Mizzi Family Holdings Pty Ltd v Morellini

BETWEEN: MIZZI FAMILY HOLDINGS PTY LTD (ACN 132 033 615)

JUDGE: DOWSETT J DATE: 1 august 2014 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 In these proceedings the applicant ("Mizzi") sought to establish that Mr Morellini ("Mr Morellini") had infringed its patent. He cross-claimed against Mizzi for a declaration of invalidity and against Mizzi and the second cross-respondent ("Mr Mizzi") for a declaration as to unjustifiable threats. I have concluded that Mr Morellini did not infringe the patent, the patent is valid and the applicant and Mr Mizzi made unjustifiable threats. Although Mr Morellini initially sought to establish that he suffered damage as a result of the unjustifiable threats, that claim has now been abandoned. Prima facie, the appropriate orders are therefore that: the claim be dismissed; there be an appropriate declaration as to the unjustifiable threats; and the cross-claim otherwise be dismissed. However Mizzi and, I assume Mr Mizzi submit that I ought not make a declaration as to the unjustifiable threats for reason that it "would mask the findings regarding the validity of the patent.". In support of that proposition the Mizzis submit that the finding as to unjustifiable threats was, "a corollary to the substantive finding with regard to validity and infringement.". That is no doubt true. It is then submitted that the claim of unjustifiable threats is, "a normal component of such an action where there is a contest concerning the validity of a patent.". My own experience does not suggest that a claim alleging unjustifiable threats is a common element of proceedings in which questions of infringement and validity arise. No doubt it occurs from time to time. In my view none of this is to the point. The fact is that Mizzi and Mr Mizzi made unjustifiable threats. There is some evidence that such threats had an adverse effect upon Mr Morellini in connection with his own device, although he no longer claims damages. In those circumstances I see no reason to deprive him of the benefit of a declaration establishing that the threats were unjustified. 2 The only other outstanding issue is the question of costs. The Mizzis submit that the majority of the evidence, both oral and written dealt with the question of validity, and that the evidence concerning infringement was "considerably less in scope and took much less time.". In those circumstances it is submitted that an appropriate order would be that Mr Morellini pay two-thirds of Mizzis' costs. It is said that this would "isolate" the costs associated with Mr Morellini's failed claim. 3 Mr Morellini submits that I should not depart from the general rule that costs follow the event. He submits that the cross-claim was defensive, that is a part of his defence against the claim of infringement. He also criticizes the Mizzis' conduct of the case, particularly as to infringement. Mr Morellini also submits that he should have the benefit of an order for an interim payment of costs, meaning that some part of the costs should be paid before the taxation process is completed. It seems that the English procedural rules provide for such an order. See Mars UK Ltd v Teknowledge Ltd [2000] FSR 138. In that case, Jacob J said, concerning such an order: I now turn to the second issue, whether or not there should be an order for interim payment. The first thing to do is to consider what the general rule should be, interim payment or not. There is no guidance given in the Rules other than that the court may order a payment on account. There is no guidance in the Practice Direction. So I approach the matter as a question of principle. Where a party has won and has got an order for costs the only reason that he does not get the money straightaway is because of the need for a detailed assessment. Nobody knows how much it should be. If the detailed assessment were carried out instantly he would get the order instantly. So the successful party is entitled to the money. In principle he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping him out of some of his costs that you need time to work out the total amount. A payment of some lesser amount which he will almost certainly collect is a closer approximation to justice. So I hold that where a party is successful the court should on a rough and ready basis also normally order an amount to be paid on account, the amount being a lesser sum than the likely full amount. This is likely to have practical advantages in another way. The motive for trying to prolong a detailed assessment, namely putting off the evil day when payment has to be made, will be considerably reduced when he who has to pay can only put off the evil day in respect of a considerably reduced sum. Moreover the whole point of the detailed assessment as a commercial matter may become less important with the result that there will be less detailed assessments than there used to be of taxations of costs. Thus I start from the proposition that there should be an interim payment in general. However, the court has a discretion. In exercising that discretion the court must take into account all the circumstances of the particular case. One of those is that the Defendant may wish to appeal. Another is dealing with the case in a way which is proportionate to the financial position of each party, one of the matters which one must consider in allowing the overriding objective of enabling the court to deal with the cases justly. The overriding objective applies as much to the exercise of the costs discretion as to any other discretion given under the Rules. This is a case, for example, where there is a wealthy successful party and a financially weak unsuccessful party. That is one thing that should be taken into account. Other things that might be taken into account are the likelihood of an appeal or possibly successful appeal. For example, there may be a case in which a claimant is financially weak. Even if it succeeds there might be an appeal by the defendant and the claimant needs the money to respond to the appeal. That would be a particularly good reason for ordering a payment on account. 4 His Lordship's observations provide a persuasive case for the making of such orders. However, in Keller v LED Technologies Pty Ltd (No 2) [2010] FCAFC 160 at [80] the Full Court doubted whether this Court had jurisdiction to do so. Mr Morellini submits that the Court's attention was not drawn to s 43 of the Federal Court of Australia Act 1976 (the "Act") which confers a very broad discretion concerning the award of costs. However it is, in my view, most unlikely that the Court was not aware of that fact. He further submits that the section, "gives the advance payment of estimated costs, as a non-limiting example of the type of orders that the Court may make (see s 43(3)(h)(i))". However the "non-limiting example" applies only to proceedings for discovery. He also submits that, "r 40.28 of the Federal Court Rules 2011 (the "Rules") gives the taxing master the power to issue interim certificates of taxation.". That provision has nothing to do with the power of the Court to order payment of costs before they have been taxed. 5 The point made in Keller seems to have been that pursuant to O 62 r 4(7) of the Federal Court Rules then in force (the "former Rules"), a party was only entitled to recover his taxed costs. The Full Court appears to have inferred that in the absence of any express provision to the contrary, this rule suggested that the Court had no power to make an order for payment of costs which had not been taxed. 6 Even under the former Rules, I would have thought that O 62 r 4(2)(d) was wide enough to include an order for the interim (ie before taxation) payment of costs. In my view r 40.2 of the current Rules is also wide enough to include such an order. Further, to the extent that r 40.2 does not do so, rr 1.34 and 1.35 authorize departure from it. Of course it is not strictly correct to treat the Rules as "authorizing" the action of a Judge. The Rules indicate to the parties the way in which the Court's business will generally be conducted. Rules such as rr 1.34 and 1.35 reflect the fact that a Judge may choose to depart from that general approach. In any event, having regarding to the orders which I propose to make, an interim order would be neither appropriate nor possible. 7 As I have said the primary aspects of the case were the alleged infringement of the patent, the alleged invalidity of the patent and the allegation of unjustifiable threats. The major considerations at the trial and the aspects to which they related were: construction of the patent - all three issues; analysis of the prior art - validity; consideration of the infringing device - infringement and threats; and nature and effects of the threats - threats. Mizzi succeeded on the issue of validity, which issue involved questions of construction and consideration of the prior art. Mr Morellini succeeded on infringement and threats, which issues involved construction of the patent, consideration of the infringing device and the effect of the threats. Consideration of the prior art and examination of the infringing device took up most of the time at trial. Construction of the patent took up a significant, but lesser amount of time. Little time was taken up in considering the effects of the threats. 8 In some cases I would adopt an approach to the question of costs which, whilst being fair to both parties, would avoid the further cost of an expensive taxation. Such an approach would inevitably be at least partly intuitive. However it seems that in this case, the amounts involved by way of costs are substantial. In those circumstances I should not take an intuitive approach. The parties have a much greater understanding of the amounts attributable to the issues than have I. If an intuitive approach is to be taken, it should be taken by them. In the circumstances I order that the applicant pay the respondent's costs of and incidental to the claim, including reserved costs. I order that the cross-claimant pay the first cross-respondent's costs of the cross-claim, to the extent that such costs relate to the issue of the validity of the patent in suit, including reserved costs. I further order that the cross-respondents pay the cross-applicant's costs of the cross-claim, to the extent that such costs relate to the issue of unjustifiable threats, including reserved costs. These orders are based upon my understanding that Mr Mizzi was only interested in the claim of unjustifiable threats. 9 I shall make a declaration in the form identified by Mr Morellini, namely that: The threats made by the first and second cross-respondents of proceedings for infringement of Australian innovation patent AU2010100955 (the innovation patent) by: (a) causing to be published in Canegrowers Magazine on 5 April 2010 a notice of a patent application in the name of the first cross-respondent in respect of the Mizzi mound planter and an accompanying article by Terry Hurlock entitled "Infringement Danger"; (b) the second-respondent stating to Mr Charles Girgenti of Ingham Queensland in or about June 2011 that the Morellini device infringes the innovation patent and demanding that Mr Girgenti pay the first cross-respondent a royalty in respect of the infringement of the innovation patent by the use of the Morellini device, were unjustifiable. 10 The application and cross-application will otherwise be dismissed. I grant liberty to apply. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.