Patents Act 1990 s. 223

Administrative Appeals Tribunal Act 1975 s.30(1A)

Re Textron Incorporated (1989) 13 IPR 1

Kimberly-Clark v Commissioner of Patents and Another (No. 3) [1988] FCA 421; (1988) 13 IPR 569

Henkle Kommanditgesellschaft Auf Aktien v Fina Research SA [1993] APO 33; (1993) 27 IPR 289

Amrad Corporation v Genentech Incorporated [1994] APO 17; (1994) 29 IPR 218

Re Sanyo Electric Company Limited and Commissioner of Patents (1996) 36 IPR 470

Re Weir Pumps Limited and Commissioner of Patents and Stork Pompen BV [1988] AATA 331; (1988) 13 IPR 163

30 September 1998 Mrs H. E. Hallowes, Senior Member

1. The applicant wants the decision of the delegate of the Commissioner of Patents ("the Commissioner") made on 17 March 1998 set aside pursuant to section 43 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act"). The delegate extended time under subsection 223(2) of the Patents Act 1990 ("the Act") within which International Business Machines Corporation ("IBM") may pay renewal fees. Subsection 223(2) provides:

(a) an error or omission by the person concerned or by his or her agent or attorney; or

(b) circumstances beyond the control of the person concerned;

a relevant act that is required to be done within a certain time is not, or cannot be, done within that time, the Commissioner may, on application made by the person concerned in accordance with the regulations, extend the time for doing the act.

The only issue between the parties is whether an "error or omission" occurred to trigger the Commissioner's discretion to extend time rather than the exercise of the discretion.

2. The Tribunal had before it the documents lodged pursuant to section 37 of the AAT Act ("the documents"). The applicant was represented at the hearing by Mr G. Halford, patent attorney. The Commissioner's legal representative advised the Tribunal, by letter dated 9 June 1998, that the Commissioner would submit to any Orders the Tribunal may make and that the Commissioner would not appear at the hearing. Following a request in writing, the Tribunal made an Order joining IBM as a party to the proceedings under subsection 30(1A) of the AAT Act. Mr F. Old, patent attorney, represented IBM at the hearing. No oral evidence was called. In fact, there was very little material before the Tribunal or the Commissioner's delegate on which to determine the matter. The facts are set out on page 2 of the reasons for decision of the delegate (T3), paragraphs 1 to 5 are not in dispute and are supported by the documents. The delegate found:

"1. Miki Aridome was responsible for monitoring due dates for patent maintenance fees in a number of countries in the Asia Pacific region including Australia.

2. On 12 March 1996 Ms Aridome informed John Holcombe by E-mail that a number of listed patent annuities including that for Australian patent 579156 were due in the following 3 months. She also indicated that because of the limited budget for those countries the patents would be allowed to lapse 'unless otherwise recommended'.

3. The IBM docket number for the present patent is BC984012 and is given in the list the PPM code 329. Mr Holcombe clearly was one of a number of PPM's in IBM responsible for making decisions about maintaining the listed patents and it is evident from the E-mail address details (Exhibit A to the declaration) that Mr Holcombe is identified by the code PPM300.

4. On 13 March 1996 Mr Holcombe replied "Please drop all PPM 300 listed dockets in Australia".

5. Ms Aridome on 23 April 1996 sent a facsimile to IBM's Australian patent attorney, Davies Collison Cave, indicating that a number of Australian patents including 579156 be abandoned."

3. Mr Old noted that section 223 of the Act and its predecessor, section 160 of the Patents Act 1952 have been available to correct what he referred to as "the inevitable gap between human aspiration and performance". By way of background he said that IBM had established a system of patent portfolio managers who each had available to them an electronic data base of relevant information about each member of each patent family in their care. Mr J. Holcombe was employed by IBM in June 1959 and held the position of patent portfolio manager ("PPM") from July 1989 through to his retirement in September 1996. It was the task of an administrator, in this case Ms M. Aridome, patent associate of IBM's Japan Intellectual Property Department, to issue instructions to the Australian patent attorney as to whether or not renewal fees should be paid. Australian Patent 579156 IBM docket No. BC984012 was due for renewal on 16 May 1996. The relevant fee needed to be paid by that date or by 16 November 1996 at an increased fee. No fee was paid and the patent was advertised as lapsed on 2 January 1997. On 17 February 1997 IBM filed an application under subsection 223(2) of the Act to extend the time within which to pay the renewal fee which led to the delegate making the decision on 17 March 1998 which is now before the Tribunal for review. The documents included an affidavit by Mr Holcombe who resides in the United States of America and who is now retired. Attached to both Mr Holcombe's affidavit dated 7 April 1997 (T5) and Ms Aridome's affidavit, dated 8 April 1997 (T6) were copies of Emails passing between them. At 1637 hours on 12 March 1996 Ms Aridome Emailed Mr Holcombe as well as other PPMs with respect to patent maintenance in Australia, New Zealand and Sri Lanka as follows:

"For the following dockets, whose annuity falling due in April, May and June in Australia/New Zealand/Sri Lanka, please overview and let us know if there is any reason to maintain some docket.

In view of limited budget for those countries, we will let all the dockets expire without paying annuity, unless otherwise recommended.

We appreciate your early reply. Especially for Messrs. Stanland, McGinnis, & Holcome, there are some dockets falling due in April. Please check on them as soon as possible. Sorry for the delay of our inquiry."

Most of the dockets were falling due in Australia and the docket with respect to which this Tribunal is concerned (BC984012) was falling due on 16 May 1996 as already indicated. At 1459 hours on 13 March 1996, Mr Holcombe Emailed Ms Aridome from San Jose saying "Please drop all PPM300 listed dockets in Australia".

4. In his affidavit Mr Holcombe deposed that Australian patent No. 579156 (IBM docket No. BC984012) was originally filed in the United States Patent and Trademark Office on July 13, 1984, the patent issuing on 20 September 1988. Applications were filed in approximately 19 other countries including Australia and patents were issued. IBM's International Property Law Department in Japan handles the maintenance of Australian patents. Worldwide royalties for the patents until 1 March 1996 totalled $US1,266,999 and $US996,215 during the month of March 1996. It was Mr Holcombe's responsibility to make decisions whether or not to maintain IBM patents in each country having maintenance fees, such as Australia. Mr Holcombe set out the normal procedure with respect to maintenance decisions which he followed in response to specific requests from the IBM Intellectual Property Law Department based on information related to the patent received by PPMs from various attorneys and business personnel throughout IBM. That information is "received in the IBM DOSSIER data base under the IBM docket number".

5. Mr Holcombe deposed that he does not recall his specific actions with respect to IBM docket No. BC984012. He normally made maintenance decisions in response to specific requests, having reviewed the IBM DOSSIER data base for each IBM patent under his responsibility. His normal practice was to maintain patents important to licensing negotiations or likely to become important to such negotiations. That is not what he did in this matter. The patent was not maintained in Australia but it is now suggested that it should have been. Mr Holcombe noted the exchange of Email already referred to. Mr Holcombe noted the IBM DOSSIER data base entry BC984012 which discloses that royalty payments had been received by IBM for the patent. In paragraph 8 of his affidavit he states:

"Had I seen the entry in the IBM DOSSIER data base for BC984012 when I reviewed the IBM Japan March 12, 1996 list, which entry "APPEARS In US PATENT ROYALTY LISTING" existed at that time, I would have maintained the IBM patent in Australia."

He surmised that due to his relocation from Tucson, Arizona to San Jose, California, which was a hectic period for him, he mistakenly departed from his normal practice. In fact, Mr Holcombe had inserted material into the data base on 4 March 1996 just nine days before he sent his Email to Ms Aridome. At the relevant time he was responsible for approximately 9000 documents.

6. Mr Old put to the Tribunal that Mr Holcombe's advice to Ms Aridome to drop all PPM300 dockets in Australia, represented aberrant behaviour constituting an error or omission by him such that the Commissioner's discretion to extend time is triggered. He described IBM as having a sophisticated system of paperless record keeping to enable decisions to be made and noted that Mr Holcombe replied to Ms Aridome's request in less than 48 hours during a hectic period for him. Mr Old referred the Tribunal to the decision of Deputy McDonald in Re Sanyo Electric Company Limited and Commissioner of Patents (1996) 36 IPR 470. In that application the Commissioner had refused to extend time, the delay being such that the public's interest in certainty with respect to a patent's status outweighed Sanyo's interest, even though no objections were lodged by another party. That is not the situation in this application. Deputy President McDonald found that there were errors enlivening the discretion under subsection 223(2) of the Act having regard to the scope and purpose of the Act. The Commissioner conceded that errors had occurred. In this application, the applicant does not accept that an error occurred and the Tribunal is not concerned with the exercise of the discretion but rather whether it is triggered in the first place.

7. Having explained IBM's system, Mr Old said that he was in a dilemma as to why this matter had "gone off the rails" but, if Mr Holcombe had looked at the IBM DOSSIER data base it was his contention that Mr Holcombe had explained what he could have done. He would have seen that the docket had some royalty bearing aspects as a result of the message inserted into the data base on 15 March 1996. In his affidavit Mr Holcombe noted the royalties (see paragraph 4 above). Mr Old said that on 17 February 1997 it was discovered that the fee had not been paid and instructions were received "from our ashen-faced client" to do something about it although the IBM DOSSIER data base had recorded as far back as 10 June 1996 "Abandon in Australia with PPM's concurrence in 1996". The patent was advertised as lapsed on 2 January 1997.

8. Mr Old put to the Tribunal that the applicant had introduced no evidence to rebut what he was putting to the Tribunal on behalf of IBM. He sought assistance from the decision of the House of Lords in Re Textron Incorporated (1989) 13 IPR 1 where the corporate owner of a patent had set up a system, although errors may have occurred when individual employees made mistakes. The "corporate mind" finished its work although an employee may then make a mistake, a circumstance the company could not control. Mr Old put to the Tribunal that IBM had a system in place with respect to renewal fees but something went wrong with the operation of the system.

9. Mr Halford submitted that time should not have been extended in this application as no error or omission had been established by IBM; if a mistake was made it did not attract the operation of the discretion under section 223 as no mistake had been established and no causal connection "between any mistake and the non-payment of the renewal fee" had been made out. He put to the Tribunal that Mr Old's submissions with respect to what may have gone wrong were speculative and, in his words, the Tribunal was being asked to presume an error. Although Mr Holcombe had outlined "normal procedures" in his affidavit, Mr Halford suggested that the situation was not a normal one as Ms Aridome had advised that there was a limited budget for Australian renewals and he put to the Tribunal that the documents support a finding that a considered decision had been made by Mr Holcombe to not renew the Australian patents. He pointed out that Mr Holcombe had a further two months within which to proffer his advice to Ms Aridome and that there would have then been a further six months within which the renewal fee could have been paid. It was Mr Halford's contention that there had been no error or omission if Mr Holcombe had departed from his normal practice by mistake. He suggested that it was unlikely that Mr Holcombe had "overlooked" consulting the data base and it was more likely that he had made a conscious decision not to refer to it. The entry in the data base on 4 March 1996 only referred to "US Patent Royalty Listing". It was only in relation to Australia that Mr Holcombe was providing his instructions to Japan. Sixty-one patents were involved. Mr Halford submitted that Mr Holcombe, as a person experienced in making decisions with respect to patent renewals, must have been conscious of the risks involved in not looking at the data base.

10. Mr Halford sought to rely on the decision of Jenkinson J in Kimberly-Clark v Commissioner of Patents [1988] FCA 421; (1988) 13 IPR 569 with respect to the phrase "error or omission" where His Honour said, at pages 579 and 580:

"...Further, the word 'error' is not easily assigned a clear meaning restricted by reference to one or several particular categories of flawed mental function. The attempt is likely to lead to the drawing of fine and often unrealistic distinctions. And some error of judgment by agents and attorneys may be as bizarre and as little to be anticipated as lapses of memory and accidental slips. Although the latter kinds of error may be those which the draftsman had principally in mind, I do not think the phrase 'error or omission' should be given by construction the restricted meaning which the delegate assigned, and accordingly I conclude that this ground of the application has been established.

I do not think that the conclusion I have reached reduces s 160(2)(a) to a mere general power of extension. By no means every judgement by 'the person concerned' or by 'his agent or attorney' which can be shown to have been mistaken will answer the description 'error or omission' in the ordinary meaning of those words, which in their context carry, in my opinion, a connotation of obviousness in error."

Mr Halford submitted that if Mr Holcombe had undertaken a calculated risk it could not have the connotation of an obvious error referred to by Jenkinson J. He urged the Tribunal not to so broadly the words "error or omission" such as to reduce the discretion under subsection 223(2) of the Act to a mere general power of extension. In any event, Mr Halford said Mr Holcombe had to make a decision with respect to the patents in question and his contended failure to consult the IBM DOSSIER data base was therefore not connected with his instruction to Ms Aridome to abandon the patents.

11. In hypothesising what may have been in Mr Holcombe's mind at the relevant time, and whether he formed an intention or deliberately made a policy decision, Mr Halford is doing no more than submitting what he suggested was flawed speculation on behalf of the respondent. Mr Halford suggested that the patents were doomed by Ms Aridome's reference to the limited budget. He noted the distinction drawn in decisions of the Commissioner between errors affecting the carrying out of parties' intentions and the consequences of deliberate decisions. He referred the Tribunal to the decisions of the Commissioner in Henkle Kommanditgesellschaft Auf Aktien v Fina Research SA [1993] APO 33; (1993) 27 IPR 289 and Amrad Corporation v Genentech Incorporated [1994] APO 17; (1994) 29 IPR 218. In both those matters an extension of time was sought within which to oppose patent applications, an intention to oppose having been formed and watches of data bases arranged although wrong data bases were chosen (not the situation here but the same provision applied). In Re Henkel there was found to be an error of judgement which prima facie constituted an error or omission on behalf of an agent. However, in deciding whether it was as a result of the error that notice of opposition was not filed, there was an absence of evidence to satisfy the decision-maker that the error prevented the filing of the notice of opposition. In Re Amrad there was a breakdown in procedure rather than a deliberate decision or policy and the necessary causal connection was found to exist. Further, in Re Weir Pumps Limited and Commissioner of Patents and Stork Pompen BV [1988] AATA 331; (1988) 13 IPR 163 at pages 166 and 7, Deputy President Bannon (as he then was) said:

"...As the supervising examiner of patents observed, it is due to a deliberate policy of Weir that it did not maintain a watch for pending patent applications or for their acceptance. I do not regard Weir's actions as falling within the phrase 'error or omission on the part of the person concerned' nor as involving 'circumstances beyond the control of the person concerned'."

12. Mr Old noted that some of the decisions referred to by Mr Halford were with respect to extending time within which to lodge opposition to a patent application. As Mr Old put it,

"...this is not an absolute, final, drop dead provision and that that is inextricably bound up with the question of weighing the interests of the parties and the public interest"

In this application the parties "live or die". The Tribunal is satisfied however that, as the same subsection applies, those applications may be of assistance to it in determining this matter. Mr Old also suggested that the Kimberly-Clark case was a highly unusual one under the old Act and the background to the case coloured its nature. He submitted that IBM had a suitable system. If Mr Holcombe had looked at the data base, he would have made the right decision but a decision had been made not to pay renewal fees.

13. The Tribunal finds that Mr Holcombe made an error and as a result of his error maintenance fees, an act to be done, were not paid in Australia. The decision under review should be affirmed as the discretion under subsection 223(2) of the Act is triggered. Mr Holcombe made an error in instructing Ms Aridome to drop all PPM300 listed documents. Mr Holcombe's affidavit provides the Tribunal with very little assistance in determining whether he made an error. He has no recall of his actions. He recorded a decision which, to IBM, is an aberration although the applicant contends that Mr Holcombe made a conscious decision, not an error, and that IBM cannot seek to now have a "second bite at the cherry". Australia should remain abandoned.

14. The Tribunal is satisfied that there has been an unexpected failure of a servant to exercise due diligence when giving directions. There has been an unforseen and unexplained failure as far as IBM is concerned. There has not been a failure to act by Mr Holcombe but rather, on review, a flaw in his mental function in carrying out his intentions, which is an error made by him. The Tribunal is not satisfied that Mr Holcombe took a calculated risk in giving a direction to Ms Aridome. Normal practice would be to maintain patents attracting royalty payments. The error is obvious. Mr Holcombe "went off the rails" for reasons which are not clear to the Tribunal. Due to his move, he may have been under additional pressure at the relevant time. This conclusion does not place a restricted meaning on the phrase "error or omission", but it recognises human frailty and does not so broaden the meaning of "error or omission" as to make those words otiose. Whether or not Mr Holcombe looked at the data base before instructing that all PPM300 listed documents in Australia be dropped and whether or not he was unduly influenced by the terms of the Email he received from Ms Aridome, his error resulted from a faulty reflection which he now acknowledges although he cannot explain it. It was as a result of his instruction that the maintenance fees were not paid.

I certify that this and the ten (10) preceding pages are a true copy of the decision and reasons for decision herein of

Signed: .........Lou Coffey.......................................

For the Applicant Mr G. Halford, Patent Attorney, Halford & Co

Solicitor for the Respondent Australian Government Solicitor

For the Party Joined Mr F. Old, Patent Attorney, IBM