Failure to pay patent renewal fee? Advanta can take advantage of extension of time provision

In brief 2 min read

Advanta Seeds Pty Ltd (Advanta), a broadacre seed company that owns thousands of patents relating to agricultural chemicals, seeds and seed technologies, applied for review of a decision by the Commissioner of Patents refusing its application under s 223 Patents Act 1990 (Cth) (Patents Act) for an extension of time to pay a renewal fee on its Australian Patent 2009304572 (a standard patent relating to a hybrid plant cell, and of considerable commercial value to Advanta). It had paid its renewal fee for the first four years of the patent, but failed to pay its fifth renewal fee on the due date of 6 October 2017.

After discovering on 1 April 2019 that the Patent had ceased, Advanta applied for an extension under s 223(2)(a) Patents Act, which allows an extension for error or omission. At first instance, Advanta erroneously pleaded that its new management database had caused the error or omission which led to the failure to pay the fee. On appeal, however, it changed tack and pointed to a series of communication and process errors by itself, its agents and its lawyers.

Deputy President Molloy of the AATA ultimately found that a relevant error or omission under s 223 had occurred on the part of Advanta that caused its failure to pay the fifth renewal fee, and that the Tribunal's discretion under s 223 ought to be exercised to grant an extension of time for the payment to be made.

Key takeaways

• This decision affirms that the threshold for 'error or omission' under s 223 is not high and that the extension of time provision in Australia is relatively generous, in particular where the knowledge, mental processes and circumstances of the persons involved are disclosed in a full and frank manner, where the party had always intended to make the patent renewal payment, and where the party has not delayed seeking the extension upon realising its mistake.
• Further factors that would weigh in favour of the exercise of the discretion include the potential prejudice to a patentee were its patent to expire, and the broad public interest in the promotion of innovation through the reward of patent rights.
• This case is an example of what can go wrong when a company does not have adequate processes in place to close old email accounts, and to alert partner organisations of changes to key employee contacts. Whilst the implications of the errors made in this case could be rectified (via the application for, and grant of, an extension of time), it is preferable to have adequate processes in place to begin with, to avoid the stressful and costly risk of missing a patent renewal payment and needing to seek an extension of time.

Who in your organisation needs to know about this?

IP Team – Legal Counsel - Patentees.

The decision

What is an error or omission under the provision?

Advanta applied for an extension under s 223(2)(a) Patents Act. This section provides that where, because of an error or omission by a person concerned or by his or her agent or attorney, a relevant act (eg payment of a renewal fee) that is required to be done within a certain time is not, or cannot be done within that time, the commissioner may, on application by the person, extend the time for doing the act.

The Deputy President observed that the phrase 'error or omission' has a 'broad scope' and 'includes a series of errors and breakdowns in procedure or a failure to exercise due diligence'.¹ The Deputy President also noted that the term extended to 'negligence and incompetence' and 'the breakdown of a system that lacks sophistication'.²

Equally, it is sufficient if the error or omission 'contributed to' the failure to do the act or that there is 'some link between them'. There can be more than one contributing error or omission.

Did Advanta make relevant errors or omissions?

The Deputy President heard Advanta's evidence by way of hearing de novo and found that the entity appointed to handle the payment of Advanta's renewal fees, CPA Global Limited (CPA), issued renewal notices which, in each case, were addressed to a long-departed Advanta employee, Dr Stalker. Searches of Advanta records did not locate any of these notices. Eventually, CPA followed up with Advanta's patent attorneys Sprusons, who in turn sought to email Advanta. Sprusons' email, however, was incorrectly sent to a defunct email address used for marketing support purposes which had not been operational since 2016. The email was also sent to Dr Stalker, who, as noted, had departed Advanta, as well as to Mr Easton, another ex-employee. Although Mr Easton's email inbox was still active (which meant that the sender did not receive a 'bounce-back' message), the inbox itself was not being checked by Advanta and had not been redirected to an appropriate Advanta employee. The Deputy President noted that there was 'plainly an error on the part of Advanta in not closing Mr Easton's email account, and instead leaving it open and unmonitored for more than four years'.³

The Deputy President found that the 'direct cause of the failure to pay the fifth renewal was Advanta's error or omission in failing to authorize CPA to make the payment'. He further noted that that error had 'several contributing causes' including, among others: Advanta not receiving renewal notices from CPA or otherwise failing to forward them to the relevant person, and the failures to advise CPA of Dr Stalker's departure, or Sprusons of Dr Stalker and Mr Easton's departures.⁴

Should the discretion be exercised in its favour?

In relation to whether an extension of time should be granted given there had been an error or omission, the Deputy President made the following observations:

• No delay in seeking extension: upon ascertaining that the patent had ceased owing to a failure to pay the renewal fee, Advanta did not delay in seeking an application for an extension of time.⁵
• Subsequent conduct: since discovering its failure to pay the fee, Advanta had paid subsequent annual renewal fees 'as though' the patent remained on foot.⁶
• Prejudice: Advanta always maintained an intention to keep the patent valid and subsisting, and there were serious adverse consequences to Advanta if the extension was refused.⁷ On the other hand, there was 'no evidence of any prejudice to any third party… if the extension [was] granted'.⁸
• Public interest: there is 'broad public interest in the promotion of innovation through the reward of patent rights. That entitlement should not be lost because of mere error or omission on Advanta's part or the part of its attorney.'⁹

As a result, the Deputy President granted an extension of time. In subsequent orders (Advanta Seeds Pty Ltd and Commissioner of Patents [2022] AATA 1366) the Delegate determined the period of the extension to be from the due date of 6 October 2019 to 9 April 2019 (by which time the fee had been paid), or if further action was required with respect to the payment due, to 26 June 2022 (one month from the date of the judgment). In doing so the Delegate rejected a submission by Nufarm Australia Limited (Nufarm) (an interested party) that the Delegate was limited to the extension that had been sought by Advanta at first instance (ie 20 months).¹⁰ The Delegate noted that its jurisdiction to make the correct decision was not limited in the way that Nufarm contended, rather, as Advanta had been successful at the Tribunal, the order should ensure that it had the 'practical benefit of that decision'.¹¹

Actions you can take now

• If your company is a patentee, it is advisable to have clear processes in place for changeovers of staff, and for incoming staff who will be taking over patent-related work. Email contacts and IT systems should be updated appropriately (and immediately) to reflect staff changes, and any relevant third parties should also be kept in the loop. It may be advisable to set diary alerts before each patent renewal payment due date.
• Equally, it is advisable to make it common practice (and communicate across the company, and to third parties) that emails or letters sent with respect to patent renewal that do not receive a reply should be followed up with a phone call.
• Outsourcing a patent renewal function to a third-party organisation (as in this case) is not uncommon, however companies should be aware that this can increase the risk of communication errors and should take the steps mentioned above to mitigate this risk.
• If you have any queries in relation to patent renewals, or patents in general, feel free to get in touch with the Allens Patent Attorneys Practice.