To sue or not to sue (but amend the claims first)? That is the question

A competitor is infringing your patent, but there is a problem with the claims. Should you sue or try to fix the problem first?

Commonly, when an allegation of patent infringement arises, the patentee becomes aware that the claims of the patent are somewhat unclear in scope or may be invalid in light of prior art located subsequent to the grant of the patent.

Where there is a real risk that the claim(s) will be found invalid or the lack of clarity could be used by the alleged infringer to avoid infringement, the patentee must decide whether to sue for infringement (and try to amend the claims before the court during the infringement proceedings), or to amend the claims before instituting proceedings (where the amendments are dealt with by the Patent Office, which is less expensive and easier, but takes time).

Legal background
The requirements for amendments before the Patent Office before proceedings are filed, and recent cases on the more onerous requirements for amendment before the court during proceedings for infringement or revocation of the patent, were previously discussed in "When did your patent portfolio last have a health check?"

Since that article, a further decision of the Federal Court of Australia has reinforced that the court is prepared to allow amendments, provided that the patentee fully discloses all relevant matters.

In Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd ([2010] FCA 983) the patentee instituted proceedings for infringement of a standard patent and an associated certified innovation patent. The respondent denied infringement of claim one of both patents on the basis that its method did not use a reservoir having a "second inlet". The respondent’s denial identified, for the first time, that there was an error in claim one, as "second inlet" should in fact have read "first outlet".

The patentee immediately made application to amend both patents to correct the error and filed evidence from the European patent attorney who was responsible for the patent family and involved in the preparation of the patent specification and claims. This evidence addressed how the wording had been included and that, on identification of the error, the patentee had moved swiftly to amend the patents.

The court found that the amendments sought were allowable amendments and, most importantly, that the patentee’s conduct and candour were such that the court was prepared to exercise its discretion in the patentee’s favour and make the amendments.

The alleged infringer has now admitted infringement of the amended claims.

So where does that leave the Australian law?
Undoubtedly, it remains easier from a legal perspective to amend a patent before the Patent Office. Because the Patent Office has no discretion to refuse the amendments (it must make the amendments if they are allowable), it is not necessary to file evidence disclosing all facts relevant to the application to amend. This also makes amendments before the Patent Office considerably cheaper.

However, applications to amend can be opposed and the patentee cannot sue on the amended claims until the opposition is concluded. If the alleged infringer is watching the patent, it may oppose the amendments as a delay tactic, which could potentially lead to the patentee being unable to take action on the amended claims for over 12 months.

It is clear, in light of recent cases, that it is not as difficult as once thought to amend a patent before the court, but the requirement for the patentee to show that its conduct has been reasonable, such that the amendments should not be refused, is onerous. This requires, among other things, that the patentee:

  • Fully disclose all relevant matters.
  • Show that there has not been any unreasonable delay.
  • Prove that it has not taken unfair advantage of the unamended patent.

The evidence required to discharge the patentee's obligation is potentially significant and thus costly.

More concerning is the fact that many of the documents relevant to these issues would be subject to legal privilege and thus usually excluded from disclosure. While the courts in Australia have fallen short of requiring the patentee to disclose privileged documents, they have found that in some circumstances there may be a need to disclose privileged documents in order to satisfy the obligation for full and frank disclosure (see Apotex Pty Ltd v Les Laboratoires Servier).

Given that many of the documents that would need to be disclosed, either as part of the supporting evidence or during discovery, may also contain information on the overall IP strategy, litigation strategy and comments on validity or clarity, there is a risk that the patentee will be forced to disclose documents that inform the infringer of strategic considerations or that make the infringer aware of a problem with the patent that it may never have identified.

What should patentees do?
There is no right answer as to whether a patentee should amend the patent before instituting proceedings. It depends on the particular circumstances of the case.

Previously, the court took a very strict view of when it would allow amendments and it was difficult, if not impossible, to amend a patent before the court successfully. It is now clearly a legitimate strategy for a patentee to amend before the court, but just as clearly there are potentially significant disadvantages to adopting this course.

In the ideal situation, where the patentee has the option and there are no timing issues, from an ease of process and cost perspective, it is clearly preferable to amend the claims before the Patent Office and then sue for infringement.

But litigation is rarely ideal. Court proceedings are usually contemplated because the infringer's activities are damaging business and it is necessary to minimise the damage as soon as possible. The temptation is thus to sue for infringement immediately. However, before proceedings are initiated, a patentee should consider, from a strategic standpoint, whether this is the best option.

For example, if the infringer is not on notice of the patent and is unlikely to be watching it, and thus the risk of opposition to an amendment application is low, it may be possible to get the amendments through the Patent Office quickly, with little cost and without the requirement of disclosure. In these circumstances amendments before instituting proceedings would be preferred.

However, if the infringer is causing significant damage to the business and it is necessary to take instant action, or for other commercial reasons it is desirable to institute proceedings quickly, amendments before the court during the infringement action would be preferable, provided that the patentee is fully prepared for the disclosure requirements.

In circumstances where the risks associated with the material that would need to be disclosed are not too great,  suing for infringement first and seeking to amend the patent before the court later is a viable option that should be considered as part of the overall strategy.

However, if any of the following apply, then amendments should be made before the Patent Office before suing for infringement:

  • If it has been known for many years that the present form of the claims is invalid and no attempt has been made to amend the claims, the court may refuse to make the amendments as there has been unreasonable delay.
  • If the patentee has previously taken action (or resolved a dispute without needing to take action) on the present form of the claims, particularly if it knew that the unamended claims were invalid, the court may refuse to make the amendments, as the patentee has taken unfair advantage of the unamended patent.
  • If there are documents that would need to be disclosed that contain information that would seriously damage the patentee's case, the risk that the amendments would not be allowed by the court, and the risk to the case as a whole, are so great that they would outweigh any commercial advantage in instituting proceedings quickly. 

Amendments before the Patent Office or before the court are simply tools that the patentee can use to improve its patent. Like any litigation tool, there are advantages and disadvantages to their use.

If there is a need to amend a patent that is being infringed, it is cheaper and easier to amend the claims before the Patent Office before instituting proceedings. However, there are circumstances where this is not a viable option, as it is commercially imperative that proceedings be initiated immediately.

It is clearly now possible in Australia to amend a patent before the court successfully during infringement proceedings. However, before adopting this strategy, critical consideration of the risks of amending before the court should be undertaken in order to ensure the tactic is the right one in the circumstances of the case.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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