Old Digger Pty Ltd (formerly called SDS Digger Tools Pty Ltd) v Azuko Pty Ltd

The Patents 8 To understand the issues raised by the notices of motion it is necessary to refer tothe patents, and to the claims that have been declared to be infringed. 9 By way of background, the applicant, Old Digger Pty Ltd, and the first respondent, Azuko Pty Ltd (Azuko), are manufacturers of drilling equipment. Both parties supply their equipment to the mining and exploration industry in Australia, and compete with one another. Azuko trades as "Premier Rock Tools". 10 The inventions described in each of the patents in suit concern features of a down hole reverse circulation percussive hammer incorporating a face sampling drill bit. Hammers of this kind are used in the mining industry for exploratory drilling. The intended purpose of the hammers is to permit the collection of cuttings from the drill face which are of sufficient quality and quantity to permit reliable geological evaluation. At trial the applicant contended that the inventions claimed in the patents markedly improved the quality and quantity of sample recovery over other rock drilling arrangements that were known at the relevant priority dates. 11 The infringed claims of the SDS patent read: "1. A sacrificial transmission sleeve when used with a reverse circulation down hole hammer of the percussive type actuated by a fluid under pressure, including an outer sleeve, a drill bit retaining means held in the outer sleeve, and a drill bit retained in the retaining means and extending forwardly therefrom; the transmission sleeve comprising a body and an annular flange, the body having a first inner surface and a second outer surface, the diameter of the second outer surface being greater than that of outer sleeve and substantially the same as that of the drill bit, the transmission sleeve located near an end of the down hole hammer proximate the drill bit, the annular flange being of diameter substantially the same as the drill bit and extending from the body towards the drill bit, and the wear characteristics of the transmission sleeve being similar to that of the drill bit, whereby, in use, the transmission sleeve wears at a similar rate to the drill bit. … 3. A sacrificial transmission sleeve according to claim 1 or 2, wherein said transmission sleeve is clamped to said hammer between said outer sleeve and said drill bit retaining means. … 7. A reverse circulation down hole hammer of the percussive type actuated by a fluid under pressure comprising a drill bit retained by drill bit retaining means, the retaining means being held in an outer sleeve and a sacrificial transmission sleeve located longitudinally between the outer sleeve and the drill bit retaining means, the transmission sleeve comprising a body and an annular flange, the body having a first inner surface and a second outer surface, the diameter of the second outer surface being greater than that of outer sleeve and substantially the same as that of the drill bit, the transmission sleeve located near an end of the down hole hammer proximate the drill bit, the annular flange being of diameter substantially the same as the drill bit and extending from the body towards the drill bit, and the wear characteristics of the transmission sleeve being similar to that of the drill bit, whereby, in use, the transmission sleeve wears at a similar rate to the drill bit. … 9. A reverse circulation down hole hammer according to claim 7 or 8, wherein said transmission sleeve is clamped to said hammer between said outer sleeve and said drill bit retaining means."

12 The infringed claims in the Giehl patent read: "1. A drill bit assembly for in-the-hole hammer reverse circulation percussive drilling using air pressure to both drive the percussion hammer and clear cuttings, the bit having a plurality of outermost channels extending in direction parallel to the axis of the bit down the outer side of the bit and having a collection duct or ducts passing through the bit with its collection opening or openings through the face of the bit and an outlet at the axially aligned opposite end of the bit, and an outermost cover acting as a shroud which is located to engage against and extend around the outer side of the drill bit and form with the channels conduits which are shaped and positioned so that air flow to clear the cuttings will be directed by reason of passage through a one or more of the conduits directly at the periphery of the cutting face of the bit for subsequent passage across the face of the bit to the collection opening or openings of the collection duct or ducts through the face of the bit and such that substantially all of such directed air will flow through such collection opening or openings to the collection duct or ducts. … 4. A drill bit assembly substantially as described in the specification with reference to and as illustrated by the accompanying drawings. 5. A drill bit assembly as in any one of the preceding claims incorporated in an in-the-hole hammer reverse circulation percussive drill using air pressure to both drive the percussion hammer and clear cuttings and such that air flow to clear the cuttings from the face of the bit will be directed by reason of passage through a respective one of the conduits thereby directly at the periphery of the cutting face of the bit for subsequent passage across the face of the bit."

13 The feature of each of these claims which was of central importance to the cases mounted by the parties at trial in regard to the separate issues of infringement and revocation, was the "transmission sleeve" referred to in the SDS patent and the "shroud" referred to in the Giehl patent. It is convenient to use the expression "transmission sleeve" to include the Giehl "shroud". 14 It was not in dispute at trial that on the dates alleged in the particulars of infringement Azuko manufactured and distributed face sampling reverse circulation down hole hammers known as the Premium PR 5, the Premium PR 54 and the Premium 40 (the Premier tools) and that the second respondent, Seismic Supply International Pty Ltd, distributed and sold the Premier tools from its premises in Queensland. 15 In the case of the applicant's commercial embodiment of the invention described in the SDS patent and the Giehl patent, the transmission sleeve comprised a cylindrical metal sleeve that is clamped into position on the body of a down hole hammer proximate to the drill bit. Transmission sleeves are "sacrificial" items that wear in the course of drilling in the manner described in the judgment at first instance at 51 IPR 43, pars [11]-[26] and [41]. The Premier tools also incorporated a component similarly shaped to the applicant's transmission sleeve proximate to the drill bit. The respondents refer to this component as a "gauge sleeve". One issue in the infringement case was whether the gauge sleeve in the Premier tools constituted a "transmission sleeve"; the Court held that it did. 16 Whilst the transmission sleeve is the subject of claims 1 and 3 in the SDS patent, and the drill bit assembly which incorporates a transmission sleeve is the subject of claims 1 and 4 of the Giehl patent, claims 7 and 9 of the SDS patent and claim 5 of the Giehl patent claim an assembly that includes a down hole hammer. A transmission sleeve, as a stand alone item, is relatively inexpensive. On the other hand, down hole hammers are expensive items of mining equipment. The present notices of motion are prompted by the desire of the respondents to avoid monetary remedies that have regard to the manufacture and sale by them of the down hole hammer component of the Premier tools. They seek to advance the contention that monetary remedies should be limited to the manufacture and sale of transmission sleeves.

The Notice of Motion 17 When the notices of motion came on for hearing, leave was given to make the amendments sought in the second notice of motion. As amended, the notice of motion now before the Court reads: "1. That pursuant to Order 29 rule 2, the question of whether upon: (a) an enquiry as to damage suffered by the Applicant, or (b) an account for any profits made by the Respondents, as a result of the infringement of Australian Letters Patent 656274 (the 'Giehl Patent') and 638571 (the 'SDS Patent') in accordance with the orders of His Honour Justice von Doussa made on 28 June 2000 and on 19 September 2001, the account or the enquiry be limited: (c) in the case of the Giehl Patent, to the drill bit and outermost cover and any spare parts or consumables therefor that infringe the Giehl patent; (d) in the case of the SDS Patent, to sacrificial transmission sleeves or gauge sleeves and any spare parts or consumables therefore that infringe the SDS Patent, and be heard and tried prior to and separately from the taking of the account of profits or the enquiry as to damages. 2. Upon: (a) an enquiry as to damage suffered by the Applicant, or (b) an account for any profits made by the Respondents, as a result of the infringement of the Giehl Patent and the SDS Patent in accordance with the orders of His Honour Justice von Doussa made on 28 June 2000 and on 19 September 2001, the account or the enquiry be limited: (c) in the case of the Giehl Patent, to the drill bit and outermost cover and any spare parts or consumables therefor that infringe the Giehl patent; (d) in the case of the SDS Patent, to sacrificial transmission sleeves or gauge sleeves and any spare parts or consumables therefor that infringe the SDS Patent, or in the alternative, the orders made by His Honour Justice von Doussa on 28 June 2000 and on 19 September 2001 be varied so as to have the foregoing effect. 3. The Respondents be granted leave to re-open the Cross-Claim to revoke Australian Letters Patent 638571 [SDS Patent], in respect of claims 7, 8, 9, 10, 11, 12 and 14 thereof upon the grounds: (a) that the claims are not fairly based upon the matter described in the specification, in terms of s 40(3) of the Patents Act 1990; (b) that the claims do not define the invention which is described in the complete specification in terms of s 40(2)(b) of the Act; and (c) that the complete specification does not describe the invention fully. PARTICULARS 3.1 The complete specification admits that the reverse circulation down hole hammer of the percussive type actuated by a fluid under pressure was part of common general knowledge in the relevant art at the priority date. 3.2 The specification describes an improvement or alternative to a sacrificial compensating ring for use with such hammers, namely the 'sacrificial sleeve of the present invention' defined in claims 1 and dependent claims. 3.3 If, which the Respondents deny, claims 7-12 and 14 extend to include, and entitle the patentee to pecuniary remedies with respect to, hammers in addition to the sacrificial transmission sleeve of the invention then: 3.3.1 those claims travel beyond the matter described in the specification, 3.3.2 those claims do not define the invention described in the specification, and 3.3.3 the specification does not fully describe the invention. 3B The Respondents be granted leave to re-open the cross-claim to revoke Australian Letters Patent 656724 [Giehl Patent] in respect of claim 5 upon the grounds: (a) that claim 5 is not fairly based upon the matter described in the specification, in terms of s 40(3) of the Patents Act 1990; (b) that claim 5 does not define the invention which is described in the complete specification in terms of s 40(2)(b) of the Act; and (c) that the complete specification does not describe the invention fully. PARTICULARS 3B.1 The specification concerns a drill bit assembly for in-the-hole hammer reverse circulation percussive drilling. 3B.2 The specification describes an improvement being a drill bit assembly of a particular configuration consisting of a drill bit and an outermost cover acting as a shroud. 3B.3 If, which the Respondents deny, claim 5 extends to include and entitle the patentee to pecuniary remedies with respect to, hammers in addition to the drill bit assembly then, 3B3.1 those claims travel beyond the matter described in the specification, 3B3.2 those claims do not define the invention described in the specification, and 3B3.3 the specification does not fully describe the invention. 3C In the alternative, that the Respondents be granted leave to file a second Cross-Claim to revoke, (a) Australian Letters Patent 638571 in respect of claims 7, 8, 9, 10, 11, 12 and 14, and (b) Australian Letters Patent 656724 on the grounds respectively set out in paragraphs 3 and 3B1."

18 Only pars 3, 3B and 3C of the notice of motion now falls for determination, but the claims in pars 1 and 2 reflect an alternative position anticipated by the respondents (the respondents' alternative position) in the event that they fail to obtain an order under pars 3, 3B or 3C. That position is that, upon the proper application of the "hammer" claims in each of the patents, they do not extend so as to confer an entitlement to relief as broad as the hammers. 19 As is apparent from the terms of pars 3, 3B and 3C, the respondents now wish to argue that, if the impugned claims extend to include hammers, then the claims travel beyond the matter described in the complete specifications, and thus are not fairly based in terms of s 40(3) of the Patents Act 1990 (Cth). The grounds set out in pars 3 and 3B of the notice of motion also include insufficient description in terms of s 40(2)(a), and failure to define the invention in terms of s 40(2)(b) of the Patents Act. However, precisely the same point is intended to be made under each ground.

The Submissions 20 In support of pars 3, 3B and 3C of the notice of motion, the respondents submit that: · because of the way the case was run at first instance, the Court did not need to give separate attention to the "hammer" claims. The principal focus of the trial on infringement was whether the Premier bit, drive sub and gauge sleeve met the relevant integers;

· whilst the respondents in their particulars of objection and at trial raised a number of objections under s 40, including particulars that fell under each of the headings now sought to be raised - "sufficiency" under s 40(2)(a), "failure to define" under s 40(2)(b) and "fair basis" under s 40(3), all of which were rejected - the ground now sought to be raised relating to the entitlement to "hammer" claims was never raised;

· the present issue arises because the split trial of issues caused the parties to concentrate on whether the transmission sleeve met the relevant integers in claim 1 of each patent, and there was no need to draw a distinction between those claims and the "hammer" claims;

· whilst the respondents accept that, with the benefit of hindsight, they should have realised that the applicant would or might claim an entitlement to pecuniary relief in relation to the hammers, they misapprehended this possibility. That such a misapprehension is understandable is supported, so it is contended, by the next two submissions;

· the terms of the order made on 28 June 2000 are ambiguous about whether the hammer is included as part of the infringing Premier tools for which the respondents must now make amends;

· "… it seems fair to assume that the present issue is one which was not apparent either to the Applicant or to the Respondents until it arose some time after the making of the Court's orders on 28 June 2000, or at best on that date. If it was apparent to the Applicant at an earlier stage, it should have been made clear to the Respondents and to the Court": see respondents' written submissions par 31. The respondents' submissions emphasise that it appears that the first occasion on which the applicant anticipated its present position was at a directions hearing on 24 August 2001 when counsel for the applicant, in the course of discussion about directions for discovery relevant to remedies, said:

"… the first thing is we wish to take this opportunity to make it clear that our case on the inquiry will be that damages or profits are available to my client not only in relation to the shrouds or sleeves as they are called [transmission sleeves], but also on related apparatus and particularly the hammers, the efficacy of which your Honour recalls is enhanced by the shroud. That is the very reason why the Respondent chose to manufacture them. So we don't want any difficulties, your Honour, about the scope of discovery and so I take this opportunity, public as it is, to say that." The respondents argue that this statement by counsel strongly supports the position they now take;

· the respondents should now have the benefit of the opportunity to raise the issues identified in pars 3, 3B and 3C of the notice of motion by way of a cross-claim for revocation of the hammer claims;

· the preferable course would be for the Court to grant leave to file a further cross-claim to be the procedural vehicle for re-opening the question of revocation. Leave is sought to file a new cross-claim under FCR O 5, r 9(2);

· alternatively, as the judgment presently standing against the respondents is interlocutory, leave should be given under FCR O 35, r 7(2)(c) to set aside the judgment and re-open the cross-claim;

· as the respondents seek to have the patents revoked on different grounds from those advanced at trial, no question of issue estoppel would arise, nor would there be any question of conflict with the Court's judgment such that the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (Anshun) would arise. Whilst the respondents accept that it is undesirable as a matter of general principle for there to be a second cross-claim advancing new grounds of invalidity, this should be weighed against the "paramount consideration" of justice: Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 155;

· finally, the respondents contend that the patent is obviously bad on the grounds they now seek to advance, and it is in the public interest that the Court grant the orders sought as the patents confer statutory monopolies, being rights in rem.

21 The applicant opposes the orders sought by pars 3, 3B and 3C of the notice of motion. The applicant submits that: · there is no basis for finding that the respondents were, or could have been, under any misapprehension about the scope of the relief sought in the proceedings;

· the orders declaring and enjoining infringement of claims 7 and 9 of the SDS patent and claim 5 of the Giehl patent, and more particularly, the order which dismisses the cross-claim for revocation, are for relevant purposes final orders, not interlocutory orders;

· in law the respondents' application is misconceived as the orders sought are prevented by res judicata or estoppel (including Anshun estoppel). At law the Court has no discretion to allow the cross-claim at this stage to be re-opened;

· regardless of any misapprehension the respondents may have had as to the scope of the relief the applicants sought for infringement, the essential fact remains that it was at all times open to the respondents to challenge the validity of all claims of both patents, including on grounds under s 40, which they did. No change in law, or other circumstance has been identified by the respondents which would make it reasonable to allow them to advance another case for revocation under s 40;

· paragraphs 3, 3B and 3C of the notice of motion should be dismissed with indemnity costs.

Is it established that the respondents were, or could have been, under any misapprehension, as they allege? 22 The applicant has taken the Court on a journey through pre-trial correspondence, the pleadings and many versions of the respondents' particulars of objection, the evidence and submissions at trial, and events which followed. Parts of that material are referred to below. On that material I am satisfied that, not only should the respondents have appreciated during the trial that monetary remedies were sought in respect of the manufacture and sale of hammers, but also that the respondents did appreciate that fact. 23 In my opinion it is of considerable significance that no sworn evidence has been advanced from the respondents, or from the legal advisers who were acting for them during the trial, to say that they were under any misapprehension of the kind which the respondents have now instructed their counsel to assert from the bar table. Counsel for the respondents seeks to minimise the significance of the absence of sworn evidence as to misapprehension, arguing that if the applicant was concerned about that matter, the applicant should have applied to cross-examine the deponent of one of the affidavits filed by the respondents who was the solicitor and junior counsel for the respondents at trial. I reject this submission. The respondents are the parties asserting misapprehension and the onus is on them to establish it. They have chosen not to depose to the fact. The need to cross-examine the deponent therefore did not arise. 24 The considerable emphasis given in the respondents' submissions to the statement made by counsel for the applicant on 24 August 2001 is misplaced. Senior counsel who appeared for the respondents at trial, in the course of written submissions filed in Court on 22 June 2000, ahead of the orders of 28 June 2000 being made, said: "21 The respondents evidence deals with total sales of RC hammers, consumables and spares. However, the respondents contend that any damages or account of profits should take into account the fact that the Premier gauge sleeve is only a single component of the reverse circulation hammers produced by Premier. Therefore, any damages or profits payable should only be the damages or profits attributable to the use of the gauge sleeve and not the hammer as a whole. There must be an appropriate apportionment. See Dart Industries v Decor Corporation Pty Ltd 1991 33 FCR 397 at 407." I understand this submission to be a plain acknowledgement that the applicant was claiming monetary remedies in relation to the hammers. The statement made by counsel for the applicant on 24 August 2001, upon which the respondents rely, was, in my opinion, merely a reiteration of the position which had been well understood by the respondents long before 22 June 2000. 25 I do not consider that the terms of the order of 28 June 2000 contain any ambiguity about whether the hammer was included as part of the infringing product. In my opinion the terms of the order indicate that it was made on the basis that the hammer was part of the infringing product. I think this is clear from the first paragraph of the order which reads: "1.1 By manufacturing or arranging for or causing or authorising the manufacture of, distributing, keeping for sale, offering for sale and/or supply, and/or selling and/or supplying reverse circulation hammers, and any sacrificial transmission sleeves or gauge sleeves therefor, known or described or designated by the First Respondent as PR5, PR40, PR54, after 7 November, 1991 the First Respondent has infringed each and all of claims 1, 2, 3, 7, 8, 9, 13 and 14 of Australian Letters Patent 638571. [Hereafter in these Orders a reference to 'specified reverse circulation hammers' shall mean any reverse circulation hammer(s) known or described or designated by the First Respondent as a PR5, PR40, or PR54 model hammer.]" The definition of "specified reverse circulation hammers" is then used throughout the balance of the order. 26 I turn now to some of the earlier evidentiary material relied on by the applicant which, in my opinion, establishes that the respondents knew the scope of the remedies sought by the applicant even before the proceedings were issued. 27 A letter from the applicant's solicitors to each of the respondents dated 19 December 1996 asserted infringement of the SDS patent, including the hammer claims in claims 7 and 9. The letter is plain in its terms that the applicant sought remedies in respect of the Premier hammers. Subsequent correspondence between the parties included reference to claim 7 of the SDS patent and claim 5 of the Giehl patent. 28 The application, the first statement of claim, and the particulars of infringement, all pleaded infringement of the hammer claims. By way of example, the particulars of infringement specifically referred to the hammer claims, including claims 7 and 9 of the SDS patent, and alleged infringement by the first respondent by it manufacturing "reverse circulation hammers" as claimed in each and all of the relevant claims of the SDS patent, and by the second respondent by offering for sale "Premier PR54 and Premier PR40 reverse circulation hammers … which hammer falls within the scope of the relevant claims of (the SDS patent)". Later amendments to the applicant's pleadings made similar references to the hammer claims. 29 The respondents' defence, cross-claim and particulars of objection were first filed on 11 April 1997. The particulars of objection commenced by pleading that the invention as claimed in each of the claims of the SDS patent is not a manner of manufacture as required by s 18(1) of the Patents Act. The particulars plead that the alleged invention is constituted by a combination of integers which are not placed together in an inter-working relationship producing a new result. Each of the integers was known at the priority date or were mere workshop practice. Then follow particulars of disclosure contained in a number of earlier patent applications which relate to down hole hammers. 30 Letters from the respondents' solicitors to the applicant's solicitors dated 30 May 1997 and 16 June 1997 deal with discovery issues. In the first of those letters the respondents' solicitors raise the issue that each of their clients are in direct competition in the market for hammers and spare parts. The respondents' solicitors say: "Nearly all of the categories of confidential information above are relevant only to the issues of damages or the profit made by our clients. Very few relate to the issue of liability, namely, does our clients' hammer or gauge sleeve infringe your client's patents." The author of that letter, in his affidavit filed in opposition to the present notice of motion, does not assert that he was under any misapprehension at the time that letter was written. 31 Witness statements were filed by the applicant and respondents prior to the trial commencing. The principal witness for the applicant on infringement, Mr McGoggan, in his affidavit sworn on 16 April 1998, dealt specifically with the hammer claims at pars 26, 29-35, 68 and 77-78. He expressed the view that all the integers of the relevant hammer claims are present in the Premier tools. 32 In opening the case, counsel for the applicant referred specifically to the hammer claims, and the hammer claims were dealt with in the applicant's written submissions on infringement at the end of the trial. In his final address, counsel for the respondents, in dealing with the construction of the claims, referred specifically to claim 7 (one of the hammer claims) of the SDS patent: transcript pp 1677-1680, and 1684. 33 On the day judgment was delivered the public listed holding company of the second respondent made an announcement to the Australian Stock Exchange which included the statement: "The directors of Nautronix Ltd refer to the legal action brought against one of the Groups' subsidiary companies, Seismic Supply International Pty Ltd ("SSI") and an associated company Azuko Pty Ltd ("Azuko") alleging infringement of patents in respect of products, namely percussive hammers, manufactured by Azuko and distributed by SSI."

34 The recurring reference to hammers and to the hammer claims in this material, and par 21 of the respondents' submissions filed on 22 June 2000, does not support an inference that the respondents were under a misapprehension as to the scope of the monetary and other remedies which the applicant was seeking in respect of the infringements alleged by it. On the contrary, I think the inference from the material supports the opposite view. Absent any sworn evidence from the respondents or their legal advisers that they were under such a misapprehension, I have no hesitation in acting upon that inference to find that they were not under a misapprehension.

The cross-claim for revocation and s 40 issues 35 The defence and cross-claim filed on 11 April 1997 alleged that both the SDS patent and the Giehl patent were invalid for reason of the matters set out in the particulars of objections, and revocation of all claims in both patents was claimed. The particulars of objection pleaded in respect of both patents were that the specification did not sufficiently and fully describe the alleged invention and the method by which it was to be performed, and failed to define the invention claimed in the claims and each of them. Further, in respect of the SDS patent it was pleaded that "the claims" are not fairly based on the matters disclosed in the specification as lodged or the completed specification. In the case of the Giehl patent it was pleaded that "the claims and each of them" are not fairly based on the matters disclosed in the complete specification. Thus, the particulars of objection from the outset pleaded matters arising under s 40(2)(a) and (b) and under s 40(3) of the Patents Act (the s 40 grounds). A number of particulars of each of the pleadings were given. The particulars of objection in respect of the SDS patent were amended five times and in respect of the Giehl patent four times before trial, and those amendments in some respects dealt with the s 40 grounds. In particular, the fifth version of the SDS particulars of objection expanded the ground alleged under s 40(3). However, at no stage were the precise particulars which the respondents now wish to agitate pleaded. 36 The trial commenced on 8 March 1999, but was not completed in the allotted time by 25 March 1999. The hearing was adjourned until July 1999. On 27 April 1999 the respondents filed a sixth version of particulars of objections to the SDS patent and a fifth version of the particulars of objections to the Giehl patent. In these amendments certain grounds of objection relating to the s 40 grounds were abandoned. The s 40 grounds, insofar as they were still pressed, were dealt with in the final addresses. A finding was made that none of the grounds of objection, whether under s 40 or otherwise, were made out: see 51 IPR 43 at [209]-[215], [221]-[223] in relation to the grounds which relied on s 40. The formal order of the Court on 28 June 2000 was that the cross-claims for revocation of both patents be dismissed. That judgment was not disturbed on appeal.

Is the judgment dismissing the cross-claim a final judgment? 37 In my opinion the judgment that has been entered on the cross-claim is a final judgment dismissing the claim for revocation. 38 The proceedings for revocation were brought by way of cross-claim. This procedure is permitted by s 121 of the Patents Act, which uses the expression "counter-claim" to describe the proceedings for revocation. This is a convenient course to allow proceedings on separate causes of action to be heard together, as the issues likely to arise in a case to which s 121 has application will, to an extent at least, be common. The proceedings brought by way of cross-claim are nonetheless proceedings in their own right, and in that respect are no different to any other cross-claim or counter-claim: see Cairns, Australian Civil Procedure, 5th ed. 2002 at 207-208. The proceedings by way of cross-claim have been finally concluded by the entry of a judgment, and the cause of action asserted by the cross-claimant in the cross-claim has merged in the judgment. The claim for revocation is at an end between the parties. The Court has no power to set aside a final judgment which has been entered: Bailey v Marinoff (1971) 125 CLR 529. For this reason, FCR O 35, r 7(2)(c), which empowers the Court to set aside a judgment after it has been entered where the order is interlocutory, has no application. 39 Counsel for the respondents sought to persuade the Court to a contrary view by pointing out that the appeal to the Full Court was brought by leave, leave being necessary in the case of an interlocutory judgment: s 24(1A) of the Federal Court of Australia Act 1976 (Cth). In reply, counsel for the applicant referred to Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767. In that case the appellant sought to appeal to the High Court against orders made in the Full Court of the Federal Court which first, restrained the appellants from infringing copyright, and secondly, restrained the appellants from certain acts of importation. Both orders were for permanent injunctions. The Full Court had then ordered that if the respondents wished to pursue claims for damages they should file and serve on the appellants notice to that effect. Other orders were made as to the taking of further evidence and as to the settling of minutes to give effect to the Court's findings on matters arising under Trade Practice Act claims. Gibbs CJ, with whom Murphy and Wilson JJ agreed, at 767 said: "What is plain is that the judgment of that Court [the Full Court] comprised two orders which, viewed by themselves and apart from the rest of the judgment, were final orders, and one order which was plainly interlocutory. The result of the judgment as a whole was that some of the questions in issue in the case were determined and others were not. The question then is whether a judgment of that kind is a final judgment within the meaning of s 33(4) of the Federal Court of Australia Act, and s 35(3) of the Judiciary Act as they stood at the material time." Counsel for the applicant sought to rely on this passage as indicating that in a composite order of the kind in the present case, some of the individual orders can be final orders. Counsel suggested that a distinction is to be drawn between rules governing appeals, and rules governing the re-opening of those parts of a composite order that are final. It is to be noted, however, that the appeal to the High Court in Computer Edge Pty Ltd v Apple Computer Inc was held to be incompetent. Gibbs CJ at 768 said:

"… the question in the present case is whether the whole judgment finally determined, in a legal sense, all the rights of the parties that were at issue in these proceedings. And the answer is, plainly, that it did not, because it left undetermined the question whether any, and what, damages were payable …"

40 In my opinion Computer Edge Pty Ltd v Apple Computer Inc does not assist the applicant in the way counsel contended. Nor do I think that the case of the respondents is assisted by pointing out that the appeal to the Full Court was brought by leave. 41 The question is not whether some of the orders are final, but whether the judgment is final. This is clear from the reasons of Gibbs CJ. In the present case, by parity of reasoning the judgment on the applicant's application for remedies for infringement is not a final judgment. However, in my opinion the same reasoning indicates that the judgment on the respondents' cross-claim is a final judgment. That judgment dismissed the entire proceeding. No issue in the cross-claim is left undetermined. 42 In my opinion the order dismissing the cross-claim was not an order in respect of which leave to appeal was necessary. The cross-claim stood as a separate and distinct proceeding: see National Society for the Distribution of Electricity by Secondary Generators v Gibbs [1900] 2 Ch 280 at 287-288. Had they chosen, the respondents could have appealed as of right from the dismissal of the cross-claim, for example if they chose not to contest the finding of infringement. As it was, the respondents desired to attack the finding of infringement, and for that reason they required leave. 43 The respondents' application to re-open the cross-claim is, in substance, an application to set aside the judgment on the cross-claim so that the cause of action for revocation can be further agitated. For the reasons given, I consider the Court has no power to make such an order.

Should leave be given to issue another cross-claim? 44 The respondents rely on FCR O 5, r 9(2). Rule 9 provides: "(1) A respondent desiring to cross-claim after the directions hearing shall obtain all necessary directions at the directions hearing in relation to the cross-claim, including the time within which the cross-claim is to be filed. (2) A respondent who does not obtain directions pursuant to sub-rule (1) shall not cross-claim after the directions hearing without the leave of the Court." The respondents argue that the generality of this rule has the effect that no other relevant limitation on the number of cross-claims or their timing is imposed. I do not think it is necessary to decide whether the rule has so broad a meaning. 45 FCR O 5, r 9 has been held to be directory only: Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 at 334. In my opinion this recognises that the cross-claimant, apart from that rule, has other avenues to enforce causes of action which are open against an applicant. The causes of action can be enforced in separate proceedings. In this case, I think the essential question is whether the respondents now have the right to bring fresh proceedings seeking revocation on the new s 40 grounds, which in substance are based on the allegation that the hammer claims are not fairly based on the matter described in the respective complete specifications. If so, reasons of convenience would make it appropriate to do so by way of a fresh cross-claim. If not, then the adjectival directive in FCR O5, r 9 does not create a new substantive right to do so. 46 For the reasons just given, I consider the causes of action that were the subject of the cross-claim determined at trial have passed into final judgment. In Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502, Deane, Toohey and Gaudron JJ at 507 cited the following passage from Anshun: "The distinction between res judicata (in England called 'cause of action estoppel') and issue estoppel was expressed by Dixon J in Blair v Curran (1939) 62 CLR 464 at p 532 in these terms: 'in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order'."

47 The respondents contend that neither res judicata nor issue estoppel precludes them from bringing new proceedings for revocation, as the s 40 grounds now asserted constitute a new cause of action that was not determined at trial. In Chamberlain v Deputy Commissioner of Taxation, Deane, Toohey and Gaudron JJ also cited with approval at 508 a passage from the judgment of Brennan J in Anshun at 610 where his Honour said: "There is an imprecision in the meaning of the term cause of action, which is sometimes used to mean the facts which support a right to judgment … sometimes to mean a right which has been infringed … and sometimes to mean the substance of an action as distinct from its form ..." Whatever meaning is attached to the term "cause of action", I consider that the causes of action claimed in the cross-claim determined at trial included the causes of action which the respondents now seek to pursue.

48 Brennan J in Anshun went on to discuss in more detail the possible meanings of the term "cause of action". His Honour said at 611: "If cause of action is taken to mean a right, the rule is stated in terms of the passing of the right into judgment, and the rule precludes a party bound by the judgment from maintaining against another party bound by it any subsequent proceeding to recover a judgment giving a remedy to enforce or to compensate for an infringement of that right. The rule does not preclude litigation seeking a remedy to which a party is entitled in virtue of a different right from that which was first put in suit provided that the facts which support the right sued upon in the second action are not the same facts as those supporting the right which passed into the first judgment ..." In this case the right which the respondents sought to enforce by the cross-claim determined at trial was the right to have each of the SDS and Giehl patents revoked because the patents were invalid. That is precisely the right they once again seek to pursue. The right claimed in the cross-claim may have arisen by virtue of a number of grounds of invalidity, but the right, whatever the grounds and the number of them, was a right to have the patent revoked because it was invalid: see Chiron Corporation v Organon Teknika Ltd (No 6) [1994] FSR 448 (Chiron (No 6)) at 455. 49 However, even if this conclusion is wrong, and each ground of invalidity recognised by a provision in the Patents Act gives rise to a separate cause of action, and a separate right, the respondents are still confronted with the reality that the grounds of invalidity under ss 40(2)(a), 40(2)(b) and 40(3) were pleaded against each patent, and were determined adversely to the respondents at trial. Moreover, even if each ground of invalidity is recognised as a separate right, the proviso expressed by Brennan J in the above passage would apply. This gives rise to the same problem which the respondents confront if "cause of action" is taken to mean the facts which support a right to judgment. On that possible meaning of "cause of action" Brennan J at 611 said: "If cause of action is taken to mean the facts which support a right to judgment, the rule of res judicata bars an action for relief founded upon the same facts as those upon which an earlier judgment was recovered, though the right sued upon in the second action is different from the right which passed into or was negated by the earlier judgment." Here, the facts on which the new s 40 grounds are based are the same facts as the respondents relied on previously, namely the asserted failure of the completed specification to describe the invention fully, to end with a claim or claims defining the invention, and to make claims that are fairly based on the matter described in the specification. Admittedly, the respondents now seek to give attention to parts of the completed specifications that they did not rely on previously, but that is merely to place a different and new significance on precisely the same essential facts, namely the text of the completed specifications. On the same facts they now seek to advance different arguments, as the ones advanced at trial did not succeed.

50 If "cause of action" is taken to mean the substance of the action, as distinct from its form, I consider the respondents' position is no better. In Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406 at 418, Gummow J expressed the opinion that for the law of Australia it is most suitable to adopt this meaning of "cause of action". His Honour considered Sir William Brett MR in Brunsden v Humphrey (1884) 14 QBD 141 at 146 was directing attention to the substance of an action as distinct from its form by asking "whether the same sort of evidence would prove the plaintiff's case in the two actions". Here, as I have observed above, the new s 40 grounds which the respondents seek to pursue are based on the same facts which they relied upon at trial. The substance of the cross-claim pursued at trial was a comprehensive attack on the validity of the patents, including a number of particulars arising under ss 40(2)(a), 40(2)(b) and 40(3). The substance of the right or rights they now assert is the same as the right or rights asserted at trial. 51 In support of the contention that the validity of the patents, as between the parties to this litigation, is res judicata the applicant relies upon Shoe Machinery Company v Cutlan [1896] 1 Ch 667, Chiron (No 6), and the consideration of that decision in the Court of Appeal: Chiron Corporation v Organon Teknika Ltd (No 14) [1996] FSR 701 (Chiron (No 14)). 52 In Shoe Machinery Company v Cutlan, a patentee claimed damages for infringement and an injunction. The defendant denied the infringement, and also denied the validity of the patent, alleging amongst other things, that it had been anticipated by certain specifications. The Court upheld the validity of the patent but granted no injunction or damages on the ground that the evidence as to the alleged infringement was, under the circumstances, not admissible. In a second action between the same parties in respect of the same patent, the defendant again denied validity of the patent, alleging that it had been anticipated by certain specifications which were not known to the patentee until after judgment in the first action. Romer J held that the validity of the patent was res judicata, and that the judgment in the first action estopped the defendant from again denying the validity of the patent. Whilst the decision is based on res judicata, the applicant's opposition to the notice of motion is also supported by the following passage from Romer J's judgment at 672: "But a further point is now taken on behalf of the defendants. It is said that they are entitled in this action to retry the question of the validity of the patent because they have discovered fresh materials for impeaching it, fresh alleged anticipations, and are entitled to have the issue of validity retried on the footing of these further materials. In my opinion they are not so entitled. If they were held to be so entitled, I do not see how there could be any finality of the questions in an action as between parties such as these. According to this contention the defendant might try his case piecemeal. He might raise such objections as he thought convenient, and when he was defeated he might then raise other points at his leisure, and might in that way try the case piecemeal, and, so far as I can see, extend it over as long a period as he pleased. In my opinion the defendants are not entitled to do that. When the question of the validity of a patent is brought for trial by reason of the defendant's contesting that question, he is bound to put his whole case before the Court; and if he does not do so, then it is his own fault or his misfortune. He cannot be allowed to put part of his case, or to put his case in an incomplete manner. He is bound, when that question is raised, to search and find out all that he intends to rely upon in support of his contention that the patent is invalid."

53 The respondents acknowledge that Shoe Machinery Company v Cutlan is against them. However, they contend that observations from the Court of Appeal in Chiron (No 14), which in the result approved the Chiron (No 6), should be taken as the more modern approach, being one that concentrates upon the particular ground upon which the validity of a patent is upheld, rather than on the circumstance that the cross-claim for revocation was dismissed. 54 In the Chiron cases, earlier proceedings between the parties had resulted in certain claims of the patent in suit being held valid and infringed. However, the Judge further held that a licence agreement between the plaintiffs afforded the defendants a defence under s 44 of the Patents Act 1977 (UK). In the earlier proceedings the defendants had counter-claimed for revocation of the patent in suit on the grounds of lack of novelty and obviousness, relying, inter alia, on prior art relating to proteins of the Ross River virus. At trial the defendants withdrew their reliance on this prior art at the end of the plaintiffs' case. The plaintiffs removed the offending provision from the licence agreement, but failed in an attempt to amend their pleadings prior to the order being drawn up. Consequently, they issued fresh proceedings for patent infringement. The defendants served defences alleging that the patent was invalid, and relied upon the Ross River virus prior art. The plaintiffs applied to strike out the attack on the patent and claimed that the allegations of invalidity were res judicata. 55 Aldous J struck out the parts of the defence alleging invalidity of the patent in suit. He gave three reasons for doing so. The first and principal reason was on the ground of res judicata. His Lordship said in Chiron (No 6) at 455: "I believe that there can be no doubt as to what was the cause of action raised by the defendants in their counterclaims in the 1992 actions. There, the only allegation was that the patent was invalid for the reasons set out in the particulars of objections. Thus, the decision of the court that was sought was that the patent was invalid. That was decided in the plaintiffs' favour, with the exceptions to which I have referred. That is the matter which the defendants now wish to relitigate. I believe that they are precluded from so doing. The validity of the patent as decided is res judicata between the parties."

56 Aldous J went on to give his second reason at 456: "If I am wrong and the relevant cause of action is the validity of the patent on the ground of the Ross River virus prior art, I believe that the cause of action was raised and in effect decided. Thus, there is an absolute bar to the matter being relitigated. The validity of the patent based upon the Ross River virus prior art was pleaded in the 1992 actions. The plaintiffs adduced their evidence on the matter which was cross-examined. The defendants abandoned their case on the matter. Thus, the matter was considered by the court and abandoned before judgment." The respondents contend that Aldous J in this passage correctly addresses the question that must be answered, namely whether the particular ground of invalidity has been earlier tried. For the reasons given by Aldous J, he took the view in Chiron (No 6) that the particular ground of invalidity raised by the second defence had been part of the substance of the first trial. 57 The third reason given by Aldous J for striking out the defence, in effect, applied the Anshun principle. 58 The decision given by Aldous J came before the Court of Appeal in Chiron (No 14), not by way of appeal, but by way of an application to set aside leave to appeal against Chiron (No 6) that had been granted by a Full Court. The Court of Appeal (Sir Thomas Bingham MR and Roch and Saville LLJ) revoked the leave, but in doing so the members of the Court agreed that the defence had been correctly struck out by Aldous J. Sir Thomas Bingham MR did so principally for reasons akin to the Anshun principle. At 708 he said: "What, in my understanding, is not permissible is for a party with more than one cause of action or more than one ground of defence to advance one of them and then keep the others in reserve for a rainy day. That seems to me to be in effect what the defendants are seeking to do here … I find myself in complete agreement with the third reason in which the learned judge based himself. That does not mean that I disagree with his first two reasons, but simply that his third reason seems to me adequate to dispose of this application and indeed to be unassailable." The respondents rely on this passage as supporting the proposition that the Court should treat a particular ground of invalidity as one cause of action separate from other grounds of invalidity which constitute other causes of action. The respondents contend that in the present case they were not keeping the new s 40 grounds in reserve for a rainy day. They say they were under a misapprehension as to the extent of the applicant's claims against them. 59 Roch LJ at 709 said he was content to decide the matter as one of issue estoppel. The Ross River virus matter was one of the defendant's causes of action, and it had been specifically raised in the first action. 60 Saville LJ at 710 agreed that the leave to appeal should be set aside saying that he agreed with both of the judgments delivered by the other members of the Court. 61 The respondents point out that two members of the Court treated the Ross River virus matter as a cause of action. However, as the applicant points out, two Judges also did not disagree with the primary reason given by Aldous J, namely that the validity of the patent as decided is res judicata between the parties. 62 I do not think that the judgments of the Court of Appeal provide persuasive authority for the view that each separate ground of invalidity gives rise to a cause of action for revocation of a patent that can be pursued by separate action, where in earlier proceedings between the same parties a claim for revocation on other grounds has been dismissed. In my opinion the decision of Aldous J in Chiron (No 6), and the decision of Romer J in Shoe Machinery Company v Cutlan reflect a proper application of the res judicata principle. 63 In the present case, in my opinion the validity of the patents is res judicata, and the respondents are for that reason barred from bringing fresh proceedings, whether by way of cross-claim or otherwise, against the applicant seeking revocation. 64 If I am wrong in this conclusion, then I consider that such proceedings are barred by the principles of issue estoppel, or alternatively by Anshun estoppel. 65 On issue estoppel, I consider the judgment at trial on the cross-claim determined that the complete specification of each patent did not fail to meet the requirements of ss 40(2)(a), 40(2)(b) and s 40(3) of the Patents Act. This is a conclusion of mixed fact and law which was fundamental to the decision. The conclusion was legally indispensable to the decision: Blair v Curran (1939) 62 CLR 464 at 532. The proposed new cross-claim would seek to contest that conclusion. 66 In Anshun, the High Court endorsed the "extended principle" expressed by Wigram VC in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319. In their joint judgment Gibbs CJ, Mason and Aickin JJ re-formulated that principle at 602-603. Their Honours said: "… we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few."

67 In my opinion, it was unreasonable in the sense in which that expression is used in Anshun for the respondents not to raise the new s 40 grounds in their cross-claim at trial. This is not the kind of situation where the facts and issues raised by the cross-claim at trial were so remote from those in the principal claims that the application of the Anshun principle could be avoided: see Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 297-298. 68 Under the Anshun principle, the new s 40 grounds which the respondents now seek to advance could and should have been raised at trial. The new s 40 grounds simply involve different arguments based on the wording of the completed specifications that were in evidence at trial. Even if the respondents were under a misapprehension as to the extent of the remedies sought by the applicants, this provides no reason for not advancing the new s 40 grounds. No other reason for not advancing those grounds at trial has been put forward. 69 In Anshun Gibbs CJ, Mason and Aicken JJ at 603 went on to say: "It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment. In this respect the discussion in Brewer v Brewer is illuminating. There it was held that the wife's omission to plead matters which would have constituted a discretionary bar to her husband's suit for dissolution of marriage on the ground of adultery did not estop her from raising those matters in subsequent proceedings for maintenance. Fullagar J, with whom Dixon CJ agreed, said: 'In Hoysted's Case the Commissioner was not merely seeking to raise on the second appeal a point which he might have raised but had omitted to raise on the first appeal. He was seeking to raise a point which could not be decided in his favour consistently with the decision on the first appeal. The point had not been argued on the first appeal, and there was therefore no express decision on the point. But the Commissioner had allowed it to be assumed against him, and the assumption was fundamental to the decision in the sense that, if the assumption had not been made, the decision must have been different. As Somervell LJ said: - 'He was therefore seeking to obtain an order which was on the face of it and in form in direct conflict with the order which had been made previously'. The point in question had been 'the groundwork of the decision itself, though not then directly the point at issue' (per Coleridge J in Reg v Township of Hartington.' [references omitted]

70 In the present case I consider the new proceedings by the respondents would inevitably seek a judgment which would contradict or be inconsistent with the judgment in the earlier proceedings. The judgment at trial dismissed the cross-claim for revocation, and did so for the reason that invalidity was not made out. A judgment in subsequent proceedings that revoked the patent on the ground of invalidity would directly contradict the earlier judgment. Both proceedings would be between the same parties. There has been no change in the law in the meantime that could justify the inconsistent results. The first judgment would uphold the validity of the patent, the second would deny it. 71 If and insofar as the Anshun principle may allow an exception in the case of "special circumstances" (an exception which Brennan and Dawson JJ considered did not exist), there are no "special circumstances" deposed to in this case by the respondents. The excuse of misapprehension asserted on the respondents' behalf from the bar table as to why the new s 40 grounds were not advanced at trial, could provide no reason why the grounds of invalidity were not relied on at trial. 72 The respondents argue that this case falls outside the ordinary application of the Anshun principle as the validity of a patent is concerned because the grant of a patent creates rights in rem. In my opinion this fact, and the possibility that a third party might in other proceedings seek revocation of the patents on the new s 40 grounds, does not provide a basis for distinguishing the application of the Anshun principles. The present proceedings are inter-parties proceedings and are governed by the rules that regulate inter-parties proceedings, including res judicata, issue estoppel and the Anshun principle. In the event that a third party were to successfully challenge the validity of the patents on the new s 40 grounds, no possibility of inconsistent judgments in the relevant sense would arise, as the other proceedings would be between different parties and therefore in respect of different rights. 73 The respondents in their written submissions in reply on the notice of motion, at pars 25-40, argue that it is still open to them when the outstanding issues in the infringement proceedings come on for hearing, to raise questions about the validity of the claims insofar as they extend to hammers, and to argue about the extent to which monetary remedies for infringement extend to the hammers. For these reasons it is argued that the Court should give leave to re-open the cross-claim. Even if there is merit in these arguments (which the applicant denies and I do not think it is necessary to resolve to determine the notice of motion), those arguments concern the future course of the infringement proceedings. For the reasons earlier given, I consider that the cross-claim which was determined at trial was a separate and discrete proceeding. It is now at an end. Any new cross-claim would be a further separate and discrete proceeding and the right to bring such a proceeding is not to be determined by issues that may remain unresolved in the infringement proceedings. 74 For these reasons I consider pars 3, 3B and 3C of the notice of motion should be dismissed. 75 In written submissions opposing the orders sought by the respondents, the applicant sought the dismissal of pars 3, 3B and 3C of the notice of motion with indemnity costs. However, the basis on which costs should be awarded in the event that dismissal occurred was not argued. In these circumstances I shall give the parties the opportunity to be heard before making a costs order. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice von Doussa.

Counsel for the Applicant: Mr B N Caine and Mr B J Hess

Counsel for the Respondents: Mr D K Catterns QC and Ms S J Goddard