The patent proceedings
31 Boss contends that, in respect of Offer 1, r 25.14(3) is engaged on the basis that it should be treated as an "applicant" in respect of the cross-claim. To support its contention, Boss refers to r 15.10:
(1) To the extent practicable and not inconsistent with this Part:
(a) the parties must conduct a cross‑claim in the same way as the principal proceeding; and
(b) these Rules apply to the cross‑claim in the same way as they apply to the principal proceeding; and
(c) the trial or a hearing, or any other step, in relation to the cross‑claim is to be carried out at the same time as the trial or hearing, or any other step, in relation to the originating application.
(2) For the purpose of giving effect to this rule:
(a) a cross‑claimant is to be treated as an applicant; and
(b) a cross‑respondent is to be treated as a respondent.
32 I do not accept that r 25.14(3) is engaged. First, r 15.10 is of no assistance to Boss. Rule 15.10(2) makes clear that a cross-claimant is to be treated as an "applicant" solely for the purpose of giving effect to that particular rule. It says nothing about the meaning of "applicant" in r 25.14. Secondly, and more importantly, the definition of "applicant" in the Dictionary to the Rules makes clear that an "applicant" is a party claiming relief other than a cross-claimant.
33 Therefore, the relevant rule, here, is r 25.14(2). Subject to the operation of r 1.35, the effect of r 25.14(2) is that Boss is entitled to its costs on a party and party basis up to 11.00 am on 30 July 2019 and, after that time, on an indemnity basis.
34 Offer 1 was served on Trafalgar approximately 11 weeks after Boss filed its evidence in support of its case that all the claims of the patent were invalid for lack of novelty based on the disclosures at the Seltor meeting in Norway in September 2015. This evidence comprised Mr Ramunddal's affidavit of 2 May 2019 and Mr Prior's affidavit of 10 May 2019. Boss's particulars, filed in respect of its cross-claim, are dated 29 October 2018. They particularise the demonstration of the Pass-It Version 2 at the Seltor meeting as a novelty-destroying disclosure. Trafalgar was, therefore, on notice, some seven months prior to the service of the affidavits, that this particular challenge to validity was being made. Boss's case on lack of innovative step was also based on the disclosures that supported its case on lack of novelty including, importantly, the disclosures at the Seltor meeting.
35 I do not know what, if any, investigations Trafalgar carried out in respect of the (then) alleged disclosures at the Seltor meeting before service of Mr Ramunddal's and Mr Prior's affidavits, but certainly, upon service of those affidavits, Trafalgar had Boss's evidence of those disclosures, which included, through Mr Ramunddal's affidavit, digital images of the samples that were demonstrated at the meeting and the Firestopit PDS. Mr Ramunddal's affidavit also exhibited the actual samples of the Pass-It Version 2 that were demonstrated at the meeting and the Firestopit PDS that Mr Ramunddal was given at that time. I was informed (and there does not seem to be any dispute) that the physical exhibits were inspected by Trafalgar's solicitors on 29 May 2019.
36 Regardless of any views that Trafalgar might have formed about the strength of Boss's other grounds of challenge to the validity of the patent, Trafalgar must have realised - or, at least, ought to have realised - that if the Court accepted Mr Ramunddal's evidence and Mr Prior's evidence of the Seltor meeting, as given through those affidavits, then claims 1 to 4 of the patent were anticipated by the disclosures at that meeting and were not valid.
37 Similarly, Trafalgar must have realised - or, at least, ought to have realised - that the validity of claim 5 of the patent was then vulnerable on the ground that the invention, as claimed in that claim, lacked an innovative step given that the only feature added by claim 5 to the method of the invention was the step of marking a centre line on an external object to depict the proposed centre line of the barrier. I note that Trafalgar treated this aspect of the case on lack of innovative step as a matter of onus only (namely, whether Boss had discharged its onus of establishing that the invention claimed in claim 5 lacked an innovative step): T1004, lines 7 - 19. Trafalgar did not, itself, call evidence to suggest that marking a centre line made a substantial contribution to the working of the claimed invention. I concluded that marking a centre line was a trivial addition.
38 At the hearing, Mr Ramunddal's and Mr Prior's affidavits, in respect of this meeting, were read without objection. Trafalgar's challenge to this aspect of Boss's case was to attempt to impugn Mr Ramunddal's credit and Mr Prior's credit, and to contend that various items of evidence were fabricated. As to this challenge, I held:
217 Trafalgar's challenge to the veracity of the evidence given by Mr Prior and Mr Ramunddal in relation to the Seltor meeting really amounts to an allegation of fabrication that involves both Mr Prior and Mr Ramunddal. Trafalgar's submissions were laced with the suggestion that, because of their relationship, Mr Ramunddal was a witness who would be prepared to conspire with Mr Prior to give false evidence at Mr Prior's behest. I reject that suggestion. I have no reason not to accept Mr Ramunddal as an honest witness.
218 To summarise, according to Trafalgar the Firestopit PDS shown in the digital image is not a genuine document and, as at September 2015, the products shown in the image did not exist. Further, Trafalgar contended that the image was staged and that some unknown person purposely altered the date setting on the camera to record an event that did not take place.
219 On the evidence before me, this scenario is fantastical. It is based on theories which are not established by the evidence and which, taken as a whole, lack coherence. It also seems to envelope Mr Atkinson's evidence concerning the creation of the Firestopit PDS and the date when the Pass-It Version 2 was first manufactured by FSi. However, I also accept Mr Atkinson as an honest witness. As explained in the next section of the reasons, I accept that the Pass-It Version 1 and the Pass-It Version 2 commenced to be manufactured by FSi in the period late 2014 to early 2015. I do not accept the likelihood that Mr Atkinson was mistaken about that matter. And, as I have said, I am not persuaded that the Firestopit PDS is not a genuine document. Indeed, it was not even put to Mr Ramunddal that he was not given a copy of the Firestopit PDS at the Seltor meeting.
39 In failing to accept Offer 1, Trafalgar obviously elected to go to trial on whether the relevant disclosures were made at the Seltor meeting, hoping to persuade the Court that it could not be satisfied, on the balance of probabilities, that the disclosures had been made. There was, however, nothing on the face of Mr Ramunddal's affidavit, or on Mr Prior's affidavit, that would suggest that the meeting did not take place, or that the disclosures were not made as Mr Ramunddal and Mr Prior had deposed. Having elected to put Boss to proof, and to chance its arm in persuading the Court not to accept Mr Ramunddal's and Mr Prior's evidence, Trafalgar must assume the costs consequences of its own forensic decision.
40 Trafalgar resists the outcome provided by r 25.14(2) on the basis that Boss advanced an "expansive case" in respect of its cross-claim, where most of the costs of the patent proceedings resulted. Trafalgar contends that Boss achieved success only because of the findings made in respect of the Seltor meeting, which was but one issue amongst "the sea of issues" raised by Boss. Other issues raised in the cross-claim were either abandoned at trial or did not succeed.
41 It is undoubtedly true that, ultimately, a number of the issues pleaded in the cross-claim, insofar as they were directed to claim validity, were abandoned by Boss or failed. In the normal course of events, this circumstance might justify a discount being applied to the costs to which Boss is entitled. But it is equally true that Trafalgar raised a great many factual issues that were directed to establishing that Boss's evidence had been fabricated. The alleged fabrications found a particular focus in the evidence of the Seltor meeting: whether the Pass-It Version 2 was in existence at the time of the Seltor meeting; whether the Firestopit PDS was a genuine document; whether the photographic images of the samples and the Firestopit PDS that were displayed at the Seltor meeting had been falsified. These challenges raised myriad sub-issues. Trafalgar even went so far as to challenge whether the Seltor meeting had taken place.
42 All of these challenges by Trafalgar were fruitless. All added significantly to the complexity of the case - complexity that was not otherwise present in this part of the cross-claim. All added considerably to the volume of evidence that Trafalgar called at the hearing. And all added to the intricate web of factual issues that, ultimately, fell for determination. Had these unsuccessful challenges not been made, much of the factual complexity attending the question of claim validity would have been avoided, and the hearing of the cross-claim considerably shortened.
43 Boss's success on the cross-claim, insofar as it was directed to claim validity, inevitably meant that Trafalgar's case on infringement could not succeed. Trafalgar places reliance on the fact that it would have succeeded in its infringement case against Boss (the corporate entity) if the claims were, in fact, valid. That is so, but the infringement case was a very small part of the overall patent proceedings and turned on limited questions of claim construction. Moreover, Trafalgar's case against Mr Prior personally (based on authorisation and joint tortfeasance), which was a significant part of its factual case on infringement, would have failed regardless of the outcome of the cross-claim.
44 It is also to be remembered that Boss succeeded in the cross-claim insofar as it was directed to Trafalgar's misleading and deceptive conduct in sending the letters to participants in the building industry in September 2018. It is true that Boss failed in establishing that these letters amounted to unjustifiable threats within the meaning of s 128 of the Patents Act. However, importantly, the claim for contravention of s 18(1) of the Australian Consumer Law and the claim of unjustifiable threats under s 128 of the Patents Act were based on common facts and concerned different legal characterisations of the same conduct.
45 Trafalgar also resists the outcome provided by r 25.14(2) on the basis that Offer 1 was not "a real offer" because Boss was seeking Trafalgar's "capitulation". Trafalgar also submits that discontinuance of the patent proceedings would not have brought about a final resolution of the dispute.
46 I am satisfied that Offer 1 raised a genuine compromise. By that offer, Boss signified its preparedness to give up its claim for damages arising out of Trafalgar's wrongful conduct in sending the letters in September 2018 (a claim which it will now pursue), and a not insignificant proportion of its costs, assessed on a party and party basis. It also signified its preparedness to give up its claim to revoke the patent. Had it accepted Offer 1, Trafalgar would have insulated itself from Boss's claim for damages; its costs burden would have been reduced; and it would have kept its patent. My conclusion that Offer 1 raised a genuine compromise is not gainsaid by the fact that the offer involved discontinuance of the claim and cross-claim.
47 Trafalgar further resists the outcome provided by r 25.14(2) on that basis that its failure to accept Offer 1 was not unreasonable. Here, Trafalgar points to the fact that, even though Boss's evidence in support of the cross-claim had been served a considerable period of time before Offer 1 was made, Boss was granted leave on 3 June 2019 to file amended particulars of invalidity and was ordered to give discovery, by 3 July 2019, of certain documents including documents that recorded the presentation made by Mr Prior at the Seltor meeting. Trafalgar also relies on the fact that, on 1 July 2019, it was granted leave to issue a subpoena to FSi.
48 I am satisfied that Trafalgar's failure to accept Offer 1 was unreasonable. None of the matters referred to by Trafalgar persuades me to a different view.
49 First, the leave granted to Boss to file amended particulars of invalidity simply resulted in Boss bringing its particulars into line with the affidavit evidence it had already filed and served. The fact that the amended particulars raised a number of issues concerning the validity of the claims did not rob the disclosures at the Seltor meeting of their obviously decisive significance seen in the light of Mr Ramunddal's and Mr Prior's affidavits.
50 Secondly, Trafalgar's wish to take steps, such as by discovery and requesting the issue of subpoenas, to gather evidence to challenge Mr Ramunddal's and Mr Prior's account of the Seltor meeting, does not signify that Trafalgar was not acting unreasonably in failing to accept Offer 1. On the contrary, it signifies that Trafalgar had already made, and wished to persevere with, the forensic decision to contest whether the Seltor meeting had taken place as Mr Ramunddal and Mr Prior had deposed. This was so in circumstances where, as I have said, there was nothing on the face of Mr Ramunddal's affidavit, or on Mr Prior's affidavit, to suggest that the Seltor meeting did not take place, or that the disclosures, to which Mr Ramunddal and Mr Prior had deposed, were not made. In any event, the discovery that Trafalgar sought in relation to the Seltor meeting produced no documents. Similarly, the subpoena that was issued at its request did not result in the production of what Trafalgar calls the "original" version of the Firestopit PDS. These facts were known by Trafalgar before Offer 1 was made.
51 Trafalgar also seems to suggest that its failure to accept Offer 1 can be excused on the basis that the time had not passed for it to file its evidence in answer, including its expert evidence in answer. However, Mr Ramunddal's affidavit, and Mr Prior's affidavit, were perfectly clear on what was disclosed at the Seltor meeting. This was the reality that Trafalgar had to face. Trafalgar did not need the opinions of experts (of the kind called as experts in this case) to inform it of the significance of the disclosures at the Seltor meeting. It is tolerably clear that Trafalgar chose to meet Boss "head on" in relation to that meeting. As I have said, it must bear the costs consequences of its own forensic decision in that regard.
52 Further, any decision to accept or reject Offer 1 did not need to await the time when Trafalgar was directed to file and serve its evidence in answer to the cross-claim. Had, in fact, Trafalgar needed more time to consider and respond to Offer 1, it could have raised that prospect with Boss. It did not. It simply chose not to respond to the offer.
53 In oral submissions, Trafalgar also raised an argument that it was not unreasonable for it to fail to accept Offer 1 because Offer 1 merely offered discontinuance. I do not find this argument persuasive. It is based on the proposition that, having extricated itself from legal proceedings because of Trafalgar's acceptance of Offer 1, Boss would then turn around and commence proceedings against Trafalgar afresh, raising the same claims. I can think of no rational basis for Boss doing so as the party that was originally sued. The argument seems more theoretical than real. What is more, Trafalgar has not adduced any evidence to support the proposition that its failure to respond to Offer 1 was because Boss was only offering discontinuance.
54 I am satisfied that, in all the circumstances, the costs of the patent proceedings should fall as provided by r 25.14(2). The prima facie position under r 25.14(2) should not be displaced under r 1.35.
55 It is not necessary for me to address in any detail Trafalgar's contentions that, absent the application of r 25.14(2), it should be awarded 90% of its costs of the infringement claim and that Boss should only be awarded 30% of its costs of the cross-claim. I will simply note that, had I been persuaded that r 25.14(2) should be displaced in respect of the patent proceedings, I would not have awarded costs on this basis. In particular, I would not have been persuaded that Trafalgar should necessarily have an order for costs in its favour in respect of the infringement claim and I would not have been persuaded that Boss's costs of the cross-claim should be subject to the very deep discount that Trafalgar seeks.