Contributory infringement – New Zealand strengthens the position of patent owners

Article written by: David Koedyk    |   Tuesday 30th September 2014

The New Zealand Patents Act 2013 (the Act) strengthens the position of patent owners by introducing new rules relating to “contributory infringement”. 

Contributory infringement is a type of patent infringement which is committed by suppliers of products, where the product supplied can be used in a way that infringes a patent (but where the product itself does not infringe any patent).  Although the end-user of the product commits the actual infringement, the supplier has “contributed” to the infringement by selling the product in the first place.
The rule introduced by the new Act allows patent owners to hold suppliers of products liable for infringement where the supplier knew or ought to have known that the product was suitable for, and intended to be put to, a use that infringes a patent. 

The new rules apply for any infringement occurring from the date of commencement of the Act, which is 13 September 2014.  

The old regime

For any infringement occurring before 13 September 2014, patent owners need to prove there was collusion between the supplier and the customer of an infringing product in order to hold a supplier liable for contributory infringement.  Courts have repeatedly stated that it is not enough to merely facilitate the actual infringement.  Rather, a “common design” between supplier and the actual infringer is required. 

These rules make it difficult for patent owners to stop suppliers from selling products which, while not infringing in themselves, may be put to an infringing use by a customer.  A consequence has been that the patent owner is left with the often undesirable option of pursuing the customer of the product (which could be an individual consumer).

The new regime

Section 141 of the Act removes the requirement to prove that infringement of a patent was a “common design” between the supplier and customer.  Patent owners can hold suppliers liable for contributory infringement of a patent by proving the supplier knew, or reasonably should have known, that the product was suitable for an infringing use and that the product was intended to be used in an infringing way.

There is an exception where the product is a “staple commercial product”, being a product having a range of uses and being widely available in the marketplace.  In these cases, contributory infringement occurs where the product is supplied “for the purpose of inducing the customer to put the invention into effect”.  The inducement requirement sets a much higher threshold to prove contributory infringement by the supply of “staple commercial products”.

Comparison with Australia

Section 141 of the Act is based on the law in the United Kingdom, and differs slightly to the equivalent Australian provision (section 117 of the Australian Patents Act 1990).  The Australian Act takes a three-tiered approach for the requisite knowledge of the supplier to establish contributory infringement, summed up by the High Court of Australia as:
(a) “only use” – where there is only one use of a product and that use would be an infringement, the supplier’s knowledge is irrelevant;
(b) “known use” – where the product is not a “staple commercial product” and the supplier has reason to believe that a person would use the product to infringe;
(c) “instructed use” – where the product (including staple commercial products) is supplied with instructions for the use of the product, and following those instructions would be an infringement.

The main differences between the Australian and New Zealand law relate to the requisite knowledge of the supplier for products which are not “staple commercial products”. 

Arguably, the Australian standard provides broader protection for the patent owner against contributory infringement than section 141 of the New Zealand Patents Act.  The Australian Act leaves no doubt that the supplier is liable as a contributory infringer where a product’s only use is an infringement.  In addition, the Australian law requires that a supplier “had reason to believe that a person would use the product to infringe” in other situations.  In comparison, New Zealand’s approach requires that the supplier knew or ought to have known that the product had an infringing use and that the product would be put to that use.

Overall, the new statutory provisions relating to contributory infringement benefit New Zealand patent owners.  The Act provides greater certainty around this area of law, and provides an effective way for patent owners to stop unauthorised supply of products which could be used in infringing ways.  However, as with all new legislation, it remains to be seen how the Act’s provisions will work in practice.
 
The law relating to contributory infringement is complex and this article is only intended to briefly survey changes to New Zealand’s law.  Baldwins Intellectual Property recommends that you seek advice from an IP professional if you have any concerns relating to contributory infringement of a patent.

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