Imagine that you have invented a unique technology or product, sent a sample of it to another country, and then, some time later, decided to apply for a patent. Suddenly, your competitors argue in court: “You had already transferred this product earlier, so your secret became public. The patent is invalid!”
This is precisely the kind of legal drama that unfolded before the Australian Patent Office (APO) in a dispute between two industrial giants — voestalpine Rail Technology and Nippon Steel Corporation. The key question the lawyers had to resolve was: does the ordinary supply of goods on consignment result in the loss of novelty of an invention?
What was the dispute about?
The patent applicant had developed an ultra-strong railway rail with a special chemical composition and steel structure. However, the opponent sought to have the patent revoked, arguing that the product had lost its novelty even before the patent application was filed.
The allegation was based on one fact: several months before the patent was officially filed, a sample of the rail had already arrived in Australia — it had been delivered to a local subsidiary. According to the opponent, this constituted so-called “prior use,” which made the technology publicly available.
Why did one legal detail change everything?
Australian patent law follows a strict rule: an invention loses its novelty if, before the filing date, at least one legally or factually independent person has obtained free access to it and could examine it “without any restriction imposed by law.”
However, the Patent Office focused on one crucial detail: the rail had not been transferred through a direct sale, but had instead been supplied on consignment.
What does this mean in practice?
Under a consignment arrangement, ownership of the goods remains with the seller until the consignee sells them to the final buyer. Since the Australian company did not own the rail, it had no right to alter it, cut it apart, or subject it to chemical analysis. Any such action would have damaged the property and made its subsequent sale impossible.
Moreover, simply looking at the rail was not enough — in order to discover the secret composition of the steel and its microstructure, the product would have had to be destroyed during the analysis. And no one had the legal right to do that to someone else’s property.
A Lesson for Businesses and Inventors
The case ended in favor of the patent owner: the court found that, in this particular case, supplying the product on consignment had not made the invention “publicly available.”
However, patent attorneys warn: this is not a universal rule.
If the secret of the technology could have been discovered simply by looking at the product, without destroying it (or if the agreement had expressly permitted testing), the outcome could have been the opposite. For example, in similar cases involving plant seeds, the mere transfer of samples often destroys novelty, since the claimed plant inevitably grows from the seeds.
The key takeaway for businesses: consignment may temporarily protect an invention from losing its novelty, but the legal details of the agreement and the physical nature of the product itself can make all the difference.
Founder of Research & Patent group Intectica, author of patent algorithms for solving problems in the pharmaceutical industry, patent attorney certified in all intellectual property objects (Patents, Design, TM), with education in chemistry and law, chief expert of the patent institution of Ukraine UKRPATENT (1997-2004). Member of international organizations, including ECTA, PTMG, UAM, lecturer and blogger.
