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No automatic defence for nonprofit experimental research

For a long time, researchers in non-profit organisations in the USA have assumed that they are effectively shielded from patent infringement suits by the non-profit aims of their institutions. This is not necessarily the case, as reinforced by the Federal Circuit Court in its decision in Madey v Duke.

In this article we set out the background to that case and compare it with the situation under Australian law.

Madey v Duke

Dr John Madey had been a professor in the physics department of Duke University (Duke). He and his research team conducted research using laser equipment covered by patents owned by Dr Madey. Following a dispute with Duke, Dr Madey resigned from Duke University in 1998 but the University continued to use the equipment without his authorisation. Dr Madey later sued Duke for patent infringement. Duke was successful at first instance before the District Court based on the experimental use defence to infringement.

The Federal Circuit Court overturned the District Court judgment, saying that it had applied the experimental use defence in an overly broad manner. In so doing, the Federal Court stated:

In short, regardless of whether a particular institution or entity is engaged in an endeavour for commercial gain, so long as the act is in furtherance of the alleged infringer’s legitimate business and is not solely for amusement, to satisfy idle curiosity, or for strict philosophical inquiry, the act does not qualify for the very narrow and strictly limited experimental use defense. Moreover, the profit or non-profit status of the user is not determinative.

The Federal Circuit went on to explain that a university will obtain a number of benefits from such experiments, such as attracting further research funding or increasing its reputation, even where no direct commercial gain comes from them.

The situation in Australia

As in the US, the experimental use defence has been rarely used in Australia. In fact, there is very little relevant case law on the defence so that the courts are likely to rely heavily on precedent from overseas jurisdictions, and particularly the United Kingdom.

In Australia, as in the US, it is irrelevant whether the research institution is non-profit. However, the defence as applied in Australia would be broader in scope than in the US. In particular, it is likely that as long as the experimental use is bona fide and not done with the aim of obtaining a profit (even to a limited extent), then there will be no infringement. The rationale under UK law (as set out in Frearson v Loe is that patent rights were never granted to prevent persons of ingenuity exercising their talents in a fair way. In fact, one reason for the existence of patents is to enable new technology to be disclosed so that it may be improved on.

This is to be contrasted with the US requirement that the experiment will be an infringement unless it is done "solely for amusement, to satisfy idle curiosity, or for strict philosophical inquiry".

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