Australia: The Schütz v Werit patent case - a win for spare parts manufacturers or a case on its facts?

Last Updated: 2 April 2013
Article by Mary Still and Ana Totoeva

Key Points:

Schütz v Werit makes it clear you do not simply ask if, once the replaceable part is removed, the remainder embodies the whole of the inventive concept of the patent claim.

In a unanimous decision the UK Supreme Court has ruled on the vexed question of when replacing a consumable part of a larger device will constitute an act of patent infringement (Schütz (UK) Limited (Respondent) v Werit (UK) Limited [2013] UKSC 16).

The decision has made it clear that the relevant test is not simply one of asking whether, once the replaceable part is removed, the remainder embodies the whole of the inventive concept of the claim. Rather, the issue is more nuanced and the considerations of relevance are much broader.

The ins and outs of intermediate bulk containers

Schütz is a leading manufacturer of intermediate bulk containers (IBCs) in the United Kingdom.

IBCs are large containers used for the transportation of a wide range of liquids. Often, IBCs face tough transport conditions; they must withstand prolonged vibration and resist the forces caused by the liquid splashing around inside, without buckling, cracking or leaking.

IBCs of a two-part construction have been around for many years. They consist of a metal cage into which a plastic container or "bottle" is fitted, resting on a flat pallet.

Often, the bottle cannot be reused, either because there is a residue of toxic liquid or it has been physically damaged during transportation.

The metal cage also has a limited life-span, lasting on average five or six times longer than a bottle.

A market for "cross-bottling" and "re-bottling" used IBCs has developed. "Reconditioners" remove the old bottle, and fit a new bottle into the cage.

They can "re-bottle", which is replacing the bottle with a new bottle from the original manufacturer, or "cross-bottle" with one from a different source.

Werit sells bottles for IBCs to a reconditioner, Delta. Delta acquires discarded IBCs originally put on the market by Schütz and replaces the original Schütz bottles with Werit bottles. It then offers these cross-bottled IBCs on the market, in competition with the original Schütz IBCs.

The invention and the Patent

The proprietor of the Patent is Protencha S.A. and Schütz is the exclusive licensee in the UK.

The relevant claim of the Patent the subject of the proceedings is set out at paragraph 9 of the judgment. In summary, the following points are of note:

  • the Claim relates to a complete IBC, being a pallet, a bottle and a cage;
  • the claimed inventiveness of the Patent lies in the idea of flexible weld joints in the cage, to increase its strength and durability;
  • the description of the Patent acknowledges that the bottle is "exchangeable" or replaceable.

What does the Patents Act say?

The provision in question in the proceedings was section 60(1)(a) of the Patents Act 1997 (UK), which says that a person infringes a patent for a particular product if "he makes, disposes of, offers of, uses or imports the product or keeps it". The principal issue on appeal was the meaning of "makes".

In Australia, the same concepts are at play. The Patents Act 1990 formulates the exclusive rights of the patentee as follows:

"the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention" (section 13(1) of the Act).

The word "exploit" is defined in the Dictionary to the Act to include:

"where the invention is a product... make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things".

What does "make" mean?

In setting out the proper approach to the meaning of "makes", Lord Neuberger (with whom the other judges agreed) made the observation that the word "makes" must be interpreted contextually:

  • first, it must be given a meaning which "as a matter of ordinary language" it can reasonably bear;
  • second, it is not a term of art and like many English words it does not have a precise meaning;
  • third, it will inevitably be a matter of fact and degree whether an activity involves "making" an article or whether it falls short of that.

He then considered the prior House of Lords decision of United Wire Ltd v Screen Repair Services (Scotland) Ltd [2000] 4 All ER 353, and noted that the reasoning in that case emphasised that one must avoid basing a decision on the point at issue simply by contrasting the two concepts of making and repairing, not least because "the notions of making and repair may well overlap" (per Lord Bingham and Lord Hoffmann at para 71).

However he also found that it may sometimes be useful to consider whether the alleged infringer is repairing rather than "making" the article. For example, the mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves "making" of a new article rather than the repair of the original article.

He found that neither the judge at first instance nor the Court of Appeal approached the issue in the correct way and therefore it was up to the Supreme Court to determine the matter afresh.

Did Delta "make" the article: the relevant factors

In answering the question of whether Delta "makes" the article, Lord Neuberger highlighted the following points:

  • It is relevant to consider the question of whether the bottle is such a subsidiary part of the patented article that its replacement does not involve the "making" of a new article. In his opinion, viewed as a whole, the bottle was a relatively subsidiary part.
  • The bottle does not include any aspect of the inventive concept of the Patent. It is legitimate in the context of addressing the question whether a person "makes" the patented article by replacing a worn out part, to consider whether that part includes the inventive concept, or has a function which is closely connected with that concept.

He also noted two further factors of weight. First, the replaced bottle is a free-standing item of property, which does not include, or relate to, the inventive concept. In United Wire, the replaced part, being a wire mesh system, had no independent identity from the retained part, being the frame.

Secondly, there is a significant difference between the nature of Delta's operations in this case and that of the defendants in United Wire. In that case:

  • the replaced part was integrally connected to the retained part;
  • the replaced part was subjected to significant improvement work;
  • the inventive concept either largely resided in the replaced part or was closely connected with it; and
  • the work involved could be undoubtedly described as manufacture.

Lord Neuberger finally found that one further factor which may be of relevance to this assessment (but on which there was no evidence in this case) was whether the end-user is paid for a used IBC:

"If an article has no value when it has been used and before it is worked on, and has substantial value after it has been worked on, that could fairly be said to be a factor in favour of the work amounting to more than repair. However, this would be just one factor and would have to be approached with caution."

Lord Neuberger concluded that this was a classic example of identifying the various factors which apply on the particular facts, and, after weighing them all up, concluding, as a matter of judgment, whether the alleged infringer does or does not "make" the patented article. In this case, given that the bottle:

  • is a freestanding, replaceable component of the patented article;
  • has no connection with the claimed inventive concept;
  • has a much shorter life expectancy than the other, inventive, component;
  • cannot be described as the main component of the article; and
  • apart from replacing it, Delta does no additional work to the article beyond routine repairs,

in carrying our this work, Delta cannot be considered to have "made" the patented article.

Relevance for future cases

While this decision largely turned on its facts, what we have here is a useful framework for assessing the facts in future cases and some guidance on the sort of principles which will be of relevance in answering the recurring question, "making or repairing"?

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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