4.3 Consideration
64 It is apparent from the reasoning of the primary judge at [119] - [123] that he took into account the factors identified in s 122(1A) of the Act, although he did not consider that all were relevant.
65 He first had regard to the fact that Oxworks copied the Gram plinth from the website. In so doing, at [119] he rejected the contention made on the face of the 29 May 2017 email that Mr Hosking was not made aware of the patent prior to that date. At [122] he found that the copying was deliberate and to be considered against a background of Oxworks having purchased considerable quantities of the plinths in question from Gram before the act of copying. In this regard no doubt his Honour was considering the flagrancy of the infringement within s 122(1A)(a). Next, in observing at [123] that Oxworks received a cease and desist letter on 9 May 2017 that referred to the patent and its infringement but nonetheless continued to sell the infringing plinth thereafter until July 2018 and also observing that there was no evidence that Oxworks obtained legal advice as to whether or not it was infringing, his Honour was addressing the conduct of Oxworks after the act of infringement within s 122(1A)(c). Finally, at [124] his Honour concluded that these factors in combination entitled Gram to additional damages under s 122(1A), noting that it was not appropriate for him to go further by reference to the separate parts of that section.
66 In summary, it is apparent that the primary judge found that the deliberate and continued copying of the Gram plinth by Oxworks was sufficient to warrant an award of additional damages. Stated at a level of generality, that may in some cases be so. However, in our respectful view the primary judge erred in this case by failing to attend to an important aspect of the argument advanced on behalf of Oxworks, namely that Oxworks had a reasonably arguable defence to the allegation of infringement based on its construction of the claims of the patent. Had he done so, he ought to have concluded in accordance with the authorities to which we refer below that the decision of Oxworks to continue to pursue its own commercial interests in the face of allegations of infringement that could objectively be considered to be reasonably defensible is a strong factor telling against the award of additional damages.
67 In Zetco, Bennett J said:
267 More than copying is required to enliven the application of s 122(1A). Patent infringement may occur whether or not there is copying. However, deliberate copying may be relevant to a decision whether to award additional damages. As in the application of s 115(4) of the Copyright Act 1968 (Cth), there must be an additional element to the infringing conduct to warrant additional damages (as in Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 93 per Burchett J and 103-104 per Tamberlin J and Sullivan v FNH Investments Pty Ltd (2003) 57 IPR 63 at [91]). Austworld maintains that there is no evidence of flagrancy of infringement or of a calculated disregard of Zetco's rights to enliven the Court's discretion to award such damages (MJA Scientifics International Pty Ltd v SC Johnson & Son Pty Ltd (1998) 43 IPR 275 at 281-282). Austworld has at all times denied patent infringement and has maintained its contention that the Patent is invalid. It cross-claimed for revocation of the Patent. The right to file a cross-claim arises from s 138 of the Act and by reason of Austworld's position as a defendant in infringement proceedings (s 121 of the Act). As part of its continued assertion of invalidity, Austworld earlier sought a re-examination of the Patent in the Patent Office under chapter 9 of the Act.
268 Zetco says that 'the only defence put forward is invalidity'. That, however, is hardly unusual where patent infringement is asserted, even where infringement is admitted. At the hearing, the basis of that defence seemed to rely in a large part on the evidence of Mr Morris. That evidence was only adduced on the first day of the hearing. However, the defence of invalidity was at all relevant times based on the AVG Quickie Valve and the other prior art valves, as well as obviousness. It cannot be said that the invalidity case was hopeless or improperly pursued. In my view, an unsuccessful defence of invalidity is not of itself sufficient to warrant the award of additional damages.
68 In Industrial Galvanizers, after citing the above paragraphs of Bennett J's judgment in Zetco, Burley J observed:
132 In my view Ingal has not established that it is entitled to additional damages for the following reasons. First, no evidence suggests that Mr Wallace or anyone else affiliated with Safe Direction had any knowledge of the amendments that were to be made to the Complete Patent until they were notified by Ingal's letter before action on 15 December 2015. There is no suggestion that the RamShield Product was a copy of a product that embodies the claims of the Final Patent. Indeed, the Final Patent (as amended) was not advertised until 2 July 2015 and there is no evidence that Safe Direction became aware of it on that date. Secondly, upon receipt of the letter before action, Safe Direction raised a substantial defence to the allegation of infringement in the form of the external fair basis argument. Even on the hypothesis that my conclusions on that subject are wrong, it was certainly not a hopeless or improperly pursued defence. Thirdly, the decision on the part of Safe Direction to continue to pursue its own commercial interests in the face of allegations of infringement that objectively could be considered to be defensible is unlikely to amount to conduct that will attract an award of additional damages. Fourthly, the conduct of Safe Direction in continuing to market and sell the RamShield Product does not have the flavour of reprehensible conduct of the type that warrants an award of additional damages.
133 Taken together I am not satisfied that Ingal would be entitled, upon a finding of infringement, to an award for additional damages.
69 The authorities show that the reasonableness of arguments as to why there was no infringement is a relevant factor to take into account in considering whether the infringement was "flagrant" in the sense that word is used in s 122(1A) of the Patents Act. "Flagrant" in ordinary usage connotes conduct which could be described as "glaring, notorious, scandalous" (Oxford English Dictionary); to this the Full Court in Raben Footware v Polygram Records Inc (1997) 75 FCR 88added: "or blatant" (at 103). The word derives from the Latin flagrans meaning "blazing, burning".
70 At trial, Oxworks relied on the email sent by Mr Hosking on 29 May 2017 in response to the first letter of demand. It contended that it was apparent from that email that Oxworks contended that it had a non-infringement argument that was reasonably maintainable, and that the fact that there was a reasonably arguable defence to infringement based on the construction of the claims was a relevant consideration to the exercise of the discretion as to whether or not to award additional damages. On appeal, Oxworks contends that the primary judge did not address that contention.
71 In our view there is substance to this submission. It is apparent from his Honour's reasoning that he did not turn his mind to the point. In the circumstances of the present case, that was a material consideration to the exercise of the discretion.
72 More than copying is required to enliven the application of s 122(1A). Patent infringement may occur whether or not there is copying. It is not illegitimate, or flagrant, for a competitor to examine the disclosure of a patent and to attempt to work around the monopoly claimed in the claims. An important public policy rationale for the requirements of s 40(2) of the Patents Act that the complete specification describe the invention fully, including the best method known, and that the specification end with a claim or claims defining the invention is to give the world access to the technical contribution to the field provided by the patentee. It is part of what is often referred to as the "consideration" given by the patentee in return for the fixed term monopoly granted by the patent: Pfizer Overseas Pharmaceuticals v Eli Lilly and Company (2005) 225 ALR 416 (per French and Lindgren JJ at [359], Crennan J agreeing at [405]); Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 (at [97]). Equally, the patentee chooses to delimit the scope of its monopoly by reference to the language used in the claims. The function of the claims is to define clearly and with precision the monopoly claimed so that others may know the exact boundaries of the area within which they will be trespassers: Electric and Musical Industries Ltd v Lissen Ltd (1938) 56 RPC 23 (at 39); D'Arcy v Myriad Genetics Inc (2015) 258 CLR 334 (per French CJ, Kiefel, Bell and Keane JJ at [14]).
73 A competitor may take the patent, examine the scope of the claims, and endeavour to produce something that does not fall within them. Often, infringement cases are determined by having regard to contestable constructions of the claims. The fact that an alleged infringer fails to defend its reasonably arguable view as to the correct construction of the claim, and continues to produce infringing products in the face of that view, may result in an award for damages, but would not of itself trigger an entitlement to additional damages within s 122(1A) of the Patents Act.
74 Section 122(1A) was introduced to the Patents Act by the Intellectual Property Laws Amendment Act 2006, Schedule 5. The Explanatory Memorandum to the Intellectual Property Laws Amendment Bill notes that Schedule 5 implements the Governement's response to a recommendation of the Advisory Council on Intellectual Property's Review of Enforcement of Industrial Property Rights. In its commentary to that recommendation the Advisory Council said that the provision should be introduced as a deterrent, to give the courts the power to award exemplary damages in cases of "wilful infringement". As an example, it gives the scenario where it is shown that an infringer had a legal opinion that its activities would amount to an infringement, but went ahead with those activities anyway. In such circumstances a finding would expose an infringer to an award of additional damages.
75 The primary judge observed at [122] that there was no evidence that Oxworks obtained legal advice as to whether it infringed Gram's patent. It may be accepted, as submitted by Oxworks, that no authority requires an alleged infringer to waive privilege in its legal advice in order to avoid an order for additional damages. Equally, it is open to an alleged infringer to adduce such evidence if it chooses to negative a finding of flagrancy (bearing in mind, however, that the onus lies on the patentee to establish an entitlement to additional damages). The Court is entitled to weigh the evidence before it in assessing flagrancy. However, it is apparent that the primary judge did not consider in the balance the question raised in the submissions for Oxworks that it was reasonable to hold the view that it would not infringe the patent. It follows, in our respectful view, that the primary judge erred in failing to consider a relevant consideration in the assessment of the flagrancy of infringement under s 122(1A) of the Patents Act.
76 Having identified error in the exercise of the discretion under s 122(1A), we consider that this is an appropriate case for the discretion to be re-exercised on appellate review. The same materials and considerations are before this Court as were before the primary judge.
77 In the present case it is apparent from the content of Mr Hosking's email of 29 May 2017 that, as at that date, a non-infringement argument addressing the "formed from sheet material" integer of claim 1 was contemplated. As may be apparent from the reasons set out in addressing grounds 1 and 2 of the present appeal, whilst that argument has been resolved in favour of Gram, we are satisfied that the non-infringement contention based on this integer was reasonably arguable. In this instance this weighs heavily against an award of additional damages. It diminishes the force of the submission that the act of copying was flagrant, because it provides a legal basis for Oxworks to pursue that conduct, and it provides an explanation for the decision on the part of Oxworks to continue making and selling the Oxworks plinth after the cease and desist letter. While giving great deference to the discretionary nature of the decision, when the reasonableness of the arguments against infringement are taken into account, we do not think that the circumstances warrant the award of additional damages under s 122(1A) of the Patents Act. Accordingly, the first basis upon which this ground of appeal is advanced is accepted.
78 In the second argument pressed on appeal Oxworks contends that the learned primary judge erred by failing to address other matters in s 122(1A). Although senior counsel for Gram contended that the weight of authority suggested that flagrancy alone might warrant the award of additional damages, the natural reading of the words of s 122(1A) would not support the contention that the award of additional damages should be made by considering only one of the factors appearing under the subsection. Regard ought to be had to the considerations in paragraphs (a) to (d) and then "all other relevant matters" as contemplated by paragraph (e). It appears to us that, when determining an application for additional damages under s 122(1A), the Court must consider each of the factors appearing under s 122(1A) of the Patents Act. That is a natural reading of the conjunctive operation of the paragraphs of the subsection. Having done this, the statutory task is to consider whether it is appropriate to make such an award. This would not necessarily preclude an award of additional damages on the ground of a finding of flagrancy alone, but the statute does require that the other matters be considered in arriving at such a conclusion. However, a court would not be required to explicitly make findings in respect of each and every factor, as clearly in some cases certain considerations may not arise on the facts or pale into insignificance. Nor do we consider that adumbrating "principles" applicable to the exercise of the discretion are necessary or appropriate: cf H. Lundbeck A/S v Sandoz Pty Ltd [2018] FCA 1797; 137 IPR 408 (at [354], [355]). However, the discretion conferred by s 122(1A) is not without fetters; it may be exercised if the Court considers it appropriate "having regard to" the enumerated considerations in the subsection.
79 In the present case it is apparent that the learned primary judge directed his attention to all of the elements within s 122(1A). It was not necessary, in the exercise of his discretion, to explicitly identify each of the sub-paragraphs. It is apparent that his Honour considered each of the factors listed, and mentioned his findings in relation to each of those that he considered to be relevant.
80 However, in our respectful view, the exercise of discretion by the primary judge miscarried by failing to take into account the argument that non-infringement of the patent was a view which could reasonably be held at the time of the alleged infringement. Indeed, in exercising our discretion under the provision, we consider such a view should be held and is relevant to s 122(1A) of the Patents Act such that additional damages would not be warranted. The appeal would be allowed on this aspect alone.