Supply of essential oil for topical use infringes method of treatment patent claims
Justice Nicholas’ 96-page judgment in John Hood v Bush Pharmacy Pty Ltd  FCA 1686 raises numerous legal issues including contributory infringement under s. 117 of the Patents Act 1990 (Cth), patent validity, trade mark infringement, issues under the Australian Consumer Law, and damages issues. And all of that grew out of a medium-sized Australian shrub on the corner of a farm in rural Tasmania. Here, we focus on the patent law issues, which resulted in wins for the both the applicant and most respondents.
The judgment is most notable for its application of s. 117. Importantly, the Court found that an essential oil with therapeutic uses is a staple commercial product, a significant development bearing in mind that products have rarely been held to be staple commercial products in the Australian case law, and never in the case of pharmaceuticals.
Mr Hood, the applicant, found a native shrub, Kunzea ambigua, growing on his farm in Tasmania. Mr Hood asked the University of Tasmania whether the shrub might contain oil of commercial use, and the University provided him with the chemical composition of the oil from the shrub. This identified constituents present in other plant oils. Mr Hood asked his family and friends to test the oil, obtaining anecdotal evidence that it demonstrated antimicrobial and anti-inflammatory activities. He then sought patent protection for this “new essential oil” with therapeutic properties.
The respondents were five businesses which sold oil derived from Kunzea ambigua (Ka Oil) products. Each was accused of infringing Mr Hood’s patent.
The focus of the case was on the patent’s method of treatment (MoT) claims. The broadest of the MOT claims (claim 5) was to a MoT in which the Ka Oil is applied topically as a treatment to relieve pain, minimise bruising, or to assist in healing. Subsequent MoT claims referred to other therapeutic uses, such as pain relief from specified causes including muscle strains (claim 6), relief from sinus congestion (claim 7) and treatment of various skin conditions (claims 8 and 9).
Although the subsequent MoT claims originally depended on an independant product claim, those claims referred to the product claim as an MoT claim. The Judge was in no doubt that this was an obvious error and that the reference should have been to the broadest MoT claim (5). The applicant had no choice but to amend the dependencies of these subsequent MoT claims to avoid a finding that they were all invalid for lack of clarity. Unfortunately for the applicant, this meant that all of the MoT claims therefore included a limitation that the Ka Oil was to be applied topically. As a result, the MoT claims did not encompass other methods of administering Ka Oil, such as by inhalation.
The respondents challenged the validity of the MoT claims principally on the grounds that they did not represent a manner of manufacture and that they lacked an inventive step.
In relation to manner of manufacture, the respondents contended that the MoT claims represented “known uses of a known material”, as in Commissioner v Microcell (1959). However, the respondents accepted at trial that, although Ka Oil may have been a known material before the priority date of the patent (e.g. from the two earlier publications), the respondents had not established that Ka Oil had been used therapeutically before the priority date. And while indigenous Australians had used native shrubs for the claimed therapeutic uses for many years, it had not been shown that they extracted the oil from Kunzea ambigua specifically (or indeed any other shrub) when doing so. Therefore, the evidence did not support a finding that the applicant had claimed a known use of a known material. Further, there was nothing on the face of the specification to suggest that Ka Oil was a known material and that its therapeutic uses were known.
During trial, the respondents abandoned their position that the claims were obvious over a Master’s thesis, having failed to establish that it could reasonably be expected to have been ascertained, understood and regarded as relevant. Instead, the respondents’ case was essentially that, if the skilled person were presented with Kunzea ambigua and asked whether it would contain an oil of commercial use, using his or her common general knowledge, that person would routinely have determined the species and chemical composition of the shrub, immediately observed the presence of compounds known for their antimicrobial and anti-inflammatory activities, and therefore concluded that its oil would be expected to be useful in treating the claimed conditions. On that basis, the MoT claims were obvious. The problem with this line of argument, according to the Judge, was that it presupposed that the skilled person would consider Kunzea ambigua as a candidate for analysis, and thereby excluded from consideration Mr Hood’s decision to investigate it. This gap in the respondents’ evidence resulted from hindsight reasoning, consequently resulting in the respondents’ failure to prove their case.
Perhaps a better approach may have been for the respondents to primarily rely on the evidence that the Kunzea genus is part of a number of plant genera referred to as ‘tea tree’, whose oils have been used medicinally for many years. From there, the skilled person would presumably have been led as a matter of course to try the oil from any given Kunzea species (such as Ka Oil) in the expectation that it would also be useful for medicinal purposes. Hindsight, of course, is a wonderful thing.
Infringement by supply of products
As there were no product claims in issue and it was not alleged that the respondents had themselves performed any MoT, the applicant’s infringement case dependent on s. 117 of the Patents Act 1990 (Cth). Pursuant to this, as the use of the respondents’ Ka Oil by a person to perform the claimed MoT would infringe the applicant’s patent, the respondents’ supply of Ka Oil to another would also infringe the patent, provided that:
(a) Ka Oil could only reasonably be used to perform the MoT;
(b) Ka Oil is not a staple commercial product and the respondents reasonably believed that it would be used to perform the MoT; or
(c) the respondents gave instructions to use their Ka Oil to perform the MoT, or gave inducements for the Ka Oil to be used in that way, including through their advertisements.
The applicant abandoned the first of these arguments, so the main issues under s. 117 were whether Ka Oil was a staple commercial product, and whether the respondents’ advertisements constituted inducements to use their Ka Oil to perform the MoT.
Staple commercial product
Regarding the former, the High Court in Northern Territory v Collins (2008) held that cypress pine trees were staple commercial products as they were “supplied commercially for various uses”. In AstraZeneca v Apotex (2014), the Full Federal Court considered whether rosuvastatin, a commercially-available pharmaceutical used to treat a limited class of diseases, was a staple commercial product. In holding that it was not, the Court supplemented the reasoning in Collins, observing that rosuvastatin could not be characterised as either a raw material or a basic product.
In the present case, the Judge accepted the respondents’ submissions that Ka Oil is a raw material supplied commercially in that form or as an ingredient in other products, and that it is a basic product with a wide variety of possible uses, including very broad therapeutic uses on account of its antimicrobial and anti-inflammatory activities. For example, in addition to the scope of the MoT claims already referred to, the patent included claims to the use of Ka Oil as an insect repellent or a rust inhibitor, none of the MoT claims included indications such as stress relief for which the applicant’s Ka Oil was listed on the ARTG, and none of the claims extended to the use of Ka Oil in aromatherapy or as a bath oil. As such, and notwithstanding the applicant’s evidence that Ka Oil was a niche, expensive product with only a few specialist suppliers, the Judge considered it a staple commercial product.
Further, in considering whether the respondents had supplied a staple commercial product, the Judge was inclined to view the product much more broadly, as oils from native Australian shrubs, on which basis the applicant’s counter arguments fell away. In support of his view, the Judge cited Justice French’s consideration in Collins of whether the type of product supplied, or a broader class of products including that product, is relevant when considering whether the infringement allegation relates to a staple commercial product. But in both cases, this reasoning seems to overlook the fact that the only products capable of infringing the claims were the products actually supplied (and complained of). In the present case, only Ka Oil was relevant to the MoT claims – oils from other shrubs were not. And in Collins, only cypress pine trees were relevant to the claims – trees in general were not. We cannot help but speculate that if the Full Federal Court in AstraZeneca had considered whether statins in general, rather than rosuvastatin specifically, were staple commercial products, the outcome might have been different, as statins are more likely to be considered basic products (albeit not raw materials).
Inducement to use products in an infringing way
Most of the respondents faced allegations that their advertisements, in the form of statements on websites and product labels, constituted inducements to use their Ka Oil to perform the claimed MoT.
The first respondent (Bush Pharmacy) supplied Ka Oil to other businesses. Bush Pharmacy’s website (which was also directed to businesses) stated in relation to its Ka Oil that it “can be applied with or without the need for dilution under the guidance of a medical professional”, and that it is “suitable for medical applications”. The Judge considered that a reasonable person reading the information on the website would understand from the former statement that Bush Pharmacy’s Ka Oil was suitable for topical application for medical purposes, and from the latter statement that its Ka Oil could be used to assist in healing. These statements were inducements because they encouraged the use of the products for these purposes, even though the statements may never have been seen by consumers. The Judge therefore found that Bush Pharmacy’s supply of Ka Oil infringed the broadest MoT claim (5) of the applicant’s patent.
The second respondent (Down Under) supplied Ka Oil to overseas customers only. This raised the issue of whether s. 117 applies to export sales, i.e. the supply of products to customers outside ‘the patent area’. The Judge noted that, although s. 117 does not expressly require the act of supply to occur in the patent area, such a requirement may be implied. Having noted the presumption that statutory provisions are interpreted to apply within territorial limits, the Judge concluded that s. 117 only applied where the supply of products took place within Australia. That was not the end of the matter for Down Under, as it was also alleged to have offered to supply Ka Oil in Australia by means of its website, which included an on-line purchase facility for a period. However, the evidence indicated that Down Under had sourced its Ka Oil from the applicant during this period, and that the on-line purchase facility had been removed by the time Down Under began supplying Ka Oil from another source (Bush Pharmacy). Consequently, none of Down Under’s activities infringed the applicant’s patent.
The third respondent (New Directions) supplied Ka Oil to businesses and consumers in Australia. New Directions’ website stated in relation to Ka Oil: “has traditionally been used for relieving muscular aches and pain”; and “has also been used to relieve symptoms of cold and flu when used in steam inhalations.” As inhalation of Ka Oil was outside the scope of the MoT claims, the second statement could not amount to an inducement to infringe the patent. Regarding the first statement, the Judge noted that it said nothing about how the Ka Oil was to be administered, and that the reader could just as easily infer that the Ka Oil was to be applied topically as it was to be used in a bath or inhaled. He therefore held that the statement did not encourage the use of the Ka Oil for an infringing purpose. This appears surprising (and perhaps harsh to the applicant) as the most logical way to treat muscular aches and pains with an oil may be to apply it topically on the affected muscle (which may have been the traditional method of administration).
The fourth respondent (Native Oils) was not alleged to have induced recipients to use its Ka Oil to perform the claimed MoT, so the finding that Ka Oil is a staple commercial product disposed of the infringement case against it.
The fifth respondent (Heritage Oils) supplied Ka Oil, as well as various products containing Ka Oil, to customers in Australia. Although all of the pure Ka Oil bottles sold by Heritage Oils had labels, none of these referred to topical application of the Ka Oil. Instead, the labels mentioned use in aromatherapy or as a bath oil. However, the Heritage Oils website described various therapeutic uses of its Ka Oil, a number of which are within the scope of the MoT claims, and it also stated, “it is advised to try a few drops on the skin before application, although it is known to be well tolerated on the skin in an undiluted state.” The Judge was satisfied that this represented an inducement to apply the Ka Oil topically, so it followed that Heritage Oils infringed several of the MoT claims.
The Judge found that Heritage Oils’ other products in which Ka Oil was an ingredient, such as blended oils, soaps, shampoos and conditioners, did not infringe the MoT claims. This conclusion followed from his narrow construction of the claims to exclude any product that contained one or more active ingredients not being carriers for the Ka Oil. The Judge’s justification for this appears to have been his observations that the specification did not contemplate the use of Ka Oil as part of a blend. Again, this finding is surprising, bearing in mind the MoT claims were to an MoT in which the essential oil as claimed in a preceding product claim is applied topically for a specified therapeutic purpose.
The outcome of the patent aspects of this case was that the validity challenges to the applicant’s patent failed and, although the respondents were able to establish that Ka Oil is a staple commercial product, the applicant succeeded in proving that two of the five respondents had induced others to use their Ka Oil in an infringing way, contrary to s. 117. But as noted above, it is the Judge’s approach to the questions arising out of s. 117 that is most interesting.
It was stated in Collins that “staple commercial product” should be given a broad interpretation, and the test from Collins that the product should be supplied commercially for various uses appears to present a low threshold. Yet there are few examples in the case law where the courts have found that a product supplied is a staple commercial product, and none where the product supplied was a pharmaceutical. As the applicant’s Ka Oil in this case was ARTG-listed with several indications, this case goes some way towards filling the gap. The Judge considered the therapeutic uses of Ka Oil to be very broad, but it was also recognised to be a raw material. Pharmaceuticals with the broadest range of therapeutic uses (e.g. aspirin) could potentially match Ka Oil in relation to the former. And many more pharmaceuticals might qualify as staple commercial products if the broader class to which they belong should be considered (e.g. statins rather than rosuvastatin). But if it is necessary for a product to be a “raw material” for it to qualify as a staple commercial product rather than just a “basic product”, even pharmaceuticals like aspirin would not appear to qualify. Further judgments are required to clarify the position.
While the meaning of staple commercial product remains unclear, those supplying pharmaceuticals in Australia would be wise to ensure that their actions do not give rise to a reasonable belief on the part of the supplier that another person would use their pharmaceuticals for an infringing purpose. It will not necessarily be sufficient for the supplier to avoid instructing or inducing another person to put their pharmaceuticals to an infringing use (e.g. by avoiding problematic statements made in public documents). A higher standard is likely to be required, requiring care to be taken over documents generated internally.
However, the supply of a product that could be put to an infringing use to a person outside Australia will not amount to an infringement by the supplier under s. 117. So where, as in this case, there are no product claims in issue (or method claims that could support a product-by-process infringement action), provided the supply is an export (i.e. the immediate recipient is outside Australia), the supply should not infringe in Australia.
Aside from s. 117, the judgment is also a reminder of the pitfalls in seeking to prove that an invention is obvious based on evidence that the skilled person would routinely have taken the same steps as the inventor. In this case, the respondents’ evidence involved presenting the skilled person with a sample of Kunzea ambigua to investigate, which omitted from consideration the inventor’s interest in exploring the species. This was fatal to the respondents’ obviousness case.
CEO, Executive Lawyer, Patent & Trade Mark Attorney
Naomi is the founder of Pearce IP, and is one of Australia’s leading IP practitioners. Ranked in virtually every notable legal directory, highly regarded by peers and clients, with a background in molecular biology, Naomi is market leading in the field of pharma/biopharma, biotechnology and animal health.
Underpinning Naomi's legal work is a deep understanding of the pharma/biopharma industries, resulting from 25 years' experience including as VP of IP in-house global pharma giants, Partner of a top-tier international law firm, and as the founding Principal of Pearce IP.