In a recent Federal Court case (Inverness Medical Switzerland GmbH v MDS Diagnostics Pty Limited), it was held that a director of two of the companies selling the infringing product was also personally liable for the infringing acts.
Inverness Medical Switzerland GmbH (Inverness), the owner of four Australian patents covering a range of immunoassays, filed a patent infringement action against a number of companies involved in the distribution of a home pregnancy testing kit. The infringement action was also filed against Dr Prakash Appanna, a director of two of the companies, MDS Diagnostics Pty Limited and MDS Diagnostics Limited.
Deciding that the kits did indeed infringe the patents, Justice Bennett turned her attention to the question of whether Dr Appanna was also personally liable, on the basis of being a joint tortfeasor, or on the basis that he "authorised" the infringing acts of the MDS companies.
The mere fact that Dr Appanna controlled the MDS companies as shareholder, or the fact that he was described as Managing Director, alone, were not sufficient to establish that he was personally liable for the infringing acts. Something more is necessary.
While it was argued that since there were other directors, Dr. Appanna was just "part of a suite of appropriately skilled personnel who managed and supervised the operations of MDS", however, the evidence indicated that: Dr Appanna was the person to whom the General Manager reported; that the Board minutes were prepared by Dr Appanna and not distributed to the other Board members for their approval; that while he was aware of competitive products on the market, the issue of whether there were any relevant patents was "something not considered at the time"; and that he was the person directly involved in obtaining the distribution rights for the products in Australia and continued to be involved in the sourcing and distribution. As such, Justice Bennett considered that Dr Appanna knowingly pursued a course of conduct which led to infringement or was likely to constitute infringement or reflected an indifference to the risk of infringement, whether or not there was knowledge of infringement or likelihood of infringement.
As a result, it was held that Dr Appanna was personally liable for the acts of patent infringement, both on the basis of being a joint tortfeasor, as well authorising the infringing acts.
While serving as a reminder to directors of companies that they are not immune to personal liability in instances of infringement of intellectual property (IP) rights, this decision also reinforces the need for companies to conduct the required due diligence and consider the possibilities of IP infringement before undertaking a commercial venture.
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