[The IPKat] Is consignment a novelty destroying prior use in Australia?

[Claire Gregg]

Is consignment a novelty destroying prior use in Australia?

 Dr Claire Gregg Tuesday, September 01, 2026 - #patents, Claire Gregg, consignment, novelty, OzKat, prior use

A recent Australian Patent Office (APO) opposition decision, voestalpine Rail Technology GmbH v Nippon Steel Corporation [2026] APO 17, considered whether delivery of a product on consignment can amount to novelty destroying prior use in Australia. This decision is a useful reminder of the principles governing prior use and raises an important question about when a consignment might make an invention publicly available.

Principles of prior use

Novelty can be destroyed by prior art information made publicly available in a single document or through doing a single act, the latter being known as "prior use". The principles applied by the courts in assessing prior use include:

·                The information must have been made available to at least one member of the public who, in that capacity, was free in law and equity to make use of it.

·                The question is not whether access to an invented product was actually availed of, but whether the product was made available to the public without restraint at law or in equity. 

·                The information must be of a kind that would disclose to a person skilled in the relevant art all of the essential features or integers of the invention.

·                The information must enable the skilled person at once to perceive, understand and practically apply the discovery, without the need for further experiments.

The opposition

Consignment Kat

The opposed application related to a rail for freight railways comprising steel having a specified composition. The Opponent argued, inter alia, that the claims lacked novelty in light of prior use of Rail Piece 7020A102 (the Product). The Product was said to be "a rail piece manufactured by the Opponent in September 2018 and comprises a sample obtained from a length of rail delivered to voestalpine Railway Systems Australia Ltd".

Importantly, the Applicant characterised the claims as “product claims directed to a rail defined by its composition, microstructure, and hardness properties”.

In view of the close relationship between the Opponent and its Australian subsidiary, voestalpine Railway Systems Australia Ltd (vaRS AU), the Applicant sought to characterise the delivery as a consignment, rather than a sale free from restraint at law or in equity.

The consignment issue

The evidence established that the Product had been delivered on consignment rather than sold outright. the Delegate described a sale by consignment as follows.

A sale by consignment is generally understood as a sale arrangement where the buyer does not pay upfront, [the] owner of the goods retains ownership, and payment is made to the owner only after the sale of the goods.

The Delegate considered that, absent contractual terms departing from the ordinary meaning of a consignment, a consignee is not free in law and equity to use the consigned product. Because vaRS AU did not own the Product, the Delegate concluded that it was not free in law and equity to use or analyse it.

As the only recorded sale to an external party occurred after the priority date, the Delegate considered there had been no novelty destroying prior use.

Can consignment ever amount to prior use?

The Delegate’s reasoning does not establish that consignment can never amount to prior use. Contractual terms departing from an orthodox consignment arrangement may affect whether the consignee is free in law and equity to use or analyse the product. The Delegate also considered whether someone could have analysed the Product during transport to vaRS AU or while in the stock yard of vaSR AU.

First, the Delegate noted this is merely a speculative possibility. Second, the question of analysability appears to be critical, because in this case it would not have been possible for a person to determine all of the essential features or integers of the invention without damaging the Product (and rendering it unsalable). In this regard, the Delegate stated.

Without ownership, vaRS AU can hardly be said to be free in law and equity to use or analyse the rail pieces, particularly where the required analysis would render the product unsaleable.

However, not every product supplied on consignment will require destructive analysis. The reasoning therefore leaves open the possibility that prior use may arise where a consigned product is readily analysable and the skilled person can identify and reproduce the claimed invention. Another useful comparison is the APO’s recent decision in Nuseed Pty Ltd and Norddeutsche Pflanzenzucht Hans Georg Lembke KG v Limagrain Europe [2025] APO 25, in which the claims were found to be anticipated because the seeds relied upon as prior use inevitably gave rise to the claimed plant.

Final thoughts

The outcome of this decision may very well have been different if the Product had revealed the essential features of the invention without destructive analysis. The terms of the consignment arrangement and the relationship between the parties may also affect whether the recipient is free in law and equity to use a product supplied on consignment.

It would be unwise to assume that consignment can never constitute prior use in Australia. While consignment may prevent a product from being made publicly available in a novelty destroying sense in some circumstances, the question of prior use will ultimately turn on the facts.

 

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