Federal Court: S. 105(1A) Patent Amendment Costs Get 'Watered-Down' Indulgence

• The Federal Court clarified cost awards for patent application amendments under section 105(1A) of the Patents Act 1990 (Cth).
• A 'watered-down' version of the indulgence principle applies to unsuccessful oppositions against s. 105(1A) applications, differing from amendments to granted patents.
• In *Cytec Industries Inc v Nalco Company*, Cytec was ordered to pay Nalco's appeal costs for a successful amendment appeal.
• However, both parties were directed to bear their own costs for the first-instance amendment proceedings, as Cytec's opposition was deemed reasonable.
• This ruling provides important guidance on Federal Court s. 105(1A) patent amendment costs and the Australia patent application indulgence principle.

This led to the court's conclusion that a 'watered-down version of the indulgence principle' is applicable to unsuccessful oppositions against s. 105(1A) applications, significantly shaping the landscape for Australia patent application indulgence principle cases.

The Federal Court has issued a significant costs ruling in the case of *Cytec Industries Inc v Nalco Company*, providing crucial clarification on how costs are awarded for amendments to patent applications under section 105(1A) of the Patents Act 1990 (Cth). This decision introduces a 'watered-down' version of the indulgence principle for such proceedings, impacting expectations for cost recovery in patent opposition costs Australia. The ruling arose from a successful appeal concerning Australian patent application no. 2012220990, titled 'Reducing aluminosilicate scale in the Bayer process'.

While Cytec Industries Inc was ordered to pay Nalco Company’s costs for the appeal related to the amendment decision, the court directed that each party should bear its own costs for the initial amendment proceedings at first instance. This split decision followed the court's May ruling on two appeals involving the same patent application. In that earlier decision, the court dismissed Nalco's appeal regarding a claim construction issue but allowed its appeal from a 2024 decision concerning its application to amend the patent application. The court ultimately ordered the patent application to proceed to grant in the form annexed to Nalco's amendment application, leaving the costs of the successful amendment appeal and the first-instance amendment proceedings to be resolved.

Nalco had argued that Cytec should cover the costs of both proceedings, asserting that appeal costs should naturally follow the event. Cytec, conversely, contended that Nalco should bear the costs, partly relying on the established principle that allowing a patent amendment constitutes an indulgence to the applicant. The Federal Court did not fully accept either argument, instead drawing a critical distinction between amendments to granted patents under s. 105(1) and amendments to patent applications under s. 105(1A).

The court highlighted that a granted patent confers a monopoly, which means the indulgence principle applies with greater force to amendments under s. 105(1) due to the potential for abuse of that monopoly. However, a patent application, by its nature, does not confer a monopoly. Consequently, the rationale for applying a strong indulgence principle does not hold in the same way for patent applications. Despite this, the court acknowledged that permitting an amendment to a patent application still grants a form of indulgence to the applicant, albeit a lesser one compared to amending a granted patent. This reasoning led to the court's conclusion that a 'watered-down version of the indulgence principle' is applicable to unsuccessful oppositions against s. 105(1A) applications, significantly shaping the landscape for Australia patent application indulgence principle cases.

The application of this 'watered-down' principle resulted in the Federal Court s. 105(1A) patent amendment costs being split. For the appeal, Nalco achieved complete success regarding the amendment decision. While Cytec's arguments concerning construction, allowability, and discretionary grounds were considered neither unmeritorious nor unreasonable, the court determined that costs for the appeal should follow the event. Therefore, Cytec Industries Inc must pay Nalco Company’s costs of the amendment appeal on a party-party basis, with the specific amount to be determined as a lump sum by a registrar.

However, the situation at first instance was viewed differently. The court found that Cytec was entitled to challenge the amendment application, and its opposition was not deemed unmeritorious or unreasonable. Furthermore, Nalco's successful amendment at that initial stage still involved an element of indulgence. For these reasons, the court ordered that each party bear its own costs for the first-instance amendment proceedings, without disturbing any existing costs orders. This ruling provides important guidance for lawyers advising on Australian patent strategy, particularly regarding cost recovery expectations under Patents Act 1990 (Cth) s. 105(1A) costs.

Lawyers advising on Australian patent strategy must note the Federal Court's clarification on cost awards for patent application amendments under s. 105(1A), as the 'watered-down' indulgence principle impacts cost recovery expectations differently than for amendments to granted patents.

Source: Reporting on a recent Federal Court decision.