SNF's case before the primary judge
24 SNF contended before the primary judge that Ciba was required to but did not discover 15 documents. The documents were required to be discovered, SNF said, because they were directly relevant to its case that the patents lacked an innovative step. SNF did not suggest that if Ciba had discovered the documents SNF would or might have succeeded before Kenny J on the ground of lack of innovative step. SNF's case is that, if Ciba had discovered the documents, SNF would have amended its case before Kenny J to raise other grounds of invalidity - lack of novelty because of prior uses at locations other than those identified in the proceeding before Kenny J and secret uses by Ciba. If this had occurred, SNF said and Ciba conceded, then there was a real possibility that the outcome of the proceeding before Kenny J would have been different.
25 The parties provided the primary judge with a list of issues to be determined as follows:
(1) Was the Respondent (Ciba) obliged to discover the documents identified in Schedule A to the Applicant's (SNF) particulars dated 31 July 2014 pursuant to:
(a) the order for general discovery made 8 August 2008 as varied on 24 October 2008; or
(b) [not pressed].
(2) If yes to question 1, what was the level, if any, of culpability of Ciba in not discovering the documents.
(3) If yes to question 1, did SNF exercise reasonable diligence and was it likely in all the circumstances that SNF would have amended its case.
(4) If yes to questions 1 and 3, Ciba has conceded that there was at least a real possibility that there would have been a different outcome at the trial on the question of validity.
26 On 3 June 2014, the primary judge ordered SNF to:
provide full and complete particulars of each of the precise acts and documents (including without limiting the generality of the foregoing, each document in fact discovered by the Respondents/Cross-Claimant) which SNF alleges:
…
(b) enliven the power of the Court, pursuant to rule 39.05(b) of the Federal Court Rules 2011 (Cth), to make the orders sought by SNF in the Application.
27 It is no longer in dispute that, as the primary judge held (at [132]), r 39.05(b) provides the Court with the power to set aside the orders of Kenny J. This rule permits the Court to vary or set aside a final order which has been entered if it was obtained by fraud. Before the primary judge and in this leave application, the parties accepted that "fraud" in r 39.05(b) would include a case in which a party failed to discover documents as required, albeit without any dishonest intent (so-called "equitable fraud").
28 In accordance with the order of 3 June 2014, SNF filed a document on 31 July 2014 headed "Particulars of Ciba's Conduct". Paragraph 11 appeared as follows:
Innovative step discovery obligations
(11) By reason of the matters referred to above in paragraphs 3 to 10 above, Ciba was obliged to give general discovery of all documents that were, or had once been in its possession, power or control, relating to the issue of innovative step including, without limitation, the following documents:
(a) documents which describe or refer to prior public disclosures of any process the same as or similar to the Patented Process,
(b) test reports and experimental results, notes and other internal records relating to the development of the processes described in the patents;
(c) prior art evaluations; and
(d) trade literature and other material consulted during the developmental phase.
(Innovative Step Discovery Obligations).
29 Paragraph 43 asserted that, by reason of the matters in paragraphs 3 to 41, Ciba had engaged in equitable fraud by breaching its discovery obligations.
30 SNF and Ciba filed extensive evidence on the basis of SNF's particulars dated 3 June 2014.
31 On 10 December 2014, but without objection by Ciba, SNF filed a document "Amended Particulars of Ciba's Conduct". Paragraph 11 was amended and appeared as follows:
Innovative step discovery obligations
(11) By reason of the matters referred to above in paragraphs 3 to 10 above, Ciba was obliged to give general discovery of all documents that were, or had once been in its possession, power or control, relating to the issue of innovative step including, without limitation, the following documents:
(a) documents in the possession of Ciba that formed part of the common general knowledge or which contained information that was indicative of matters that formed part of the common general knowledge as at the Priority Date;
(b) documents which related to Ciba's development pathway (including up to the filing of the Australian application on 7 January 2004) that led to claimed invention, including:
(i) test reports and experimental results, notes and other internal records relating to the development of the processes described in the Patents;
(ii) prior art evaluations; and
(iii) trade literature and other material consulted during the developmental phase (including up to the filing of the Australian application on 7 January 2004).
(a) Documents which describe or refer to prior public disclosures of any process the same as or similar to the Patented Process,
(b) Test reports and experimental results, notes and other internal records relating to the development of the processes described in the patents;
(c) prior art evaluations; and
(d) trade literature and other material consulted during the developmental phase.
(Innovative Step Discovery Obligations).
32 On the same day, SNF filed amended written opening submissions. Those submissions reflected the case as put in the amended paragraph 11. For example, they said:
The statutory test imposed by s 7 (4) requires an evaluation of relevant prior art in the context of common general knowledge. The test requires an assessment of whether the claimed invention constitutes a sufficient advance over the prior art in light of the common general knowledge to amount to an innovative step. The obligation of discovery when a lack of innovative step is alleged necessarily extends to documents which are relevant to an understanding of common general knowledge. Documents which reveal the patentee's development pathway bear on the extent to which the invention represents an advance over the art.
…
By reason of the Discovery Order, Ciba was obliged to give general discovery of all documents that were, or had once been in its possession, power or control, relating to the issue of lack of innovative step including, without limitation, the following documents:
(a) documents in the possession of Ciba that formed part of the common general knowledge or contained information that was indicative of matters that formed part of the common general knowledge as at the Priority Date;
(b) documents which related to Ciba's development pathway that led to claimed invention, including:
(i) test reports and experimental results, notes and other internal records relating to the development of the processes described in the Patents;
(ii) prior art evaluations; and
(iii) trade literature and other material consulted during the developmental phase.
(the Innovative Step Discovery Obligations).
33 SNF's written opening then explained, by reference to each of the disputed documents, why that document ought to have been discovered because it was relevant to Ciba's "development pathway" and/or the common general knowledge.
34 On 18 December 2014, Ciba filed its written opening submissions. Those submissions explained Ciba's reasons for rejecting the proposition that it was obliged to discover documents said by SNF to be relevant to Ciba's "development pathway" and the common general knowledge.
35 The application was heard by the primary judge on 27 January - 6 February, 31 March and 1 April 2015.
36 On 27 January 2015, the first day of the hearing, the primary judge gave leave to SNF to file "Further Amended Particulars of Ciba's Conduct". Paragraph 11 remained unchanged.
37 On 27 January 2015, SNF's senior counsel made opening submissions. Senior counsel said:
Now, we say, your Honour, two things come from that: first of all, the orders for general discovery are wider than category 4(e), not the least because general discovery would require discovery going to common general knowledge, which is not in category 4(e), and in any event, we say that there was an agreement between the parties; Ciba had agreed that it would give 4(e) discovery, but of course that would be subsumed under the general order anyway, so we rely upon the scope of the orders made by her Honour, and if there's any doubt about what they include, they at least include CGK and category 4(e), and we point out - sorry, I should go on to say, your Honour, that as we observed in paragraph 96, if it matters, we received nine folders of non-confidential documents, and another folder with some confidential documents in them.
That was the universe of discovery, as we set out in paragraph 96, and then we make three points in paragraph 97. At no stage during the conduct of the proceeding, let alone prior to discovery, did Ciba say it was not prepared to make general discovery, including the documents in 4(e). Indeed it appears that that's exactly what they set about doing. 97(b) points out that at no stage did Ciba say that it thought the categories, including 4(e), were irrelevant, too wide, or oppressive, and at no stage did they say, "We hadn't made discovery, as you thought, of the documents in category 4(e)," so that the scope or ambit of Ciba's discovery was, as I've just mentioned, your Honour, inter alia to give general discovery which included, for the avoidance of doubt, 4(e) documents.
That had the consequence that had Ciba made proper compliance - or properly complied with their discovery obligations, they would have given my client documents which fell into two categories, two camps: one was documents relevant to establishing common general knowledge; and the second is documents relating to what I've called Ciba's development pathway, the 4(e) documents. Had they done so, we would have been able to - we would have been provided with information which would have enabled my client to plead, discover and prove a trial, and, by discover, I would include in that, your Honour, if it were necessary to subpoena third parties, and we will come to this, such as Nalco or Iluka, we would have been in a position to advance our case on OreBind, Yoganup and secret use.
38 It will be recalled that category 4(e) is a reference to one of the categories of discovery by Ciba initially proposed by SNF. Orebind and Yoganup are references to the prior uses SNF alleged it would have raised in respect of the ground of lack of novelty had the disputed documents been discovered.
39 As discussed above, SNF no longer suggests that there was an agreement with Ciba or that Ciba is estopped from denying that it was required to discover documents in category 4(e). This part of the transcript is relevant because it discloses SNF's case, consistent with paragraph 11, that if Ciba had complied with its obligation to give general discovery in accordance with Order 15 r 2(3) it would have discovered documents relating to the common general knowledge and Ciba's "development pathway".
40 Senior counsel for Ciba responded noting this:
Now, if I could then in the particulars take your Honour back to paragraph 11, and paragraph 11 - I'm sorry, your Honour.
HER HONOUR: Yes.
MR SHAVIN: The innovative step obligation is articulated in paragraph 11 in two ways: the first is documents in the possession of Ciba that form part of the common general knowledge; and then look at the next phrase, your Honour, "or which contained information which was indicative of matters that formed part of common general knowledge".
41 He continued in these terms:
It was the first big reform after the introduction of the docket system to cutting back the discovery obligations to prevent the excesses, a matter of real controversy in the court, and it was a very significant modernisation of the rules, and the second thing is in subparagraph (b), documents which related to Ciba's development pathway that led to the claimed invention - and then they list 1, 2, and 3. Now, it's our respectful submission that based on the law to which I'm now going to take your Honour, this is untenable. The development pathway cannot and does not relate to any matter arising under section 7(4), which is the definition of innovative step to which my friend took your Honour.
…
So for the purposes of the Act, an invention is taken to involve an innovative step when compared with a prior art base unless the invention would to a person schooled in the relevant art in the light of common general knowledge as it existed in the patent area before the priority date only vary from the kinds of information set out in subsection (5) in ways that make no substantial contribution to the working of the invention. In other words, is it novel? And you look at the extent to which any differences make a substantial contribution. That's what it adds to novelty.
…
What you don't do is you don't adduce a whole lot of evidence about common general knowledge, because it's not relevant. All that you do is you look at this through the eyes of the skilled addressee. You certainly don't look at the development pathway, because the development pathway is not relevant to any matter. Unlike the case of inventive step in section 7(2), where the comparison is between the invention and common general knowledge to see whether or not it was obvious, in the light of that common general knowledge, in relation to innovative step, you look at a comparison between the invention, the kinds of information in subsection (5) and see if the variation - in fact, there is only varies in ways that make no substantial contribution to the working of the invention.
Now, the subtext of that was if it's a trivial variation from that which had gone before, it might be novel, because depending upon the view you take of knowledge - it is not quite as plain as our friends say, but novelty, in a sense, is lining up each of the integers in the claim and seeing if those integers are disclosed in the prior publication or the prior use. So if you've got a small variation - I'm sorry. Sorry, your Honour. If you've got a small variation, that might be enough for it not to be novel, but if there is a variation, it can't be trivial. It has to be something that makes a substantial contribution to the working of the invention, and that's why section 7(4), properly, is understood as a modified novelty test for innovation patents.
…
Now, your Honour, in our respectful submission, when one considers both the statutory text and the explanation of that text by the Full Court in Delnorth [Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd [2009] FCAFC 81; (2009) 177 FCR 239], accepted by the Full Court in this case and accepted by those representing our friends below, it is plain that the comparison is limited. It is plain that it is not the test for invention. It is plain that the role of common general knowledge is quite different and there is no room in that comparison for any relevance on the development pathway. Now, if we pause there, then it cannot be said by our friends "Oh, well, if we had known of the existence of these documents, we would have come to the court and asked for an order for further discovery," because they would never have got it because discovery of a development pathway isn't relevant. So that if one looks at those of the documents in annexure A, and there are many of them, the discoverability of which is argued by reference to the development pathway, one can immediately know that those documents and classes of documents aren't relevant, weren't relevant and weren't at any time the subject of an obligation on Ciba under an order of general discovery.
…
Now, could I then move to considering the three categories. Your Honour will recall that we started at paragraph 11 of the amended particulars which defined the innovative step discovery obligations so called.
42 This part of the transcript shows Ciba's response to SNF's case. First, paragraph 1 of the extract identifies the two classes of documents SNF alleged Ciba had to discover - those relating to common general knowledge and Ciba's "development pathway". Second, the transcript demonstrates that Ciba contended it had no obligation to discover documents relating to the common general knowledge or its "development pathway".
43 On 5 February 2015, SNF filed "Further Amended Particulars of Ciba's Conduct" which deleted some matters but did not change paragraph 11.
44 On 6 February 2015, the last day of the evidence before the primary judge and with the primary judge's leave, SNF filed their "Second Further Amended Particulars of Ciba's Conduct" which also did not change paragraph 11.
45 The matter was adjourned part-heard until 31 March 2015 for closing submissions.
46 On 2 March 2015, SNF provided its written closing submissions. Those submissions do not refer to Ciba's "development pathway" as a ground for Ciba's alleged obligation to discover the disputed documents. Instead the submissions include the following:
SNF contends that Ciba has failed to comply with its obligations of discovery. Ciba's obligation of discovery pursuant to Order 15 Rule 2(3) included an obligation to discover documents relevant to the pleaded ground of innovative step. SNF's pleaded case on innovative step particularised prior processes which only varied from the Patented Process in terms of:
(a) the form in which the polymer was added to the tailings (aqueous solution, powder or neat emulsion); and
(b) whether improved rigidification was achieved by the prior processes particularised.
…
(b) Key variations from the pleaded prior art
Documents are directly relevant to innovative step insofar as they relate to the "variation" between the Patented Process and the pleaded prior art and the contribution made by that variation to the working of Patented Process.
On SNF's pleaded case in relation to lack of innovative step, there were two key variations between the invention claimed and the prior art particularised:
(i) the form in which the polymer is added;
(ii) improved rigidification as compared to settling and sedimentation.
The form in which the polymer is added
Each version of SNF's Particulars of Invalidity, including the Amended Particulars of Invalidity dated 22 August 2008 identified both the Gallagher patent and the Pearson patent as relevant prior art for the purposes of innovative step.
A key difference between the process of the invention and the process described in the Gallagher patent (Slatter 3) is that the Gallagher patent discloses a process of secondary flocculation in which the polymer is added to the mining tailings in powder (particulate) form to achieve improved rigidification whereas the invention involves the addition of polymer in aqueous solution to the mining tailings to achieve improved rigidification.
A key difference between the process of the invention and the process described in the Pearson patent ('Cytec') patent (Slatter 4) is that the Pearson patent discloses the addition of polymer to the mining tailings in the form of a neat emulsion to achieve improved rigidification whereas the invention uses polymer in aqueous solution to achieve improved rigidification.
Accordingly, a key issue raised by SNF's allegation of innovative step is the contribution made to the working of the invention by the form in which the polymer is added.
At the time of giving discovery, Mr Lee was familiar with the Patent and also had 'probably read' the Gallagher patent. Mr Lee accepted that the pleaded case on innovative step advanced by SNF involved a comparison between the process of the invention and the specifically pleaded pieces of prior art including Gallagher and Pearson and that 'there was certainly a lot of focus on that difference'.
Documents which relate to this issue are directly relevant and therefore properly discoverable. For example, documents relating to trials conducted by Ciba involving the addition of the polymer in different forms to assess the contribution of the different forms of polymers to achieving 'improved rigidification', would be directly relevant to innovative step.
47 For each of the disputed documents, SNF's written closing submissions explain why the document should allegedly have been discovered on the grounds that the document was directly relevant to differences between the invention (the so-called variations) and the prior art (being the form of addition of the polymer and improved rigidification) and/or showed the views of Ciba's employees about the variations.
48 Ciba provided its written closing submissions on 23 March 2015. According to Ciba, SNF had reformulated its case by deleting every reference to "development pathway" and contending, for the first time, that Ciba was required to give discovery in respect of "two key variations between the invention claimed and the prior art particularised". Ciba contended that in a case involving an allegation of equitable fraud, SNF should not be permitted to reformulate its case at that late stage given that Ciba had filed its evidence, opened, cross-examined and called evidence based on the versions of paragraph 11 as filed.
49 During closing oral submissions the primary judge asked senior counsel for SNF to deal with Ciba's submission that SNF had "gone well beyond the case as particularised". Senior counsel for SNF said that SNF had "narrowed [its] focus". Senior counsel also said:
So, your Honour, the position is this: that we, in our amended particulars at paragraph 11 and in our opening submissions at 102, spelt out that the two species of documents that we said our friends should have discovered were common general knowledge - and if I can take your Honour to the second further amended particulars of Ciba's conduct.
HER HONOUR: Yes.
MR CAINE: At paragraph 11, we say that those two species of documents should be at the top of - sorry, in paragraph 11A. Documents in the possession of Ciba that form part of common general knowledge. And (b), documents which related to Ciba's development pathway that led to the invention. And then we set out the types of documents that fall into that category. We've consistently put, your Honour - and this isn't a matter - just to pause, your Honour. This isn't a question of identifying with precision the fraudulent conduct. This is drawing attention to the two species of documents that we say our friends should have discovered consistent with their obligations under order 15, rule 2.
We've consistently put our case on the basis that the enquiry under 7(4) is as I've articulated to your Honour. And more particularly, your Honour will note that all of the schedule A documents relate to Ciba's development pathway, if that general term be used. We say, your Honour, that the central enquiry has always been - I will put that differently, your Honour. There can't be any surprise or prejudice on our friends' part by us now saying that the documents in schedule A should have been discovered under section 7(4). Our case has always been that the schedule A documents lie at the heart of the case.
The central question is whether the schedule A documents are directly relevant to the question that arises under innovative step. It always has been. The comparison that we sought to make - now seek to make or raise as an issue in the case - it has always been clear. It's a matter of law, your Honour. We've pleaded it out and we say those documents are documents that are relevant under order 15, rule 2 to that enquiry. That is, Gallagher's variation, Pearson's variation and Slatter 10, 12 and 13 have always laid at the heart of the case.
The next thing, your Honour, is that in terms of any suggestion there might be prejudice, if we look at the content of the schedule A documents and how that was managed at trial. Dealing with the evidence first, what each schedule A document disclosed was the subject of, I think, little or no evidence from either side in affidavit form. I think Mr Lee gave some evidence about certain aspects of the documents but not their content or their technical content. There was some oral evidence where I cross-examined Mr Lee about some of the documents and then stopped, for reasons I will articulate. And my learned friend cross-examined Mr Watson about some of the documents and then stopped.
Both sides ultimately, with your Honour's concurrence, accepted it was ultimately a matter for submissions about what's in the documents. And I don't think your Honour - well, I withdraw that. When we come to submissions, the position is that Ciba has put on detailed submissions on the content of each document and what your Honour should conclude. We say the case is one that hasn't substantially changed. It has always been about whether the schedule A documents are documents that were relevant to the question of innovative step. And our friends have not suffered any prejudice in the way they've been able to conduct the case or put their submissions.
50 In other words, SNF denied that its case had changed.
51 SNF did not make any argument in the alternative if the primary judge accepted Ciba's contention that SNF had reformulated its case and should not be permitted to do so. Nor did SNF seek leave to be heard further in that event.