Vector Corrosion fails to cement entitlement claim

Vector Corrosion Technologies Limited v E-Chem Technologies Ltd [2022] FCA 188

9 March 2022

Federal Court of Australia

Jagot J

Background

Vector Corrosion Technologies Limited (Vector) claimed that it was entitled solely or jointly to a patent directed to a treatment process for concrete (E-Chem Patent), held in the name of E-Chem Technologies Limited (E-Chem).  It sought a declaration that it was the “eligible person” in relation to the patented invention under s34(1) of the Patents Act 1990 (Act) and an order rectifying the Register to this effect under s192(2).  In the alternative, it sought to revoke the patent on the basis that the owner was not entitled to it. 

Like many entitlement disputes, the background concerned inventors who moved from employment by one company to set up their own company.  In this case the three inventors were employed until early 2004 by a UK company, Fosroc International Limited (Fosroc).  They then moved to a new venture, E-Chem, set up by the primary inventor, Dr Glass, after which time the Patent was filed.  Vector acquired the business of Fosroc in 2009. It alleged that the invention had been conceived while the inventors were still employed by Fosroc, and therefore that Vector, by virtue of an assignment of rights forming part of the business purchase of Fosroc, was entitled to the invention.  E-Chem contended that the invention had been conceived after the inventors left Fosroc, and further even if entitlement to the Patent had vested in Fosroc, Vector had not acquired the relevant rights from Fosroc. 

Further background on the overall dispute between the parties can be discerned from the subsequent costs judgment (Vector Corrosion Technologies Limited v E-Chem Technologies Ltd [2022] FCA 519) (Costs judgment).  Prior to instituting this proceeding, Vector had commenced a proceeding against a related company of E-Chem and the same inventors for infringement of its Australian ‘high voltage anode’ patent (Vector patent).  Those proceedings were withdrawn shortly before trial.  The Vector patent assumed prominence in this judgment for reasons set out below.

Key Issues

Jagot J set out fourteen principles of the Australian law of entitlement, which are generally uncontroversial.  These made clear that the touchstone for entitlement is the “inventive concept”.  Her Honour emphasised that the reduction of that inventive concept to practice is distinct from the inventive concept itself.  Nevertheless the inventive concept is to be derived from the specification as a whole, and the it may or may not include the manner in which an idea is carried out or the reduction of the idea to practice. 

The principal issue between the parties was one of timing – was the inventive concept conceived while the inventors were employed by Fosroc or after they had left its employment?  E-Chem additionally argued that even if Vector made out its claim to entitlement, the Court should exercise a discretion to refuse the relief sought due to Vector’s alleged delay and unreasonable conduct.

Outcome

The invention described and claimed in the E-Chem Patent related to a method of providing corrosion protection to steel reinforcement in concrete.  Jagot J accepted that at the priority date two approaches to corrosion protection were known – cathodic protection systems, involving the application of a low current for the lifetime of the structure, and temporary protection systems using significantly higher current over a shorter period.   Sacrificial anode cathodic protection, a type of cathodic (that is, lifetime) protection system known at the time, involved a galvanic anode coupled to the steel and consumed (“sacrificing itself”) in order to protect the steel. 

The E-Chem expert witnesses described the inventive concept of the E-Chem Patent as being the combination of these two types of treatment to form a hybrid system.   Jagot J found that the “heart of the invention” described in the specification and claims was the use of the same anode in two modes – in the first phase supplying a high  current from an external power source to the inert anode for a short period and, in the second phase using the same anode as a sacrificial anode to generate a continuous low galvanic current to maintain the passive conditions induced by the first phase.  While the claims were not limited to any specific current levels, Jagot J emphasised that the differences in current were crucial to the inventive concept, namely a high current in the first (short) phase, followed by a low, long-term current.  

The primary inventor, Dr Glass maintained that the concept of a hybrid anode had not occurred to him while he was at Fosroc. Rather, it was in the context of a later project which he worked on after he started E-Chem that he realised that E-Chem’s prototype sacrificial anodes could be used in temporary high current modes, whereas previously he had thought that this would cause the connectors to fail. 

Vector pointed to work done by Dr Glass at Fosroc which culminated in a 2004 Fosroc patent application (from which the Vector Patent claimed priority) as evidence that the hybrid system had been conceived earlier.   

The 2004 Fosroc application claimed a high voltage sacrificial mode achieved by the coupling of a sacrificial anode to the cathode of an isolated anode-cathode cell.  Jagot J concluded that the invention of that application was an improved sacrificial anode which allowed greater current to be delivered to the steel, but not the kind of high charges used in temporary protection treatments.   Further, a reference by Dr Glass in an email of the possibility of “including an electronic gizmo that will connect the zinc directly to the steel when the battery runs flat” was no more than a musing and he had no idea how that might be done. She found therefore that the inventive concept of the Patent was not conceived while the inventors were employed by Fosroc and did not accept that any key developments conceived of during that time would make Vector an eligible person. 

Although not referred to in this judgment, it is interesting to note that in the corresponding infringement proceeding, E-Chem argued that the Vector Patent was invalid insofar as its claims covered a two-step process because the 2004 Fosroc priority application did not disclose such a process.   The Costs judgment recorded E-Chem’s assertion that the infringement proceeding had been discontinued shortly after receipt of the joint expert report in which Vector’s expert witness agreed that the 2004 Fosroc application did not disclose a two-step process.

Her Honour further found that if she was wrong as to the timing of the inventive concept, Vector had in any event not obtained the relevant rights through its contracts with Fosroc.

The final issue of a possible discretion of the Court in granting the relevant relief did not arise given her Honour’s findings on the earlier issues.  However her Honour noted that if such discretion did arise, the factors noted by E-Chem would be relevant, and that the serious prejudice alleged by E-Chem to have been caused by Vector’s delay in asserting entitlement had been substantiated in the evidence – because E-Chem had invested an enormous amount of time, money and effort in commercialising the invention while Vector “sat on its hands” for at least 8 years, from which Vector would obtain a substantial and unjustified windfall.  She stated that if the relevant provisions of the Act provided a discretion, then she would have exercised it against Vector for these reasons.

Implications

While not significantly adding to the established principles in relation to entitlement, this case provides an illustration of their application and the difficulties that can arise where inventors make a series of developments over time during which they move employment.

The Costs judgment also provides an interesting sequel.  E-Chem sought indemnity costs on the basis that Vector had brought both sets of proceedings in an attempt to “cause [its] business to fold under the substantial costs of litigation”, and that Vector’s case was hopeless.  E-Chem also referred to a Calderbank letter/offer of compromise presented by E-Chem after evidence in chief was filed offering to settle the infringement proceeding.   Jagot J held the case was not hopeless, although it was never a “good case”.   However she did find that it was unreasonable for Vector not to accept the offers in the infringement proceedings, in circumstances where it was well able to assess the weakness of its case.  Vector was therefore ordered to pay indemnity costs of the infringement proceeding from the date of the offers.

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