Lockwood Security Products Pty Ltd v Doric Products Pty Ltd

THE COURT 1 The High Court has remitted to this Court a number of matters, including the costs of the trial and the two appeals to Full Courts of this Court. 2 Doric commenced proceedings against Lockwood in 2000 pursuant to s 128 of the Patents Act 1990 (Cth), seeking relief for alleged unjustified threats by Lockwood of infringement proceedings in relation to a patent ('the Patent'). Lockwood cross-claimed alleging that Doric had infringed the Patent by the manufacture and sale of certain door lock products. Doric in turn cross-claimed against Lockwood alleging that the Patent was invalid and liable to be revoked on various grounds. 3 At first instance, on Lockwood's cross-claim, Hely J held that claims 1-6, 12-15, 20 and 30-32 of the Patent were infringed by the manufacture and sale of Doric's locks. On Doric's cross-claim, his Honour held that each of claims 1-32 was invalid and liable to be revoked for lack of fair basis. His Honour also held that claims 1-6, 12, 31 and 32 were not novel over certain prior art locks and were liable to be revoked on this basis. All other grounds of alleged invalidity relied upon by Doric before his Honour failed. These grounds included obviousness, insufficiency, lack of utility and lack of clarity or ambiguity in the claims: Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2001) 192 ALR 306. 4 Lockwood appealed to the first Full Court against the orders of Hely J, challenging his Honour's findings that claims 1-32 of the Patent were not fairly based and that claims 7, 8, 17, 22 and 23 had not been infringed. Lockwood's notice of appeal also initially put in issue Hely J's finding that claims 1-6, 12, 31 and 32 of the Patent were not novel, but this ground was not pressed. As such, from this point onwards, the position was that claims 1-6, 12, 31 and 32 were accepted to be invalid. Doric pressed two additional grounds of alleged invalidity by way of notice of contention before the Full Court, namely obviousness and insufficiency. All three members of the first Full Court upheld Hely J's finding that claims 1-32 were invalid for lack of fair basis. The grounds of obviousness and insufficiency were not determined; nor was Lockwood's appeal against the finding that claims 7, 8, 17, 22 and 23 were not infringed: Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2003) 56 IPR 479. 5 Lockwood then appealed to the High Court against the finding of lack of fair basis of claims 1-32. The High Court allowed the appeal: Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274. 6 Upon remitter we, sitting as a second Full Court, dealt with the remaining issues of obviousness and insufficiency and Lockwood's appeal against the finding that claims 7, 8, 17, 22 and 23 were not infringed. The Court found in favour of Doric on obviousness but rejected the insufficiency ground. On the issue of infringement, Lockwood's appeal failed and the finding of non-infringement of claims 7, 8, 17, 22 and 23 was upheld. In the result, the appeal was dismissed: Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2005) 226 ALR 70. 7 On further appeal by Lockwood to the High Court, the High Court overturned the finding of obviousness and allowed Lockwood's appeal ('the second High Court appeal'). The result was that claims 7-11, 13-30 and 33 of the Patent had survived all of the various challenges to validity raised by Doric, and, of those claims, claims 13, 14, 15, 20 and 30 had been found by Hely J to be infringed. Accordingly, the High Court issued an injunction restraining Doric from infringing the latter claims: Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) (2007) 235 ALR 202. 8 We have concluded that Lockwood should recover all of its costs, on a party and party basis, of the trial and the two Full Court appeals, but subject to a discount of 15 per cent on the costs of the trial and 20 per cent on the costs of the second Full Court appeal. We shall hereafter deal briefly with the written submissions which the parties have filed on the issue of costs. However, there is one major consideration. Lockwood was drawn into this protracted litigation in order to defend its patent. Doric does not suggest that the claims now held to be valid and infringed are commercially insignificant. The fact that those claims total five out of 32 in the Patent says nothing as to their true value for Lockwood. The great effort and expense put into 21 days of trial and appeals suggest that victory was a prize worth winning. Clearly, Lockwood has won it. 9 Typically of much modern patent litigation in Australia, this case involved many claims of a patent being attacked on different validity grounds, and disputes as to infringement. This was so even though the technology background was relatively straightforward. Each side was represented by leading specialist solicitors and counsel. Different judges, themselves experienced in litigation of this kind, reached different results. Having been entangled in this unpredictable and hazardous odyssey, the ultimately victorious party should not be subjected to a replay and penalised simply because it did not succeed on some of the issues which it legitimately raised in the context of complex patent litigation. 10 Doric submitted that Lockwood only succeeded because of an argument, said to have been raised for the first time in the second High Court appeal, that claim 13 involved an inventive step, distinct from claim 1, and that the extended forms of prior art information available under s 7(3) of the Patents Act applied differently in the case of claim 13. 11 However, argument at all levels revolved around two pieces of prior art: the old Lockwood 001 lock (a rim mounted lock) and storeroom locks (which were not rim mounted). The parties also accepted that the Patent contained broader claims (like claim 1) and narrower claims (like claim 13, which added integers (ix) and (x)). Claim 1 covered both rim mounted locks and locks that were not rim mounted. Claim 13 was confined to rim mounted locks. 12 The old Lockwood 001 plus integer (vi) represented at least one embodiment of many claims of the Patent, including claims 1 and 13. 13 Claim 1 and other broader claimswere held by Hely J to be not novel because they were anticipated by the storeroom locks. Lockwood did not challenge this finding further. Claim 1 and the other broader claims were accepted to be invalid. However, throughout the rest of the litigation, claim 13 and the other narrower claims were attacked because, Doric said, it was obvious to add integer (vi) to the old Lockwood 001 lock. This would also have been the case with claim 1, were it any longer in issue. 14 The High Court on the second appeal (at [154]) noted that Doric did not challenge Hely J's finding that storeroom locks containing integer (vi) were not part of common general knowledge. Their Honours said at [164]: 'None of [the skilled persons who gave evidence] contemporaneously regarded the information conveyed by the storeroom locks as relevant to that work [of resolving the "locked in" problem] and none of them possessed the solution in claim 13, despite their familiarity with one or other of the storeroom locks.' 15 Their Honours at [165] rejected the argument that the prior art base discussed at [164] (the traditional or s 7(2) information) could be 'displaced by constructing a prior art base for claim 13 by reference to the broader claim 1'. Their Honours continued: 'The facts here lead to the conclusion that the information conveyed by acts of sales of the storeroom locks, assessed by reference to the statutory test in s 7(3), does not qualify as s 7(3) information for inclusion in the prior art base for claim 13.' Their Honours went on to say at [166] that even if the information as to storeroom locks did come within s 7(3) it would not have satisfied the question posed by s 7(2), ie would the skilled person, considering that information, have regarded the invention in claim 13 as obvious. 16 Having been given an opportunity further to address the issue, both sides agreed, correctly as the High Court held, that a court could distinguish between a broad and narrow claim for the purpose of determining what might be regarded as relevant for s 7(3) purposes (at [139]). Presumably Doric would have also agreed to this proposition if it had been raised at any earlier stage of the litigation. Claim 13 was confined to rim mounted locks, and storeroom locks were not rim mounted. The conclusion, based on evidence of both inventive and uninventive experts, that storeroom locks would not qualify as 7(3) information for claim 13 was not surprising. Anyway, as mentioned above, the result would have been the same had the storeroom locks so qualified. 17 Doric further argued that it should receive an allowance on the question of the infringement of claim 7 and the novelty issues on claims 1-6, 12, 31 and 32. The latter were not pressed beyond the trial judgment and Doric says it warned Lockwood well before the trial. 18 Doric was successful in the second Full Court in establishing that it did not infringe claims 7, 8, 17, 22 and 23. That finding was not challenged in the second High Court appeal. Contrary to Lockwood's submissions, issues relating to infringement were the subject of substantial attention in the appeal and, it can be deduced, in argument before Hely J. Doric should have the benefit of its success on those issues. 19 We take account of the fact that Hely J apportioned the costs payable by reference to the issues before him. His Honour awarded Doric 75 per cent of its costs to reflect its success on infringement on fair basis and partial success on novelty. Of course, the success on fair basis was changed to failure in the first High Court appeal. The reduction of 25 per cent reflected Doric's lack of success on obviousness, some aspects of novelty and copying. Rather than make a separate costs order in Doric's favour in relation to infringement we would discount the costs awarded to Lockwood in respect of the hearing before Hely J by 15 per cent and those in respect of the second Full Court appeal by 20 per cent. 20 It is appropriate to order, under O 62 r 3 of the Federal Court Rules, that the costs be taxed and paid forthwith. Issues on liability have now been finally settled. 21 It is not now in dispute that the other matters remitted to us by the High Court, namely amendment, orders for delivery up, the issue of a s 19 certificate and damage or an account of profits, should be remitted to a single Judge of this Court. I certify that the preceding twenty one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Sundberg and Bennett.