Aspirating IP Limited v Vision Systems Limited

Introduction 1 These are applications for costs in appeals in opposition proceedings under s 60 of the Patents Act 1990 (Cth) ('the Act'). My reasons for the final orders I made are reported in Aspirating IP Limited v Vision Systems Limited [2010] FCA 1061; (2010) 88 IPR 52. The Court's jurisdiction to award costs is contained in s 43(2) of the Federal Court of Australia Act 1976 (Cth). Section 160 of the Act gives this Court the power to affirm or vary orders made by the Commissioner or his or her delegate in the opposition proceedings. 2 There were two relevant decisions by a delegate of the Commissioner of Patents. The first decision was made on 2 March 2005 and the second decision was made on 10 December 2008 and both concerned Australian Patent Application No 689484. In relation to the first decision the applicant filed and served an appeal to this Court under s 60(4) of the Act and the respondent filed and served a cross-appeal and a notice of contention. In relation to the second decision, the applicant filed and served an appeal. 3 The history of the proceedings before the delegates is set out in my reasons at [1]-[13]; (2010) 88 IPR 52 at 57-61. 4 As will be apparent from my reasons, at the hearing of the appeals and cross-appeal the parties were agreed that the set of 20 claims which were, on 26 September 2006, the subject of a successful application to amend should be those considered by the Court as the opposed claims and that the Court's decision in relation to those 20 claims would determine both appeals (at [14]; (2010) 88 IPR 52 at 61. 5 The final orders which I made following the trial were as follows: Proceeding No SAD 59 of 2005 and VID 1042 of 2008 1. The decision of the Delegate of the Commissioner of Patents in respect of Australian Patent Application No 689484 made on 2 March 2005 be set aside. 2. The decision of the Delegate of the Commissioner of Patents in respect of Australian Patent Application No 689484 made on 10 December 2008 be set aside. 3. Australian Patent Application No 689484 not proceed to grant unless the specification is amended by: (a) deleting claims 1 to 18 (both inclusive); (b) renumbering the claims as appropriate. 3A. The applicant make any request to the Commissioner of Patents for leave to amend the specification of the Australian Patent Application No 689484 pursuant to s 104 of the Patents Act 1990 (Cth) in the form referred to in paragraph 3 above within 60 days of the date of these orders. 4. Remit the matter to the Commissioner of Patents for any further application to amend Australian Patent Application No 689484 prior to grant to be dealt with by the Commissioner of Patents pursuant to law under s 104 of the Patents Act 1990 (Cth). 5. Issues of costs arising from paragraphs 1 and 2 above and the Court's decision dated 30 September 2010 be deferred to a hearing on 8 December 2010 at 10.00 am. 6. The applicant file and serve an outline of its submissions on the question of costs before 4.00 pm on 22 November 2010. 6A. The respondent file and serve an outline of its submissions on the question of costs before 4.00 pm on 6 December 2010. Proceeding No SAD 59 of 2005 7. The orders sought in the applicant's Notice of Appeal dated 22 March 2005 be otherwise refused. 8. The orders sought in the respondent's Further Amended Notice of Cross-Appeal and Notice of Contention dated 23 September 2009 be otherwise refused. Proceeding No 1042 of 2008 9. The orders sought in the applicant's Notice of Appeal dated 16 December 2008 be otherwise refused. 10. The orders sought in the respondent's Amended Statement of Grounds of Invalidity dated 23 September 2009 be otherwise refused. 11. The costs of the hearing today be reserved. 6 The respondent submits that it has been 'overwhelmingly' successful in the proceedings and should have its costs subject to a reduction which it accepts should be made because it was not successful with respect to some issues contested at trial. It suggested that an appropriate reduction was 30 per cent. In other words, the respondent submits that it should have 70 per cent of its costs of the proceedings. There were costs incurred in the two opposition proceedings before the delegates and the respondent contends that those costs should be treated in the same way except that they should be taxed according to the scale fee set by the Patent Regulations 1991 (Cth) ('Patent Regulations') in respect of such evidence. The applicant accepts that the costs of the opposition proceedings before the delegates should be assessed in accordance with the scale fee set by the Patent Regulations in respect of such evidence. Both parties also accept that to the extent that further work was done in the proceedings before this Court in relation to such evidence then, providing it is a properly recoverable item of costs, it should be recovered according to this Court's scale. For example, to the extent that one of the parties was required to prepare for cross-examination or make submissions with respect to such evidence in the appeals before this Court then that work, providing it is otherwise recoverable, is to be assessed according to this Court's scale. 7 The applicant submits that neither party has been substantially successful and that I should award costs having regard to each party's success or failure on the major issues in the case. In other words, it submits that it should have its costs on the issues with respect to which it succeeded and accepts that the respondent should have its costs on the issues with respect to which it succeeded. The applicant was aware of the difficulties this can cause a taxing officer in cases where there is an overlap between issues and that such an order can lead to additional costs, perhaps significant additional costs, in relation to the taxation of costs (see JMVB Enterprises Pty Ltd (Formerly A'Van Campers Pty Ltd) v Camoflag Pty Ltd (No 2) [2007] FCAFC 6 at [8]). Its alternative submission is I can avoid these difficulties by applying a broad approach and that as, on its submission, honours in the case were about even an appropriate order would be that each party bear its own costs. 8 In my opinion, the appropriate orders as to costs are as follows: 1. Save and except for the issue of entitlement under s 59(a) of the Patents Act 1990 (Cth), the applicant pay 75 per cent of the respondent's costs of the proceedings before this Court in VID 1042 of 2008 and SAD 59 of 2005 to be assessed on a party and party basis. 2. With respect to the issue of entitlement under s 59(a) of the Patents Act 1990 (Cth), the respondent pay the applicant's costs of the proceedings before this Court in VID 1042 of 2008 and SAD 59 of 2005 assessed on a party and party basis. 3. (1) Save and except for the issue of entitlement under s 59(a) of the Patents Act 1990 (Cth) the applicant pay 75 per cent of the respondent's costs of the opposition proceedings before the delegates of the Commissioner of Patents. (2) With respect to the issue of entitlement under s 59(a) of the Patents Act 1990 (Cth) the respondent pay the applicant's costs of the opposition proceedings before the delegates of the Commissioner of Patents. 9 These are my reasons for reaching the conclusion that the above orders are the appropriate orders. 10 A convenient starting point is to consider the matters put forward by the applicant as matters in respect of which there should be a separate order for costs in its favour. Those matters are as follows: 1. The lack of entitlement ground advanced by the respondent. 2. The priority date ground. 3. The costs of the applicant of preparing and filing evidence in respect of prior art pleaded by the respondent but abandoned or not relied upon at trial. With respect to this matter the applicant submits that such costs should be assessed on an indemnity basis. 4. The costs of the applicant of preparing and filing evidence responsive to evidence filed but not read by the respondent. 5. The costs of the applicant of and incidental to the costs of trial preparation in relation to evidence filed but not read by the respondent. 6. The costs of the applicant of and incidental to the following matters and issues in respect of the lack of novelty ground: Nohme Bosai Application (JP Patent Application 2 - 173896) Autronica Autrosense Radio Australia Shepparton Billy Guyatts Moonee Ponds Billy Guyatts Blackburn 11 The applicant submits that the appropriate order with respect to the costs of and incidental to the lack of inventive step ground is that each party should bear its own costs. 12 The applicant accepts that it should pay the respondent's costs of and incidental to matters and issues in respect of the lack of novelty ground upon which the respondent was successful. 13 The matters identified in paragraphs 3, 4 and 5 may be characterised as matters going to what are alleged to be unnecessary or wasted costs. I will deal with them separately. 14 The principles which I propose to apply in determining the appropriate orders as to costs are as follows. First, it is necessary to consider the overall result in the case. Has one party been successful or substantially successful? If so, that party has a prima facie entitlement to its costs. Secondly, even if one party has been successful or substantially successful, has the unsuccessful party been successful on a particular issue and, if so, was that issue sufficiently separate and important in the trial and preparation for trial to warrant a separate order for costs? If so, the party successful on the particular issue may be awarded its costs of the issue. If the issue was not sufficiently separate and important, it may nevertheless have features which mean that the successful party's failure with respect to it warrants a reduction in that party's costs. These principles are stated at a fairly high level of generality, but I think that is almost inevitable where questions of costs are concerned. 15 The respondent in this case was substantially successful. In my final orders I made an order that the Patent Application not proceed to grant unless the specification is amended by deleting claims 1 to 18 (both inclusive). Only the two omnibus claims (claims 19 and 20) remained and they are the preferred embodiment and narrowest form of the alleged invention. The respondent succeeded on the major issues of novelty, inventive step and claim construction. It failed on the issues of lack of entitlement and priority date. It failed on some of the disputes within the issues of novelty and inventive step. Nevertheless, in my opinion, not only the final orders but also the balance of the case was such that it can be said that the respondent was substantially successful. 16 Of the matters identified in paragraphs 1, 2 and 6 of the applicant's list of matters, only the entitlement ground warrants a separate order for costs. The respondent bore the onus on the entitlement ground and it was unsuccessful. The entitlement ground involved consideration of factual material, much of which was quite separate from other issues in the case. A number of the witnesses gave evidence by video-link from England and the respondent called a witness who travelled from England. I have considered whether I should reduce the respondent's costs in a way which reflects an allowance for the applicant's costs. The problem with doing that in relation to the entitlement ground is that it is very difficult to know what reduction will produce a fair and just result particularly having regard to the evidence taken from England. The applicant should have its costs with respect to the entitlement ground. 17 I think that a different approach is warranted in relation to the priority date ground. That ground did not occupy a great deal of time at the trial, nor was there significant evidence with respect to it. The issues raised in relation to it were largely issues of construction. I think it is appropriate to reduce the respondent's costs because of its failure with respect to the priority date ground. 18 Although the respondent was successful with respect to the novelty ground, it was unsuccessful in showing that certain prior uses and publications demonstrated a lack of novelty. I do not think the issues or matters upon which the respondent was unsuccessful warrant a separate order for costs. There is a good deal of force in the respondent's submission that if one considers separate orders beyond the major issues then there is no obvious stopping point and one could base a separate order for costs on almost every or any factual or legal issue in the case. I could refer to a number of examples in this case. One will suffice. Although the respondent was unsuccessful with respect to the Brown, Moores and Birkby article, it succeeded with respect to two of the three 'sub-issues' in relation to the article. The respondent's failure with respect to certain prior uses and publications should be reflected in a reduction in its costs. 19 As far as inventive step is concerned, the applicant pointed to a number of matters in support of its contention that each party should bear its own costs. Those matters and my comments on them are as follows. First, the applicant submits that the respondent's primary case was a case under s 7(3) of the Act, rather than one by reference to common general knowledge alone. I do not accept that submission. Not only is there the material referred to by Mr Pascarl in his affidavit, but it was not my understanding of how the respondent was putting its case. Secondly, the applicant submits that almost all of the important evidence about common general knowledge was put forward by the respondent relatively late in the proceedings, that is, in May 2009. That is true to a point, but it is not the full picture, as the respondent pointed out in its written submissions on costs. Thirdly, the applicant submits that prior to trial the respondent placed heavy reliance on the British Steel Patent as a publication which fell within the terms of s 7(3). The respondent abandoned reliance on that Patent relatively close to trial. The applicant's submissions on this point are correct and I take them into account. Overall, I think the respondent succeeded on inventive step. The applicant's success with respect to the Brown, Moores and Birkby article does not warrant a separate order for costs in its favour. Some of the respondent's arguments were unsuccessful and I propose to take that into account in considering the appropriate reduction of its costs. 20 Both parties sought to support their respective submissions by putting forward evidence of an analysis carried out by their lawyers with respect to the evidence. The applicant put forward tables of its analysis of the written evidence and its interpretation of the issues to which that evidence was directed. Those issues were identified as issues upon which either the applicant or the respondent was successful. Two lawyers on the respondent's side identified various issues and then allocated a certain proportion of the written evidence and transcript of the trial to particular issues. Mr Pascarl, who performed the exercise in relation to the issue of entitlement, also took into account submissions. The result of those exercises was an estimate expressed in percentage terms of the proportion the issue bore to the whole. 21 The exercises performed by the applicant and the respondent are of limited assistance. They are necessarily imprecise and will often raise contestable issues as to the assumptions used. They might on occasion help confirm an impression already formed by a trial judge. In this case I have relied primarily upon the knowledge I have gained as the trial judge hearing and reading the evidence and submissions (see Patent Gesellschaft AG v Saudi Livestock Transport & Trading Co (No 2) (1996) 33 IPR 461). 22 I turn now to consider the applicant's submissions on what were said to be unnecessary or wasted costs. 23 With respect to the costs of preparing and filing evidence in respect of prior art pleaded by the respondent but abandoned or not relied upon at trial on an indemnity basis (paragraph 3) I reject the applicant's application for a separate order for costs in its favour assessed on an indemnity basis. The applicant relied on an affidavit of Belinda Leigh Muir in relation to this matter. Ms Muir is a lawyer employed by the firm representing the applicant. Ms Muir exhibited to her affidavit a number of pieces of correspondence. Based on her affidavit and my knowledge of the pleadings and the course of the trial I accept that there was prior art information pleaded and then abandoned and I accept that there was prior art information which was pleaded but not specifically mentioned at the trial. I accept that the applicant made requests of the respondent to identify with precision the prior art information it would rely on at trial and that the applicant told the respondent that it would seek indemnity costs with respect to the issue if prior art information remained in the pleadings but was not relied on at the trial. On the other hand, I take into account and accept Mr Pascarl's evidence as to the nature of the evidence filed by the applicant after the indemnity costs letter from the applicant and the extent to which the prior art pleaded immediately before trial was relevant at the trial. All things considered I do not think the respondent's conduct warrants a separate order for costs, let alone an order for costs on an indemnity basis. I have taken into account the principles referred to in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and the other cases referred to by the applicant (Applicant's Supplementary Submissions on Costs - Indemnity Costs paragraph 19) and the respondent (Respondent's Submissions on Costs paragraphs 93 and 94). At the same time, the applicant's requests of the respondent that it narrow the prior art information it was going to rely on at trial were quite reasonable and ultimately the respondent did so. The respondent's failure to do so in a more timely fashion is a matter I will take into account in considering the appropriate reduction in the respondent's costs. 24 With respect to the costs of the evidence not read (paragraphs 4 and 5), the applicant submitted that the respondent did not call three witnesses who had made statutory declarations or swore affidavits. The applicant was not advised that they would not be called until late in the respondent's case. The submission was that their evidence was unnecessary and it was repetitive of other evidence in the case. Those circumstances were said to justify the orders as to costs referred to in paragraphs 4 and 5 of the applicant's list of matters. 25 The persons in question are Russell John Cooper, George Barry Hubber and David Roy Packham. Each of those persons made or swore six statutory declarations or affidavits. I have perused those documents again. Each of them deals with relevant issues in the case including matters relevant to the industry generally before the priority date, items of prior art information and matters relevant to inventive step. The fact that a person who has prepared evidence is not called as a witness may mean that he or she was unnecessary right from the start or it may mean no more than that counsel has determined that the witness's evidence is no longer necessary perhaps because, in light of the way the trial has proceeded, the proposed evidence is unlikely to add anything to evidence already given. Of course, there might be other reasons and costs may be a factor. Here the evidence dealt with relevant issues and unless it can be said that it should not have been obtained in the first place I do not think the orders sought by the applicant are warranted. The applicant submits that the evidence was repetitive of other evidence in the case. That is true to a point and there is force in the applicant's submission. However, the decision as to how much evidence is sufficient on any particular point is a difficult one and I am not satisfied that this is such a clear case that the particular orders for costs sought by the applicant should be made (see Minnesota Mining and Manufacturing Co v Tyco Electronics Pty Ltd [2001] FCA 1624). 26 I should mention that there was a suggestion by the applicant that an affidavit of a Ms Hantos obtained by the respondent was unnecessary. I will not set out the details. It is sufficient for me to say that having regard to the circumstances in which that affidavit was obtained and then not read, I reject any suggestion that the affidavit was unnecessary. 27 The respondent correctly accepts that its costs ought to be reduced. Determining the appropriate reduction is not easy. The entitlement issue is to be the subject of a separate order and may be put to one side. To reflect the respondent's lack of success on the priority date issue, certain items of prior art information in the context of novelty, the Brown, Moores and Birkby article, other matters I have mentioned in the context of inventive step and the fact that it pleaded items of prior art information which it did not pursue, I would reduce the respondent's costs by 25 per cent. 28 I propose to make the orders set out in paragraph [8] above. However, before doing so I will hear the parties as to any matters relevant to the form of those orders. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.