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Glass Hardware Australia Pty Ltd v TCT Group Pty Ltd [2024] FCAFC 95

Background

This is an appeal from the first instance decision of Justice Burley in TCT Group Pty Ltd v Polaris IP Pty Ltd [2022] FCA 1493.  The decision at first instance involved two innovation patents, AU2020100485 (the 485 Patent) and AU2020102918 (the 918 Patent), which relate to hinges for soft-closing glass panelled doors.  Both patents are divisionals, and so claim priority from parent application 2017201858 (the Parent) filed three years earlier.  This appeal concerned only the 918 Patent, owned by Polaris IP Pty Ltd (Polaris).  Glass Hardware Australia Pty Ltd (Glass Hardware), the appellant, is the exclusive licensee.  TCT Group Pty Ltd and Astral Hardware Pty Ltd (collectively TCT Group) marketed and sold hinges under the “Orion” brand in Australia before the divisional application for the 918 Patent was filed.

The primary judge, Justice Burley, found the 918 Patent infringed but held that:

1. The 918 Patent was not entitled to claim priority from the Parent because the Parent did not disclose the invention claimed in the 918 Patent in a manner that was clear enough and complete enough for the invention to be performed by a person skilled in the relevant art (PSA).  As a result, the 918 Patent claims were anticipated by the sale of the Orion hinges; and

2. The specification of the 918 Patent also failed for insufficiency because it did not disclose the invention claimed in the 918 Patent in a manner that was clear enough and complete enough for the invention to be performed by a PSA.

On appeal, Glass Hardware raised three grounds:

1. The proper construction of the invention disclosed in the Parent and the 918 Patent.

2. Whether the 918 Patent claims disclose a “relevant range” requiring embodiments to be enabled across the scope of the range.

3. If a relevant range exists, whether a PSA can make other embodiments without undue burden.

Glass Hardware needed to succeed on all grounds.  As grounds two and three depended on ground one, failure on ground one would resolve the appeal.

Key Issues

Person Skilled in the Art

The parties agreed that the PSA was a “person engaged in, or who has experience in, the design of mechanical devices and, in particular, in respect of hinges used in domestic and commercial applications”.  The experts called by the parties met this description (Mr Hunter for TCT Group and Mr Richardson for Glass Hardware).

Primary Judge’s Findings

Justice Burley construed claim 1 of the 918 Patent without limiting the dampener’s orientation or how it affects dampening upon closure of the hinge.  His Honour held that the disputed integer, “striking surface to cooperate with the dampener”, encompassed a striking surface which interacted both directly and indirectly with the dampener to achieve the dampening effect.  The Full Court summarised Justice Burley’s view as follows:

…the dampener must have a longitudinal axis disposed between, and substantially parallel with, planes defined by opposing faces of the first panel and be at least partially housed within the first insert component of the first leaf assembly.

Justice Burley observed that the Orion hinges were “actuated by a combination of interactions between several sliding surfaces external to the dampeners themselves”.  On Justice Burley’s construction of claim 1, this indirect interaction between the dampener and the striking surface fell within the scope of the claim.

However, TCT Group argued that claim 1 of the 918 Patent was broader than the invention disclosed in the Parent (and the 918 Patent specification), which did not include dampeners functioning without direct contact.  Justice Burley agreed.  The Full Court summarised Justice Burley’s conclusion as follows:

…the specification of the Parent describes the invention by reference not only to the “co-planarity feature” but also by the limitation that the dampener comes into contact with the second leaf assembly, with the dampener arranged so that it is orthogonal or substantially orthogonal [i.e at right angles]  to the hinge axis”

(emphasis added)

Justice Burley held that the requirement for the dampener to be oriented at right angles to the hinge axis addressed a problem arising from lateral forces applied to the dampener at other angles.  Expert evidence indicated that changing the dampener angle would require a fundamental redesign and determining its feasibility would require a prototype to be built and tested.  His Honour considered that this “left gaps in its teaching that must be filled by imaginative design work”.

Justice Burley also rejected Glass Hardware’s submission that the word “dampener” in the Parent meant a  “dampener mechanism” for three reasons:

1. A dampener is a component recognised in the field, which the expert evidence described as a component where a piston moves within a cylinder, its motion restricted by factors like friction or pressure.

2. The specification supported the view that a PSA would understand a dampener to mean a specific component.  The figures also depicted the dampener as a component, cooperating with a dampener body and dampener pin.

3. Cross-examination of Mr Hunter revealed that he agreed that the ‘sliding cam’ could be regarded as a component of the “dampener mechanism”.

As a result, Justice Burley concluded that the 918 Patent was not entitled to claim priority from the Parent because the Parent did not disclose the invention claimed in the 918 Patent in a manner that was clear enough and complete enough for the invention to be performed by a PSA; and that the specification of the 918 Patent failed for insufficiency because it did not disclose the invention claimed in the 918 Patent in a manner that was clear enough and complete enough for the invention to be performed by a PSA.

Appeal submissions

Glass Hardware challenged Justice Burley’s decision on several fronts.

On the question of construction, Glass Hardware submitted that his Honour employed an “over-meticulous verbal analysis”, and argued for a more purposive construction with a “generous measure of common sense” such that the dampener mechanism in the Parent could function through both direct contact and indirect contact via an intermediate component.  Glass Hardware contended that “coming into contact with” (in the Parent) shouldn’t exclude indirect contact, and that it was materially equivalent to the 918 Patent’s phrasing of “a striking surface to cooperate with the dampener”.  Glass Hardware also took issue with the narrow interpretation of ‘dampener’, arguing it should include broader mechanisms achieving a dampening action.

Regarding sufficiency, Glass Hardware:

(i) Disputed the application of the “relevant range” concept described in Regeneron Pharmaceuticals Inc v Kymab Ltd [2020] RPC 22.  Justice Burley found that “the angle of the dampener relative to the second leaf assembly is unlimited”, such that the 918 Patent claimed a range of dampener axis orientations from 0° to 360°.  In Regeneron, the relevant claim was to a range of types of transgenic mouse, however, the PSA could only make some of the types of mice within that range.  Glass Hardware sought to distinguish Regeneron on the basis that the claims of the 918 Patent employed a descriptive or functional language which “may well cover a variety of things”, and therefore did not evoke the notion of a “relevant range”;

(ii) Distinguished Jusand Nominees Pty Ltd v Rattlejack Innovations Pty Ltd (2023) 176 IPR 336, in which the Full Bench of the Federal Court had found that the range of materials that could be used was part of the invention’s ‘essence’ or ‘core’.  Glass Hardware submitted that the innovative step in the 918 Patent related to the transmission of dampening forces within the same plane as the panel; and

(iii) Argued that a single example of a preferred embodiment of the invention could meet the disclosure requirement.  In support, Glass Hardware cited the Explanatory Memorandum to the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) (the Explanatory Memorandum), which states:

A specification that provides a single example of the invention may satisfy the requirements, but only where the skilled person can extend the teaching of the specification to produce the invention across the full width of the claims, without undue burden, or the need for further invention.

In response, TCT Group submitted that the wider context of the Explanatory Memorandum provides further direction as to this requirement as follows:

However, it is expected to be more likely that, where the claims are broad, the specification will need to give a number of examples or describe alternative embodiments or variations extending over the full scope of the claims. This ensures that the monopoly extends only to that which could reasonably be said to be disclosed and no further.

Consideration

The Full Court emphasised that the 918 Patent would only be entitled to the Parent’s priority date if it clearly and completely disclosed the 918 Patent claims such that a PSA could perform the invention.

In their analysis, the Full Court noted that Glass Hardware did not challenge the primary judge’s construction of the “cooperate” integer in claim 1 of the 918 Patent (that it was not limited to direct contact between the dampener and the striking surface).  The Full Court observed that “cooperate” was only found in the Summary of the 918 Patent describing the “first aspect” of the invention, but was not found in the Parent.

Applying a purposive construction, the Full Court agreed with Justice Burley’s observation that the language of the Parent was “unambiguous” and required the dampener to be oriented at right angles to the hinge axis and make direct contact with the second leaf assembly.

Relying on a joint expert report, the Full Court also agreed that “dampener” meant a component of a dampener mechanism.  The Full Court observed that a “dampener” had a generally accepted definition and emphasised that this was not an instance where the patentee was attempting to describe a previously non-existent concept.  This was consistent with the description in the Parent which showed the “dampener” as a component and not as an entire mechanism itself.

The Full Court also addressed Glass Hardware’s argument that Justice Burley applied inconsistent reasoning by construing “coming into contact” to exclude indirect contact, yet construed “orthogonal” to mean more or less at right angles per Catnic Components Ltd v Hill and Smith Ltd [1982] RPC 183.  The Full Court observed that minor variations to the orthogonality (a few degrees either side) would not materially affect the invention’s function, whereas including indirect contact would fundamentally change how it worked.

In their concluding remarks, the Full Court stressed that while purposive construction and common sense are vital in patent construction, they cannot displace or override the clear ordinary meaning of words chosen by the patentee.  They affirmed that Justice Burley had correctly given effect to the plain language without resorting to an “overly meticulous verbal analysis or purely literal construction”.  The Full Court’s final message was clear:

Calling in aid a combination of purposive construction, together with the application of common sense, does not enable words deliberately chosen by the patentee to be broadened beyond their ordinary English meaning to expand the scope of the monopoly claimed (to what the patentee may have intended) in order to catch a creative alleged infringer, whilst maintaining priority from the earlier specification.

Outcome

The Full Court substantially agreed with Justice Burley’s decision, finding that:

1. The 918 Patent was not entitled to claim priority from the Parent because the Parent did not disclose the invention claimed in the 918 Patent in a manner that was clear enough and complete enough for the invention to be performed by a PSA; and

2. The specification of the 918 Patent also failed for insufficiency because it did not disclose the invention claimed in the 918 Patent in a manner that was clear enough and complete enough for the invention to be performed by a PSA.

The Full Court dismissed the appeal with costs.

Implications

The Full Court’s decision emphasises that:

1. Unlike many other countries, Australia does not have a doctrine of equivalents.  While purposive construction and common sense are integral to patent construction, they cannot broaden the scope of the monopoly claimed by expanding or overriding the clear and ordinary meaning of words deliberately chosen by the patentee.

2. Technical terms will be construed in light of their meaning as understood by a PSA.  If a technical term is to be given a different meaning, then the specification will need to provide a clear definition of that term as it is to be understood in the context of the patent.

3. To rely on a parent application’s priority date, the invention claimed in the divisional application must be clearly and completely disclosed in the parent.  Patentees should be cautious about using different terminology in divisional applications from that used in the parent application, and avoid broader language that may extend beyond the scope of the parent.  Similarly, the invention claimed in the patent must be enabled by the disclosure in the specification, that is, the specification must disclose the claimed invention in a manner that is clear enough and complete enough for the invention to be performed by a PSA.

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards - Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.

Aristocrat Technologies Australia Pty Limited v Commissioner of Patents [2024] FCA 987

In a recent Federal Court decision, Justice O’Bryan has granted Aristocrat Technology Australia Pty Ltd (Aristocrat) leave to appeal against Justice Burley’s decision on remittal from March 2024.  This latest development adds another chapter to the long-running saga concerning the patentability of Aristocrat’s electronic gaming machine technology.

The case, which has already seen multiple hearings in the Federal Court, a Full Court appeal, and an equally divided High Court Decision, centres on whether Aristocrat’s innovation patents claim a manner of manufacture within the meaning of s 18(1A)(a) of the Patents Act 1990 (Cth) (the Act).

Background and Procedural History

The Commissioner of Patents initially revoked four of Aristocrat’s innovation patents, finding that the relevant claims were not to a manner of manufacture.  These patents, all related to gaming systems and methods, were:

• AU2016101967 (967 patent)
• AU2017101097 (097 patent)
• AU2017101098 (098 patent)
• AU2017101629 (629 patent)

Aristocrat appealed to the Federal Court, where Justice Burley allowed the appeal, setting aside the Commissioner’s decision.  The Commissioner then successfully appealed to the Full Court, which delivered two judgments (a joint and a separate judgment).  Notably, the parties agreed that if claim 1 of the 967 patent is a manner of manufacture, then so too were the rest of the claims in all of the patents in suit.  The Full Court ultimately found that claim 1 of the 967 patent was not a patentable invention.

Aristocrat’s subsequent appeal to the High Court resulted in a 3:3 split decision.  As per s 23(2)(a) of the Judiciary Act 1903 (Cth) (Judiciary Act), this equally divided opinion affirmed the Full Court’s decision, remitting the proceedings back to the primary judge.

On remittal to the Federal Court, Justice Burley dismissed Aristocrat’s appeal from the original decision of the Commissioner, applying the Full Court’s reasoning to the residual claims.

Following this, Aristocrat sought leave to appeal under s 158(2) of the Act, raising two principal issues:

1. Whether the primary judge erred in applying s 23(2)(a) of the Judiciary Act, specifically in applying the Full Court’s reasoning rather than the reasoning in the High Court’s split decision.

2. Whether the primary judge ought to have found that the invention claimed in the residual claims is a manner of manufacture.

Parties’ Submissions

In seeking leave to appeal, Aristocrat presented three main arguments.  Aristocrat contended that the primary judgment’s finality in determining their innovation patents’ non-grant could cause substantial injustice.  Aristocrat also contended that their appeal grounds were arguable, pointing to the disagreement among High Court judges with parts of the Full Court’s reasoning (albeit three ultimately coming to the same conclusion).  Lastly, Aristocrat emphasised the case’s broader significance for patent law administration and the patentability of computer-implemented inventions.

The Commissioner, opposing leave, countered that the primary judge’s decision was not sufficiently doubtful so as to warrant reconsideration, emphasising that the High Court’s split decision created no binding precedent.  The Commissioner further argued that Aristocrat did not raise issues of general importance.  The Commissioner also argued that refusing leave would not cause substantial injustice given the patents’ expiration and Aristocrat’s pending standard patent applications on the same subject matter.

Consideration

Justice O’Bryan noted that the application for leave was finely balanced.   His Honour agreed that the primary judgment finally determined the non-grant of the patents in suit but observed that this consideration was lessened by:

1. The parties’ agreement that the patentability of claim 1 of the 967 patent had been finally determined by the Full Court’s decision, and all that remained was determination of the residual claims by the primary judgment.

2. The expiration of the innovation patents and Aristocrat’s pending standard patent applications covering the same subject matter which remained on foot.

His Honour accepted that Aristocrat’s grounds of appeal were arguable, noting the novel issues concerning the application of s 23(2)(a) of the Judiciary Act, especially in unusual circumstances where the affirmed Full Court decision required a remittal based on its own reasoning, despite both High Court judgments disagreeing with parts of that reasoning.

However, Justice O’Bryan was not fully convinced by Aristocrat’s argument about the wider significance of the case to patent law administration and the patentability of computer-implemented inventions, observing that the case’s unusual circumstances limited its broader applicability.

Despite reservations about granting what could be seen as a “second go” at establishing different principles for adjudicating the manner of manufacture requirement, Justice O’Bryan ultimately granted leave to appeal.  Two factors marginally tipped the balance:

1. The effect of the primary judgment in finally determining that the innovation patents would not be granted.

2. The arguable nature of Aristocrat’s grounds of appeal, which raised novel questions about the operation of s 23(2)(a) of the Judiciary Act in unusual circumstances.

Key Takeaways

This decision prolongs the uncertainty surrounding the patentability of computer-implemented inventions in Australia and highlights the contrasting approaches taken at different court levels:

• Federal Court (Justice Burley): Initially found Aristocrat’s invention to be a manner of manufacture and not a mere scheme
• Full Court: Unanimously overturned this decision, emphasising the need for an advance in computer technology itself.
• High Court: Equally divided on the patentability of the Aristocrat gaming technology, but overall critical of the Full Court’s two-step test.

The case now raises novel questions about the application of s 23(2)(a) of the Judiciary Act in cases of equally divided High Court decisions.  According to the currently accepted interpretation of s 23(2)(a) of the Judiciary Act, the Full Court’s approach stands as the prevailing test.

However, the Full Court’s approach remains contentious and may be subject to change.  All eyes now turn to the Full Court and the opportunity it has to provide clarity as to the proper application of the Judiciary Act, and perhaps further to the patentability of computer-implemented inventions in light of the High Court’s reasoning.

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards - Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.

 EIS GmbH v LELO Oceania Pty Ltd (Evidence of Experiments) [2024] FCA 713

Background

The applicant, EIS GmbH (EIS) initiated Federal Court proceedings against the respondents, LELO Oceania Pty LTD and LELOiAB (LELO) (and separately against Calvista Australia Pty Ltd, a distributor of LELO’s products in Australia) alleging infringement of Australian patent 2018200317 (Patent) which relates to a feminine pressure wave massager.  LELO denied infringement and cross-claimed for revocation.  The proceedings have been set down for trial in February 2025.

This decision concerned LELO’s application for an order under r 34.50(2)(b) of the Federal Court Rules 2011 (Cth) (‘Rules’) for:

… leave to rely on the affidavit of Michael Duff affirmed on 6 March 2024 (and annexures “MD-11”, “MD-13” and “MD-14”) as evidence of the conduct and results of experiments performed in Suzhou, China on a Satisfyer Pro 2, Womanizer W100 and Womanizer W500.

Under r 34.50(1)(a), when a party wishes to submit experimental proof as evidence in a proceeding, they must first apply for orders related to the experiment, including orders about the following:

• the service on other parties of particulars of the experiment and of each fact that the proponent asserts is, will or may be proved by the experiment;
• any persons who must be permitted to attend the conduct of the experiment;
• the time when, and the place where, the experiment must be conducted;
• the means by which the conduct and results of the experiment must be recorded;
• the time by which any other party (the opponent) must notify the proponent of any grounds on which the opponent will contend that the experiment does not prove a fact that the proponent asserts is, will or may be proved by the experiment.

Under r34.50(2), experimental evidence will only be admissible if the party proposing to file experimental evidence has complied with r 34.50(1), unless the Court otherwise grants leave.

Prior to LELO’s application, EIS had applied to the Court seeking orders to rely on experimental testing of LELO’s allegedly infringing massager.  The purpose of the testing was to measure the volume change in the cavity of the pressure wave massagers during operation to prove that the volume change ratios and pressure fields generated fell within the scope of the Patent claims.  LELO challenged EIS’ Notice of Experiments, arguing that the results of the experiment would not be relevant and raised further concerns regarding the accuracy and reliability of the experimental protocol.  Ultimately, Nicholas J made orders granting leave to EIS to tender experimental evidence at trial, but noting that LELO had reserved its right to argue at trial that EIS’ experimental evidence was neither relevant nor accurate.

The experiments which LELO’s expert, Mr Duff, conducted in his laboratory in Suzhou, China generally followed the same protocol which EIS had used for the conduct of EIS’ experiments, but with some improvements said to increase accuracy.  LELO did not apply to the Court for an order pursuant to r 34.50(1) prior to conducting those experiments, claiming that it was not practical to give such notice to EIS and seek such orders due to the tight Court timetable for the filing of evidence in chief on invalidity.  LELO instead proposed that EIS watch the video it had made of the conduct of Mr Duff’s experiments, and also offered to repeat the experiments at a later time.  EIS declined to watch the video and did not consider that the experiments should be repeated.

Key Issues

The key issue for Justice Downes was whether to grant leave under r 34.50(2) to LELO to rely on the experiments already conducted by Mr Duff. EIS opposed the Court granting leave primarily on the basis that EIS would suffer prejudice both in prosecuting its infringement case and in defending LELO’s cross-claim for invalidity. EIS raised the following key arguments in support of its position:

1. Contemporaneous records

EIS submitted that the experiments were undertaken by Mr Duff’s team and that there were no contemporaneous records of the conduct and results of the experiments.  Justice Downes observed that EIS had relied upon the affidavit evidence of Mr Payne (who conducted EIS’ experiment) which also did not annex such contemporaneous records.  In any case, her Honour considered that this objection could be dealt with at trial.

2. Lack of representatives

EIS submitted that it had not been given the opportunity to have its representative attend Mr Duff’s experiments and that the video was “limited to what [Mr Duff’s team] elected to film”.  Justice Downes did not consider this submission to be persuasive as EIS had never requested to view the footage despite being offered nor accepted the invitation by LELO to have the experiments repeated.

3. Independent expert

EIS submitted that Mr Duff was not an independent expert, but was aligned with and had an interest in LELO succeeding.  Justice Downes declined to determine this issue at this stage of the proceeding,  particularly given that Mr Duff was yet to be cross-examined on his evidence.

4. Experimental protocol

EIS submitted that Mr Duff’s affidavit did not disclose a clear experimental protocol.  Justice Downes disagreed, observing that Mr Duff’s evidence indicated that he had followed the same protocol as that used for EIS’s experiments, albeit with some identified changes.  In any case, her Honour considered that whether there had been a failure to disclose Mr Duff’s experimental protocol was an issue to be addressed at the trial.

5. Massagers

EIS raised a number of issues in relation to the massagers that Mr Duff tested in his experiments.  EIS’ key argument was that it was no longer possible to inspect any of these massagers to confirm their authenticity as they had been destroyed during testing.  Her Honour rejected this submission, finding that the massagers were in fact not destroyed and were available for inspection, although not in their original state.  Furthermore, EIS could also inspect undamaged versions of the devices prior to any further experimentation.

6. Analogous decisions

EIS argued that refusing leave would “accord with previous decisions” of the Federal Court involving analogous facts.  EIS relied on the decisions of Justice Jagot in Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd [2013] FCA 226 and Beadcrete Pty Ltd v Fei Yu trading as Jewels 4 Pools [2012] FCA 1091.  Justice Downes distinguished these cases on the following bases:

• In Bayer, the applicant brought the application on the first day of the hearing, and did not offer to repeat the experiments; nor was there any indication that the experiments had been video-recorded.
• In Beadcrete, the party seeking leave did not provide any explanation as to why they failed to seek orders pursuant to r 34.50 before carrying out the experiment. Furthermore, the experiments caused the samples to be destroyed.

Outcome

Justice Downes held that LELO’s application should succeed and made orders granting leave to rely on Mr Duff’s affidavit evidence of the conduct and results of the experiments he performed in Suzhou, China.  Her Honour also ordered EIS to pay LELO’s costs of its application for leave to rely on experimental evidence.

Implications

Justice Downes’ judgment provides guidance to litigants who may wish to rely on the Court’s discretion to grant leave to admit experimental evidence under r 34.50. In particular, her Honour’s judgment illustrates:

1. The importance of taking reasonable steps to promote transparency and fairness to the opposing party, if a party decides that it wishes to rely on experimental evidence but is not able to comply with r 34.50(1)(a) prior to conducting the experiments.

2. That steps to document and maintain records of experiments (such as video recording) will be viewed favourably by the Court when considering whether to grant leave. Informing the opposing party of the experimental protocol, remaining substantially consistent with an earlier protocol, and offering to repeat experiments at a later time are also likely support an application under r 34.50(2).

3. That questions regarding the accuracy, reliability, or credibility of experiments are likely to be deferred to and addressed at trial.

The order that EIS pay LELO’s costs also highlights the monetary cost associated with procedural disputes of this nature.  Cost penalties may arise when objections are not substantiated and the opposing party fails to cooperate or engage with the reasonable efforts of the other party to conduct experiments in a transparent and fair manner, despite not having applied for orders and r 34.50(1).

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards - Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.

Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 4) [2024] FCA 678 (fedcourt.gov.au)

Highlight

On 18 June 2024, Justice Burley delivered a decision regarding documentary discovery in the long running dispute between Pfizer (Pfizer Ireland Pharmaceuticals and Pfizer Australia) and four of its competitors over AU2005280034 for the “Production of polypeptides” (the Pfizer Patent).  Justice Burley’s decision illustrates clearly the Federal Court’s strict approach to confining discovery only to the production of documents that are directly relevant to the issues in dispute. Following this strict approach, his Honour declined to order discovery of Pfizer’s research & development documents, warning that the relevance of the patentee’s research & development documents to a lack of inventive step ground will vary from case to case. His Honour did however order the production of documents in a second category given its direct relevance to the pleaded lack of best method case. His Honour also took the opportunity to comment on the parties’ case management, criticising what he described as the “poorly focussed, scattergun approach” to lack of inventive step, and requiring the parties to reduce the scope of the currently pleaded case which at the time of Justice Burley’s decision involved over 80 combinations of common general knowledge and prior art documents.

Background

In the proceedings, Pfizer has alleged that Organon (Organon LLC and Organon Pharma), Samsung Bioepis (Samsung Bioepis Co. Ltd and Samsung Bioepis Australia), MSD (Merck Sharp Dohme Corp and Merck Sharp Dohme Australia) and two Arrow companies (the Respondents) infringe the Pfizer Patent in their manufacture of etanercept, a biologic used in the treatment of autoimmune diseases. Pfizer manufactures and sells etanercept under the brand name ENBREL®. The Respondents have cross-claimed alleging that the Pfizer Patent is invalid on numerous grounds including want of novelty, lack of inventive step, inutility and failure to disclose the best method.

The proceedings are not far advanced, despite Pfizer commencing the proceedings in May 2022. Pleadings have closed but no affidavit evidence has been filed. Affidavit evidence in chief is due to be filed in December 2024, with answer affidavit evidence due in April 2025. The proceeding has then been listed for a three week hearing in September to October 2025.

Key Issues

In advance of filing any affidavit evidence, the Respondents sought discovery in two categories, summarised as follows:

1. Category One: documents recording the research and development on the claimed invention between August 2002 and August 2004. The Respondents argued that Category One documents were relevant to both the lack of inventive step and inutility grounds.
2. Category Two: all documents created or dated before the filing date of the patent concerning the production of etanercept or “TNFR-Ig” as described in Example 16 of the Pfizer Patent. The Respondents argued that Category Two documents were relevant to the lack of best method ground.

Outcome

Category One

Justice Burley did not order discovery in Category One for two key reasons.

First, the Federal Court Rules require that documents be “directly relevant to the issues raised by the pleadings or in the affidavits” to be discoverable. Lack of inventive step is an objective test which requires the Court to consider whether a person skilled in the art would have found the invention to be obvious “…which is a remove from the steps taken by the inventors themselves”. So, the patentee’s research and development documents, while relevant to the question of inventive step, are of secondary significance only. The Respondents’ inventive step pleading emphasised the secondary significance of the research and development documents, giving “no inkling that [the inventor’s own path to the invention was] relevant at all”.

Second, section 37M of the Federal Court of Australia Act 1976 (Cth) “requires the court to be astute to the quick, inexpensive, and efficient disposition of cases”. The Judge considered that the Category One documents could be viewed as “an exercise in fishing”. While there was no evidence that discovery of these documents would be oppressive, additional work would be required by Pfizer to locate and produce the documents, by the Respondents to review and assess the documents and by the Court, all of which would add to the cost of the proceedings.

Justice Burley also did not consider that the inutility ground supported discovery of Category One documents. His Honour, however, indicated that he would order Category One discovery if Pfizer ultimately file affidavit evidence from the inventors.

In considering the Category One discovery, Justice Burley made some initial observations on the Respondents’ lack of inventive step case which relies on the common general knowledge considered alone or alternatively in combination with multiple prior art documents considered separately or in combination. The combinations and permutations of the prior art add up to over 80 variations of common general knowledge and prior art documents. Justice Burley expressed his dissatisfaction with the Respondents’ approach on inventive step, noting that “[g]iven the number of permutations and items of prior art pleaded, it may be said that the lack of inventive step case takes something of a poorly focussed, scattergun approach”. In response, the Respondents have undertaken to streamline their lack of inventive step case in the coming months.

Category Two

Justice Burley ordered discovery in Category Two (in a slightly amended and narrower form than sought by the Respondents) as the category is directly relevant to the Respondents’ lack of best method pleading. The Respondents expressly plead that the best method is set out in Example 16, but that Example 16 omits certain information which may be inferred to be known to the patent applicant at the time of filing the patent application. His Honour also considered that the Respondent’s pleaded case was to some extent supported by the evidence of Dr Denis Drapeau, one of the co-inventors, whose declaration was annexed to an affidavit filed by Pfizer in response to the Respondents’ discovery application.

Implications

Justice Burley’s decision is a timely reminder of the Federal Court’s strict approach on discovery applications. Discovery will only be ordered for documents directly relevant to the issues in dispute.

His Honour’s decision is also a timely reminder that the Court seeks to conduct proceedings in accordance with section 37M of the Federal Court of Australia Act 1976 (Cth) which “…requires the court to be astute to the quick, inexpensive, and efficient disposition of cases”. The Court looks to the parties to run cases in as streamlined and as cost-effective manner as possible. His Honour took the opportunity to comment on the parties’ case management, criticising what he described as the “poorly focussed, scattergun approach” to lack of inventive step, and requiring the parties to reduce the scope of the currently pleaded inventive step case.

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards - Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.

Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd (No 7) [2024] FCA 445  and Vald Pty Ltd v KangaTech Pty Ltd (Costs) [2024] FCA 693 (fedcourt.gov.au)

Australian Mud:

The Federal Court has continued its run of decisions on contested costs orders.  The cost of litigating patent disputes in the Federal Court is high.  To maximise the costs recovered, parties are issuing Notices of Offer (pursuant to the Federal Court Rules) and Calderbank letters.  These are designed to put the other party at risk of an indemnity costs order should they reject the offer and the first party ultimately receive a more favourable judgment.  Indemnity costs orders enable a successful party to claw back up to 100% of their legal costs, whereas a party/party costs order typically only provides a successful party with around 60% of their actual legal costs.  So, significant sums of money can be at stake as a result of an effective or ineffective Notice of Offer or Caldberank letter.

Here, we discuss the outcome of the contested costs orders in the long-running litigation between:

1. Australian Mud Company Pty Ltd (Australian Mud) and Reflex Instruments Asia Pacific Pty Ltd (Reflex) against Globaltech Corporation Pty Ltd and Globaltech Pty Ltd (together, Globaltech) regarding a type of core sample orientation tool for use in mapping cores drilled in mining operations; and
2. Vald Pty Ltd and KangTech Pty Ltd regarding an apparatus for use in assessing the strength of a knee flexor muscle of a person.

Australian Mud and Reflex v Globaltech

Australian Mud and Reflex sought an order for the two Globaltech companies to pay their costs on a party/party basis from 26 March 2019 to 22 February 2023, and then on an indemnity basis from 22 February 2023 onwards.  Australian Mud and Reflex submitted that an indemnity costs order from this date onwards was appropriate as they had achieved a more favourable outcome than that set out in their Notice of Offer which Globaltech had rejected.  So, the issue for the Judge was whether Australian Mud and Reflex had in fact achieved a more favourable outcome from the litigation.

In the Notice of Offer, Australian Mud and Reflex offered a full and final resolution of their monetary claim if the two Globaltech companies paid them $7,100,000.  Rejecting the Notice of Offer, the two Globaltech companies were ultimately ordered to jointly pay an amount lower than $7,100,000 (the Joint Amount), with one of the Globaltech companies separately ordered to pay another sum of money (Separate Amount).  The Joint and Separate Amounts totalled more than $7,100,000.

Globaltech argued that the offer was made jointly to both Globaltech companies, and so, the relevant amount was the amount both companies were ordered to pay. On that approach, it was clear that the outcome was not more favourable than the terms of the offer.

The Judge disagreed with Globaltech, holding that there should be an order that Globaltech pay indemnity costs as claimed by Australian Mud and Reflex. In the Judge’s opinion:

1. the Globaltech companies were closely related parties; one was the operating company and the other had no assets or employees; and
2. those in the Globaltech Group who considered the offer would not have placed any weight on the difference between the two companies. Instead, they would have considered the offer from the point of view of the amount of the offer.

Vald v KangaTech

The starting position on costs was that the Judge considered that Vald should be the beneficiary of a costs order in its favour.  The Judge had held in an earlier decision that the Vald patent was valid and infringed by the original but not the modified KangaTech products.  See here for our report on the Judge’s earlier decision on liability.  KangaTech, however, argued that it should receive an indemnity costs order following a Notice of Offer and Calderbank Letter (the Offers).

The Judge disagreed, finding that an indemnity costs order was not appropriate because:

1. The Offers did not include any agreement by KangaTech to submit to an inquiry as to whether additional damages ought to be awarded, and if so, in what amount. Vald had ultimately obtained such an order in the proceedings.
2. The Offers did not include an undertaking in the same terms as the general injunctive relief, or an offer to consent to any declarations. Vald had sought this relief in its Amended Originating Application and was ultimately awarded this relief in the proceedings.

So, in the Judge’s opinion, Vald did not obtain a judgment that was less favourable than the terms of the Offers.  Her Honour also did not consider that Vald had acted unreasonably in continuing its claim, particularly given that the central issue of the interpretation (construction) to be given to the Vald Patent remained unresolved and as KangaTech had made only limited admissions as to infringement at the time of the Offers.

Conclusion

The outcomes of these contested costs orders underscore the significant financial implications of effective Notices of Offer and Calderbank letters in patent litigation.  In Australian Mud and Reflex v. Globaltech, the Judge ruled in favour of indemnity costs for Australian Mud and Reflex, emphasising the joint nature of the offer and the relationship between the Globaltech companies.  Conversely, in Vald v. KangaTech, the Judge denied indemnity costs to KangaTech due to the inadequacies in their offers, highlighting the importance of comprehensive and inclusive settlement proposals.  These cases illustrate the critical role of strategic cost management in high-stakes legal disputes.

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards - Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.