Reckitt's application to amend
20 On 4 March 2016, Ms Gourley swore the substantive affidavit on which Reckitt relied in support of its application to amend, from which she subsequently redacted a small portion, because of concerns about inadvertently revealing some material that was confidential in the United States proceeding. The redacted version of that affidavit is substantively what Reckitt relied on to explain its own circumstances and state of mind for the purposes of its application.
21 Ms Gourley said that, at the date of her affidavit, the sales of Durex brand synthetic polyisoprene condoms in Australia since 2013 had generated less than a six-figure sum. She said that, in substance, one reason for Reckitt's economy and admissions in Reckitt's defence and cross-claim was the small actual and potential market value of sales in Australia of sales of the Durex product. Ms Gourley said that she had understood from the correspondence between the parties and their lawyers, exchanged before the proceedings were launched, that Ansell had previously conducted tests on the Durex product, including ones called TEM tests. I referred to such tests in my reasons of 7 April 2016, in which I refused to order Ansell to produce, in answer to Durex' notice to produce, those TEM test results that I inferred did exist: Ansell Healthcare Products LLC v Reckitt Benckiser (Australia) Pty Limited [2016] FCA 506.
22 Ms Gourley explained that at the time these proceedings were commenced, Reckitt had concerns and beliefs based on the pre-litigation history and the nature of the allegations in the statement of claim, that Ansell's patent related to a process for manufacturing synthetic polyisoprene condoms that was different to the process in the GB566 patent, and that Reckitt's patent sought to minimise pre-vulcanisation, as acknowledged at [15] in the specification of the Ansell patent. She said that, in accordance with the method followed by Reckitt in the production of the Durex product, pursuant to its own GB566 patent, it did not add a post-vulcanisation composition to its latex. The patent in suit described that step or feature as an important feature of the invention being the Ansell product.
23 Ms Gourley said that Reckitt used steps additional to examples 1 and 3 in the GB566 patent in the manufacture of the Durex product that involved confidential proprietary techniques for stripping the condoms from a former. A former is an article that is dipped into a solution of synthetic latex to which the synthetic latex adheres in the formation of the condom that ultimately is produced. She said that the pre-litigation correspondence, which I have briefly summarised above, had indicated the existence of those additional steps to Ansell, as early as May 2014.
24 She said that there appeared to be no direct commercial rationale for the proceedings and that Reckitt was very concerned about the potential high cost to it of defending the proceedings in this country, having regard to the small volume and low value of sales of the Durex product in Australia and the nature of patent litigation. Ms Gourley also stated that Reckitt had concerns about what genuine losses or damage Ansell would suffer in this country. She said that Ansell had joined four Reckitt companies, including two overseas ones, one of which is the group's UK publicly listed holding parent company, and that Reckitt:
…was therefore concerned that Ansell was seeking to obtain from the litigation a collateral commercial benefit of discouraging [Reckitt] internationally from competing with Ansell in the supply of synthetic polyisoprene condoms and condoms generally.
25 Ms Gourley noted that because they were made from artificial ingredients, the synthetic condoms made by both parties were suitable for use by consumers who had concerns about possible allergies to rubber condoms.
26 Ms Gourley said that Reckitt had chosen to resist Ansell's demands and defend these proceedings on a basis that was "sensibly narrow and confined to what [Reckitt] understood were the critical issues in dispute, in an effort to achieve early disposal of the proceedings without incurring substantial costs" or by an agreed resolution. As a result, she said, Reckitt had continued to resist production of its confidential manufacturing process documents, deferred investigations in relation to the availability of records to establish any prior use defence, resisted production of those records, and had only undertaken limited searches for possible novelty-defeating prior art. She said that Reckitt had sought to confine the extent to which it had sought independent expert assistance and, given that the major issue in contention on infringement:
… appeared to be the presence of the "pre-vulcanised" feature in the Durex product, [Reckitt] chose to make admissions and concessions in its defence of the statement of claim, other than in relation to matters it understood to be directly relevant to "pre-vulcanisation" in claim 1 of the Ansell patent.
27 Ms Gourley said that, in its defence, Reckitt had admitted the particulars of pre-vulcanisation feature, but denied the presence of "pre-vulcanisation" on the basis of its construction of the patent in suit. She said that, in preparing the cross-claim and particulars of invalidity, Reckitt had relied:
… only on the information it then had to hand, and sought to put forward relatively narrow and confined grounds and particulars of invalidity.
28 Ms Gourley asserted that Reckitt had sought to negotiate a narrow and prompt way of resolving the proceedings. She said that, in formulating the pleadings up to that time, Reckitt had only had very limited conferences, through its legal representatives, with its independent expert, Dr Bill Potter. He had only been provided with a copy of the Ansell patent in suit in December 2015.
29 Importantly, Ms Gourley said that she was under a misapprehension as to what the expression "at the time of dipping" in particular 13(vii) of the further amended statement of claim meant, and that after the mediation on 29 October 2015 it became increasingly clear to Reckitt that the admission of the pre-vulcanisate relaxed modulus (PRM) value that was made there had been based on a different understanding to what she had thought Ansell's understanding was.
30 In contrast, Ansell's solicitor, John Afaras, asserted that both sides had the same understanding. He said that understanding had come out of one of Reckitt's manufacturing process documents that I had ordered be produced. That document identified a confidential value for the PRM of Reckitt's mixture of the latex before the completed maturation time, as compared to the figure set out at the time of dipping, being the 0.1 to 0.25 MPa figure set out in particular 13(vii). That difference, and how it could occur, may be important but its significance, if any, is not explained in Reckitt's current defence.
31 I am satisfied because of the way in which Ansell pleaded particular 13(vii), and how Ms Gourley stated that Reckitt had approached its admission of that asserted fact, that it is in the interests of justice that Reckitt be allowed to amend its admission, so as precisely to plead in response to particular 13(vii) what she has said was its actual understanding of the factual position.
32 The remarkable feature of Ms Gourley's affidavit evidence is that at no point did she mention any person within Reckitt who had identified specifically what it did or did not know about the subject matter of its admissions, or how its last three admissions came to be made, being those of claims 2, 6 and the error which I have suggested should be allowed to be corrected in relation to paragraph 13(vii). Rather, she gave generalised evidence of her understanding of Reckitt's position, which I have no reason to doubt accurately set out her belief. However, her evidence did not identify any facts about the knowledge, understanding or state of mind of her client, Reckitt, in making the factual admissions. After all, Reckitt, and not Ms Gourley, was responsible for manufacturing the very product whose hitherto admitted features are the subject of this litigation.
33 If anyone would know what the Durex product's features were, prima facie, Reckitt must have known them. There is no explanation at all in its affidavit evidence as to who knew what within Reckitt or what inquiries were made, before Reckitt filed its various defences, as to whether the admissions were accurate or correct. Moreover, and critically, there is no evidence whatsoever in Ms Gourley's very lengthy and detailed affidavit that extends, with annexures to 536 pages, of what, if any, inaccuracy to Reckitt's knowledge or understanding, there was in any of the admissions, other than in relation to particular 13(vii).
34 As I observed to senior counsel for Reckitt in the first directions hearing:
You make the things, so you will know whether it has that or doesn't have that, [the pre-vulcanised feature].
35 I am still of that view. There is no explanation in Reckitt's evidence as to what it knew or did not know about the factual basis for the admissions that it now seeks to withdraw and whether the admissions are inaccurate. Therefore, I am not in a position to determine on Reckitt's application to withdraw those admissions, that it would suffer some or any injustice as a result of having made them, other than the information about their impact in the United States' proceedings.
36 Ms Gourley's affidavit continued to explain in detail her understanding of the pleaded and factual position. She said that the first time that Reckitt's Australian legal representatives spoke to its US attorneys was on 21 January 2016 when they told her that, although the disclosure in each of the four patents sued on by Ansell companies in the United States was very similar to that in Ansell's Australian patent in suit, there were some different claims and that, in some claims in two of the four patents in suit in the United States, the pre-vulcanised feature was not explicitly included. However, Ms Gourley said that in each of the independent product claims in those four United States' patents, one explicit claim feature was the presence of "substantially uniform interparticle and intraparticle cross-links".
37 She said that Reckitt's United States attorneys had made her aware that "it would be significantly disadvantageous to [Reckitt] in the proceedings in the United States if various admissions made in the Australian proceedings were not withdrawn". The disadvantageous admissions were those in Reckitt's defence concerning the presence of "substantially uniform cross-links" and "substantial uniformity" in claims 1 and 8 respectively, "substantially conchoidal" in claim 2, the word "decorated" in claim 4, and the pre-vulcanised feature in par 13 of the statement of claim. However, Reckitt had not admitted any feature of claim 4 and it is not clear to what admission in relation to "decorated" Ms Gourley referred.
38 As I have said, the concerns that Reckitt's US attorneys had expressed led ultimately to the amendment applications that Reckitt communicated to Ansell for the first time on 28 January 2016. Ms Gourley thought that these would not give rise to any significant consequences in terms of time or cost in preparing evidence. She said that based on her discussions with Dr Potter and the tests that Ansell had already done, Ansell would not need to do more tests in relation to the features of claims 1, 2 and 6. She noted that the parties were negotiating agreed protocols or ways in which prior tests might be used in evidence for the purposes of r 34.50 of the Federal Court Rules 2011 (Cth). She also said that Ansell's lawyers in the United States had informed the United States Court that it proposed to rely on Reckitt's admissions in these proceedings and that, unless these admissions were withdrawn, Reckitt would be in a "significantly disadvantageous" position there. She said that it would still be possible to have a hearing here before the end of this year, if the amendments Reckitt sought were allowed and that it had proposed those in an effort to narrow the issues in dispute. Ms Gourley stated that now, having had the benefit of Dr Potter's evidence, she considered that the meaning of the claim features in relation to which Reckitt had made the admissions was unclear and, given Ansell's desire to rely on those admissions in the United States' proceedings, it was in the interests of justice to allow Reckitt to withdraw them.
39 As I noted in my reasons of 7 April 2016 (Ansell [2016] FCA 506 at [9]), there is a dispute between Dr Potter and Ansell's expert, Dr Cook, as to the utility of doing TEM tests to determine whether or not the substantially uniform feature is present in the Durex product. If the amendments are allowed, Ansell would wish to rely on such tests that would take about eight weeks to perform and cost $50,000 to $66,000. In the context of patent litigation, as it is ordinarily conducted in this Court, while not an insubstantial sum, such an expense would represent a drop in the bucket of what would be spent in this case were it to be a fully-blown contested hearing in which Ansell had to prove what Reckitt no longer wishes to admit. Ansell relied on that consequence as prejudice to it.
40 Reckitt argued that the earlier correspondence demonstrated that Ansell had already performed such TEM tests and that Ansell had not been able, as Dr Potter argued, to demonstrate the presence of sulphur crosslinks, either for inter or intra-particle purposes. Dr Cook appeared to assert the contrary. That dispute is clearly a matter that would require exploration at a trial if the admissions were allowed to be withdrawn. It is not possible to resolve that dispute on the evidence before me.
41 Dr Potter also opined about a number of ambiguities in the wording of the patent in suit. He explained his opinion about his difficulties in ascertaining the existence of crosslinking and understanding the meaning of expressions such as "substantially uniform" or "substantially conchoidal", on which Reckitt relied.
42 Mr Afaras gave evidence about the work that Ansell had done on the basis of the pleadings to date. He explained that Ansell had invested significant time and incurred significant expense taking steps to prepare its infringement evidence on the basis that the Durex product possessed each feature, the subject of the admissions, now sought to be withdrawn. I accept that evidence. He said that, as I have mentioned, if the admissions were withdrawn Ansell would wish to conduct TEM tests and that would cause it to incur some expense. He said that Ansell also would need to conduct some other tests. He said that, if leave to withdraw the admissions were refused, Ansell proposed to abandon its claims for infringement of claims 3, 4 and 8 of the patent in suit and that would avoid the need for it to perform any further tests, including scanning electron microscopy or SEM tests.
43 Reckitt complained that it would be terribly unfair for it to have to meet such an attempt to bargain, as it were, with the Court on the basis that Ansell would abandon claims if Reckitt's amendments were refused. I simply note that that is what Ansell has stated will happen and the matter must be dealt with in that way.
44 Mr Afaras said, and there is no issue, that, irrespective of whether or not I permitted Reckitt to withdraw the admissions, Reckitt could file a pre-trial motion in limine in the United States' proceedings seeking to preclude Ansell from making use of the admissions. He said that, if Reckitt sought to do so, both parties would be entitled to file evidence and make submissions addressing that issue so that the United States District Court could exercise its discretion as to whether it would allow that to occur. He also argued, which is contested by evidence from Ms Gourley, that the admissions, even if withdrawn, would be available to be used against Reckitt in any event. I am satisfied that that is a matter that is arguable in the United States and is open to be dealt with by the District Court when it considers any in limine pre-trial motion.