When perceiving the problem is the inventive step – complacent market leader Reflex infringes disruptor Globaltech’s valid patent

Reflex Instruments Asia Pacific Pty Ltd v Globaltech Corporation Pty Ltd [2023] FCAFC 158

On appeal from Globaltech Corporation Pty Ltd v Reflex Instruments Asia Pacific Pty Ltd [2022] FCA 797, previously reported here

29 September 2023

Full Court of the Federal Court of Australia

Moshinsky, Burley and Kennett JJ

Highlight

In this Full Federal Court decision upholding the decision below, market leading infringer Reflex was unsuccessful in its validity challenge to disruptor Globaltech’s patent because perceiving the problem solved by the patent was found to be inventive, despite the solution being obvious. 

Background

In the first instance decision handed down in 2022, innovator Globaltech Corporation Pty Ltd succeeded in its patent infringement proceedings against market leader Reflex Instruments Asia Pacific Pty Ltd relating to Globaltech’s post-RTB patent AU 2012297564 (the Patent).  The priority date of the Patent is August 2011, and Reflex incorporated the claimed features into two of its market leading products in 2016.  Reflex conceded infringement, but Justice Jagot (now of the High Court) dismissed Reflex’s revocation (novelty and inventive step) cross-claim in the 2022 decision.  

Reflex appealed and Globaltech filed a Notice of Contention.  The Full Federal Court heard the appeal in February 2023 and upheld the decision of Jagot J on novelty (with a different construction) and inventive step.

The Patent is entitled “Optical device for use with downhole equipment” and is directed to an optical device that allows collection of drilling core orientation data from equipment located in a mining well or borehole without disassembly of the data collection unit.  This is achieved by modifying existing designs to realign LED signals to exit through a side port of the device for collection and, optionally, communication to the surface.

Key Issues

Reflex’s appeal was in part based on claim construction which (it submitted) would have changed the validity findings.  Reflex asserted that Justice Jagot unduly (i) confined the field of the invention to mineral exploration, thereby excluding the fields of oil and gas exploration, and (ii) construed the claim term ‘downhole equipment’ to exclude wireline telemetry equipment (used in oil and gas exploration) which involves data transmission in real time via electronic pulses up a cable.  Her Honour’s basis for this construction focussed on the improvement of the claimed invention – avoiding  the need for disassembly – which she found would be immaterial if wireline telemetry were included as the latter wouldn’t require disassembly. 

Reflex also appealed from the finding of the primary judge that the inventive step lay in the perception (of the problem) and the related idea (for its solution).  Reflex submitted that the disadvantages of disassembly were well known at the priority date, and that the need for improvement was part of the common general knowledge in the field (CGK).  Reflex also submitted that the problem was a “minor issue or inconvenience not worth the commercial trouble of fixing” but that its lack of improvement does not make the Globaltech patent inventive. 

Outcome

Although Reflex was successful on certain claim construction points, the Full Court upheld the primary judge’s findings on novelty and inventive step, declaring the patent valid and infringed.

The Full Federal Court agreed with Reflex that Justice Jagot unduly confined the field of the invention to the field of mineral exploration and therefore erred in her construction of the claim term “downhole equipment” and related terms.  The Full Court found that, while the primary judge’s conclusion that the improvement disclosed in the specification (reorienting the light signal through the side wall so as to avoid the need for disassembly) was relevant to an understanding of the invention, it was not the sole determinant of construction of the claims.  As the claims did not contain any explicit limitations, there was “no basis… to construe these expressions to exclude equipment used in conjunction with wired telemetry.”  The Full Court accepted Reflex’s submission that it is “not legitimate to narrow or expand the boundaries of the monopoly as fixed by the words of the claim by adding glosses drawn from other parts of the specification”.

The Full Court supported the primary judge’s findings in relation to the remaining construction issues. 

Reflex’s arguments on inventive step were not convincing to the Full Court as the Court held they were unsupported by the evidence, a problem brought about by the way Reflex conducted its case at first instance.  The Full Court found no error on the primary judge’s part in finding that the problem was not part of CGK, and therefore it would not have been obvious to the person skilled in the art at the priority date that existing designs could be improved by re-aligning the light signal to exit through a side port.  The Court acknowledged that the perception of the problem may be the inventive step, even if – once perceived – the solution is forged by way of straightforward experimentation. 

Implications

This case represents a timely reminder to both market leaders and disruptors.  Dominant players in a market should not become complacent and assume that they will always maintain a market-leading position.  Re-evaluating market position in connection with understanding opportunities to drive IP innovation should be a regular occurrence.  On the other hand, disruptive innovators should consider the possibility of enhancing existing technologies and pursuing patent protection for those enhancements. 

The fact that the infringing features were only introduced into two products in the Reflex range will “ring fence” the damages payable by Reflex, but it will be interesting to see how the materiality of the claimed improvements to the value of the product overall features in the damages calculations.

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