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IP considerations when you want to pivot production to fill COVID-19 shortages

24 March 2020
nils versemann
Read Time 6 mins reading time

With the current COVID-19 crisis imposing severe strains on the production and supply of key products in the medical, hygiene and protective equipment fields, a number of companies have pivoted their production facilities to help meet that shortfall.

You may have heard about Louis Vuitton repurposing its perfume production lines to make hand sanitiser in France, iPhone manufacturer Foxconn making surgical masks in China or car manufacturers making ventilators.

Unsurprisingly, there are a range of intellectual property implications for this change in production.

trade marks

Trade marks are registered in relation to specific goods and services.  An infringement or registrability issue generally only arises if somebody else uses a substantially identical or deceptively similar trade mark in relation to:

  • goods that are similar to the goods in respect of which the trade mark is registered; or
  • goods that are closely related to the services in respect of which the trade mark is registered;

This means that there are many instances of different entities using very similar trade marks, albeit in relation to very different goods and services.

Issues may arise however if a company that has previously exclusively made perfume suddenly starts using that trade mark in relation to hand sanitiser, or a car maker starts using its trade mark in relation to ventilators.  Those companies are entering new industries where other entities may hold conflicting rights in similar trade marks.

patents

Innovations occur in any industry.  Frequently those innovations and the research and development investment that underpins them will be protected by patents.  Even with products as apparently simple as face masks.

The urgency of the current crisis provides an incentive to get scarce products to market as rapidly as possible.  However simply copying existing products brings with it the risk that those products may be covered by patents that will be infringed if the products are copied.

To manage the risk, it is necessary to first identify whether relevant patents exist and to then either:

  • obtain a licence from the patent holder; or
  • work around those patents

Where a licence cannot be negotiated, a mechanism exists under section 133 of the Patents Act 1990 for a court to order the granting of a compulsory licence to exploit a patent.  It was only on 27 February 2020 that the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020 amended section 133 to give the court with more leeway to grant such a licence.

On the wording of the new section 133, the court may make an order if a number of requirements in section 133(3) are all met.  The only impediment to an order appears to be section 133(3)(d): the patentee has given no satisfactory reason for failing to exploit the patent to the extent necessary to meet the demand for the original invention in Australia.  If the issue is that the manufacturer is unable to meet unprecedented and unexpected demand because of capacity or materials limitations, it will be interesting to see whether the Federal Court will consider this a “satisfactory reason” and grant a compulsory licence or not.

The alternative is for a State or the Commonwealth to authorise private businesses to exploit a patent under a Crown compulsory licence.  Mechanisms exist for Commonwealth, State and Territory governments to permit themselves or others to exploit third party patents where this is necessary for Crown purposes.  A new Patents Act 1990 section 163A that only came into effect on 27 February 2020 allows a rapid approval process in the event of an emergency without the usual negotiation and notice period required under section 163.

The Crown licence must be in relation to services of a relevant authority, which include (but are not limited to) services that are primarily provided or funded by the Commonwealth or a State or Territory.  Presumably this would allow the provision of vital equipment including protective equipment to hospitals and medical services, schools, aged care facilities, aged and disability home care providers and other private enterprises that receive government funding.

These compulsory licences are not granted free of charge.  Remuneration is payable to the patentee.  This is either determined by agreement between the parties, or failing agreement by a court.  However especially in circumstances where licence terms have been the sticking point preventing the granting of a voluntary licence, it allows the exploitation of the patent to commence immediately and the relevant licence terms to be agreed or determined later.

designs

Design registration under the Designs Act 2003 protects the visual designs as applied to particular products.  A third party may have a right in the visual design of particular scarce products.  For example, multiple design registrations exist in Australia in respect of face masks.

If a registered design needs to be infringed in order to make a scarce product and no licence from the design holder can be obtained, then as with patents provisions exist to allow:

  • a court to grant a compulsory licence under section 90 of the Designs Act; or
  • the Commonwealth or a State or Territory government to grant a Crown use licence under section 96 of the Designs Act, or under the streamlined section 96A process in the event of emergencies.

Again the Crown licence provisions were amended on 27 February 2020 by the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020.  As with Crown patent licences, the licence must be in relation to services of a relevant authority and all compulsory licences will involve a licence fee.

implications for your business

With significant challenges and needs existing within Australian society, there is opportunity for the manufacturing sector to contribute towards overcoming these challenges and at the same time maintaining cashflow and employment.  While there is a headline health crisis, the economic challenges are equally real.

In pivoting production to take advantage of needs and opportunities to exist:

  1. It is important to remain aware of third party trade mark, patent and design rights.
  2. Unless the goods are manufactured as a subcontractor of existing suppliers, prior trade mark, patent and design searches are vital to identify and avoid risk.
  3. If the goods are manufactured as a subcontractor of existing suppliers, the supply agreement should contain appropriate indemnities against third party IP infringement claims.
  4. If an existing patent or design stands in the way of production and no licence can be negotiated, consideration should be given to either seeking a compulsory licence before a court or entering into an agreement with government to manufacture and supply under a Crown licence.

For more information or assistance, contact our IP team.

stay up to date with our news & insights

IP considerations when you want to pivot production to fill COVID-19 shortages

24 March 2020
nils versemann

With the current COVID-19 crisis imposing severe strains on the production and supply of key products in the medical, hygiene and protective equipment fields, a number of companies have pivoted their production facilities to help meet that shortfall.

You may have heard about Louis Vuitton repurposing its perfume production lines to make hand sanitiser in France, iPhone manufacturer Foxconn making surgical masks in China or car manufacturers making ventilators.

Unsurprisingly, there are a range of intellectual property implications for this change in production.

trade marks

Trade marks are registered in relation to specific goods and services.  An infringement or registrability issue generally only arises if somebody else uses a substantially identical or deceptively similar trade mark in relation to:

  • goods that are similar to the goods in respect of which the trade mark is registered; or
  • goods that are closely related to the services in respect of which the trade mark is registered;

This means that there are many instances of different entities using very similar trade marks, albeit in relation to very different goods and services.

Issues may arise however if a company that has previously exclusively made perfume suddenly starts using that trade mark in relation to hand sanitiser, or a car maker starts using its trade mark in relation to ventilators.  Those companies are entering new industries where other entities may hold conflicting rights in similar trade marks.

patents

Innovations occur in any industry.  Frequently those innovations and the research and development investment that underpins them will be protected by patents.  Even with products as apparently simple as face masks.

The urgency of the current crisis provides an incentive to get scarce products to market as rapidly as possible.  However simply copying existing products brings with it the risk that those products may be covered by patents that will be infringed if the products are copied.

To manage the risk, it is necessary to first identify whether relevant patents exist and to then either:

  • obtain a licence from the patent holder; or
  • work around those patents

Where a licence cannot be negotiated, a mechanism exists under section 133 of the Patents Act 1990 for a court to order the granting of a compulsory licence to exploit a patent.  It was only on 27 February 2020 that the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020 amended section 133 to give the court with more leeway to grant such a licence.

On the wording of the new section 133, the court may make an order if a number of requirements in section 133(3) are all met.  The only impediment to an order appears to be section 133(3)(d): the patentee has given no satisfactory reason for failing to exploit the patent to the extent necessary to meet the demand for the original invention in Australia.  If the issue is that the manufacturer is unable to meet unprecedented and unexpected demand because of capacity or materials limitations, it will be interesting to see whether the Federal Court will consider this a “satisfactory reason” and grant a compulsory licence or not.

The alternative is for a State or the Commonwealth to authorise private businesses to exploit a patent under a Crown compulsory licence.  Mechanisms exist for Commonwealth, State and Territory governments to permit themselves or others to exploit third party patents where this is necessary for Crown purposes.  A new Patents Act 1990 section 163A that only came into effect on 27 February 2020 allows a rapid approval process in the event of an emergency without the usual negotiation and notice period required under section 163.

The Crown licence must be in relation to services of a relevant authority, which include (but are not limited to) services that are primarily provided or funded by the Commonwealth or a State or Territory.  Presumably this would allow the provision of vital equipment including protective equipment to hospitals and medical services, schools, aged care facilities, aged and disability home care providers and other private enterprises that receive government funding.

These compulsory licences are not granted free of charge.  Remuneration is payable to the patentee.  This is either determined by agreement between the parties, or failing agreement by a court.  However especially in circumstances where licence terms have been the sticking point preventing the granting of a voluntary licence, it allows the exploitation of the patent to commence immediately and the relevant licence terms to be agreed or determined later.

designs

Design registration under the Designs Act 2003 protects the visual designs as applied to particular products.  A third party may have a right in the visual design of particular scarce products.  For example, multiple design registrations exist in Australia in respect of face masks.

If a registered design needs to be infringed in order to make a scarce product and no licence from the design holder can be obtained, then as with patents provisions exist to allow:

  • a court to grant a compulsory licence under section 90 of the Designs Act; or
  • the Commonwealth or a State or Territory government to grant a Crown use licence under section 96 of the Designs Act, or under the streamlined section 96A process in the event of emergencies.

Again the Crown licence provisions were amended on 27 February 2020 by the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020.  As with Crown patent licences, the licence must be in relation to services of a relevant authority and all compulsory licences will involve a licence fee.

implications for your business

With significant challenges and needs existing within Australian society, there is opportunity for the manufacturing sector to contribute towards overcoming these challenges and at the same time maintaining cashflow and employment.  While there is a headline health crisis, the economic challenges are equally real.

In pivoting production to take advantage of needs and opportunities to exist:

  1. It is important to remain aware of third party trade mark, patent and design rights.
  2. Unless the goods are manufactured as a subcontractor of existing suppliers, prior trade mark, patent and design searches are vital to identify and avoid risk.
  3. If the goods are manufactured as a subcontractor of existing suppliers, the supply agreement should contain appropriate indemnities against third party IP infringement claims.
  4. If an existing patent or design stands in the way of production and no licence can be negotiated, consideration should be given to either seeking a compulsory licence before a court or entering into an agreement with government to manufacture and supply under a Crown licence.

For more information or assistance, contact our IP team.