding that the product could be used in a way that directly infringes the patent holder’s rights.

Element 3 – knowledge or reason to believe:

The supplier must either know, or have reason to believe, that the product will be used for an infringing purpose.  The court considers whether the supplier had awareness, or should have had awareness, that the product could be used in an infringing way.

Exceptions to infringement by supply: staple commercial products

Section 117(2)(b) of the Act provides an exception to infringement by supply for products that are considered “staple commercial products”.  In the High Court case of Northern Territory v Collins [2008] HCA 49 at [179], the concept of “staple commercial product” was clarified as referring to products supplied commercially for various actual uses, even if not generally available.   

Resultingly, the High Court found that the supply of cypress pine timber did not constitute contributory infringement under section 117 of the Act, as the timber was a “staple commercial product”, available for various uses and not specifically tailored to infringe the Defendant’s patent.  This case clarified that for contributory infringement to apply, the product must not be a staple commercial product and the supplier must have knowledge that it will be used in an infringing way.

Other authoritative cases regarding staple commercial products are summarised below.

Hood v Down Under Enterprises International Pty Limited [2022] FCAFC 69

The Full Court of the Federal Court of Australia examined whether the supply of Kunzea oil, an essential oil with various uses, constituted contributory infringement. The court concluded that the oil was a staple commercial product, as it was supplied for various purposes, including non-infringing uses.

Bristol-Myers Squibb Co v F.H. Faulding & Co Ltd [2000] FCA 316

The Federal Court of Australia ruled that the supply of the cancer drug Taxol by F.H. Faulding, accompanied by product information guides, did not constitute contributory infringement under section 117.  The Court reasoned that Taxol was a known substance and was not specifically tailored for infringing the patent, and the information provided was intended to ensure safe and effective use of the drug.  This decision clarified that the supply of a known substance with guidance for proper use does not amount to contributory infringement, even if the substance could potentially be used to infringe a patent.

Concluding remark infringement by supply

Contributory liability for patent infringement may arise if the three (3) elements contained in section 117 of the Patents Act 1990 (Cth) have been met.  There is an exception if the products in question are “staple commercial products” as per section 117(2)(b).  During a transaction involving supply of a product that may infringe a patent, it is important to consider whether the product is a staple commercial product and whether it has a non-infringing use.

Links and further references

Legislation

Patents Act 1990 (Cth)

Cases

Bristol-Myers Squibb Co v F.H. Faulding & Co Ltd [2000] FCA 316

Hood v Down Under Enterprises International Pty Limited [2022] FCAFC 69

Multisteps Pty Ltd v Specialty Packaging Aus Pty Ltd [2018] FCA 587

Northern Territory v Collins [2008] HCA 49

Further information about patent infringement by supply

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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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