Quality, not quantity, the key to inventorship

Neobev Pty Limited v Bacchus Distillery Pty Limited (Administrators Appointed)[1], a decision of Besanko J of the Federal Court published earlier this year, provides insight into the vexed question of joint inventorship – just what does it mean to be a joint inventor of an invention that is the subject of a patent?

The respondent, Bacchus Distillery, was a small Victorian brewing company.  In 2002, it began to pursue the development of a cream liqueur using a grape spirit alcohol base.  Mr Scott, a dairy consultant associated with the applicant (Neobev), was retained to advise Bacchus on the development of this product in light of certain disadvantages associated with the grape spirit alcohol base.

In 2004, Mr Scott began to look into alternative alcohol bases at the request of Bacchus’s CEO, a Mr Hajdinjak.  Mr Scott determined that a “clean wine spirit” or CWS would be suitable if it was created using a multistep filtration process (involving nanofiltration, ion exchange and charcoal filtration) to remove the taste, odour, acidity and colour which were undesirable properties of other wine spirit bases for cream liqueur products.  There was some debate as to the level of involvement of Mr Hajdinjak in the creation of the CWS production process, but Besanko J ultimately held that any research Mr Hajdinjak did was superficial at best and did not amount to a meaningful contribution to the creation of the CWS process.

Bacchus was advised that it would stand a better chance of obtaining government funding if it were to own a patent for the CWS process.  A number of informal discussions between Mr Scott and Mr Hajdinjak took place in which they discussed who would own the patent.  The two men ultimately applied for and were granted a patent in the name of Bacchus with Scott and Hajdinjak listed as joint-inventors.  There was some evidence of an informal agreement between Mr Scott and Mr Hajdinjak that although the patent was in the name of Bacchus, in fact it would be co-owned by both Bacchus and one of Mr Scott’s companies.  Neobev seized on these discussions to argue that the patent was owned by Bacchus, but held on trust for Bacchus and Mr Scott’s company in equal shares.  This was denied by Mr Hajdinjak.

When Bacchus went into administration in 2008 and the administrators sought to sell the business (including the patent), Neobev argued (on behalf of Mr Scott) that Bacchus had forfeited its 50% interest in the patent.

Bacchus argued that Mr Scott and Mr Hajdinjak were joint inventors.  Besanko J acknowledged the difficulty faced when determining whether a person is a joint inventor, and considered what the Full Court said in Polwood Pty Limited v Foxworth Pty Ltd[2], including the touchstone that joint inventorship is to be determined by the quality of each person’s contribution to the invention, not the quantity of this contribution.  A small, but material, contribution to the final invention would be enough for that contributor to claim entitlement as a joint inventor.

Besanko J agreed with Neobev’s argument that the inventive process could be divided into three phases: first, the discussions between the two men about the problems of wine spirit bases for the product; secondly, the development of the concept of multiple filtrations to create the CWS, and thirdly, the steps directed towards the commercialisation of the invention.  His Honour held that Mr Scott was the sole contributor to the second stage, and that Mr Hajdinjak’s contributions to the first and third stages were largely immaterial to the claimed invention, since the industry was already aware of the problems of wine bases for these types of beverages, and the tests performed by Mr Hajdinjak were either suggested by Mr Scott or were directed to determining the best exploitation of the invention.  On this basis, his Honour determined that the Register of Patents be amended to remove Mr Hajdinjak as an inventor.  His Honour also held that the agreement between Mr Hajdinjak and Mr Scott that the patent would be in Bacchus’ name, but co-owned by Bacchus and Mr Scott’s company, amounted to a declaration that Bacchus would hold the patent on trust for the two in equal shares.

So what lessons does this case hold about joint inventorship?

The key lesson is that it’s not how much you contribute to the invention, it’s how much your contribution matters.  A hired consultant might only provide one step of a complex, multi-step process, but if the invention would not have arisen without that step, that consultant will be able to claim an entitlement as an inventor.  On the other hand, a person may provide significant capital expenditure in the pursuit of a patent, but if that person did not make a material contribution to the invention itself, no such entitlement arises.

This case also serves as a reminder of the importance of clear, written agreements confirming the ownership of patent rights.

[1] [2014] FCA 4 (No 3), and [2014] FCA 21 (No 4).

[2] [2008] FCAFC 9.