Federal Court Considers Offshore Performance of Method Patents in Zoetis’ Application for Summary Dismissal

Scidera, Inc. v Meat and Livestock Australia Limited (No 2) [2025] FCA 1236

Introduction

Justice Rofe has handed down an interlocutory judgment dismissing Zoetis Australia Pty Ltd’s (Zoetis) application for summary dismissal of Scidera, Inc.’s (Scidera) patent infringement claims.  The decision addresses a novel question of Australian patent law: whether all essential integers of a claimed method must be performed domestically for infringement to occur where the method does not produce a product.

Background

Scidera is the patentee of patent AU2010202253 (the Patent) which broadly relates to methods for identifying traits in cattle through genetic testing using single nucleotide polymorphisms (SNPs) in nucleic acid samples.  Scidera alleged that MLA, along with the Agricultural Business Research Institute (ABRI), Zoetis Australia Pty Ltd, DataGene Limited and Genotyping Australia Pty Ltd (together, the Respondents), directly infringed or authorised infringement of the Patent through the provision of genomic selection services in Australia.

This decision follows an earlier interlocutory judgment by Justice Rofe in Scidera, Inc. v Meat and Livestock Australia Limited [2025] FCA 308, in which her Honour dismissed the Respondents’ applications to strike out Scidera’s statement of claim.  Following that decision, Scidera was permitted to file an amended statement of claim.

The dispute the subject of her Honour’s decision centres on Zoetis’ business model for genetic testing of Australian cattle.  According to evidence submitted by Zoetis Inc., this testing involved the following steps:

1. Biological samples from Australian cattle are collected and sent to Zoetis’ Queensland premises.
2. Zoetis sends these samples to its US-based related entity, Zoetis Inc., for testing.
3. Zoetis Inc. performs SNP Testing in the US using specialised SNP Chips that detect 50,000+ SNPs through a process involving DNA amplification, hybridisation, and fluorescent imaging.
4. The testing generates a SNP text file containing genetic data (the Genotype Files), which is transmitted back to Australia.
5. In Australia, the Genotype Files are analysed by associations or institutes representing breeders to produce reports such as Estimated Breeding Values (EBVs) and Australian Breeding Values (ABVs).  In the case of beef cattle, breeders received EBVs in Australia via ABRI.

Critically, Zoetis’ evidence stated that all SNP testing has been conducted by Zoetis Inc. in the US since Zoetis commenced business in Australia in 2012, and that Zoetis has never had the capacity to perform SNP Testing in Australia.

Zoetis’ application for summary dismissal raised an issue not previously determined in Australia: whether all essential integers of a claimed method must be performed domestically for infringement to occur where the method does not result in a product.  Broadly, Zoetis contended that as a matter of statutory construction, the act of exploitation must occur within the patent area (Australia), and where their SNP testing is performed in the US, there can be no infringement in Australia.

Consideration

Claim Construction

Despite extensive consideration of the Patent’s claims by Beach J in the appeal from the opposition decision in Meat and Live stock Australia v Cargill, Inc (2018) 129 IPR 278 (Cargill), and subsequently in the amendment application in Meat and Livestock Australia Ltd v Cargill, Inc (No 2) (2019) 139 IPR 47 (Cargill (No 2)), the parties still disagreed on the construction of claim 1, which provides:

A method for identifying a trait of a bovine subject from a nucleic acid sample of the bovine subject, comprising identifying in the nucleic acid sample an occurrence of at least three single nucleotide polymorphisms (SNPs) wherein each of the at least three SNPs are significantly associated with the trait, with the degree of statistical significance being p≤0.05, and wherein the at least three SNPs occur in more than one gene; and wherein (a) at least one of the SNPs [meets the limb (a) requirement], or (b) the SNP [meets the limb (b) requirement].

(Emphasis added)

Zoetis argued that the phrase “identifying in the nucleic acid sample an occurrence of at least three SNPs” refers to the step performed by Zoetis Inc. in the United States.  Zoetis characterised the phrase “method for identifying a trait” as a “purpose constraint”, whereby the physical act of conducting the genetic testing must be done with the purpose of resulting in the ability to identify or infer a trait.  According to Zoetis, the claim is met by the mere ability to identify or infer, regardless of whether an identification or inference is actually drawn.  At [73], Justice Rofe observed that:

In recasting the underlined integer as a purpose constraint rather than an essential integer, Zoetis seeks to dismiss Scidera’s contention that the identifying or the drawing of an inference of a trait is an essential integer of the claim that, when performed or used by Zoetis in Australia, satisfies the territorial nexus required by the acts of exploitation and infringement as contemplated by the Patents Act.

So on Zoetis’ construction, the claim is met by carrying out the genetic testing in the US with the mere purpose of being able to infer, and because nothing further is required, the integers of the claim are entirely carried outside the protected jurisdiction.

Scidera rejected this characterisation, contending that its own construction correctly adopts that of Beach J in Cargill, such that “the claim is infringed by a method which takes all the integers, including the actual identification or inference of a trait”.  Scidera referred to the Amended Statement of Claim which particularises that “[…] [t]he identification of the trait occurs upon the provision of the EBV reports”.

Justice Rofe’s “provisional view” favoured Scidera’s construction.  Her Honour rejected Zoetis’ “purpose constraint” characterisation, noting Beach J’s references to “purpose” in Cargill were made in the context of an anticipation analysis, not claim construction.  Beach J had held that for method claims, construing “for” as merely requiring that a disclosure of something that could be used for that purpose is “misconceived” and “inapposite” as it “involves disregarding what is an important limiting and characterising feature of the claim”.  Justice Rofe found that claim 1 requires both identification of SNPs through physical testing and a separate step of identifying or inferring traits, the latter of which appeared to be undertaken in Australia on the evidence available to her Honour.

Justice Rofe identified two flaws in Zoetis’ approach.  First, Zoetis impermissibly disaggregated the integers of the claimed method, focusing solely on the physical testing integer while relegating the identification or inference of traits to a mere purpose.  Her Honour cited Ariosa Diagnostics, Inc v Sequenom, Inc (2021) 159 IPR 371 (Ariosa Diagnostics) and National Resource Development Corporation v Commissioner of Patents (1959) 102 CLR 252 for the principle that the invention is a “unitary concept” and “it is the whole process that must be considered”.  Second, Zoetis’ submission that the invention is not a manner of manufacture contradicted Beach J’s findings in Cargill, where his Honour held the claim 1 was a manner of manufacture because the method “involves drawing an inference about the potential for the trait of interest to exist in the bovine subject” and creates “an artificially created state of affairs of economic significance”.

Territorial Question

Justice Rofe noted that the case raises “a novel and important question of law: whether all the essential integers of a claimed method or process must be performed within the patent area for there to be infringement of a claim to said method or process that does not produce a product”.

Her Honour considered the inclusion of an object clause under s 2A of the Patents Act 1990 (Cth) (the Patents Act), introduced by the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2019 (Cth), which states that the object of the Patents Act is “to provide a patent system in Australia that promotes economic wellbeing through technological innovation”.  The Explanatory Memorandum to the amending bill further stated that the object clause would “assist courts in interpreting the Patents Act in cases where the text of the legislation is uncertain or ambiguous”, ensuring “that the patent system remains adaptable and fit-for-purpose”.  Justice Rofe noted that neither party addressed the object clause and how it might influence the question of whether potential infringers may circumvent a patentee’s exclusive rights to exploit its invention through divided performance of a method overseas.

Australian courts have previously considered infringement of method claims involving overseas use, but each involved the extended definition of “exploit”, wherein a product resulting from use of a method overseas was imported into Australia.[1]  Justice Rofe also referred to Ariosa Diagnostics, in which samples were taken from Australian patients and sent to the US for genetic testing and analysis, with the Full Court finding that the Harmony Test results did not constitute a “product” for the purpose of the definition of “exploit” in the Patents Act.  However, unlike the present matter, the method of detecting was carried out in its entirety in the US.  Thereafter, no further steps of the method remained to be performed in Australia – only the results of the test had to be electronically transmitted to the relevant medical practitioner in Australia, who would inform the patient of those results.  As those constituted mere information (and not a product), the Full Court held that no infringement occurred.

Justice Rofe noted that there is no fundamental requirement that all essential integers of a method claim that does not result in a product must be performed in the patent area.  Her Honour observed that there seems to be little basis in the Patents Act to distinguish methods which produce products (where offshore steps are considered), and those that do not.  Justice Rofe considered that such an “arbitrary distinction” would be inconsistent with UK authorities[2] which have demonstrated the UK court’s disinclination to enable infringers to avoid infringement by performing an integer of a claimed method offshore.

In reaching this view, Justice Rofe considered two modern UK cases.  Menashe Business Mercantile Ltd v William Hill Organisation Ltd [2003] 1 All ER 279 concerned a gaming system patent where the host computer processing customer bets was located in Antigua but accessed by UK customers placing bets from the UK.  In that case, Aldous LJ held that the UK punter “will in substance use the host computer in the United Kingdom, it being irrelevant to the punter where it is situated”.  Illumina, Inc v Premaitha Health Plc [2017] EWHC 2930 concerned a prenatal diagnosis patent where DNA sample preparation and sequencing occurred in the UK, but the data analysis and processing to generate diagnostic results occurred in Taiwan.  In that matter, Carr J held that the crucial question was whether, in substance, the process was used in the UK, accepting that any other result would make it “far too easy to avoid infringement of patents of this nature ‘given the ease of digital transmission and the ability to offshore computer processing’”.

Justice Rofe observed that these UK authorities demonstrate that the question of divided-performance of a method overseas is “not a simple one”, and that at this stage, “there may be an arguable case that the policy-based approach taken by the United Kingdom courts in Menashe and Illumina may align with a construction of ‘exploit’ which gives effect to the object clause of the Patents Act”.  Her Honour added that in each UK case, the question of law was “inextricably tethered to the factual circumstances”.

Outcome

Justice Rofe concluded that the matter was “not a straightforward case that is appropriate to be summarily dismissed”.  Her Honour noted that the “relevance and applicability of the United Kingdom case law in light of the object clause and differing statutory language” has not been the subject of argument and warrants full consideration at trial, further stating:

Whether the introduction of the object clause under s 2A of the Patents Act is consistent with a legislative intention towards a construction of infringement that patentees are entitled to enjoy the full benefit of their statutory right that ought not be set at naught by offshoring a step of a claimed method, is a question that merits fulsome argument and consideration on the facts of the case.

Consequently, Justice Rofe dismissed Zoetis’ application and ordered it to pay Scidera’s costs of the interlocutory application.

Implications

Should the matter proceed to trial, the proceedings are positioned to produce the first Australian decision addressing whether all essential integers of a method claim must be performed in the patent area (domestically) for infringement to occur where the method does not produce a product.  Justice Rofe’s decision signals that her Honour may adopt an “in substance” approach similar to UK jurisprudence, preventing circumvention of patented methods through the offshoring of essential steps.

[1] See Apotex Pty Ltd v Warner-Lambert Co LLC (No 2) (2017) 123 IPR 30 at [296]–[298] (per Nicholas J), endorsed in Warner-Lambert Co LLC v Apotex Pty Ltd (No 2) (2018) 129 IPR 205 at [167] (per Jagot, Yates and Burley JJ).

[2] See Von Heyden v Neustadt (1880) 14 Ch D 230, Saccharin Corp Ltd v Anglo-Continental Chemical Works Ltd [1901] 1 Ch 414 and Beecham Group Ltd v Bristol Laboratories Ltd [1978] 95 RPC 15.

About Pearce IP

Pearce IP is a specialist firm offering intellectual property specialist lawyers and attorneys with a focus on the life sciences industries.  Pearce IP and its leaders are ranked in every notable legal directory for legal, patent and trade mark excellence, including: Chambers & Partners, Legal 500, IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WTR 1000, Best Lawyers, WIPR Leaders, 5 Star IP Lawyers, among others.

In 2025, Pearce IP was recognised by Australasian Lawyer and New Zealand Lawyer’s 5 Star Employer of Choice, and is the “Standout Winner” for inclusion and culture for firms with less than 100 employees. Pearce IP was awarded “IP Team of the Year” by Lawyers Weekly at the 2021 Australian Law Awards. Pearce IP is recognised by Managing IP as the only leading ANZ IP firm with a female founder, and is certified by WEConnect International as women owned.