The Federal Court of Australia recently found a company director personally liable for patent infringement. In Inverness Medical Switzerland GmbH v MDS Diagnostics Pty Limited [2010] FCA 108, Inverness was the owner of a number of patents in the field of pregnancy testing and sued both the company MDS and its director, Dr Appanna, a family doctor in Auckland. Inverness argued that the doctor was a joint tortfeasor in directing MDS in the infringement.

Having duly considered the relevant tests, Justice Bennett said: "The question is whether Dr Appanna knowingly pursued a course of conduct which, judged objectively, led to infringement or was likely to constitute infringement, or reflected indifference to the risk of infringement" and further: "I do not accept that the fact that Dr Appanna controls the MDS companies as shareholder, or the mere description of Dr Appanna as Managing Director are, alone, sufficient to establish that he directed or procured the infringing acts of the MDS companies. Dr Appanna's liability should be determined by reference to his involvement in the management and operations of MDS concerning the MDS devices. His shareholding of itself is insufficient .... Something more is necessary".

Justice Bennett was "satisfied that Dr Appanna's position as the Managing Director of MDS NZ and his participation in the procurement and distribution of the MDS devices in New Zealand and Australia are sufficient to establish that he deliberately, willfully or knowingly pursued a course of conduct that resulted in MDS selling products that infringed the Inverness patents. Further, he was aware of competing products on the market and was indifferent as to whether or not those products were protected by patents. In taking part in the activities of MDS NZ and MDS Aus as a director and in the management of those companies, Dr Appanna directed or procured the obtaining of and the selling of the products that infringed Inverness' patents. Accordingly, he is liable...".

Her honour found that there was no requirement that the person knows that the authorisation constitutes an infringement of a patent.

A likely consequence of this case is that, in any patent infringement, the directors are likely to be also sued in a personal capacity so as to maximise the stress on defendants during patent litigation. Directors in turn need to consider this case in detail when authorising infringing behaviour.

Peter Treloar

Shelston IP
Level 21, 60 Margaret Street
Sydney NSW 2000
Australia
Tel: +61 2 9777 1111
Fax: +61 2 9241 4666
email@shelstonip.com
www.shelstonip.com