Thursday, September 5, 2013

Secret Use and Patents: Issues for the Petroleum Industry in Western Australia

It is well-known that the subject technology of a patent application must be novel to obtain patent protection.

This is why if a business is to disclose details of its technology before filing a provisional patent application, it must be disclosed under the terms of a confidentiality agreement or non-disclosure agreement. Confidentiality agreements help preserve the essential novelty in a patent.

However, there is another important issue regarding ‘secret use’. Subparagraph 18(1)(d) of the Australian Patents Act 1990 states that:
“an invention is patentable, so far as is claimed in any claim, if it was not secretly used in the patent area before the priority date of that claim by, or on behalf of, or with the authority of, the patentee or nominated person…”

The prevailing authority on secret use in Australia is the Full Federal Court case of Azuko v Old Digger (2001) 52 IPR 75. It was held that the relevant question of whether secret use has occurred before the priority date (that is, the all-important date of filing the patent application) is whether certain commercial acts done before the priority date constitute a de facto extension of the patent monopoly. An extension of the monopoly usually requires the patentee to have “reaped a commercial benefit”.

In Azuko v Old Digger, Justice Gyles provided examples of conduct which would extend the patent monopoly:
“If the invention is a process or method, to secretly use the process or method to make goods for sale can readily be seen as a secret commercial use of the invention which would extend the patent if done prior to the priority date. Another example of secret commercial use of that character is if the product which is manufactured according to a product claim is then secretly used as part of a manufacturing process to make other goods before the priority date. Another example would be the use of a device made according to the SDS patent as part of a drill rig engaged in commercial drilling, but in conditions of secrecy, prior to the priority date. To make an article for ultimate sale has, no doubt, a commercial aspect, but it does not amount to use of the product made and does not involve any de facto extension of the term of a patent claiming the product. The manufacturing of goods is not, in my opinion, commercial use of those goods.”

So, prior use of the relevant technology to manufacture products will extend the patent monopoly if the patentee offers the products for sale or obtains commercial gain. This will include accepting payment for providing prototypes to a third party, or even disclosing confidential information to potential investors for the purpose of obtaining commercial funding. It is unclear whether asking for and obtaining funding for the purposes of research will constitute an extension of the patent monopoly.

Many inventors of oil and gas technology can be caught out by this. If seeking funding to research or develop a new technology, a confidentiality agreement will not assist to preserve the novelty of the invention, because funding is a “commercial gain.”

The situation is even more complicated by reason of Western Australian laws. On 28 August 2012, the Western Australian government passed new laws applicable to petroleum legislation. This legislation requires oil and gas operators to provide full disclosure to the WA Department of Mines and Petroleum pursuant to its Reforming Environmental Regulation strategy of their environment plan or summary environment plan, the details of substances used in or added to fluids that are introduced into a well or reservoir via drilling or hydraulic fracturing. The strategy mandates public release of approved Environment Management Plans, and mandates full disclosure of chemicals.

Does this mean that the innovations in that space disclosed to the government, and then to the public, are no longer novel? Almost certainly yes: the novelty in an invention would be destroyed by this release of information. Is the benefit to be derived from the disclosure a “commercial gain”? Possibly not because it is not a sale or a procurement of monies, but that assessment is not certain. And does the disclosure destroy the novelty in any invention forming part of the environment plan or drilling processes in any event? Arguably, yes.The loss of commercial or competitive advantage for the players in this space is obvious. Preserving these innovations as trade secrets is now next to impossible in this regulatory environment: oil and gas operators will now have to file patents prior to compliance with the regime..

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