Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd

Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd - [2022] FCA 445 - FCA 2022 case summary — Zoe

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Introduction 1 There are two Interlocutory applications before the Court. 2 The first Interlocutory application is an Interlocutory application brought by the respondents in NSD 1089 of 2016. I will refer to this proceeding as the 2016 Proceeding. The respondents are Globaltech Corporation Pty Ltd and Globaltech Pty Ltd (together Globaltech). The applicants are Australian Mud Company Pty Ltd and Reflex Instruments Asia Pacific Pty Ltd (together AMC). In its Interlocutory application, Globaltech seeks the following order: 1. Proceedings No. NSD1089/2016 be stayed until all issues as to liability for patent infringement in Proceedings No. NSD1040/2019 have been determined (including any appeals therefrom in relation to the question of validity of Australian Standard Patent No. 2010200162). 3 The application for a stay is brought pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth). That section empowers the Court, in relation to matters in which it has jurisdiction, relevantly, to make orders of such kinds as the Court thinks appropriate. Section 23 is declaratory of the Court's power to order a stay of proceedings as an incident of its general power to control proceedings before the Court. 4 The second Interlocutory application is brought by Globaltech Corporation Pty Ltd in NSD 1040 of 2019. I will refer to this proceeding as the 2019 Proceeding. There are two other respondents in that proceeding and they are Boart Longyear Limited and Boart Longyear Australia Pty Ltd (together Boart Longyear) and Boart Longyear Australia Pty Ltd brings a cross-claim alleging that the relevant claims in the Patent are invalid on certain grounds. The applicants in the 2019 Proceeding are AMC. In the Interlocutory application, Globaltech seeks leave to file and serve a Further Amended Defence, a Notice of Cross-Claim, a Statement of Cross-Claim and Particulars of Invalidity to raise the same issue of invalidity of the relevant claims in the Patent as is already raised by Boart Longyear. The application is no longer pressed by Globaltech and the outstanding issue is the costs of the application. AMC seeks its costs of the application. Globaltech submits that the costs of the application should be reserved or, in the alternative, there should be an order that costs be in the cause.

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A Brief Chronology 5 The 2016 Proceeding was commenced in mid-2016. In the proceeding, AMC alleged infringement of claims in Patent No 2010200162, titled "Core Sample Orientation" (the Patent) by Globaltech. The infringement claim was based on a claim that Globaltech's v3A, v3B and v5 Orifinder devices infringed claims in the Patent. Globaltech brought a cross-claim alleging that the relevant claims in the Patent were invalid. 6 AMC were successful in establishing infringement of claims in the Patent in the 2016 Proceeding and Globaltech's cross-claim alleging invalidity of claims in the Patent was dismissed. The Court handed down reasons for judgment on 26 November 2018 (Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd [2018] FCA 1839; (2018) 138 IPR 33) and orders were made by the Court on 14 December 2018 to take effect on 23 January 2019. AMC's claim for an assessment of damages or an account of profits remains to be determined. 7 An appeal by Globaltech to the Full Court of this Court was dismissed on 13 September 2019 (Globaltech Corporation Pty Ltd v Australian Mud Company Pty Ltd [2019] FCAFC 162; (2019) 145 IPR 39). 8 On 27 November 2019, AMC commenced the 2019 Proceeding claiming that Globaltech's UPIX or Orifinder v6 Tool infringed claims in the Patent. 9 Globaltech's application for special leave to appeal from the judgment of the Full Court of this Court in the 2016 Proceeding was dismissed by the High Court in March 2020. 10 In February 2020, Boart Longyear Australia Pty Ltd filed a cross-claim in the 2019 Proceeding (the Boart Longyear Cross-Claim) alleging that the Patent was invalid. The basis of the cross-claim alleging invalidity of claims in the Patent is narrow. It is alleged that claims in the Patent are not fairly based on a provisional application relied on by AMC and that, therefore, the claims are not entitled to a priority date of 3 September 2004. A later priority date means, so Boart Longyear alleges, that the Patent is not novel, having regard to AMC's own Ace Core Tool which was introduced in Australia in October 2004. 11 By correspondence between 19 and 21 July 2021, an agreed position was reached between AMC and Globaltech that in the 2019 Proceeding, the latter could rely on a finding of invalidity should it be made in relation to the Boart Longyear Cross-Claim.

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The Stay Application 12 In the 2016 Proceeding, the parties have exchanged part of their evidence with respect to quantum. They did that in April 2021. AMC has not yet made an election between the remedies of damages or an account of profits. AMC's evidence on quantum is that it has a claim for damages for $18.4 million plus interest to April 2021 of $21.5 million. Globaltech's evidence on quantum relates to an account of profits should AMC elect to pursue that remedy. Globaltech's evidence is that an account of profits results in a figure of $3.3 million plus interest to June 2021 of $550,000. 13 It remains for each party to respond to the evidence of the other party and for the issues in dispute to be determined at a trial. Globaltech seeks a stay of that process. 14 The evidence establishes that Globaltech has negative net tangible assets. AMC points out that there is no cross-guarantee by Boart Longyear in relation to any judgment sum that may be entered in the 2016 Proceeding. Nor has Globaltech offered any security with respect to a judgment sum even of the amount it puts forward on an account of profits. As against these matters, Globaltech points out that it is trading and that it has paid AMC the substantial costs it has been ordered to pay to date in the 2016 Proceeding. 15 Globaltech's Interlocutory application in which it seeks a stay was filed on 13 May 2021. It is supported by an affidavit of its solicitor, Ms Leanne Michelle Oitmaa, sworn on 13 May 2021. AMC has filed an affidavit of its solicitor, Mr Christopher Edmund Duvall Williams, sworn on 8 June 2021, in opposition to Globaltech's application. Each party filed written submissions and made oral submissions. 16 The Court's power to stay proceedings is a wide one. It will be exercised having regard to the interests of justice in the particular circumstances of the case. The fact of other proceedings and the issues raised in those proceedings may be relevant to whether a stay is granted. The power may be exercised because of the existence of other proceedings. Nevertheless, an important starting point is that AMC has judgment in its favour in a proceeding in which all appeal rights have been exhausted. Prima facie, it is entitled to proceed to enforce its judgment by, in this case, quantifying its loss and enforcing a resulting judgment sum.

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Analysis 17 Globaltech's argument in favour of a stay involves the following steps. 18 First, Globaltech submits that there is a reasonable prospect that the Boart Longyear Cross-Claim will succeed and the Court in the 2019 Proceeding will hold that the relevant claims in the Patent are invalid. As I have said, Boart Longyear's argument is that the invention in the Patent was anticipated by AMC's own Ace Core Tool and this argument directs attention to the priority date for the claims in the Patent. AMC's case, upheld in the 2016 Proceeding, is that the claims in the Patent are entitled to priority from the date of the Provisional Specification of AMC dated 3 September 2004. In the 2019 Proceeding, Boart Longyear asserts that this is not the case because the claims in the Patent are not fairly based on the Provisional Specification. Boart Longyear refers to the following passage in the Provisional Specification: According to a fifth aspect of the invention there is provided a method of providing an indication of the orientation of a core sample relative to a body of material from which the core sample has been extracted, the method comprising: drilling a core sample from a body of material with a core drill having an inner tube assembly; recording the orientation of the inner tube at predetermined time intervals with reference to an initial reference time during said drilling; recording the specific time interval beyond the reference time at which the core sample was separated from the body of material; removing the inner tube assembly and core sample contained therein from the body of material; and relating the recorded specific time to the recorded time intervals to obtain an indication of the orientation of the inner tube and consequently the core contained therein at the specific time interval. 19 The first claim in the Patent is as follows: A method of providing an indication of the orientation of a core sample relative to a body of material from which the core sample has been extracted, the method comprising: • drilling a core sample from a body of material with a core drill having an inner tube; • recording the orientation of the inner tube at predetermined time intervals during said drilling, the time intervals being referable to an initial reference time; • inputting the specific time beyond the reference time representative of when the core sample was separated from the body of material; • removing the inner tube, with the core sample held therein in fixed relation to it, from the body of material; and • relating the inputted specific time to the recorded time intervals to obtain an indication of the orientation of the inner tube and consequently the core contained therein at the specific time. 20 Boart Longyear's argument relates to the third integer in the claim and directs attention to the contrast between the third integer in the Provisional Specification - "recording the specific time interval beyond the reference time at which the core sample was separated from the body of material" - and the third integer in claim 1 of the Patent - "inputting the specific time beyond the reference time representative of when the core sample was separated from the body of material". 21 Boart Longyear points to the difference between recording or inputting a specific time beyond the reference time and recording or inputting a specific time interval beyond the reference time. Boart Longyear argues that the first claim in the Patent is wider than the fifth aspect of the invention as described in the Provisional Specification and, therefore, the claim is not fairly based on the Provisional Specification. 22 In the 2016 Proceeding, Globaltech argued, as part of its cross-claim alleging invalidity, that the claims in the Patent were not fairly based on the Provisional Specification. The arguments it advanced are referred to in the reasons for judgment at [334]-[349]. I rejected those arguments and, in the course of doing so, I noted the following (at [339]): Initially, Globaltech's case included an argument based on the fact that the word "interval" appears in the Provisional Application, but not in the Patent. However, that argument is no longer pressed. 23 Secondly, Globaltech points to the fact that AMC accepts that in the 2019 Proceeding, Globaltech is entitled to rely upon any finding of invalidity made on the Boart Longyear Cross-Claim. That is the basis upon which Globaltech Corporation Pty Ltd decided not to press its Interlocutory application in the 2019 Proceeding. 24 Thirdly, Globaltech submits that if the claims in the Patent are declared to be invalid in the 2019 Proceeding, then it will have a defence to the claim by AMC in the 2016 Proceeding for damages or for an account of profits. Globaltech submits that that result would follow from relief in the 2019 Proceeding that the Patent is, and always has been, invalid. Globaltech referred to the decision of the Supreme Court of the United Kingdom in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2013] RPC 29 (Virgin Atlantic Airways). In that case, Lord Sumption, with whom Lady Hale, Lord Clarke and Lord Carnwath agreed, said (at [32]): … Because of this mistake, the majority had no regard to the fact that the consequences of the patent's revocation had not been decided on the earlier occasion, and could not have been because it had not happened. As for the policy considerations, they were also wrong, as it seems to me, to suppose that the court would be rehearing on the enquiry the question of validity decided by the judgment on liability. The revocation of the patent was an act in rem which determined the status of the patent as against the world. It had been revoked by the authority which had granted it and must be treated as never having existed. Although the patent had been revoked on the ground of invalidity, the issue which the defendant wished to raise on the enquiry was not invalidity but revocation. The revocation would be decisive regardless of the ground on which it was ordered. 25 In other words, Globaltech submits that the revocation of the Patent by an order in the 2019 Proceeding would provide it with a defence to AMC's claim for damages or an account of profits in the 2016 Proceeding. It also submits that should a stay not be granted and AMC's claims in the 2016 Proceeding be transformed into a money judgment, there is uncertainty as to its ability to recover amounts paid should an order for revocation of the Patent be made in the 2019 Proceeding. Globaltech referred to the observations of Lord Sumption (at [36]): Once the enquiry is concluded, different considerations will arise. There will then be a final judgment for a liquidated sum. At common law, that judgment could be challenged on the ground that the patent had later been revoked or amended only by way of appeal, and then only if an appeal is still open. I doubt whether an implied statutory right to reopen it could be derived from the scheme of the Patents Act 1977, but that is a question which will have to await a case in which it arises. (See also Lord Neuberger at [67].) 26 There was some debate before me about the strength of the Boart Longyear Cross-Claim. The 2019 Proceeding has now gone to trial before another judge of the Court and judgment has been reserved. I am unable to make any precise assessment about the prospects of success of the cross-claim. On the one hand, it seems to me that the cross-claim is not hopeless. On the other hand, it is not irrelevant that it was not pursued in the 2016 Proceeding. 27 In summary, the arguments in favour of a stay are as follows. The trial in the 2019 Proceeding has now taken place and judgment has been reserved. A stay could be granted until judgment is delivered and any application for a further stay considered in light of the then circumstances. Globaltech may have a defence in the 2016 Proceeding in which case any further expenditure on responding experts' reports and a hearing in that proceeding may be wasted. There might be difficulties in Globaltech recovering any amounts it is entitled to recover should there be a judgment and payment in the 2016 Proceeding. 28 On the other hand, it appears from the evidence as to quantum filed to date that, on any view, AMC has a substantial claim for damages or an account of profits in the 2016 Proceeding and it should be noted that it has had to wait for a considerable period of time for any pecuniary relief in that proceeding. Those circumstances are in a context in which Globaltech has made no offer of security in terms of any amount which may ultimately be payable to AMC and there must be at least a question as to Globaltech's ability to meet a substantial judgment sum. Furthermore, Globaltech delayed between February 2020 and May 2021 in bringing an application for a stay. It was in February 2020 when Boart Longyear brought its cross-claim in the 2019 Proceeding. Relatedly, this is a case in which substantial steps have already been taken with a view to a hearing on damages or an account of profits. The taking of further steps may indicate that the dispute is quite a narrow one. Finally, there may be a substantial dispute between the parties as to whether the principles enunciated in Virgin Atlantic Airways apply in Australia in light of the differences between the statutory regime in this country and the statutory regime considered in that case. 29 In my opinion, the balance of the relevant factors does not favour a stay and it is important to come back to the fact that AMC has a judgment in the 2016 Proceeding after all appeal rights have been exhausted which it is entitled to enforce. 30 I refuse Globaltech's application for a stay of the 2016 Proceeding.

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