EIS GmbH v LELO Oceania Pty Ltd

Relevant background facts 7 On 20 November 2023, EIS's solicitors indicated an intention to apply to the Court seeking orders for EIS to rely on experimental proof of fact pursuant to r 34.50(1) to establish infringement of various integers of the claims of the Patent, and they proposed certain consent orders. 8 On 22 November 2023, a Notice of Experiments was served on LELO's solicitors accompanied by a request that LELO's solicitors advise by 24 November if there was consent to the proposed consent orders provided on 20 November 2023. The original Notice of Experiments identified that the experiments would be conducted by Outerspace Design (Outerspace) between 27 November 2023 and 4 December 2023 in accordance with a protocol which was Annexure 1 to the Notice of Experiments (original experimental protocol). 9 By letter dated 23 November 2023, LELO's solicitors stated that LELO reserved its rights to argue that the results of the experiments are not relevant and made certain observations about the original experimental protocol. 10 By letter dated 27 November 2023, LELO's solicitors provided further comments on the proposed experiments and original experimental protocol which included a series of questions concerning the protocol. 11 By letter dated 30 November 2023, LELO's solicitors reserved LELO's rights to criticise the results of the experiments as being irrelevant or inaccurate to the extent that their detailed comments on the protocol were not taken into account and requested a proposed amended experimental protocol. 12 By letter dated 4 December 2023, LELO's solicitors advised that, with regard to the experimental evidence, it would be incorrect to inform the Court that the experimental protocol is agreed. 13 At the case management hearing before Nicholas J on 5 December 2023, senior counsel for LELO referred to the letter from LELO's solicitors dated 27 November 2023 and submitted that none of the specific comments and questions had been taken into account. 14 The original experimental protocol was amended on around 6 December 2023 (second experimental protocol) and provided to Mr Duff who, on 12 December 2023, affirmed an affidavit which identified concerns about the second experimental protocol (Duff 2). In Duff 2, Mr Duff commented on both the original experimental protocol and the second experimental protocol. 15 On 15 December 2023, EIS's solicitors provided another version of the Notice of Experiments and an experimental protocol. 16 At a case management hearing on 18 December 2023, senior counsel for LELO referred to the proposed complaints by LELO that the experiments are not relevant and would not produce accurate results, and referred to observations by Mr Duff in Duff 2. Senior counsel also referred to the fact that the other side had said that they had tried to fix the issues, but that it was not satisfactory. 17 By Order dated 18 December 2023, Nicholas J made certain orders which granted leave to the parties to tender as evidence at trial the conduct and results of the experiments to be conducted by Outerspace. The Order noted that the parties had agreed a proposed experimental protocol but also noted that LELO reserved its rights to submit at trial that the conduct and results of the experiments are not relevant or accurate for the reasons given in Duff 2. The Order noted that the experiments would be conducted between 29 January and 2 February 2024. 18 On 22 December 2023, LELO's solicitors gave notice that LELO proposed to submit that the experiments are irrelevant because the claims of the Patent require that the volume change is to be measured when a device is in use on the clitoris. 19 On 23 January 2024, EIS's solicitors provided an amended Notice of Experiments and amended experimental protocol to LELO's solicitors. The letter also stated that the experimental protocol contains a proviso that the "steps set out in this experimental protocol are subject to refinement by the professionals conducting the experiments" and that, after the experiments have been conducted, "we intend to apply to the Court to amend the Orders in relation to the Experimental Protocol, to formally set out any refinements made to the Experimental Protocol by Outerspace and the amendment set out above". 20 By letter dated 30 January 2024, LELO's solicitors responded: The conduct of the experiments is a matter for your client. … As you are aware, Mr Duff's affidavits provided comments on the experimental protocol as it stood before 12 December 2023. Since then, your client has made, and is continuing to make, changes to the protocol. Our clients do not intend to make any comments on these changes prior to or during the experiments. Mr Duff will attend the experiments to observe the experiments, together with junior counsel… Mr Duff's comments on the conduct of the experiments, including changes to the protocol since his affidavit dated 12 December 2023, and results thereof, will be addressed in a further affidavit in answer to your client's evidence on infringement. 21 The experimental testing was then performed by Outerspace from 31 January 2024 to 2 February 2024 for which it invoiced the parties the amount of $25,707.33. 22 Mr Duff, along with junior counsel for LELO, attended the Outerspace laboratory in Melbourne on 31 January, 1 February and 2 February 2024 to observe the experiments. LELO's junior counsel asked for measurements of length and width to be taken three times each given the inaccuracy in some of the measurements, but this request was denied. 23 Mr Duff formed the view that the experiments conducted by Outerspace were not conducted with the care, precision or equipment that he would have expected for professional experiments on the devices. On that basis, Mr Duff considered that the results of the experiments were neither reliable nor accurate. 24 Following the experiments, Mr Duff was requested by LELO's solicitors to conduct experiments on certain devices which he did in his laboratory in Suzhou, China on 22 and 29 February and 5 March 2024. The experiments were recorded on video. By his affidavit affirmed 13 June 2024 (Duff 7), Mr Duff explains as follows: 8. I was asked by Douros Jackson to attend and observe the experiments conducted at Outerspace in Melbourne early this year on behalf of LELO, as an independent expert (as I stated in paragraph 2 of my third affidavit). I was dissatisfied with the conduct of the experiments and the methodology, which led to errors and meant that the results would not be reliable or accurate (as I stated in paragraph 3 of my third affidavit). I expressed my views to the lawyers for LELO. I explain this in detail below. 9. Given my view that the Outerspace Experiments were inaccurate and unreliable, as I explained in paragraphs 3 and 4 of my third affidavit, I was asked to repeat the experiments in my laboratory at Armocon in Suzhou, China, on a Womanizer W100 and a Womanizer W500 (and other devices that are no longer relevant being the Satisfyer Pro 2, Satisfyer Number One and the Womanizer Pro 40). The details of the China Experiments conducted in February and March 2024 including the results of those experiments are provided in the annexures to my third affidavit dated 6 March 2024, and may also be observed in videos (paragraphs 6 and 7 of my third affidavit). 10. While the EIS experimental protocol was generally followed in the China Experiments, improvements were made to increase accuracy, including those listed in paragraph 8 of my third affidavit and described in detail below. 25 LELO did not apply to the Court for orders pursuant to r 34.50(1) prior to the experiments being conducted by Mr Duff in China. Mr Douros, one of the solicitors acting for LELO, explains at [32] of his affidavit sworn 6 May 2024 that: Given that the Respondents/Cross-claimants were required to file and serve evidence in chief on invalidity on or before 6 March 2024, it was not practical to give the Applicant/Cross-respondent notice of the experiments or seek the leave of the Court to conduct the experiments, but instead the Respondents/Cross-claimants proposed to offer to repeat the experiments as set out below. The experiments were conducted as a matter of urgency, within 5 weeks of the first set of experiments by Outerspace, including sourcing the devices to be tested and preparing for the experiments, and preparing and filing an affidavit. The final device for testing was only received the day before the date the evidence was due to be filed. 26 In Duff 7, Mr Duff stated: 138. As to paragraph 55, I was informed by Douros Jackson that the repeat of the experiments needed to be done within a very short time frame, by 6 March 2024. We worked extremely hard to meet this deadline, including testing and writing up a report on a device that was only received on 5 March 2024 (paragraph 5 of my third affidavit). I was also informed by Douros Jackson at the time that we did the China Experiments that LELO would offer to repeat the experiments in the presence of EIS representatives and any expert, but was later told that they did not take up the offer. 139. As to paragraph 57, Ms Lantis says that LELO did not provide a copy of any protocol that we followed, and that there were differences between the Outerspace Experiments and the China Experiments. As I have explained above, we followed the EIS experimental protocol, with the improvements listed in my third affidavit and explained in detail above. … 145. In paragraph 59, Ms Lantis says that "EIS was not provided with the opportunity to inspect the products that were the subject of testing". I am informed by Douros Jackson that devices identical to those tested in the China Experiments have been obtained and are available for inspection. 146. Further, in paragraphs 59 and 60, Ms Lantis suggests that the Womanizer tested in the Outerspace Experiments was different to the Womanizer tested in the China Experiments. 147. As I described in my first affidavit, I was familiar with the Womanizer device from about 2015 (first affidavit paragraphs 6 to 11). That Womanizer device was not retained, and the devices used in testing were located and provided by LELO. I am aware that any version of the Womanizer pre-dating April 2016 has been difficult to locate. 148. As I described in paragraph 11 of my first affidavit, the Womanizer device I saw in 2015 had two inter-connected sub-chambers. The Womanizer tested in the Outerspace Experiments (GTO-09 - noting GTO-09 A (nozzle on) and GTO-09 B (nozzle off)) was advertised on its packaging as Womanizer the Original. I understood it to be a replica of the original Womanizer W100. When the experiments were performed, it became clear that it had two interconnected sub-chambers, but the top chamber was angled. However, this would have affected only the width measurements, but not the length measurements, and would have increased the volume measurements. 149. By the time the China Experiments were performed, an original Womanizer W100 (not a replica) had been located and was delivered to me (paragraph 5 of my third affidavit). With the exception of the outlier measurements asterisked below…, the general coincidence of the results of the tests by Outerspace on the replica device and the results of the tests in China on the original device is consistent with my view that the difference in angle of the top chamber of the cavity did not affect the volume change ratio results. 150. The Womanizer W500 tested in the China Experiments was identical to the device tested in Melbourne. 151. I have been told by Douros Jackson that at a case management hearing on 7 May 2024, senior counsel for EIS stated at T5.34-36 that the accuracy of the experiments "appears to be a smokescreen because our friends only just came across a copy of the W100 that they wish to test. And so this is why this [the China Experiments] has all come about." That is not true. The China Experiments were performed because of the inaccuracy and unreliability of the Outerspace Experiments as I described in my third affidavit and above. 152. As to paragraph 61, I disagree with Ms Lantis that "EIS is unable to verify the accuracy and reliability of the results" of the China Experiments. The EIS experimental protocol was followed, with specified improvements to increase accuracy. Detailed reports were provided with my third affidavit and videos of the China Experiments are available to view. I would have expected these reports and videos to have been provided to Mr Payne or Ms Hayes for comment (the experts for EIS), if there was any issue with the professionalism or accuracy of the China experiments. However, no expert has suggested that the China experiments were not professional or accurate. I have addressed the criticism from Ms Lantis (who is not an expert). Therefore, the results of the China experiments do not appear to be in dispute. 153. Further, it would be surprising if the results of the China Experiments were in dispute because the volume measurements for the Womanizer taken by Outerspace and in the China Experiments (except the four outlier measurements) are in the same range. In my view, Outerspace was able to take more accurate measurements with the Womanizer than with the LELO Products, because the cavity of the Womanizer is made from hard plastic and the thick silicone nozzle is also relatively hard than whereas the cavity of the LELO Products is made from supersoft silicone which causes many issues that affect measurement (as I have explained above). 27 At a further case management hearing before Nicholas J on 7 March 2024, LELO's senior counsel proposed that, if the further experiments in China were objected to on the basis that they had not been performed in accordance with r 34.50(1) of the Federal Court Rules, they could be repeated in China. Nicholas J suggested that the experiments of Mr Duff might need to be repeated in China in the presence of EIS's expert. 28 By letter dated 7 March 2024, LELO's solicitors referred to this proposal. 29 By email from EIS's solicitors to the Associate to Nicholas J on 18 March 2024, EIS stated that it "does not propose that the experiments which Mr Duff gives evidence of in the Duff Affidavit [being Duff 3] should be repeated". 30 It remains to mention the following additional facts: (1) as already observed, the experiments performed by Mr Duff were recorded. The video recordings have been offered to EIS but EIS has not sought to view them; (2) LELO has offered to repeat the experiments which were conducted by Mr Duff, which offer was repeated at the case management hearing held before me on 7 May 2024 (T12/23) and again at the hearing on 25 June 2024 (T43/38-39). The dates that the experiments could be repeated are before 25 July 2024 or in the last two weeks of August 2024, provided two weeks' notice is given; (3) the trial of these proceedings is more than seven months away; (4) neither Mr Douros nor Mr Duff were cross-examined on their evidence as to the circumstances surrounding the reasons for deciding to perform the experiments in China, and nor was any submission made that their evidence ought not be accepted or why; (5) there was no evidence that, had LELO sought an extension of time to file its affidavit evidence or sought EIS's consent to orders pursuant to rule 34.50(1), this request would have been the subject of agreement by EIS; (6) Mr Duff is available for cross-examination at the trial; (7) both Mr Duff and Mr Brody Payne (from Outerspace) had the assistance of others while the respective experiments were performed; (8) LELO is not seeking a contribution from EIS in relation to the experiments which were performed in China or which are proposed to be performed again.

Consideration 31 EIS opposes leave being granted as is sought by LELO, primarily on the basis that it says that it will suffer prejudice both in prosecuting its infringement suit and in defending LELO's revocation suit. 32 I will deal with each of the submissions made by EIS in support of the claimed prejudice seriatim. 33 EIS submits that it would be at a forensic disadvantage in testing Duff 3 in cross-examination because it comprises conclusory statements in a short affidavit with a series of reports containing further conclusory statements about what occurred and, on that basis, it is not possible to properly test, verify and challenge that evidence. 34 However, if it is the case that Duff 3 or any report annexed to it comprises conclusory statements which do not comply with the Evidence Act 1995 (Cth), the Rules or the Expert Evidence Practice Note (GPN-EXPT), then EIS can object at trial. So much was accepted by the parties. 35 EIS submits that the testing was undertaken by Mr Duff's team of three people and there are no contemporaneous records from these three people. However, the testing undertaken by Mr Duff with others in the laboratory in China occurred in the same manner as was done by Outerspace. That is, Mr Payne was not the only person involved in the testing. Thus, the complaint that there are no contemporaneous records from the people other than Mr Duff who were involved in the testing in China rings hollow when EIS itself will rely upon the affidavits of Mr Payne which also do not contain contemporaneous records from the people who assisted him. In any event, if this is a proper basis to object to Mr Duff's evidence, then that objection can be taken at trial. 36 EIS complains that whilst video recordings are said to be available, such footage is "limited to what [Mr Duff's team] elected to film". However, EIS has never requested to see and so has not viewed the video footage of Mr Duff's testing such that any complaints about what the footage might contain are hypothetical only. This complaint is therefore without substance. 37 EIS complains that Duff 3 contains no clear experimental protocol said to have been followed by Mr Duff, much less one that EIS could comment on. However, Mr Duff identifies, by his evidence, the experimental protocol which he followed which was the same protocol which Outerspace followed, coupled with identified changes. In any event, even if there has been a failure by Mr Duff to identify the manner in which he carried out the experiments, that will have an impact on either the admissibility of his evidence about those experiments or alternatively the weight to be attached to that evidence. Those are matters for trial. 38 EIS raises specific concerns about the way that measurements were undertaken by Mr Duff. Those concerns are not raised through any expert witness but through a solicitor who acts for EIS and for that reason, carry little weight. I note that those expressed concerns are addressed by Mr Duff in Duff 7. In any event, if Mr Duff did not perform any measurements in a satisfactory manner, that is something which can be ventilated at trial. 39 EIS complains that no representative chosen by it attended the experiments performed by Mr Duff and that it therefore could not observe the experiments as they were conducted. However, there are two answers to this. One is that EIS can observe the manner in which Mr Duff performed the experiments by watching the video recordings (which it is yet to see and analyse) and the second is that it could accept the invitation by LELO to have the experiments repeated, as has been offered by LELO since March 2024. 40 EIS complains that Mr Duff is not an independent expert but is aligned with LELO and has an interest in LELO succeeding in this case. That is the subject of serious dispute. Once again, that is a matter that can be determined at trial, and it is not necessary that it be determined now (especially in the absence of cross-examination of Mr Duff). 41 EIS submits that it cannot inspect any of the products which were tested to check their authenticity and provenance as they were destroyed during testing. That is not the case: they were not destroyed and can be inspected, albeit not in their original state. Alternatively, the same types of products as those which were tested are available in undamaged form and can be inspected by EIS prior to any re-testing occurring. Once again, the complaint is without substance. 42 EIS raises concerns about the authenticity of the Womanizer W100 tested by Mr Duff. However, EIS can either inspect the Womanizer W100 which was tested by Mr Duff (albeit that it has been cut in the manner depicted by the photographs shown in Duff 3) or it can inspect a complete Womanizer W100 for the purposes of re-testing. Finally, any concerns about the authenticity of the Womanizer W100 which was tested by Mr Duff can be raised, and determined, at trial. 43 EIS submits that it will be prejudiced in prosecuting its infringement suit because Mr Duff did not test any of the LELO products. However, how this is relevant to the issue of whether LELO can seek to tender Duff 3 at trial is opaque. There is no obligation upon LELO to assist EIS to prove its infringement case. Further, if EIS wishes to maintain that the experiments performed by Outerspace were satisfactory and that Mr Duff's criticisms of them are unfounded (which appears to be the case), then it is unclear why Mr Duff either ought to have or should now test the LELO products. 44 EIS submits that LELO has not previously raised its "when used on the clitoris" argument. However, that specific argument was raised in the letter from LELO's solicitors dated 22 December 2023 referred to above. 45 EIS submits that the criticisms in Duff 3 were not notified in Duff 2 or while Mr Duff observed the experiments by Outerspace. However, leaving aside the multiple reservations of rights by LELO's solicitors and the content of the letter from LELO's solicitors dated 30 January 2024, the criticisms in Duff 3 concerning the manner in which the experiments were performed could not have been notified in Duff 2 because Duff 2 only addressed the original experimental protocol and the second experimental protocol, and it preceded subsequent amendments to the protocol and the experiments themselves. 46 As to the suggestion that Mr Duff ought to have raised his criticisms while observing the experiments, it is notable that Outerspace resisted performing a measurement again at the request of the junior counsel who attended the experiments. This tends to indicate that Outerspace was not receptive to receiving feedback from those who were observing and that it regarded its role as being to perform the testing in accordance with the experimental protocol under the observation of those who were present, and nothing more. 47 EIS submits that, had Mr Duff's criticisms been raised pursuant to r 34.50(1)(e), EIS would have had the opportunity to address them in the "agreed" protocol and avoid potential controversy, and that the "agreed" protocol was amended to address criticisms raised by LELO and in Duff 2. However, it is difficult to accept that there was an agreed experimental protocol when one reviews the correspondence which passed between the parties' solicitors, and the submissions to Nicholas J by LELO's senior counsel. In any event, EIS amended the experimental protocol after the Order of 18 December 2023 and accepted that leave of the Court was required for the amendments to be made. LELO did not agree to those amendments. It follows that the submission that LELO "agreed" to the experimental protocol which was used in the Outerspace experiments, and is now somehow prevented from being critical of it, is not correct. 48 EIS relies upon the fact that Mr Duff followed the experimental protocol with minor alterations and so LELO cannot now impugn that protocol. However, LELO maintains and indicates that it will maintain at trial that the experimental protocol was deficient and that the experiments conducted pursuant to that protocol were neither relevant nor accurate. If that submission fails, it will rely upon Mr Duff's experiments on the basis that they are more accurate. That is an acceptable course of action for it to take. Further, whether the experimental protocol was deficient is a matter which can be determined at trial and is not a matter which I would be able to resolve on this application, especially in circumstances where there is competing evidence relied upon by the parties through Mr Payne and Mr Duff (and those witnesses were not cross-examined). 49 EIS also submits that, having regard to evidence provided by Mr Duff in an affidavit filed on 7 June 2024, there was no basis for him to attest to certain facts in Duff 7 in support of his opinion that the testing performed by Outerspace was flawed. However, if that is so, then that is a matter which can be relied upon by EIS at trial to undermine Mr Duff's criticisms of the Outerspace testing. 50 EIS urges upon me that I should not dismiss the joint testing results by Outerspace and nor should I accept Mr Duff's criticisms of the experimental protocol or the experiments which were conducted by Outerspace. However, questions relating to the efficacy of the experimental protocol and whether the experiments conducted by Outerspace were satisfactory involve factual disputes, require the consideration of competing expert evidence and are matters for trial. Having said that and contrary to EIS's submissions, I do not agree that there are no real or substantial questions to be considered concerning the manner in which the experiments were conducted by Outerspace. The content of Duff 7 is sufficient to demonstrate that there are such questions to be considered. 51 EIS submits that LELO has not properly explained why its further testing was not conducted pursuant to an agreed protocol with leave of the Court and under EIS's supervision. It submits that the evidentiary timetable could have been further extended. However, LELO has provided an explanation as to the circumstances surrounding the further testing including why it did not approach the Court or EIS in relation to the further experiments before they were performed. That evidence was not challenged or contradicted, and I accept it. As to whether it is a proper explanation, I consider that it is. Having regard to the content of the correspondence which passed between the solicitors for the parties and the approach taken by EIS to this application, my view is that, even if EIS had been approached for its agreement to the further experiments being conducted by Mr Duff or for an extension of time for the evidence to be filed to enable the experiments to be performed, it is unlikely that EIS would have agreed to such an extension or to those experiments being performed. This is especially as there is no evidence from EIS to say that, had it been approached, it would have agreed. 52 EIS also submits that LELO has made no clear offer of substance to repeat the experiments under EIS's supervision. However, LELO made an offer on 7 March 2024 at a case management hearing before Nicholas J to repeat the experiments. That offer was repeated before me at a case management hearing held on 7 May 2024 and it was repeated again at the hearing of this application. 53 Finally, EIS submits that refusing leave would "accord with previous decisions of this Court involving analogous facts". The two decisions relied upon by EIS were as follows but which, for the following reasons, I do not regard as involving analogous facts to this case: (1) Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd [2013] FCA 226 (Jagot J) In this case, Jagot J refused leave under r 34.50 in circumstances where an affidavit was sought to be relied upon concerning certain experiments. Unlike this case, the applicant brought the application on the first day of the hearing. Further, the applicant in that case did not offer to repeat the experiments and there is no indication that the experiments conducted by the applicant's witness had been videoed. (2) Beadcrete Pty Ltd v Fei Yu trading as Jewels 4 Pools [2012] FCA 1091 (Jagot J) In this case, there was no explanation given by the party seeking leave as to why they did not seek orders pursuant to r 34.50 before carrying out the tests. Further, the experiments had the effect of destroying the samples.

Disposition 54 It follows from the above analysis that I am persuaded that LELO's application should succeed. 55 As LELO was successful in obtaining leave, costs should follow the event and EIS should pay LELO's costs. 56 For these reasons, the following orders will be made: (1) Pursuant to rule 34.50(2)(b) of the Federal Court Rules 2011 (Cth), the Respondents/Cross-claimants be granted 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. (2) The Applicant/Cross-respondent pay the costs of the Respondents/Cross-claimants of its application for the relief in Order 1. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes.

SCHEDULE OF PARTIES NSD 376 of 2023 Cross-Claimants Second Cross-Claimant: LELOI AB