Northern Territory of Australia v Collins & Anor [2008] HCATrans 245 (17 June 2008)

Last Updated: 20 June 2008

[2008] HCATrans 245

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Darwin No D2 of 2008

B e t w e e n -

NORTHERN TERRITORY OF AUSTRALIA

Appellant

and

VINCENT COLLINS AND MARYANN COLLINS

Respondents

GUMMOW ACJ
KIRBY J
HAYNE J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON TUESDAY, 17 JUNE 2008, AT 12.00 PM

Copyright in the High Court of Australia

MR S.J. GAGELER, SC: If the Court pleases, I appear with MR G.R. NICHOLSON for the appellant. (instructed by Clayton Utz)

MR G.O’L. REYNOLDS, SC: May it please the Court, I appear for the respondents with my learned friends, MR N.R. MURRAY and MS R.C.A. HIGGINS. (instructed by De Silva Hebron)

GUMMOW ACJ: Yes, Mr Gageler.

MR GAGELER: Your Honours, can I start very briefly with the facts? When I say “very briefly” I mean that. I want to take your Honours - - -

KIRBY J: I cannot hear you, Mr Gageler. I think that just records. I do not think there is any magnification.

MR GAGELER: I see. I will increase the volume, your Honour.

KIRBY J: That is better.

MR GAGELER: I want to take your Honours secondly to the evidence about the distribution - - -

KIRBY J: What was first?

MR GAGELER: The patent, your Honour. I am yet to get there, I am just telling your Honours where I am going. First to the patent, then to the evidence about the distribution and uses of the species, Callitris intratropica, and then to the licences under the Crown Lands Act that are alleged to constitute the infringement of the patent. Your Honours, the patent itself is in volume 1, beginning at page 80, with the claims defining the invention appearing at page 97. The principal claim, claim 1, refers to:

A method of producing a blue, guaiazulene-containing oil comprising the step of obtaining the oil from a mixture of the bark and the wood of Callitris intratropica.

There is then a series of subsidiary claims going over a couple of pages, all of which are method claims with the exception of claim 12, which your Honours will see refers to:

12. A blue, guaiazulene-containing oil when produced by a method according to any one of claims 1 to 12.

It clearly means claims 1 to 11. Given the scope of the separate questions as framed by the trial judge - - -

GUMMOW ACJ: Where do we see the separate questions?

MR GAGELER: At page 22 and interpreted and explained by his Honour in volume 3 at pages 1109 through to 1110. His Honour assumed the validity of the patent and his Honour assumed infringing use by the company ACOC so as to focus only on the scope of liability under section 117. Given that approach, your Honours, can I say that the validity of the product by process claim in claim 12 is not and cannot be an issue in the appeal.

Can I simply make these observations about it? The first is that in the absence of any suggestion that the oil itself is novel, it is probably invalid. The House of Lords fairly recently addressed a product by process claim in a case called Kirin-Amgen Inc [2005] RPC 169 at paragraphs 86 to 81, concluding that the claim was invalid. The second observation is whether or not - - -

GUMMOW ACJ: Is that a speech of Lord Hoffmann?

MR GAGELER: It is, your Honour, yes. The second observation is whether or not it is - - -

GUMMOW ACJ: But is there a cross-claim challenging invalidity or just a defence of invalidity?

MR GAGELER: No, there is a defence of invalidity.

GUMMOW ACJ: Where do we see that? Page 14?

MR GAGELER: Yes. It is a denial of the allegation in paragraph 4. Paragraph 4 at page 6 is an assertion of validity and paragraph 4 at page 14 - - -

GUMMOW ACJ: That will not do. That is an embarrassing pleading if ever there was one. You have to say why it is invalid.

MR GAGELER: Yes. There are some problems which, if necessary, can be addressed by appropriate - - -

CRENNAN J: You cannot have your cake and eat it too on the separate questions, can you?

MR GAGELER: No, your Honour. Your Honour, this is really in passing and I do not want to spend too much time on it, but.

GUMMOW ACJ: No, I can see why.

MR GAGELER: Yes. The second observation was this, that whether or not it is invalid, it is probably redundant given the terms at paragraph (d) of the definition of “exploit” in the Act. Thirdly, and this is really relevantly and sufficiently for the separate questions that arise in respect of section 117, it involves no product claim that is not entirely derivative from a method or process claim. So you only get to the product through a method or process. Your Honours, that is what I wanted to point out about the patent.

So far as the species, Callitris intratropica, is concerned, a species commonly known as cypress pine, the evidence like the species itself is somewhat scattered. It is probably best that I point out where it is. In volume 2 of the appeal book at pages 887 to 900, there is an expert report of a Dr Russell-Smith. He points out at page 888, lines 30 to 40, that the species occurs in the Northern Territory both naturally and in plantations at three locations: Melville Island, Gunn Point and Howard Springs. He points out that the implantations that:

were established for the purposes of developing a timber industry based on this species in the Top End of the Northern Territory.

He then refers to a report on the successes and failures of that industry, which is not in evidence. There is a Senate report of May 1978 which is in evidence. Your Honours need not turn to it, perhaps simply note it. It is in volume 1 at pages 378 to 393 and it appears from that Senate report that the failures considerably outweighed the successes of that industry in the Northern Territory. On the next page, page 889, at about line 25, here dealing with the natural distribution of the species, he cites it as being:

“locally abundant in northern tropical WA, NT and QLD” -

About line 31 he refers to an annexure which is the map at page 895, which indicates its spread across the northern part of the Northern Territory, including on the Tiwi Islands. Your Honours would only need to compare that map with the schedule to the Aboriginal Land Rights Act 1976 to recognise that it occurs across a whole expanse of land, some of which is certainly Crown land and some of which is certainly Aboriginal freehold land granted under that Act. At page 888 about line 60 he refers to the characteristics and uses of the species and he refers in that context to it being:

“an excellent timber tree, used for building, flooring, fence posts and construction”.

There are a number of Aboriginal uses - - -

GUMMOW ACJ: Does this go to the staple argument?

MR GAGELER: Principally to the staple argument, your Honour. There are a number of Aboriginal uses mentioned. Then, over the page, it is also mentioned about line 12 that:

a ‘blue oil’ derived from C. intratropica apparently has anti-bacterial and –termite properties.

In the same volume, if you go back to page 546, there is an affidavit by a forester that concerns again the distribution and uses of the timber. At page 548, line 10, he describes it as:

a commonly occurring but minor component of most of the native eucalyptus forests in the Top End region.

That is borne out by a vegetation survey that he then annexes that goes for many pages from page 556. The relevant pages, your Honours need not turn to them but simply note, are pages 582, lines 50 to 60 and pages 600 to 601, describing the mixed forest within which this species seems to be relatively abundant. Then at the same page, 548, lines 20 through to 50, he describes in broad terms the characteristics or qualities of the timber and what he describes as the then existing uses and applications. That is in paragraph 14.

The range of commercial uses is then further emphasised by another affidavit in the same volume, an affidavit of Mr Wharam that your Honours will see at page 902 and following. What Mr Wharam does is annex documents over quite a number of pages which show that during the period or about 1994 to about 2001, the purposes for which licences to take this species from Crown lands in the Northern Territory were applied for and granted included wood chipping - that is pages 907 and 949; sawdust, pages 912 and 916; poles for a golf club –I am not sure what the golf club wanted the poles for – page 942; and timber for export to Taiwan. That is pages 925 and 929. One also has in volume 1 - - -

CRENNAN J: Is wood chipping separate from the oil extraction?

MR GAGELER: Yes, this seemed to be wood chipping for gardening purposes and for mulch.

CRENNAN J: As distinct from for oil extraction.

MR GAGELER: Yes. If you go to volume 1 then at pages 167 to 187, in material put in evidence by Mr Collins there was before the primary judge this report to Mr Collins dated June 1995 which is descriptive of a “Proposal for the Forestry Operations” in respect of this particular pine plantation at Howard Springs. At page 169 there is a description of the plantation. At page 171 there is then a description of what is said to be the:

five main avenues of income able to be produced through the pine forest plantation –

there located and then each of those uses. “Woodchip Mulch”, your Honours will see, is what the other wood chipping permits appear to have been granted for. Each of those uses is then described in some detail over the next few pages. Then at page 178 it is said about line 30 that:

In the Howard Springs forest there are two types of pine wood. The first is the Pinus Caribaea which is a tall thick pine suitable for milling into timber.

Then on the top of the next page:

The second and most common type of timber at the plantation is Callitris Intratropica (Tropical Cypress Pine) which has a multitude of uses because of [its] unique properties.

The next paragraph refers to trees being suitable for “milled timber”. The next paragraph says that:

Other uses for Cypress Pine is for woodchipping into mulch for gardens and potting mixes, and also in the extraction of the essential oil found within the pine.

Your Honours, if I could then go to the licences. They are in the same volume, volume 1. They are annexed to an affidavit of Mr Wharam that ones finds at page 25 and following. At page 26 about line 35 he says that:

Callitris Intratropica is a specie of tree which is being cultivated in certain areas within the Northern Territory. The Howard Springs Pine Plantation (“The Howard Springs Plantation”) is one area in which these trees were established by cultivation by a previous Northern Territory Government department –

which is the way in which my learned junior, Mr Nicholson, likes to describe the Commonwealth –

in or about the late 1960’s. The Howard Springs Plantation is located on those parcels of Crown Land –

and then they are set out. There is some evidence which your Honours may wish to note, but please do not turn to it - - -

GUMMOW ACJ: Mr Collins put it more accurately at 169, I think:

originally established from 1964 through to 1973 by the Commonwealth Government.

MR GAGELER: Yes, that is right. It appears from pages 206 to 213 that at some stage during the life of the Northern Territory, that is after 1978, the area became a park under the Northern Territory Parks and Wildlife Act, but that the declaration as a park under that Act was revoked in November 1995. One sees evidence of that at pages 206 through to 213. By the time relevant to these licences it was, if you like, ordinary Crown land, not dedicated, not reserved. At page 27 then the licences are identified, the grant of which is alleged to constitute an infringement by virtue of section 117 of the Patents Act are designated 11(c), (d), (e) and (f).

GUMMOW ACJ: Sorry, what page are you reading from?

MR GAGELER: Page 27. You may note from page 28 - - -

GUMMOW ACJ: So it is which paragraph?

MR GAGELER: Paragraph 11(c), (d), (e) and (f).

GUMMOW ACJ: Thank you.

CRENNAN J: Are these the ones where the royalties are tied to the amounts of oil?

MR GAGELER: Yes, I will take your Honours to them, but it is (d), (e) and (f), the royalties are clearly enough tied to the value of the oil extracted, (c) not so. At page 28 about line 32 it is said that the first of those licences was issued following a competitive tender process. To go to the first of those licences, which does differ from the other three but only slightly, your Honours will see that at page 36. It is described as a miscellaneous licence, which is the statutory terminology for a licence issued under section 91 of the Crown Lands Act, relevantly when you turn to it later section 91(1)(a). It is in the form prescribed by regulation 49 for a miscellaneous licence. It is expressed to be:

Licence to go upon Crown Lands and take there from timber -

It is expressed to apply during a specified period of the dry season from July through to August and is expressed to be subject to the Act and the Regulations. There then follow a number of conditions, being conditions imposed under section 94 of the Crown Lands Act. The relevant ones are condition 1, which gives the purpose of the licence as being “timber harvesting”; condition 2 which determines a royalty for the purpose of regulation 46; condition 4 which appears to be no more than acknowledgment of the effect of regulation 48, that is that the lease may be terminated on notice for the breach; conditions 14 and 15, which respectively impose responsibility on the licensee to remove all trees and stumps and to rehabilitate the land. The second, third and fourth licences are then each in relevantly identical terms and it is sufficient - - -

GUMMOW ACJ: Now, is there any royalty here under the first one?

MR GAGELER: Yes, condition 2.

GUMMOW ACJ: Yes, per tree.

MR GAGELER: Per tree. But that changes, your Honours will see, when you get to the next series of licences. There are three more. We just go to the fourth one sufficiently for present purposes. That is at page 60. We see it again described as a miscellaneous licence, again in the prescribed form, again expressed to go upon Crown lands and to take timber therefrom during a period of the dry season subject to the Act, subject to the regulations, and expressly here subject to what is said to be the “attached Special Conditions”.

Within those conditions you will see condition 1 is identical to what we have seen in that it expresses the purpose as being “timber harvesting”. You will then see, however, that condition 2, which is to be read with conditions 3 and 4, spells out again “royalty” for the purpose of section 46, but a royalty here which is tied to the value of the oil produced. Condition 19 then makes it:

a condition of the licence that all works carried out are in accordance with an approved Site Management Plan (Attachment A) agreed by –

the licensee and the Department of Lands, Planning and Environment. That plan appears at pages 65 and following. I think there is nothing in particular to be pointed out from it. Going back to page 62, conditions 20 and 21 then impose the same responsibility on the licensee to remove stumps and trees and to rehabilitate. Condition 22 contains an acknowledgement, which would otherwise be implicit, that those things are to be:

undertaken with accordance with the Site Management Plan submitted to the Department of Lands, Planning and Environment, at nil cost to the Territory.

Your Honours, that is as much as I wanted to point out about the facts. The Patents Act, your Honours probably do not particularly need to be taken to, is in volume 1 of the joint book of authorities. It is behind tab 1. The central provision, of course, is section 13 at page 11, which is to be read with the definition of “exploit” in the dictionary appearing at page 160 of the print, relevantly where the patent is “a method or process” patent. It is paragraph (b) of that definition which is relevant. Section 117 then appears at page 85 of the print, if your Honours have been able to locate it - tab 1.

GUMMOW ACJ: Have we looked at section 13?

MR GAGELER: I was not going to read it, your Honour, but it is subsection (1) which is critical.

GUMMOW ACJ: Is there a definition of “exploit”?

MR GAGELER: That appears in the dictionary at page 160. Relevantly:

where the invention is a method or process –

as is the claimed invention in the present case, it is paragraph (b) which is the critical part of that definition. Section 13 seeks in quite clear terms to define the exclusive rights of the patentee.

GUMMOW ACJ: Now, this expression “the invention”, is that defined anywhere?

MR GAGELER: It is. It is defined at page 161 by reference to section 6 of the Statute of Monopolies.

GUMMOW ACJ: Yes.

MR GAGELER: One then goes to section 117 at page 85 of the print. It is expressed to apply:

(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.

GUMMOW ACJ: There has never been any question so far, has there, of Crown use by your client?

MR GAGELER: No, your Honour. That provision, section 117(1), has to be read with the definition of “supply”, which is set out in the dictionary, at page 165, and it is to be read with the reference to and limitations upon use which are set out in section 117(2). Your Honours, to go straight to the principal question of construction, which was not determined in the Federal Court but squarely raised by the first of the separate questions that your Honours have seen at page 22, volume 1, of the appeal book, and is now fairly acknowledged by the respondent to be raised in the appeal, the question is one of construction of section 117(1).

The construction for which we contend is that which commended itself to the Court at first instance and on appeal in Rescare, in the references to which are footnoted in our submissions in-chief at paragraph 25. I do not propose to take your Honours to Rescare. I propose to state the construction and to deal with it on its merits. It is a construction which is unashamedly literal and minimalist and it really comes down to this.

Section 117(1) expressly applies only if the use of a product by a person would infringe a patent. For use of a product to infringe a patent there must be an exercise of an exclusive right conferred on the patentee by section 13 to exploit the patent, exploit the patented invention, and when you go to the definition of “exploit” in the dictionary, where the invention is a method or process, use of a product will amount to an exercise of the patentee’s exclusive right to exploit the invention only where the product is itself the result of using the method or process.

GUMMOW ACJ: We go back to the patent, do we?

MR GAGELER: Yes.

GUMMOW ACJ: Where do we see that?

MR GAGELER: We saw that relevantly at page 97.

GUMMOW ACJ: Should we not look at the summary of invention at page 83?

MR GAGELER: Yes, we can do that. So here there is a method or process for producing a blue oil from a mixture of the wood and the bark of the particular species. The construction of section 117 for which we contend and which appears to us to be - - -

GUMMOW ACJ: This oil was previously known, obviously.

MR GAGELER: Yes. It is said to be a - - -

GUMMOW ACJ: Does it occur elsewhere in nature or only in this particular tree?

MR GAGELER: If your Honours go to page 498, you will see a publication from 1910 and that publication refers to the production of this oil from callitris. There are different species of callitris. We are concerned here with a tropical species, but it appears that a similar oil, at least in 1910, was known to be capable of being produced from a range of species of callitris, including this one, which I think somewhere in this publication is referred to as coming from what was then described as Port Darwin. I think the best I can do, in answer to your Honour’s question, is that it is a naturally occurring oil which can be extracted by various means from various species of cypress pine.

CRENNAN J: What is said to be inventive about this particular method?

MR GAGELER: Mixing the bark with the timber.

CRENNAN J: Are there time issues involved?

MR GAGELER: Apparently not.

CRENNAN J: But that is connected with getting the blueness of the oil. Is that right?

MR GAGELER: The inventive step is apparently the idea of mixing the bark in with the timber.

GUMMOW ACJ: Where do we see that?

MR GAGELER: I think you see it from page 83 - - -

GUMMOW ACJ: In the body of the patent, I mean.

MR GAGELER: Within the claims?

GUMMOW ACJ: No, in the body of the patent.

MR GAGELER: In the body of the patent.

GUMMOW ACJ: Page 85, line 6, tells you what typically has happened, will typically be obtained.

MR GAGELER: Yes.

CRENNAN J: The top of the page tells you that you do not get the blue oil if you rely on the bark alone.

MR GAGELER: Yes. Page 87, about line 10, refers to the mixture.

GUMMOW ACJ: What we are looking for is some statement of an advance on previous methods.

MR GAGELER: Yes.

GUMMOW ACJ: Perhaps you might look at that over lunch, Mr Gageler.

MR GAGELER: Yes, your Honour.

GUMMOW ACJ: We will adjourn until 2.00 pm.

MR GAGELER: If your Honour pleases.

AT 12.39 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 1.55 PM:

GUMMOW ACJ: Yes, Mr Gageler?

MR GAGELER: May I attempt to deal with your Honour’s question of where is the novelty and inventive step that is claimed. The best we can do is reading the specification at pages 83 and 86. It appears to lie in the mixing of the bark in with the wood and you get that from page 83, line 40 through to line 50. So if you look at the paragraph at line 40 there is a reference to the step of obtaining the oil from a mixture of the bark and wood of the same species and then it goes on to say that you can mix the bark of that species with the wood of another species of the genus callitris and get a similar effect. If you go over then to page 86, lines 20 to 30, what is there said is:

The fact that a blue coloured oil is not produced when oil is obtained from the bark or from the wood of Callitris intratropica alone, or when oil is obtained from the wood of other species of the genus Callitris alone, but is produced when oil is obtained from a mixture including the bark of Callitris intratropica and the wood of one or more species of the genus Callitris, indicates that the bark of Callitris intratropica provides a catalytic component which catalyses the conversion of guaiol to guaiazulene or alternatively –

and it goes on.

KIRBY J: I think we will have to ask Mr Reynolds, in due course, to tell us what the use of all this is because your heart is not in it. You do not seem to be enthusiastic of the utility. I mean, what does it do? It is not like wattle and aspirin. What is it for?

MR GAGELER: Essential oils.

KIRBY J: Aromatherapy.

MR GAGELER: That sort of thing, yes. Your Honour, my heart is not in the inventive step in the claim for the patent; that is certainly so. Your Honours, that really is our best answer to your Honour the Presiding Justice’s question.

Going back, if I can, to the question of construction, the construction for which we contend is one which, as I said, takes the opening words of section 117(1). It reads them with the central provision of section 13, reads that with the definition of “exploit”. I will not repeat the construction, but going to the language of section 117, when those provisions are read together one finds that a person would infringe a method or process patent by using a product that is a product of that method or process – in this case the oil – a person would not infringe a method or process patent merely by using a product that is an input into the method or process, however the input might be described in the present case.

Your Honours, a number of criticisms of that construction have been deployed against us. All of them can be found in the academic writing of Ms Monotti taken up by the majority in the case of Bristol-Myers. I do not want to take your Honours to those writings but they really come down to three points so far as we can see. It is said that construction of section 117 gives it no work to do – that is point one. It is said, secondly, that the construction fails to give effect to parliamentary intention and, thirdly, it is said that there is a preferable alternative construction that involves reading section 117(2) back into section 117(1).

Dealing with those in reverse order, the alternative construction is something we sought to address in our written submissions in reply and the point that we there seek to make is, even if you read section 117(2) into section 117(1), it still raises the same threshold question. The threshold question that is raised is whether use of the product supplied would infringe the patent, and it would be odd if, in addressing that threshold question, section 13 and the definition of “exploit” were to be ignored.

So far as parliamentary intention is concerned, your Honours have, in volume 3 of the joint book of authorities, the explanatory memorandum which is behind tab 19. If you go within that explanatory memorandum to page 5, there is a reference to clause 13, which became section 13, in paragraph 22. There is a reference then in paragraph 23 to the definition of “exploit”. Both of those provisions were of course new within the 1990 Patents Act and what is said at the end of paragraph 23 is that in respect of the term “exploit” as defined in Schedule 1:

This definition, when read with clause 13, avoids some obscure language in the present Act setting out a patentee’s rights.

So there you have section 13 and a definition of “exploit” introduced to avoid obscurity in the existing law. If you then go to page 28, there is at the top of the page two paragraphs which address section 117. The second paragraph, paragraph 171, simply paraphrases section 117 and does so in a way which emphasises the threshold requirement. Paragraph 170, though, says:

The intent of this clause is to implement the Government’s response to recommendation 33 of the Industrial Property Advisory Committee relating to indirect or contributory infringement –

and this is the recommendation:

“That in general the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe a patent should itself be an infringement of the patent.”

There are a number of things to say about that recommendation. It refers to a supply of goods. In section 117 the word used is “product”. The second thing to say about it is that it seeks to express a general position. There is in the recommendation itself a lack of precision and a lack of detail. The third thing to say about it is that when one analyses its language it at best addresses only the circumstances that ended up being captured in the language of section 117(2)(a) and section 117(2)(c), that is, goods whose only use would infringe a patent or goods accompanied by a positive inducement for the ultimate consumer to perform actions. That is (a) and (c). What became section 117(2)(b) was not part of the recommendation at all. So whatever occurred between the cup and the lip, it would be wrong to treat section 117 as a wholesale or simplistic adoption of whatever it was that the Industrial Property Advisory Committee was seeking to recommend.

GUMMOW ACJ: But what is the general problem that gives rise to this concern with so-called contributory infringement? Is it to make it easier for patentees to sue, as it were, further up the chain rather than sue the end party, which may be multifarious?

MR GAGELER: Yes. It appears to be the difficulty in seeking to enforce a patent in circumstances where the infringing activity is used by a multitude of consumers or persons who buy a product. What is sought to be effected, according to the IPAC report, is a policy of attempting, where possible, to get someone earlier in the chain of supply – the supplier to the infringer.

CRENNAN J: It is a more practical way of addressing the infringement issue.

MR GAGELER: Yes, not needing to prove infringement by a potentially multitude of users; that is right. So, on any view, section 117 would achieve that because it is not part of the cause of action that section 117 creates to prove actual use. It is merely the potentiality of use that then allows the act of supply to be caught. So it achieves that. It does not do nothing, which really comes to my last point.

But if one goes, your Honours, to the Government’s response to the IPAC report – that is behind tab 18 – the introduction to that goes over a couple of pages, but what is made clear enough in the introduction was that the amendments were not seen to be revolutionary. That is said in a number of places over those couple of pages, but in particular – and these pages, unfortunately, are not numbered – if you go to the third folio and to the reverse side of the third - - -

HEYDON J: They are numbered actually on the top right-hand corner of the left-hand pages.

MR GAGELER: Yes, they are – 1467. Your Honours will see the third last paragraph says:

Most of the recommendations do not involve major change, although many are significant . . .

The emphasis in the Report is on the possible; it is constructive rather than revolutionary.

So whatever it was doing was not setting out to do something absolutely dramatic. The particular recommendation that you will then see is at page 1477 and you will see recommendation 33 there set out. It is said to be accepted and there is a little text that follows that. It says:

The introduction of provisions to deal with contributory infringement will remove an area of uncertainty under Australian patent law and harmonise it with the laws of Australia’s major trading partners.

Now, we have made the point in our written submissions that that is a rather strange statement given that, on any view, there is no harmony that has been achieved here.

GUMMOW ACJ: Well, there is no harmony among the trading partners either.

MR GAGELER: Nor is there harmony among the trading partners. But there are somewhat similar statutory provisions in the United States and the United Kingdom. The United Kingdom provisions derive, it can be seen, from what was then at the time an article in an unratified European convention. Justice French set out the relevant article at paragraph 48 of his judgment. But it is instructive to compare what Parliament here chose to do in section 117 with what it might have done if it sought a greater harmony than, in our submission, it really did.

GUMMOW ACJ: Well, a real area of debate at this time was the question of whether we should get rid of the statutory monopolies in working out what an invention was, and that was not done; that was retained.

MR GAGELER: That is right, and there was a very strong, albeit short, dissenting report from an economist who formed part of the Industrial Property Advisory Committee and there is quite a deal of reference to that in the parliamentary debates. But, your Honours, if you go to the United States provision, we have given you that in volume 1 of the joint book of authorities behind tab 3. It is 35 USC 271. Paragraphs (a) and (b) deal with direct infringement and then inducing infringement, and then it is paragraph (c) which deals with what is called in the United States “contributory infringement”.

GUMMOW ACJ: It is a rather awkward sentence, paragraph (c), is it not?

MR GAGELER: It is extremely long and extremely awkward, but attempting to break it down, contributory infringement appears to involve offering to sell or selling a component of a patented invention or material or apparatus for use in practicing a patented invention constituting a material part of the invention – quite an important qualification, a material part of the invention – knowing the same to be especially made - - -

GUMMOW ACJ: The word “constituting”, is that attached both to material - - -

MR GAGELER: It appears to be, yes. So it is a general qualification that whatever it is that is sold, whether it be a component or material or apparatus for use in practicing the invention, it has to constitute a material part of the invention. Then, knowing the same to be especially made or especially adapted for use in an infringement of such patent - - -

GUMMOW ACJ: Now, what does “and not” attach to – “and not a staple” – being something but not being something else? What is the something?

MR GAGELER: The way in which this provision appears to be interpreted – and it was enacted simply to reinstate the old law, it is said, in the United States - - -

GUMMOW ACJ: Is it attached to knowing?

MR GAGELER: The knowledge is as to what the thing is and then everything that follows after the word “knowing” is really a definition of the thing. So it is something that is especially made or especially adapted for use in infringement as distinct from – that is the way the word “and” appears to be interpreted – a staple article or commodity of commerce suitable for substantial non-infringing use. I do not think what I have just said emerges in those terms from any of the American material that we have read, but that is the thrust of the way in which the Americans interpret this. The staple article or commodity of commerce is something that is not especially made or especially adapted for use in infringement. It is another way of saying the same thing, really it is stating its obverse. So that is the United States’ provision.

Importantly, for present purposes – what we have just been discussing is important for the staple article of commerce question – it expressly refers to a component of an invention or material for use in an invention and it also carries the important qualification that the thing supplied or sold or offered for sale, that needs to be a material part of the invention.

If you then go to the UK Patents Act, it is behind tab 2. The relevant provision is section 60 and in particular subsection (2). Subsection (1) deals with direct infringement and subsection (2) deals with the United Kingdom version of contributory infringement. Again, breaking it down, contributory infringement appears to involve supplying or offering to supply any of the means:

relating to an essential element of the invention, for putting the invention into effect –

So the language is a reference to any of the means of putting the invention into effect, but those means have to relate to an essential element of the invention.

GUMMOW ACJ: Would that include process and product claim?

MR GAGELER: Yes, it appears to. It appears to, although there would be – I am not sure that has been addressed in the United Kingdom, your Honour, but it could be stretched that far. It more naturally refers to a process claim, perhaps.

GUMMOW ACJ: What about the United States provision? Would that encompass both?

MR GAGELER: I think it does, your Honour.

CRENNAN J: I think it goes to practising patented process.

MR GAGELER: Yes.

CRENNAN J: So it is a bit more explicit - - -

MR GAGELER: It is a bit more explicit than the United Kingdom, yes. Then you have the knowledge element, knowing or it being obvious that the means are suitable for putting and intended to put the invention into effect. Then you have section 60(3) which is the staple commercial product exception.

CRENNAN J: There is no direct infringement claim by this patentee lurking around that we do not know about?

MR GAGELER: No. If there is we do not know about it either. It is certainly not in these proceedings.

CRENNAN J: You would know, I would have thought, on the facts.

MR GAGELER: So if you compare those provisions with section 117, then what you see – and your Honour Justice Gummow really pointed out the contrast in Rescare nearly 20 years ago – the contrast between section 117 and what appeared in the United Kingdom Act at that time. The draftsmen in Australia eschewed the expressions which would have obviously captured the supply of components or inputs. The United States provision refers to the sale of components or material. The United Kingdom provision refers to the supply of means of putting an invention into effect. Neither of those formulations are anything really quite similar to being chosen in Australia. What is referred to is the supply of a product. The very word that appears in the definition of - - -

GUMMOW ACJ: What could have been the rationale of that, though?

MR GAGELER: The rationale, your Honour, in our submission, was not to go very far, not to deviate very far at all from the existing law.

CRENNAN J: It does mean, does it not, as Ms Monotti suggests, that it would be very hard to ever have contributory infringement in respect of a method patent, process patent?

MR GAGELER: We accept that the stark choice here is that the other difference – and this is really quite important – is that both the United States provision and the United Kingdom provision have these very important limiting qualifications. In the United States the thing has to constitute a material part of the invention. In the United Kingdom it is even stronger. It has to relate to an essential element of the invention. That qualification does not exist in section 117. So you really have quite a stark choice, your Honours, of a provision that does not do very much - we accept on this construction it does not do very much. It does something. It looks to the act of supply rather than an act of direct infringement and it does not require proof of use of any particular nature to make the supply an infringement.

It does that. That may, in practical terms not amount to very much but it does something conceptually in that respect but the choice is between a provision that does almost nothing on that construction and a provision which, given the wider construction, would go way further than the United States or the United Kingdom at the time and really lead to the result that this case, probably, is a very good illustration that commercial activities become extremely vulnerable to this particular infringement provision of the Act.

So, your Honours, we point to those differences. It is difficult to get anything out of the extrinsic material further that is very much in our favour, but what we can draw from it, in our submission, is an intention in the light of the precedents that then existed specifically not to go as far as those precedents would really quite easily have pointed. As to the work done by section 117 on this construction, we accept, your Honours, that it is effectively confined to the supply of the patented product or a product that is the product of a patented method or process.

We accept that in practical terms there will be few, if any, cases, where the supply of a product of that nature is not already an exploitation of the invention and, therefore, a direct infringement but, your Honours, the provision still does not do nothing, it creates a conceptually distinct cause of action for infringement that is different from the common law cause of action which would arise more directly from the language of section 13. Importantly, in that respect, it looks only to the potentiality for use by the recipient and focuses on making the supply an infringing act, there is no need to prove actual use.

Your Honours, we did seek in our written submissions to invoke a principle for which we could find no very strong authority and the principle that we seek to invoke is this, that in the face of ambiguity the Court should lean against a construction which would involve an expansion of a patentee’s monopoly. That is a principle that we would seek to derive from the recognition by Lord Moulton in the Adelaide Steamship Company Case [1913] AC 781 at 794 that there does exist a common law right to trade and that a monopoly is a derogation from that common law right.

Very much a similar approach has been taken in the context of considering the scope of contributory infringement by the United States Supreme Court in Sony Corporation [1984] USSC 14; 464 US 417, one of the cases referred to by Justice French. He referred to it extensively at paragraphs 40 to 41 of his judgment, but in the course of the reasoning leading up to the passages Justice French quotes from there is a statement at page 431 – I am sorry we have not given your Honours these pages – where the court says that it should be circumspect in construing the rights of a patentee and refers extensively to authority in the United States that illustrates what is described as:

The judiciary’s reluctance to expand the protections afforded by –

in this case –

the copyright, without explicit legislative guidance -

That is said to be a recurring theme.

KIRBY J: What paragraph was that?

MR GAGELER: It is at [1984] USSC 14; 464 US 417 at page 431.

CRENNAN J: I think in the US there were policy debates before Senate Committees and things of that sort, where this point was a big point made by what you might call the anti-contributory infringement lobby, or whatever it was. Actually, one of the pointers for legislation being necessary was that it would have to be done in a very confined way with qualifications built in and so on for this very reason that in fact the whole idea was expanding the monopoly.

MR GAGELER: Indeed, yes, and it is partly as a result of that – I am sorry, the expansion and the monopoly has always gone hand in hand with a very wide view of what staple commercial product is. I was going to come back to it in that context, your Honour.

GUMMOW ACJ: There is a similar debate, really, in both patents and copyright. It is discussed in Time-Life, I think, this notion that applies through the patent system and not the copyright system of attaching conditions that run with the goods.

MR GAGELER: Yes, that was a parallel debate in the United States, your Honour, and quite often the notion of an abuse of a patent which could be involved there was dealt with in - - -

GUMMOW ACJ: It might be worth looking at National Phonograph v Menck and at Time-Life, I think.

MR GAGELER: Yes. Certainly the cases that have dealt with one have tended to deal with the other. It has come up in the same context on a regular basis. Your Honours, that is really the first point of construction. That is the point that was not decided in the Full Court. If we are right on that then that is the end of the case from our point of view. The other two points were dealt with in the Full Court and may I deal with them relatively briefly? The second point really comes down to this; what was granted to ACOC by the licences under the Crown Lands Act?

GUMMOW ACJ: There is a profit à prendre?

MR GAGELER: Yes – well, there are two aspects to it. The starting point is if you look at the Act, what was granted was a right to take from the land living and standing timber. From that two things flow; one is the profit à prendre point, that is, it was a right to the land, it was not the supply of a product. I need to develop that just slightly, and the other point is this, that whether or not it was the supply of a product, it was not the supply of a product that ACOC was alleged and assumed to have used to infringe the patent. I will just need to develop both of those very briefly.

GUMMOW ACJ: Do we get any assistance from Stanton v Federal Commissioner of Taxation?

MR GAGELER: Yes, very much. That is the - - -

GUMMOW ACJ: Is that in the materials anywhere?

MR GAGELER: It is in the materials. Can I come to that, your Honour?

GUMMOW ACJ: Yes. I just could not find it.

MR GAGELER: The way I come to that is through the statute and it is probably best that I do it in order. If your Honours go to the Crown Lands Act which is in volume 1 behind tab 4 you will see the definition of “Crown lands” at page 2 which would encompass land formerly of the Commonwealth, as this was, which became vested in the Territory under section 69(2) of the Northern Territory (Self-Government) Act.

If your Honours could then turn to page 47 and you see a prohibition on doing a number of things on the land without a licence, including felling or destroying trees, and if you turn back a couple of pages to page 43 you see section 91 which is the provision allowing the grant of miscellaneous licences and what is permitted by section 91 is the grant of a licence “to take from the land” a number of things, the first of them being “live or dead timber or wood”, and in the context these licences could only have been to take from the land live timber that is standing, growing timber, and then a number of other things or:

(f) any other substance or article the property of the Territory -

clearly enough flowing from the ownership of the land. If you look at section 94(2), it says:

A licence granted under this Act . . . is subject to such terms and conditions as are prescribed in the Regulations, or such other terms and conditions . . . as the Minister thinks fit and specifies in the licence document.

The regulations are behind tab 5, and the relevant regulations are at pages 11 and 12, and your Honours will see regulation 46 allows:

The Minister may determine a royalty on the material removed from the land to which a miscellaneous licence relates, and the amount of the royalty, if any - - -

I will come back to that. Regulation 48 allows for forfeiture, which appears to be the only remedy for breach of a condition, and 49 provides for the “Form of miscellaneous licence”, the licences in the present case all being in the prescribed form.

CRENNAN J: Under 46, the “royalty on the material removed from the land”, the way the royalty is structured that is the oil rather than the wood, is it not?

MR GAGELER: It is calculated by reference to the value of the oil, but it is nonetheless a royalty on the material removed. It is just calculated by reference to the economic benefit to the remover, your Honour. Stanton, we have given your Honours - - -

GUMMOW ACJ: It is behind tab 16.

MR GAGELER: Behind tab 16 and the relevant part of Stanton is at page 641 at about point 4 dealing with the term “royalties”. There is a sentence beginning:

It may be noted, however, that the modern applications of the term seem to fall under two heads, namely the payments which the grantees of monopolies such as patents and copyrights receive under licences and payments which the owner of the soil obtains in respect of the taking of some special thing forming part of it or attached to it which he suffers to be taken.

That is in that second sentence – in that second sense, that in our submission, the word “royalty” is used first in the regulations and then secondly and correctly in the condition. In each case, I think it is condition 2 of the licences. It was that passage in Stanton which is then picked up, if your Honours turn back to tab 14, which is Harper in the judgment of Justice Brennan with whom the other members of the court, for relevant purposes, agreed, there is at page 333 at statement at about point 8 referencing Stanton which says, in our submission, succinctly and correctly:

A royalty, in the sense of a payment made to the owner of land for the right to take away things which are part of or naturally attached to the soil . . . is not a tax –

That one sentence, correctly, in our submission, captures the nature of a royalty. So in the present case, what you have is a licence which is expressed to be a licence to take from the land. It is subject to the payment of a royalty – the term correctly used in that traditional sense – but it is subject to conditions, breach of which only result in forfeiture, and it is properly characterised as a conferral of the statutory right in the nature of a profit à prendre, which is the approach that Justice French took.

GUMMOW ACJ: Rather than?

MR GAGELER: Rather than as a – in the nature of a contract for the sale of goods - - -

GUMMOW ACJ: But in the terms of section 117?

MR GAGELER: Well, I have to come to the terms of section 117. I have to just deal with the characterisation in the first place, and indeed, the special conditions here – another point made by Justice French – the special conditions which require the stumps to be removed and the land rehabilitated simply emphasise that one is concerned with a right to take from the land and not with anything akin to a sale of goods.

Now, tying that to section 117, we do it in two ways. The first way is to say a grant of a right to take from the land is not the supply of a product. In that respect, we adopt the reasoning of Justice French in paragraphs 71 to 76 of his judgment, and really what he was saying is that although if you break up the word “supply” and the word “product” and give each word its broadest possible meaning, you can get there, but it is not the natural reading of the provision to take “supply of product” in section 117 as referring to the grant of rights in the nature of realty.

Three reasons we advance in support of that, your Honours, and they come down to this. The word “product”, once one abandons the notion that it is an attempt to use the word consistently and technically and in the way that it is used in the definition of “exploit” as simply being the result of an invention, once you abandon that notion where the word, we accept, could be stretched to include interest in realty, the word “product” refers comfortably to goods. It refers only awkwardly to land.

So far as the word “supply” is concerned, it is a defined expression, and when you go to the elements of that defined expression, as set out in the dictionary to the Act, what you see is that the word “supply” includes “hire” and “hire purchase”. Now, those are terms which are applicable comfortably to goods, but again, only awkwardly and really quite inappropriately to land. Then the third point is this. If you recall the recommendation in the IPAC report, the recommendation in the IPAC report referred only to goods, and it would be surprising if the word “product” was intended to result in an expansion from that recommendation.

That is the first way in which we tie it back to section 117. The other way we tie it to 117, your Honours, is this. Even if it could be said that the grant of a right to take standing timber from the land was a supply of a product for the purposes of section 117, section 117 clearly only applies in circumstances where the product supplied is the same product that is put to infringing use. It does not apply – it does not purport to apply where what you have is some earlier product in a chain of production, and what might amount to a product in any particular case, we accept, is a question of fact.

Mr Nicholson pointed out that in one of the cases to which we have referred – and we have given your Honours the case of Rochester - there is no need to turn to it in tab 16, there is reference to a decision of the Supreme Court of New South Wales in a case called In re Searls Ltd [1932] NSWStRp 68; 33 SR (NSW) 7 which illustrates the proposition that arranged flowers are not the same product as cut flowers before the arrangement.

It is just an illustration of the point that a product is the result of a production exercise and there is a difference between a product at one stage of production and a product at another stage of production. So if we are correct to say that the product supplied is living or standing trees, the point comes down to saying it is not the product that ACOC has alleged, and for the present purposes, assumed to use the infringement of the patent.

Your Honours see that from the allegations - and I do not ask you to turn to them – in the statement of claim, pages 5 to 6. The relevant allegations are paragraphs 5 and 6 where the allegation is of a supply under the licences of severed timber, and the allegation in paragraph 6 is that it is the use by ACOC of the severed timber, that is, the dismembered bark and the wood, that constitutes the infringement. Our point there – it is not a big point, it is a factual point – is that the mixing of the bark and the wood could only occur at a stage of production after the tree has been cut down.

The majority in the Full Court addressed this argument at paragraphs 160 to 163 and they dealt with it by finding at paragraph 163 that the product supplied was felled trees or severed trees, and that allowed them to conclude that the product supplied was the same as the product used. Now, if the product supplied is actually standing trees, the basis for that conclusion falls away. So those are the two arguments based on section 117 which we say follow from the correct understanding that what was conferred was a right to take from the land living or standing timber.

Your Honours, the third point in the case is the staple commercial product point. It was addressed by the majority at paragraphs 156 to 158 of the judgment and it is worth going to those paragraphs. What they said in paragraph 156 is:

No witness gave evidence that there is presently an established wholesale or retail marked for unmilled trees of species of the genus callitris, and in particular Callitris Intratropica . . .

Rather, the evidence before his Honour suggests that a person wishing to obtain unmilled Callitris Intratropica trees, at least in the Northern Territory, must apply to the Crown for a licence or permit to harvest the trees from Crown Land.

Then in paragraph 158 they say they do not want:

to hazard a comprehensive test for . . . ‘staple commercial product’ . . . However, it seems to us that a quality of such a product is that it is an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product. In our view, having regard to the evidence reviewed above, unmilled Callitris Intratropica trees, at least in the Northern Territory, are not a ‘staple commercial product’ –

so that seems to come from the notion that there is no presently established wholesale or retail market and if you want these trees you have to get them from the Crown.

Now, in our submission, in the context of section 117 – I will say a little bit more about the United States’ position in a moment – the words “staple” and “commercial” when used in conjunction with the word “product” should be read somewhat expansively and they should be read as referring to two quite distinct characteristics; two adjectives, two characteristics.

“Commercial”, in our respectful submission, simply refers to a product which is an article of commerce, can be contained commercially, irrespective of the nature of the market in which it might be able to be obtained, irrespective of whether it is a monopoly provider in that market or not. The word “staple” should not be read as some further qualification to the word “commercial” but as referring to the nature of the product and the uses to which the product can be put. A product, in our submission, comfortably answers the description of a staple product if it has a substantial range of uses. Now, one can get that very easily from the language. It is entirely consistent with the usage that exists in the United States.

I pointed out the way in which we understand the statutory text to operate. The history was surveyed by Justice French very usefully in his judgment at paragraphs 31 through to 43. At paragraph 41 his Honour extracts from Sony the way in which we say – we point out that this language is being dealt with in the United States. The extract from Sony right at the bottom of the page, the reference is to a:

product which is widely used for legitimate, unobjectionable purposes.

That is all that staple commercial product, or the United States’ equivalent of that language, is taken to refer to. The policy rationale is then usefully extracted from the MGM Case in paragraph 42 in that rather long quote at the end of that paragraph where it is said – can I just pick it up in the second sentence – that:

Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute fault than the mere understanding that - - -

GUMMOW ACJ: It is this notion of “good for nothing else”, is it not?

MR GAGELER: Yes. We cannot necessarily go that far in the present case because paragraph (a) is directed to do absolutely good for nothing else but we can say paragraph (b) - - -

GUMMOW ACJ: Paragraph (a) of 117(2) is not relied upon, is it?

MR GAGELER: No, it is not. But of course giving meaning to paragraph (b) one has to take into account that paragraph (a) precedes it. I would be overstating it if I said that it must refer to an article that is not good for nothing else. It refers, in our submission, to an article having a substantial range of uses. As I sought to point out from the facts, one can see that this species, whether it is to be regarded as the standing trees or the felled logs, has a substantial range of uses, which is good enough for our purposes.

So far as the usage in the United Kingdom and Europe is concerned, that is again almost sufficiently surveyed, certainly well surveyed, by Justice French at paragraphs 44 through to 52 of his judgment. He makes the point at paragraph 51 that:

The term “staple commercial product” has not been the subject of any substantial judicial exegesis in the United Kingdom.

One could really simply leave it there. Our learned friends, however, in their written submissions seek to draw quite a lot from text writing on the position in Europe and the United Kingdom. In the respondent’s submissions there is in paragraph 71 a reference to the 2006 edition of Terrell where it is said there is a reference simply to “basic products commonly available”. Of course, that expression does not take one very far, but it is pointed out that that definition had appeared in Terrell in earlier editions.

The only thing we would say about Terrell, and I am afraid your Honours have not been given a copy of Terrell, is that it is extremely equivocal as to the meaning of this provision and it really does not do anything more than venture an approach that is introduced by the word “presumably”. In paragraph 70 of our learned friend’s submissions there is a quotation from a text that breaks up the terminology in a way which we do not really quibble with, that is, it refers to the word “staple” as indicating a range of uses. We accept that. But then it seeks to get from the word “commercial” some wider meaner than, in our submission, the word naturally bears and a wider meaning than it should be in the Australian context. Your Honours, those are our submissions.

GUMMOW ACJ: Thank you, Mr Gageler. Yes, Mr Reynolds.

MR REYNOLDS: Your Honours, could I begin with a question of construction of section 117? It may be useful if your Honours use my learned friend’s submissions to look at section 117, because I want to take your Honours in that context to section 13 and also to the dictionary definition of “exploit” and if your Honours are able to see all of those on the one page, it would be useful. That is in annexure 1 of my learned friend’s submissions, “Applicable Statutes and Regulations”, and I think it is page 2 of those which set out sections 13, 117 and also the dictionary. Now, what I would like to start with is the issue of what are the acts of infringement within the meaning of this Patents Act. Unlike some statutes in the intellectual property area, this particular statute does not contain a list of the relevant acts of infringement.

In order to ascertain what acts will infringe a patent, one has to go through section 13 to the definition of “exploit” in the dictionary. I will not perform the task of writing out or stating what the various acts are which would amount to an infringement. Your Honours will see that it is possible to look at two forms of infringing act depending upon first of all within the meaning of paragraph (a) “the invention is a product” or, on the other hand, in paragraph (b) “where the invention is a method or process”. But if your Honours look at the definition in paragraph (a) of “exploit” it includes making a product, hiring a product, et cetera, and in paragraph (b) it includes using the method or process and then the whole of paragraph (a) is picked up insofar as it can apply in respect of a product resulting from use of a process.

It is important, I submit, to perform that exercise to determine what the acts of infringement are because the word “infringe”, which we will be coming back to in a moment, is used in section 117(1). So if one puts the list, as it were, of acts of infringement to one side and then looks at section 117 and, in particular, where the alleged contributory infringement is based upon paragraph (2)(b) there are a number of elements, five in number I submit, which my client, in effect, would need to show and can I list those. The first two are negative. The first is in paragraph (1), “the supplier is the patentee or licensee of the patent”. That is not in issue here.

CRENNAN J: Or authorised by such a person.

MR REYNOLDS: Yes, I think that is right, your Honour. Secondly, in paragraph (2)(b), that “the product is not a staple commercial product”, and I will be dealing with that obviously a little later on. Thirdly, that there is a supply of the product and that is in subsection (1). Fourthly, and there is no issue on this appeal about this, in (2)(b) that “the supplier had reason to believe that” the recipient would put the product to a particular use, and I am going to refer in a shorthand way to that as the anticipated use, that is, the use anticipated by the supplier.

GUMMOW ACJ: But that use in (b) is the use right back in (1), is it not?

MR REYNOLDS: Correct, so that one goes back, fifthly, to paragraph (1) and the fifth element is shown that that use, that is, the anticipated use of the product would infringe that patent.

GUMMOW ACJ: What is the product here?

MR REYNOLDS: Does your Honour mean generally, or what is the anticipated use of the product - - -

GUMMOW ACJ: We have to ask ourselves if it would infringe, so what do you say it is?

MR REYNOLDS: We would say timber of the species Callitris intratropica.

GUMMOW ACJ: That grows in the ground.

MR REYNOLDS: It does. That is the product definition that we embrace.

GUMMOW ACJ: You do not mean felled timber?

MR REYNOLDS: That is one form of the product. Still the same product.

CRENNAN J: Do not you have to look at the product which results from using a method or process in the patent and that is inevitably the oil.

MR REYNOLDS: I submit, one needs to look at the product to which the process is applied because the anticipated use here is both a use of a product and also a use of the process. When we look at it either of two ways, one is either inputting the product into the process that involves both the use of the product and also use of the process, or one can talk about applying the patented process to the product. That too involves a use of a product and a use of a process.

CRENNAN J: Direct infringement would always be selling, hiring or whatever, the oil which resulted from the use of the method or the process in the patent. That is right, is not it? Direct infringement.

MR REYNOLDS: I believe so, yes, it would. So, here the end focus has to be on the fifth of these steps, that is, that the use of the product would infringe the patent.

GUMMOW ACJ: Why would the use of the timber infringe the patent?

MR REYNOLDS: Because one is taking the timber and applying the process to it and the use of the process on that product comes within the meaning of paragraph (b) of the definition of “exploit” because one is both using the product and at the same time using the process and that is one of the acts of infringement.

GUMMOW ACJ: But you have to think, do not you, about what it is that this product is capable of use. It is multifarious, is not it? If the product is the timber, it could be used for all sorts of things.

MR REYNOLDS: That may be right, but relevantly one has to show that anticipated use of the product would infringe the patent and the use of the product would infringe the patent if it involves - - -

GUMMOW ACJ: That is (b), is not it?

MR REYNOLDS: - - -the use of a process which is the first act of infringement mentioned in paragraph (b). So that is in essence the construction which we adopt - - -

HAYNE J: Could I just see if I understand that construction and what it is based on. It seems to be a construction that looks at 117(2) and observes in (a) what might shortly be called “only use”, (b) what might be shortly and inaccurately called “known or intended use” and (c) “instructed use”. It seems to be a construction that takes use – lets leave aside of what – as the hinge about which the section turns and limits the uses with which the section is concerned by the three classes I have described in (2), “only use”, “known use” and “instructed use”. The third step seems to be – correct me if I am wrong – to take the word “product” and treat it simply as meaning “object”, “thing” or “item supplied”. Now, is that a fair summary of the construction you are advocating or have I mis-stated it in some particular way?

MR REYNOLDS: I do not jive, with respect, at anything your Honour has put to me. I do not know if that is a complete re-statement - - -

HAYNE J: It seems to me that the difficulty in the construction, if there is one, is in treating the word “product” as no more specific than the object that is supplied, whatever it is. If the use of something would infringe a patent, the supply of that thing, whatever it is, is an infringement and it treats the section as really hinging about the three identified forms of use.

MR REYNOLDS: Perhaps the only thing I would quibble with is whether the word “product” is just anything is supplied so long as what is supplied can be fairly characterised as a product within the meaning of the section and I assume your Honour means that.

HAYNE J: The contrast that struck me when we were taken through the United States and United Kingdom provisions is that you can identify the United Kingdom provision as hinging about any of the means relating to an essential element of the invention plus knowledge of intended use and the United States provisions seem to focus entirely on the nature of what is supplied, in particular, the qualification constituting a material part of the invention, and it seemed to me that underpinning the approach that your side of the argument was taking was to see the Australian section as focused or driven entirely by use and that by that means you could go on to say, well, that gives it work to do in relation to process patents as well as product patents, whereas if you treat the word “product” particularly differently, you end up with no or very little application of the provision to the process patent. But perhaps I am anticipating too much in the argument, Mr Reynolds, but at some point in your argument if you think it desirable or necessary to come back to that, I think I would be assisted by that.

MR REYNOLDS: Thank you, your Honour. So if one approaches the section in that way, we submit, that there is a contributory infringement. I want to move next to the issue of stapled commercial product and we have dealt with this issue in our written submissions at paragraph 63 – these are the amended submissions – following, which my learned friend has taken your Honours to briefly. Your Honours will see at paragraph 63 the approach which was adopted by the majority, which my friend took you to, and the key words have been italicised by us in paragraph 63 of the submissions. We have submitted there at paragraphs 68 and following that this definition is, so far as this has been the subject of exegesis in both the United Kingdom and in Europe, that the approach of the majority is pretty much on all fours with the approach taken in respect of those very words, that is, “staple commercial product”, as they appear in both the United Kingdom legislation and also in the various provisions that are current throughout Europe.

GUMMOW ACJ: That is all very well and you may be right, but there is interplay between (a), (b) and (c) which I do not quite understand. Given the objectives of the section, why should it matter that it is any use for (b) but only one reasonable use for (a) or instructive use for (c)? What is the rationale that links and contrasts (a), (b) and (c)? I ask you that because (a), (b) and (c) obviously are not in any of the overseas provisions.

MR REYNOLDS: Quite, and they represent to some extent a spoke approach to the issue in this country. Can I answer your Honour’s question by focusing on the definition which my learned friend propounded in paragraph 44 of his submissions, and I would ask if I might trouble your Honours to have that before you because I need it, the very words of it, before your Honours in order to take up what your Honour Justice Gummow just raised with me. Your Honours will see that this definition talks about substantial, non-infringing uses.

GUMMOW ACJ: After all, this section is going to be used to get a remedy in favour of the patentee against someone who is not directly infringing, to use that expression, but is caught because of some collateral step or anterior step. The question is, what is the necessary significance that has to be attached to that step to draw them into the net?

MR REYNOLDS: Exactly.

GUMMOW ACJ: It seemed to be some characteristic of this product which is used.

MR REYNOLDS: Certainly for (b) and in fact for (a) as well.

GUMMOW ACJ: Paragraph (c) is an easy case because it is the instructions to assemble the Meccano set is not it?

MR REYNOLDS: Quite. Or in any case, as they say, without first characterising what the product is.

GUMMOW ACJ: It is easy to say that is a tort.

MR REYNOLDS: It is and that is the closest obviously of the three to the notion of contributory infringement such as it existed under the previous law in Walker v Alemite and similar cases.

HAYNE J: What is different about (a) and (b). Paragraph (a) is the only one reasonable use. You might be inventive and think of some other possible use, but there is only one reasonable use you could have for this and (b) hinge is not, I suspect, any use, rather, the hinge is reason to believe the person would put it to that use, the known use.

MR REYNOLDS: Again, another hinge is the notion of what is a staple commercial product.

HAYNE J: Sure.

GUMMOW ACJ: And then staple commercial product is a counterweight to that.

MR REYNOLDS: It is.

GUMMOW ACJ: Why would you have the counterweight that is what I am trying to get at?

MR REYNOLDS: A partial answer to your Honour’s question is this, and I will see if I can explain what we perceive is one of the main difficulties with my learned friend’s definition. The key in his definition is substantial non-infringing uses. What I want to suggest, the end game here is that his meaning creates an anomaly with paragraph (a) and renders paragraph (b), in effect, otiose. If your Honours go back to paragraph (a), it talks about a product which is capable of only one reasonable use and if your Honours go back up to subsection (1) that has to be an infringing use, that is, the use of a product which would infringe the patent. That is the product referred to in paragraph (a).

Paragraph (b), the product is one that does not have substantial non-infringing uses and I have taken the expression “substantial non-infringing uses” from my friend’s definition and I have inserted the “not” in front of it because the “not” is in paragraph (b) before the words “staple commercial product”. My proposition is this, that the expression “not a product that does not have substantial non-infringing uses” is the same or virtually the same as a product which is capable of only one reasonable use which is an infringing use, and that is the meaning of paragraph (a), capable of only one reasonable use when taken with - - -

GUMMOW ACJ: Your criticism of your opponent’s construction of (b) is that it just replicates (a), or it assumes a replication of a new subset of (a).

MR REYNOLDS: Well, that it is a subset, as it were, of (a) on that definition, but I will either cover completely or pretty much cover everything that is referred to in paragraph (b) - - -

GUMMOW ACJ: With or without reason to believe.

MR REYNOLDS: You do not need that. You do in (b) but you do not need it in (a). So that is, we submit, the main difficulty. Your Honours will have noted form the terms of the United States statute – this is a point made by Justice French at paragraph 68 – that this notion of substantial non-infringing uses is there in addition to the notion of staple commercial product in the United States statute and we submit there is not any reason at all to import that idea, which is really only to be found in the United States statute, into the interpretation simply of the meaning of the words “staple commercial product” where those words occur in paragraph (b).

GUMMOW ACJ: What did the dissenting judge in the Full Court say on this question of construction? I am not sure what was said in that judgment is replicated by Mr Gageler’s submission.

MR REYNOLDS: With respect, your Honour is quite right, because at paragraph 70 Justice French uses a form of words which are - - -

GUMMOW ACJ: Of a kind commonly available in trade or commerce.

MR REYNOLDS: Exactly, which is not my learned friend’s definition. So even the minority judge does not support him. Certainly the majority do not.

GUMMOW ACJ: Anyhow, but why is the dissenting judge wrong?

MR REYNOLDS: Your Honour, I do not have to say that he is.

GUMMOW ACJ: Well, you may. Just favour us by telling us what was wrong, Mr Reynolds.

MR REYNOLDS: Well, his Honour there talks in paragraph 70 about a commonly available commercial product and then further down that paragraph of “a product of the kind commonly available in trade or commerce and having more than one reasonable use”.

GUMMOW ACJ: What is wrong with that?

MR REYNOLDS: Well, so far as his Honour, we submit, focuses on the notion which is similar to that in the majority at paragraph 158, we say there is nothing wrong with it, but so far as his Honour ventures into the area of relevant use in a similar way to my friend’s definition about substantial non-infringing uses, we submit that is an unnecessary inquiry in the interpretation of the words “staple commercial product”.

Can I move then to the third issue which is a question of supply of product. In my learned friend’s first submission – and I do not think he touched on it today in argument – his written submission was the product excludes natural products, in other words, it only includes artificial products. I do not think we have heard much about that today, but we have submitted in our submissions that the ordinary meaning of the expression – this is in paragraph 54 – will cover both natural and artificial products. This is one that talks about natural products, produce, primary producers, the product of land, et cetera, that natural products come well within the notion of what is a product within the meaning of section 117.

Indeed, Justice French at paragraph 75 talks about a natural process and we submit that there simply is not any reason to read that word down in that way. Likewise, we submit that my learned friend’s submission the product within the meaning of section 117 has to mean “personalty” is also a reading down of the natural ordinary meaning of that word without real justification. My learned friend has not taken your Honours, for example, to any dictionary definition of that word which would involve it being read down in that way. The legislature had intended to confine that notion to the notion of goods. It could easily have done that. The most, as I understand it, that my learned friend is able to point to, really - - -

GUMMOW ACJ: Could a product be an intangible? Electricity, for example, you would not classify as goods I would have thought.

MR REYNOLDS: I would submit probably electricity would be covered. My learned friend, in seeking to read down a word which has a broad meaning and has no dictionary definition which means simply “personalty”, has a lot of work to do in order to get your Honours to read down that provision in that way. Of course the reason he seeks to read it down in that way is in order that his client can succeed in the case. It is not by any means a natural reading of the provision. It is true – this is behind tab 18 in the list of authorities – that the recommendation of 33 of the Industrial Property Advisory Committee did use the word “goods” but, as my learned friend noted in his submission, it is difficult to make an enormous amount of this because what the clause in the Act, or the bill at that time, implements is the Government’s response to that recommendation. Naturally, most products will be goods, but that does not meant that the word “product” has to be read down so as only to refer to goods.

One also ends up – and this is something pointed out by the majority at paragraph 125 – into all sorts of artificial debates and distinctions if one reads down the word “product” so as only to include personalty. Your Honours know, in particular, no doubt from reading the judgments in this case, there are a particular number of products which can be characterised on the one hand as realty or on the other hand as personalty and that issue has given rise to, in some cases, enormous difficulties of interpretation and the majority make the point, having reviewed Justice French’s judgment in relation to the principles in Marshall v Green – this is at paragraph 125 at page 1224 – say at the conclusion, having referred to these arbitrary rules where no general rule is laid down in any one case that is not contradicted by another:

We cannot believe that Parliament intended to import into the construction of the expression ‘supply of a product’ in s 117 of the Act, distinctions derived from cases on the Statute of Frauds about the difference between fructus naturales and fructus industriales, based on a principle that is not easy to discern and contradictory decisions that establish no general rule.

But that is the effect of my learned friend’s construction, is inevitably to plunge a court interpreting this provision into having to draw, in relation to products which are at the margin between on the one hand realty and on the other hand personalty - - -

GUMMOW ACJ: But why does one then err in favour of expanding the reach of the monopoly? Do not forget, these patents are illegal at common law, need to have statute – 16.23 and we are still going. It upsets the Americans still in light of the Sherman Act.

MR REYNOLDS: Well, my learned friend’s proposition is, of course, the sort of proposition that is relied upon in this Court often in relation to the notion of rights. Not much was made of that proposition in his written submissions, as he has frankly acknowledged, because there is not much in the way of authority for it.

GUMMOW ACJ: I do not know about that.

MR REYNOLDS: We have said in our submissions the one needs to look obviously to the words, context and purpose of the Act and I would like just to give your Honours the reference to this, if I may send your Honours a note. There is a judgement of Justice McHugh talking about this notion of rights and then talking about ambiguous statutory provisions and the notion that if there is any ambiguity, you simply read the statute down. His Honour makes the point that there is not much weight that will generally be attached to that proposition, that always one needs to interpret the provision and look at its context and look at its purpose and in effect I do not think he actually says that it is this type of - - -

GUMMOW ACJ: He is not talking about this-annexure

MR REYNOLDS: He is talking about a similar principle on statutory interpretation but - - -

GUMMOW ACJ: I also think on occasion he said the opposite.

MR REYNOLDS: Your Honour is right about that too.

GUMMOW ACJ: You had better give us both.

MR REYNOLDS: But there was a Damascene conversion at one point and that is the particular authority that I am referring to, I believe the last in the group. But here my learned friend would have to show an ambiguity, for example, saying “product” can mean on the one hand “personalty” or on the other hand something else, that the narrower version is simply to read it as “personalty”, but we submit he does not even get to first base because there is no natural or ordinary meaning of that word which would limit it basically to “personalty”. If your Honours please, those are my submissions.

GUMMOW ACJ: Yes, thank you Mr Reynolds. Yes, Mr Gageler?

MR GAGELER: Your Honours, I just want to reply on one point; that is the staple commercial product point. If there is a difference between what I sought to submit and what Justice French held, then we adopt as part of our submissions what was said by Justice French at paragraph 70 so far as construction is concerned and paragraphs 97 to 100 so far as application of that construction is concerned.

Can I, secondly, and really lastly, address my learned friend’s point that if we give our construction to the words “staple commercial product” in paragraph (b), that there is some tension created with paragraph (a). Paragraph (a) refers to products with only one reasonable use. Paragraph (b), on our construction, excludes products with a substantial range of uses. What is left is products with a small range of uses, a de minimus range of uses, what the Americans would see as falling within the category of something especially adapted for an infringing use but which might have one or two other reasonable uses. That is the subject matter of paragraph (b), in our submission.

GUMMOW ACJ: Thank you. We will consider our decision in this matter.

The Court will sit again tomorrow at 10.15 to deliver the two judgments which stand on the list tomorrow and thereafter the Court will then divide into the two panels to deal with the special leave applications immediately thereafter.

We will now adjourn.

AT 3.29 PM THE MATTER WAS ADJOURNED