Kimberly-Clark Ltd v Commissioner of Patents and Another

(10) Infringement proceedings cannot be brought in respect of an infringement committed:

(a) between the day on which the patent application lapses and the day on which it is restored; or

(b) between the day on which the patent ceases and the day on which it is restored.

4. There is no dispute between the parties as to the following facts which the Tribunal is satisfied are as follows:

(a) Patent number 592800, dated 29 May 1986, in favour of the applicant was sealed on 10 May 1990. On 29 May 1990 the patent ceased by application of s.143(a) of the Act because of the non-payment of the fourth annual renewal fee. If the fee had been paid before 29 November 1990, the patent would not have been taken to have expired as the result of a period of grace of six months allowed by the respondent for the payment of renewal fees. The respondent advertised the patent in the official journal as having ceased on 7 March 1991.

(b) On 7 September 1993 the applicant, through its Australian patent attorneys DCC, sought an extension of time under the provisions of s.223(2) of the Act in which to pay the renewal fee. On 2 August 1994 the respondent wrote to DCC informing them that, unless they wished to be heard in relation to the matter, the Commissioner would refuse the request for an extension of time as there was no supporting declaration filed (T15).

(c) A statutory declaration from Mr Yamada was then filed in support of the application for an extension of time (T12, p.44) stating that:

(i) his firm acted on behalf of the applicant in relation to the patent and that on 22 June 1990 he was instructed by the applicant, in writing, that his firm was to arrange a payment of the renewal fee which was due on 29 May 1990 but that, thereafter, the renewal fees were to be paid by CPA;

(ii) on 28 November 1990 DCC faxed his firm reminding it that the fee had been due for payment on 29 May 1990. In response to that reminder, Yamada notified DCC to take no action with respect to the payment of the renewal fee, since the annuity was to be paid by CPA London;

(iii) the message conveyed to DCC was erroneous, as the payment of renewal fees through CPA was not due to commence until 1991;

(iv) in August 1993 the applicant, Sanyo, informed Yamada that the patent had lapsed through non-payment of the renewal fee. Yamada wrote to DCC on 25 August 1993 to that effect and on or about 3 September 1993 Yamada instructed DCC to seek reinstatement of the patent, which occurred on 6 September 1993;

(v) it was always the patentees intention that the subject patent be kept in force by the payment of renewal fees and that it was the error of his firm in wrongly instructing DCC not to pay the 1990 fee, contrary to the instructions received from Sanyo on 22 June 1990, that caused the patent to lapse.

(c) On 22 September 1994 DCC was notified by the respondent (T11) that the Commissioner did not accept that there had been an error or omission occurring before the date on which the fee was originally due for payment (29 May 1990) and that, given the extension of time sought was for "the considerable period of 40 months", it was unlikely that the Commissioner would grant the extension of time.

(e) Following further correspondence, a hearing was conducted by the respondent on 16 January 1995. Following that hearing, the respondent arranged for an advertisement to appear in the Australian Official Journal of Patents of 2 March 1995 (see exh KL-5 to the affidavit of Mr Leslie), the purpose of which was to alert people who may be prejudicially affected if the patent was to be restored. On 5 July 1995 the Commissioner determined not to accede to the application for an extension of time. The reasons for refusing the extension of time are set out in the decision of the respondent at T3.

5. In addition to the above facts, the applicant relied on evidence contained in a number of affidavits. In his affidavit prepared for the purposes of this hearing, Mr Sugiyama stated (exh E) that, on 21 June 1990, Sanyo had instructed Yamada:

" . . . that although [Yamada] was to have the 1990 Australian annuity due on the patent paid by Davies Collison Cave, annuities from 1991 onwards would be paid by Computer Patent Annuities of the United Kingdom, a firm that specialises in paying annuities on patents."

". . . . Sanyo then instructed a firm of Japanese patent agents, NGB, to arrange for annuities from 1991 onwards to be paid by Computer Patent Annuities . . . ."

He also deposed that, having conducted a search of Sanyo's records, he was unable to find any subsequent correspondence sent by CPA to NGB and stated that at all times Sanyo relied on NGB to arrange for the timely payment of annuities on the patent. It was Mr Sugiyama's evidence that a list arranged by NGB recording annuities to be paid that year on Sanyo's behalf through CPA, showed the subject patent on the 1991 list and that there was a debit note from NGB to Sanyo for the payment of the annuity later in 1991. While in 1992 the patent appeared on the NGB list for proposed payment, apparently there was no debit note subsequently sent by NGB to Sanyo. Ordinarily this would lead to a query being raised by Sanyo of NGB, as it was Sanyo's ordinary practice in the absence of receipt of a debit note to query it with NGB, but the file did not reveal to Mr Sugiyama either any query from Sanyo or response from NGB. It was not until early in the second half of 1993 that Sanyo noticed that it had not received a debit note relating to payment of the 1993 annuity and raised a query with NGB. It was at that time that NGB advised Sanyo that the patent had lapsed in 1990. Upon learning of these events, Sanyo wrote to Yamada seeking an explanation and requesting Yamada to seek restoration of the patent in Australia.

6. Mr Sugiyama deposed that it had always been Sanyo's intention to keep the patent on foot and that similar patents had always been renewed by Sanyo in other countries. Mr Sugiyama deposed that officers of Sanyo were not aware of any person producing or selling in Australia any product which would, if the patent was reinstated, infringe the patent. Finally, he deposed that Sanyo had advertised in the Australian Official Journal of patents on 16 May 1996 (exh YS-3) that Sanyo had agreed to waive its right to oppose the grant of a compulsory licence pursuant to s.223(9) of the Act in the event that any party meeting the conditions of s.223 should make application for such compulsory licence within three months from the date of that notice.

7. In his affidavit, Mr Sato (exh A) acknowledged being made aware of two letters (dated 26 June 1991 and 29 May 1992) said to be sent from CPA to his firm concerning the lapsing of the above patent. He deposed that, in the event of an annuity being rejected, it was NGB's policy to forward details of the rejection of the renewal fee to the client and to request instructions. If no response was received to the initial inquiry, then reminders were sent every three months until instructions were received. Mr Sato deposed that he had performed an extensive search of NGB's files but had not been able to locate either of the letters from CPA in any of the files. It was Mr Sato's evidence that NGB would send Sanyo a list of patents for which it, as patent agent, was responsible and that the subject patent had appeared on the 1991 list. He also deposed that, in relation to the 1991 year, NGB had sent Sanyo a debit note for the payment of the 1991 annuity on the patent, that it was paid and that NGB at no stage raised a credit note on the payment, leading him to conclude that Sanyo would have no reason to believe that the 1991 annuity had not been paid on the patent. No debit notes were raised in either 1992 or 1993. In 1993, Sanyo queried NGB as to why no debit note was received for the patent. Mr Sato concluded:

" It is entirely possible that NGB did not inform Sanyo about the patent lapsing prior to 1993, or if attempts were made to notify Sanyo of the patent lapsing Sanyo never became aware of the patent lapsing."

He provided as possible explanations that documents may have been destroyed when NGB moved offices in 1993, or that NGB staff were so far behind in their work that they were unable to catch up with outstanding rejections, so that the rejections were never sent to Sanyo.

8. Mr Leslie in his affidavit (exh B) deposed that his firm had paid for the renewal of the patent until 1990, when they were informed by Yamada that they were not to pay the 1990 annuity because it was to be paid by CPA London. It was not until 25 August 1993 that his firm received a letter from Yamada advising that the patent had lapsed because the 1990 annuity had not been paid. His firm responded on 3 September 1993 to Yamada's inquiry and received instructions to apply for the reinstatement of the patent, which application was made on 6 September 1993.

9. In his affidavit (exh C), Mr Yamada conceded the error his firm had made in instructing DCC not to pay the 1990 annuity and stated that, thereafter, Yamada did not have any involvement with the patent from November 1990 until August 1993, because it understood the responsibility for paying the renewal fee had been transferred to CPA. In relation to the delay occurring after the lodgement of the application for extension of time (6 September 1993) and the provision of supporting evidence, Mr Yamada stated:

(a) It took some time to make enquiries of Sanyo, NGB and CPA in order to obtain details of what had occurred.

(b) During the period in question my firm received a number of reminders from Davies Collison Cave concerning the fact that evidence had to be lodged. My firm was, however, embarrassed about the error and its part in it. This embarrassment resulted in enquiries being carried out more slowly than may have otherwise been the case. This omission to act hastily, it should be stressed was only part of the reason the evidence took so long to gather. There were, as is stated above, significant enquiries to be made."

10. Mr Walker (exh D) deposed that it was CPA's principal business to pay annuities or renewal fees for patents throughout the world and that, to keep track of its obligations, it had a computerised system. His firm first received instructions on 11 June 1990 from NGB and those instructions were to pay the annuities in respect of the patent from 1991 onwards, with the first payment due on 29 May 1991. He said that he was notified by his firm's Australian agent, Griffith Hack and Company, that the patent had ceased on 26 April 1989, due to the failure of payment of a three year renewal fee. Mr Walker deposed that, on 26 June 1991, CPA wrote to NGB advising it that the patent had lapsed because of the non-payment of the 1990 annuity. Since no response was received to that letter, he wrote again on 29 May 1992. Again no response was received from NGB and, as a result, CPA deleted the case from its records. It seems that the notice sent by the respondent to Messrs Griffith Hack and Company (see exh RCW-2 to Mr Walker's affidavit) incorrectly notes the patent as ceasing on 26 April 1989. Mr Walker, in paragraph 8 of his affidavit, deposes that subsequent evidence (set out in exh RCW-6) correctly shows that the patent lapsed on 29 May 1990.

11. In his reasons for refusing the extension of time the Commissioner, inter alia, concluded:

" In the present case there is nothing to suggest that Sanyo had an adequate monitoring system in place such as would be reasonably expected as being commensurate with continuing interest in maintaining its rights in the patent. I therefore conclude that the period of over two years from July 1991 (by when Sanyo should have, and quite possibly did, become aware that the patent had ceased) to September 1993 (when Sanyo requested an extension of time) constitutes a delay in respect of which an adequate explanation has not been provided."

The Commissioner also found that, whilst there was legitimate reason for some delay in the lodging of the declaration after filing the application for extension of time, those reasons were not "commensurate with reasonable diligence in the context of a delay of the magnitude of over 11 months" (i.e. the 11 month period between the filing date of 6 September 1993 and the lodging of the requisite declaration in support). The Commissioner identified the exercise in which he was engaged as balancing between whether the delays were detrimental, or potentially detrimental, to the public interest, which involved consideration of what were the legitimate expectations of the public in circumstances where no action was taken to renew a patent, and protection of the interests of the patentee. He noted that there was a requirement that renewal fees were paid annually on the due date of the anniversary of the patent, that there was a six month period following the anniversary in which renewal fees plus a late filing fee could be utilised to renew the patent and that, thereafter, the patent was advertised as being ceased as at the anniversary that the renewal fee was due. He then turned to a discussion of time limits and, while noting that the powers under s.223(2) of the Act would always depend on the facts of each case, said:

" However, consequent upon what I have said above, even where it has been established that the reason for a failure for a renewal fee to be timely paid was because of 'an error or omission' or 'circumstances beyond control', it follows that:

(i) if a request for an extension of time is properly made within 6 to 12 months from the date of ceasing, the interests of the patentee will normally outweigh the interests of the public.

(ii) if a request for an extension of time is properly made within 12 to 24 months from the date of ceasing, the interests of the patentee will normally outweigh those of the public in the early part of that period but the balance of those interests will normally tend to equalise towards the end of that period.

(iii) if more than 24 months have elapsed from the date of ceasing until a request for an extension of time is properly made, the interests of the public will normally outweigh the interests of the patentee.

Although no person has opposed the present request for extension of time, it is still possible that some person could be prejudiced if the patent were to be restored. . . . ."

The Commissioner then concluded that he found the delays in the present case were not justified and that they weighed against the public interest, which was to ensure certainty as to the status of a patent. Accordingly, he refused to exercise his discretion to extend time.

12. A prerequisite to enliven consideration of whether or not a discretion to extend time should be granted is the existence of a number of errors. In this case the respondent concedes that errors have occurred. However, the respondent disputes that the discretion should be exercised in favour of the applicant. The respondent claims that Sanyo has not provided sufficient information as to the surrounding circumstances to permit a proper evaluation of its application to extend time. In particular, the respondent determined that the initial period at and immediately following the lapsing of the patent and a second period, from the time the application for an extension of time was lodged - on 7 September 1993 - to the filing of evidence in support of the application - on 1 September 1994, did not:

" . . . expose frankly, inter alia, all the conduct, knowledge, beliefs and mental processes of the applicant (or, in the case of corporation aggregate, of the relevant officers and other agents) relevant to an understanding of the way the failure to do the act or take the step occurred, or relevant to an evaluation of the reasonableness of that conduct. Whether or not the error or omission of the agent which enlivened the power occurred without moral fault on his part, the applicant's claim to the exercise of the power cannot be judged without the means of evaluating the applicant's moral claim to an indulgence which will, to some extent at least, work a prejudice to the efficient operation of what Bowen CJ in [Vangedal-Nielsen v Commissioner of Patents [1980] FCA 163; (1980) 33 ALR 144 at 150] called 'the system', even if no prejudice to the applicant for a patent."

(per Mr Justice Jenkinson in Kimberly-Clark Ltd v Commissioner of Patents and Another [1988] FCA 421; (1988) 84 ALR 685, at 698.

• The paucity of evidence contained in Mr Yamada's affidavit, which did not identify the individual employee within Yamada's organisation who was charged with the responsibility of ensuring the fee was paid.

• The fact that Mr Sato did not depose to personal knowledge of what had taken place and, again, no responsible officer within NGB was identified as having responsibility for looking after Sanyo's patent. Further, it was pointed out that Mr Sato's purported explanation that NGB had "virtually no documentation in relation to the patent at all" was unsatisfactory in that Mr Sato did not advance any evidence as to how NGB's filing system operated, nor of any other contact that NGB may have had with Sanyo relating to the patent. Finally, it was claimed that Mr Sato's evidence that the relevant files may have been lost during a move was speculative.

• With respect to Sanyo, the fact that Mr Sugiyama's evidence did not even record Sanyo as having the file concerning the patent. Mr Sugiyama did not say that there had been no correspondence between NGB and Sanyo relating to the patent, his affidavit being silent as to any correspondence or contact. Further, there was no attempt to identify any person at either NGB or Sanyo who may have either corresponded or spoken concerning the patent. Finally, Mr Sugiyama did not identify when Sanyo received the list from NGB with respect to its patents in 1992 which would have indicated the absence of a debit note and thus brought the matter to Sanyo's attention. Mr Sugiyama's "belief" that follow-up was done as the result of there being no debit note subsequent to NGB's 1992 list, nor a refund for the 1991 year, was vague, and there was no disclosure as to what material, if any, concerning the patent was on Sanyo's file.

14. The respondent submitted that the existence of provisions such as ss.223(9) and (10) of the Act, to protect parties who may legitimately exploit the patent during the lapsed period, should not be able to be used by Sanyo as justification for the decision-maker to extend time. It was submitted that there was a public interest in ensuring that the patent register was kept as current as possible and that simply because no third party was demonstrably affected by the delay was not sufficient to provide a ground for the grant of an extension of time.

15. From the above evidence, the Tribunal is satisfied as to the following:

(a) In November 1990, Yamada made an error when it instructed DCC that the patent renewal, due for payment on 29 May 1990, was to be paid by CPA. That, clearly, was not the arrangement and the six month period of grace allowed by the Commissioner for late payment expired without payment being made.

(b) CPA, upon learning of the lapse of the patent from their Australian agents, notified NGB by letter dated 26 June 1991 and, when no response was received, a follow-up letter was sent on 29 May 1992. According to the unchallenged evidence of Mr Sato of NGB, no trace of either of CPA's two letters could be found on NGB's files. It would seem unlikely that neither of CPA's letters reached NGB. The Tribunal is satisfied that it was more likely that at least one of CPA's letters, if not both, reached NGB and that it was/they were not processed at NGB's offices, so that NGB's policy of notifying the client was not implemented. Accordingly, Sanyo was not notified of the result of CPA's findings that the patent had lapsed. That this did not occur is an error committed by NGB and resulted in Sanyo's attention not being drawn to the lapsing of the patent for the period of 26 June 1991 to 29 May 1992.

(c) NGB's error is further compounded by it wrongly listing the patent, for which it was assuming responsibility in 1991, and raising a debit note for Sanyo's payment to NGB. This action would consequently confirm to Sanyo that payment had been made for the renewal of the patent in the period 29 May 1991 to 29 May 1992, when in fact no such action had been taken by NGB.

(d) It is reasonable to conclude, and the Tribunal does so conclude, that NGB made a further error in that in 1992/1993 it apparently took no action to notify Sanyo that NGB was no longer paying for the renewal of the patent. As extraordinary as it may be, it would seem to be the case that NGB simply let the patent "drop off" its list of responsibilities in 1992 without taking any specific action to draw to Sanyo's attention that NGB was no longer bearing responsibility for the payment of the renewal fee. This omission constitutes, in the Tribunal's opinion, a further error.

(e) With respect to the delay occurring after the lodgement of the application for an extension of time by DCC (6 September 1993) and the provision of supporting evidence from Yamada, unsatisfactory as it may seem, Mr Yamada's explanation that his firm was "embarrassed about the error" and therefore moved slowly in its efforts to rectify it itself constitutes an error (i.e. not proceeding expeditiously or an omission to proceed at all for a period or periods of time) on its part.

(f) Sanyo itself is not free from error in this matter. A more accurate accounting and record-keeping system may have brought to its attention the debit note of NGB in relation to the patent for the 1991 year whereas, in fact, that debit note should have been in favour of CPA. Further, the fact that the patent appeared on the list with a debit note from NGB for the 1991 year but that no debit note was raised in the 1992 year, should have alerted Sanyo to the fact that a problem existed earlier than occurred. Given, however, that Sanyo had instructed NGB to see to the payment of the renewal fee and, given the information provided by NGB in particular for the 1991 year indicating that the fee had been paid, the errors attributed to Sanyo are, in the Tribunal's view, a minor component in the course of events occurring between 1991 and 1993. Further, Sanyo has no responsibility for the delays incurred as the result of Yamada's lack of action in the period post-September, 1993. In the Tribunal's view, that Sanyo itself did not pick up notification of the cancellation of the patent in the official journal of 7 March 1991 (T19) is not an error which can be attributed to Sanyo, particularly in circumstances in which it had instructed Yamada to protect its interests. If anything, the fact that this was not picked up would be a further error attributed to Yamada.

It follows the Tribunal is satisfied that a number of errors occurred, enabling the provisions of s.223(2) of the Act to be enlivened.

16. The decisions of the courts concerning the approach to be taken to the exercise of a discretion to extend time are now well-established and include:

• in the absence of nominated factors against which the discretion is to be exercised, regard should be had to the "subject-matter, scope and purpose of the Act" - per Mr Justice Mason (as he then was) in Minister for Aboriginal Affairs and Another v Peko-Wallsend Limited and Others [1986] HCA 40; (1986) 162 CLR 24 at 39-40. A further exposition of this is provided by the comments of Mr Justice Davies in Chalk v Commissioner for Superannuation [1994] FCA 1063; (1994) 50 FCR 150 at 154 where he said ". . . the discretion should be exercised by reference to the words of the statute and the context within which the discretion is conferred";

• while the applicant has the burden of placing before the Tribunal the circumstances which it claims will justify the grant of an extension of time, that does not amount to a burden of proof and it is not appropriate that it should be so described (McDonald v Director-General of Social Security [1984] FCA 57; (1984) 1 FCR 354 per Mr Justice Woodward at 357 and Jenkinson J at 368-369, Australian Broadcasting Tribunal v Bond Corporation Holdings Ltd and Others (1989) 86 ALR 424 per Mr Justice Burchett at 432;

• it is "more important to consider the consequences of extending or refusing to extend time than to debate the reasons why the act was not done in time" (per Davies J in Chalk's case, at 156, with whom Chief Justice Black and Mr Justice Cooper agreed. Similar comments are to be found in Comcare v A'Hearn [1993] FCA 498; (1993) 119 ALR 85, particularly at 88);

• actions of the agent of a principal should not necessarily be regarded as being the actions of the principal (A'Hearn's case);

• a legislative provision providing for the exercise of a discretion to extend time is beneficial in nature and should be applied beneficially (Davies J in Chalk's case at 155).

The comments made by Jenkinson J in Kimberly-Clark's case (supra) arose in the context of the Court considering an application to extend time for the lodging of an objection to the grant of a patent under the then s.59(1)(d) of the Patents Act 1952 (Cth) - a context somewhat different from that under consideration by the Tribunal in the instant case. On the basis of that differing context Burchett J, in Ferocem Pty Ltd v Commissioner of Patents [1994] FCA 981; (1994) 49 FCR 205, distinguished the reasoning expressed in the Kimberly-Clark case cited in the passage quoted at paragraph 12 herein, and said that the Court:

" . . . was not laying down rules for the exercise of general discretions to grant extensions of time." (p.208)

For the same reason, the Tribunal does not regard Jenkinson J's comments on this point as being of relevance in the instant proceedings.

17. However, as the applicant through its counsel concedes, in addition to the interests of the applicant and of any person who may be disadvantaged as the result of exploitation of the technical information which would otherwise have been protected had the patent continued in force, there is a public interest consideration. It is clear that in a system which, as in the case of patents, relies on registration as the means of keeping the public informed, it is important that the state of the register be kept current. It follows that it is undesirable in the public interest for the register not to reflect the current status of a patent. At the same time it must be recognised that the legislature has determined that there will be exceptions to the general rule and s.223(2) of the Act provides such an exception. In the Tribunal's view, since the exercise of the discretion contained in that section is unconfined, it would not be the correct approach to adopt, without qualification, the proposition that the longer the period of time that has passed since the lapse of the patent, the less likelihood there will be of an applicant succeeding in having the discretion exercised favourably. Rather, the approach which should be taken is that it is undesirable in the public interest that the register should remain unrectified and in cases such as the instant one, where an applicant is seeking an extension of time to correct the register, the public interest would not be met if the applicant by its actions caused further or unnecessary delay in undertaking the required steps to have that rectification carried out at the earliest possible date.

18. In the circumstances of this case, the Tribunal is satisfied that the errors found by the Tribunal in sub-paragraph 15(a-e) (inclusive) are errors providing an explanation as to how the delay occurred. They are errors made by Sanyo's agents independently of any actions of Sanyo and the consequences of those errors leading to the patent lapsing should not be visited on Sanyo. The Tribunal does not regard the errors it attributes to Sanyo, as outlined in sub-paragraph 15(f) herein, as having caused further delay. Rather, they were errors arising from administrative malfunction, which itself did not cause the delay. In any event, as the Tribunal pointed out in sub-paragraph 15(f), those delays are so minor in nature that the Tribunal does not believe that they should result in the weight to be accorded to the public interest component to be such as to give rise to Sanyo being excluded from the exercise of a favourable discretion. There is no evidence of any third party seeking protection or compensation if the extension of time is granted, despite the advertisement in the official journal of 2 March 1995. Having regard to the totality of the circumstances, the Tribunal is of the view that, despite the considerable time that has elapsed, the discretion provided for in s.223(2) of the Act should be exercised in Sanyo's favour.

19. Accordingly, the decision under review should be set aside and the matter remitted to the respondent with a direction that the discretion should be exercised to extend time for the registration of the patent, pending the payment of the annual fees from 1990 to date.

I certify that this and the eighteen (18) preceding pages are a true copy of the decision and reasons for decision herein of Deputy President G.L. McDonald

Signed: .....................................................................................

Counsel for the Applicant Mr A. Chernov QC, Mr G. McGowan

Solicitor for the Respondent Australian Government Solicitor