REASONS FOR JUDGMENT
1 These reasons concern claims for costs by the First and Second Respondents/Cross Claimants, the University of Melbourne and Recaldent Pty Ltd ("the University parties") against the Applicant/First Cross Respondent and the Second to Fifth Cross Respondents ("the NSI parties") and the Sixth to Eighth Cross Respondents ("the Probiotec parties"). The claims arise from my judgment in this matter, given on 8 September 2006, in relation to a claim for unjustified threats, with cross claims as to infringement, invalidity and misleading conduct.
2 In my reasons for judgment I decided that the NSI parties had failed to make out a case of unjustified threats to take infringement action which had been brought under s 128 of the Patents Act 1990 (Cth). I also found that the Complex patent claims in suit were valid and that relief for infringement should be granted against the University parties. In reaching the conclusion that the claims were valid, I found that the patent did not lack novelty; that there had not been anticipation or public disclosure of the patent so as to invalidate it; and that the patent claims were not invalid because they did not involve an inventive step. I also rejected submissions that the patent was obtained by fraud for false suggestion or misrepresentation and that there was no fair basis for the claims or that there was a lack of clarity in the claims in suit.
3 In relation to the cross claim brought by the University parties against the NSI parties that they had engaged in misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) ("the TPA Act"), I found in favour of the NSI parties. In the case of one of the claims for misleading conduct, however, the NSI parties accepted that there had been misleading conduct.
4 I made orders on 17 November 2006 restraining the NSI parties and Probiotec parties from infringing the Complex patent, requiring delivery up of documents and materials and directing the removal of information from certain web sites. I also made a declaration that the NSI parties and Probiotec parties had infringed specified claims of the Complex patent and directed further discovery on the question of further relief. I did not then make any order as to costs.
5 On this application the University parties seek costs against the NSI parties and the Probiotec parties in respect of the claims and cross claims in the proceedings and in particular the claim for unjustified threats, the cross claim for patent infringement and patent invalidity and the cross claim for the breach of the TPA Act. They seek these costs on the basis that the First to Eighth Cross Respondents are jointly and severally liable for the costs incurred by the University parties.
6 On Monday 19 March 2007 I made unopposed orders against two of the NSI parties (the Second Cross Respondent, Topocal Pty Ltd, and the Fourth Cross Respondent, Pacific Biolink Pty Ltd) in relation the cross claims for infringement, revocation and unjustified threats. Those costs are not the subject of this judgment.
7 Although I received written submissions from the NSI parties, I am informed that they no longer have legal representation and, although aware of the hearing on 20 March 2007, they did not appear. I have nevertheless had regard to their written submissions, which only consider costs on the misleading conduct claims. The remaining questions in relation to costs concerning the NSI parties relate to the costs of the remaining misleading conduct claims.
8 In relation to the Probiotic parties, all questions of costs as sought against them remain in issue. Notwithstanding that relief has been granted against the Probiotec parties, they submit that they should not be liable for any costs. The essence of this submission derives from the contention of the Probiotec parties that they have taken no active part in any of the issues raised.
9 The Probiotec parties point out that the Applicant commenced proceedings against the University parties in July 2004, alleging that the University parties made wrongful threats of infringement of several claims in patents, including the Complex patent, and sought declarations and injunctive relief to restrain the making of further threats, and compensation or account of damages. In addition, the NSI parties made allegations of misleading and deceptive conduct in breach of the TPA Act and a similar claim under the Fair Trading Act 1987 (NSW) in respect of those threats. The Probiotec parties were not included in those claims.
10 In response to the NSI parties' claim, the University parties filed a cross claim alleging infringement of patents. The Probiotec parties and the NSI parties became the respondents to that cross claim.
11 The NSI parties retaliated by cross claim against the University parties, alleging that the patent claims were invalid. The Probiotec parties were not claimants in this cross claim, and now submit that they have at no stage been active protagonists in pursuit of any issues before the Court and have not added to the costs. The fact is, they say, they were passive in the proceeding in that they allowed the other parties to contest the issues. They also say that they have made all reasonable admissions and given all reasonable undertakings. They became involved in the proceeding by no choice of their own, and were drawn in as a consequence of the cross claim by the University parties.
12 The Probiotec parties were joined to the proceedings by the amended cross claim filed on 11 July 2005 and they informed the Court that they would give undertakings as agreed between the parties and, consequent upon that, they would not seek to take any further part in the proceedings. They informed the Court that the parties had already given inter partes undertakings which they proposed in due course to give to the Court. They say that as a result of these undertakings there is no good reason for the University parties to proceed with their claim against the Probiotec parties. When the hearing began on 28 November 2005, counsel informed the Court that the Probiotec parties appeared only for a purpose of giving an undertaking but reserving the position as to costs. Thereafter they did not take any active part in the proceeding.
13 Their case, therefore, is that they played only a peripheral role in the proceedings. Their joinder to the case was not necessary to resolve the real issues which had been resolved as far as they were concerned by their undertakings. The dispute, they say, was between the University parties and the NSI parties.
14 The relevant undertaking relied on by the Probiotec parties was given by a letter to the solicitor for the University parties dated 17 September 2004, and expressed in these terms:
'5. In light of the above, we have been instructed by each of the Companies to withdraw the open without admissions undertakings given by each of themand to give the following open without admissions undertakings:
(a) Until such time, if at all, there is a final judicial determination that one or more of Australian Patent Nos 746314, 670595 and 658794 ("the Patents") have not been infringed in the manner set out in the Amended Cross-Claim dated 18 August 2004 and filed in proceedings No. N1033 of 2004 by the manufacture, supply, offer for sale or sale of the current products, each of Probiotec Pharmaceuticals Pty Ltd, Probiotec Pty Ltd, Probiotec Nutritionals Pty Ltd, Probiotec (NSW) Pty Limited, Probiotec (Australia) Pty Ltd and Probiotec (Qld) Pty Ltd undertake, while one or more of the Patents remain in force, not to manufacture, supply, offer for sale or sell the current products.' (Emphasis added.)
15 The reference to "current products" is to those products in respect of which agreement had not been reached between the University parties and the Probiotec parties. The above submissions were supplemented by counsel for the Probiotec parties when the matter came on for hearing on the question of costs. Counsel noted that the Probiotec parties were never joined in the NSI parties' invalidity cross claim and did not provide independent particulars of invalidity in relation to the Complex patent. Counsel notes that the particulars only involved certain claims so that the thrust of the undertaking given was that the Probiotec parties would take no part in the revocation proceeding other than to file defences to the infringement cross claim, a discovery and to be heard on costs. The Probiotec parties thereafter repeated their reliance on the undertakings. They say the question of the Probiotec parties' infringement of the Complex patent was only formally denied when regard was had to their conduct. They say the claim brought against them was the manufacture of Phoscal products. This was traversed in their Defence, in which the Probiotic parties relied on the undertakings offered in its letter of 17 September 2004. They say that the manufacture was effectively admitted by them in paragraph 11 of their Defence. They contend that they only appeared at the trial to make admissions and that the question of infringement not asserted by them depended on resolution of the issue of validity as between the NSI parties and the University parties. They say that infringement turned only on the validity of the patent, having regard to their admissions, and that they played no part in making submissions on that point. They say they simply stood behind the NSI parties who were the only active participants.
16 Furthermore, the Probiotec parties argue that since they did not participate at the hearing and have proffered their undertaking they did not respond to the University's closing submissions. While they acknowledge that they filed separate Defences, the Probiotec parties emphasised that they did not provide any active contest and effectively had no representation in the course of the proceedings. They denied the infringement and resisted restraint by order of the Court.
17 The Probiotec parties point out that the University parties did not get a direction seeking to have Probiotec bound under O 5 r 12(2)(f) of the Federal Court Rules, which relates to the binding effect of a determination. Consequently, due to the fact that the Probiotec parties did not seek to participate in the validity proceedings, it would not be proper to regard them as parties. In my view, this argument has no force, having regard to the pleadings of the Probiotec parties on the issues of denial and non-infringement. The fact that they are prepared to conduct themselves in a certain way without admission is not sufficient.
18 The Probiotec parties say their "formal" defences to the infringement cross claim had no practical effect to the resolution of proceedings. They say that on its true construction the undertaking given was that they would not exploit the products until such time, if at all, there is a final judicial determination that they had not been infringed. Accordingly, this means that the effect of the undertaking is not just interlocutory, but rather final and perpetual.
19 Finally, the Probiotec parties say that the invalidity issue was not raised by them, but rather in the cross claim by the NSI parties. They contend that there is no evidentiary foundation for a conclusion that the NSI parties would have resolved their cross claim if the Probiotec parties had admitted the validity of the Complex patent, and that it cannot be said that the Probiotec parties kept the invalidity issue alive. They submit that their undertakings remained in force until a final judgment was handed down determining the claims had not been infringed. If the University parties had abandoned the proceedings, it would have been entitled to the benefit of the undertaking. This is said to illustrate that it was the controversy between the University parties and the NSI parties that kept the invalidity issue as a contested matter in the proceeding, and since the Probiotec parties were not "protagonists" in the determination of the invalidity claim no adverse cost order should be made.