CONSIDERATION
40 Without conducting a mini-trial, it is necessary not to gloss over the evidence that Sovereign relies on to demonstrate that it holds the 'reasonable belief' required by r 7.23. This is especially so given the invasive and costly relief sought.
41 The first of the items of evidence that Sovereign relies upon 'that it may have a right to obtain relief' is set out by Mr Le Roux, the General Manager of Sovereign and relates to the anonymous information Sovereign received from a potential customer who had been in contact with Mr Steynberg. As I made clear to the parties during the hearing, and at [27] above, I give no weight to this hearsay evidence except to the extent that it demonstrates why Sovereign proceeded to make further enquiries into Mr Steynberg's business activities. It is no more than a part of the narrative.
42 The second piece of evidence that the prospective applicants rely upon as the basis for holding a reasonable belief that Sovereign may have the right to obtain relief in the Court from Mr Steynberg is the evidence relating to the flyer obtained from the anonymous customer.
43 Mr Van Dyk says that the photographs on the flyer 'show jobs that have been conducted by Sovereign using the Sovereign process and methods'. He goes on to express his concern that 'if Mr Steynberg is using photographs of Sovereign's method to promote his services, then he may also be using those methods himself'. Sovereign says these facts support its reasonable belief that it may have a right to obtain relief.
44 On this point, Mr Steynberg's evidence is that:
(a) All of the photographs with the exception of three are freely available and can be used without breach of copyright;
(b) the remaining three photographs were taken by him in his personal capacity during his employment with Sovereign; and
(c) 'None of the photographs reveal any confidential information of Sovereign'.
45 Mr Steynberg contends that the photographs in the flyer, whether taken alone or with other evidence, are 'considerations or views that are unreasonable, untenable, irrational or baseless,' and 'it would be difficult to conclude that the applicant has a reasonable belief' based on them: Pfizer (at [69]). As will be seen in the further discussion below, while there is force in this submission concerning the photographs, it is not the photographs in the flyer so much as the words used which may support Sovereign's reasonable belief.
46 In addition, Sovereign relies on evidence contained in the private investigator's report of a phone conversation and an email sent by Mr Steynberg, as well as statements made by him in recent correspondence with Sovereign's solicitors and wording from his business website. By reference to the 392 Patent, Sovereign claims that this evidence indicates there is sufficient similarity in Mr Steynberg's process and method to warrant a reasonable belief that Sovereign may be entitled to relief.
47 The 392 Patent is appended to these reasons as Annexure A.
48 It can be seen that under field of invention, the following appears:
The present invention relates to a method and composition for sealing passages.
49 Under background, at line 16 the following appears:
However, it has been found that the appropriate sealing of cracks may require injection of sealing composition at pressures from 1 bar up to 200 bar. At these pressures, pure and natural latex or natural rubber latex, being incapable of resisting hydrostatic pressures without setting is unsuitable.
50 Line 21 says:
Thus in these situations it appears that natural latex compositions or emulsions cannot be used.
51 Thus a hybrid product is used. Line 26:
It is the object of the present invention to provide a method and composition for sealing a passage in a body that enables employment of a latex-based composition.
52 There is an example of the sealing composition:
…the composition, or grout, as it may be known, may comprise of the following three elements -
53 There is specific reference to lauric acid. Sovereign now seeks the technical information that would give it an understanding about what precisely comprises the fluids that Mr Steynberg's business is using. It is spelt out that:
The present invention has an advantage, the ability to employ latex-based sealing compositions and sealing agents and the capacity to pump such compositions at high pressure to seal leaks especially in geological formations.
And Claim 1 provides, after the sealing proposition, that:
... said composition is pumped into the said passage where it is set or coagulated to form a seal and wherein setting or coagulation of said composition is initiated once said composition is in situ within the passage to be sealed.
54 In summary, Patent 392 provides a method for sealing passages that overcomes the problems that arise when latex compounds are pumped under pressure by the addition of an additive such as lauric acid. Sovereign says that this is the very work that Mr Steynberg's product is being utilised for.
55 To demonstrate this, Sovereign produces a document printed on 23 June 2011, taken from Mr Steynberg's then company's website showing a logo for 'LICS 100 liquid injective containment system'. Underneath that is the paragraph starting:
Our proprietary LICS-100 is a natural based highly efficient, flexible and permanent impenetrable waterproofing barrier that can be injected.
(Emphasis added.)
56 Below that there is a heading saying:
What is LICS?
It is a blend of rubber emulsions, which have the ability to convert from liquid into a strong flexible and durable rubber-like three dimensional seal. This process can be described as coagulation.
Grouting is injection of a liquid-like substance into various narrows cavities… to fill them and consolidate into a solid mass at the same time affecting a water tight seal.
(Emphasis added.)
Coagulation is then described as 'a complex process by which a liquid forms a solid'. The website goes on to state that 'H2O Control Systems do not use any polyurethane in our applications.'
57 In the flyer for H2O Seal obtained by Sovereign there is the heading:
Specialists in sealing all types of water ingress. H2O is dedicated to the development and application of effective water and gas sealing technologies.
58 There is also reference to 'under pressure' similarly to the patent and 'pressure injection grouting'. In a series of bullet points there is reference to 'tailored emulsions for different environments', which Sovereign says is also similar to the type of liquid that is the subject of the Patent.
59 The process itself seems similar to that described in Patent 392 as Mr Steynberg himself acknowledges, saying in fact that lots of people do it. What is not, however, revealed from these documents in the public domain is whether the same formula is being used for the injected grout.
60 Sovereign also relies on an email from Mr Steynberg produced in the investigator's report in which he describes his process. He says:
…
Wed, Dec 11, 2019 at 11:08 PM
Hi Emma,
Thank you for the photos, the construction appears to be a besser block wall with the floor slab being poured after. If this is correct there would be a vertical cold joint between the block work and the floor slab. It also appears that water is penetrating through the brickwork mortar joints. Besser blocks can be notoriously difficult to seal. Assuming it is only the cold joint that is leaking the cost is $380 exc GST per linear meter with a 2 meter minimum. If the blocks also needs sealing it is sometimes better to get us in on a day rate of $1,800 exc GST, including 50 liters [sic] of N-LICS and $28.50 per liter [sic] after. This is a rough estimate from the photos, we will be able to give you a much more accurate indication after a site visit.
The joint gets drilled with a specialised diamond drill 14-18mm, that is significantly quieter than conventional hammer drills. A natural nanotechnology rubber grout gets injected under presure [sic] into the voids sealing the joints and cracks.
Yes we are working over the Christmas period and filling up fast, let me know if you have any other questions.
Thanks and kind Regards,
Micheal Steynberg
…
(Emphasis added.)
61 The email makes clear that N-LICS is a liquid but Mr Steynberg now appears to suggest in his first affidavit that it is not a liquid but a name he has given to his process for waterproofing. He says that N-LICS is an acronym for 'Nano Liquid Injection Containment System'. The email describes the liquid as a rubber grout - which is injected under pressure into the voids sealing the joints and cracks. This description appears to correspond with the description of 'LICS' as a 'blend of rubber emulsions' from Mr Steynberg's website in June 2011 which is set out above (at [56]).
62 Finally, Sovereign relies on a statement made by Mr Steynberg in a letter to its solicitors dated 26 February 2020 that, 'I'm carrying on the same business of waterproofing and of sealing as I was carrying before the making of the Consent Order.' Mr Van Dyk deposes to his belief that this statement raised 'some prospect' that Mr Steynberg is using the same 'method, process and composition for sealing passages that he was at the time the Orders were made.'
63 The crux of Mr Steynberg's opposition to this evidence and Sovereign's contentions is that, whether taken together or alone, they are insufficient to ground a reasonable belief that Mr Steynberg may be using the same method, process or composition as Sovereign such that a potential patent infringement claim could arise.
64 Mr Steynberg says that a letter to him by Sovereign's solicitors ('Watermark') dated 31 January 2020 shows that Sovereign has engaged in misleading or deceptive conduct. Watermark alleges:
From our client's investigations, it appears that you are using very similar chemicals and methods as you previously used in your H2O Control Systems business. Our client's investigations have revealed that you appear to be using NOH2O and/or N-LICS and/or an alternative rubber grout that is injected under pressure into cracks.
(Emphasis added.)
65 Mr Steynberg says the material filed by Sovereign in the present proceedings has not revealed that Mr Steynberg was or is using similar chemicals and/or methods as he did previously, nor is there any evidence that he was using NOH2O.
66 Mr Steynberg also makes the point in written submissions that a prospective applicant's right to discovery under r 7.23 needs to be weighed against the rights of Mr Steynberg to his own intellectual property rights. I agree with this contention, however in the minute of orders provided by Sovereign just prior to the hearing, they have responded to this concern by proposing a relatively conventional confidentiality regime: see for example MMD Design and Consultancy Limited v Camco Engineering Pty Ltd [2019] FCA 1803 per O'Bryan J (at [57] and [61]) and SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 per Finkelstein J (at [33]).
67 It is clear that the evidence obtained by Sovereign so far does not provide it with sufficient information to consider whether it is entitled to relief against Mr Steynberg. Although Mr Steynberg is correct that none of the evidence adduced proves that he is employing the same method and using the same chemical composition as Sovereign, there is no doubt that the processes being carried on by both parties appear on their face to be very similar.
68 It is not clear however, how more detailed information regarding the precise constituent elements of Mr Steynberg's sealing composition could be obtained outside of the discovery orders sought. In my view Sovereign is entitled to test that composition.
69 As to the evidence from Mr Steynberg that he was not aware of the 392 Patent, that would not usually, taken alone, be an adequate response to an infringement allegation, nor would the fact that others are using the same process (if that indeed be the case though there is no evidence here). But more importantly for present purposes, a lack of awareness of the patent is no answer to Sovereign's discovery orders which are directed principally at providing Sovereign with sufficient information to determine whether it could be entitled to commence proceedings.
70 Although I am of the view that Sovereign is entitled to the relief it seeks, I am concerned about the cost of compliance with the orders in the terms sought by Sovereign. They are quite expansive. Although no application has been made, my tentative view is that if Sovereign presses for orders of such width, it should give security for the costs of compliance.
71 Rule 7.29 of the Rules is in these terms:
7.29 Costs
A person against whom an order is sought or made under this Division may apply to the Court for an order that:
(a) the prospective applicant give security for the person's costs and expenses including:
(i) the costs of giving discovery and production; and
(ii) the costs of complying with an order made under this Division; and
(b) the prospective applicant pay the person's costs and expenses.
Note: Part 40 deals with costs and Division 40.2 deals with taxation of costs
(Emphasis added.)