University of Sydney v ResMed Limited

REASONS FOR JUDGMENT 1 This proceeding was commenced by application filed on 13 February 2007. The applicant, The University of Sydney, claims that the respondent, ResMed Limited, has infringed Australian Patent No 643994 (Patent) of which the University is the registered proprietor. It also claims that ResMed has breached a "Licensing Agreement" with the University dated 17 May 1991 and its obligation of confidentiality by using confidential information which the University provided to ResMed. 2 Since it was commenced the proceeding has had a chequered history which has included a number of interlocutory applications that have raised issues of pleading and discovery and which have been the subject of three judgments of Lindgren J; see The University of Sydney v ResMed Ltd [2008] FCA 1020; The University of Sydney v ResMed Ltd (No 2) [2008] FCA 1969 and The University of Sydney v ResMed Ltd (No 3) [2009] FCA 527. ResMed, by its Further Amended Notice of Motion filed on 29 November 2010, has raised another interlocutory issue. To understand the issues raised by the notice of motion and the nature of the relief sought it is necessary to give some background information about the proceeding. 3 The Third Further Amended Statement of Claim (Statement of Claim) filed on 24 September 2009 describes the Patent as being for a "Membrane Mask" invented by an employee of the University, Professor Colin Sullivan and his assistant Jakob (Jim) Bruderer. According to the Statement of Claim the Patent has a priority date of 21 May 1990 which it derives from Australian provisional application No PK0228 which was filed on that date in the name of the University. The complete specification of the Patent was published and became open to public inspection on 21 November 1991. 4 Paragraph 11B of the Statement of Claim alleges that during the period from 21 May 1990 to the end of 1991 the University supplied information to ResMed which concerned the structure and function of a facial mask which used a thin flexible membrane to seal the interface between the face of the wearer and the mask against gas leakage. Paragraph 11C alleges that in the same period the University also supplied ResMed with prototypes of the Membrane Mask to ResMed. The "Information" is pleaded to have been confidential and to constitute "Intellectual Property" within the meaning of the Licensing Agreement. The University claims, inter alia, that ResMed used the Information in breach of the Licensing Agreement and also in breach of an equitable duty of confidence that ResMed owed to the University. 5 The Statement of Claim as originally filed did not contain paragraphs 11B and 11C; they were introduced by the Second Further Amended Statement of Claim which was strenuously resisted by ResMed. ResMed objected to that pleading on grounds that included that each of the three categories of legal obligation that relied on the Information identified in paragraph 11B (a) to (m) of the document was not adequately pleaded and particularised. In rejecting ResMed's objection, Lindgren J said, [2008] FCA 1969 at [38]: I agree with ResMed that the University must indicate all of the facts, matters and circumstances on which it relies as establishing each of the three categories of legal obligation. However, in my opinion, the University does so. 6 In relation to the pleading of an equitable obligation of confidence (one of the three categories referred to above) his Honour said, at [55], that he had concluded "[w]ith some misgiving" that the pleading was sufficiently precise. However, his Honour identified a defect in the pleading that related to the Licensing Agreement. His Honour said, at [44], that the pleading should be amended "to make clear to ResMed and the Court precisely what the University's case is in these respects". Having considered ResMed's multiple objections, on 23 December 2008, Lindgren J ordered that the University had "leave to file and serve a second further amended statement of claim consistent with reasons for judgment" delivered on that date. 7 Subsequently the parties were again in dispute as to whether the amendments proposed by the University were consistent with his Honour's reasons. Resmed's objections were the subject of a hearing before Lindgren J on 13 May 2009. In the course of that hearing some of ResMed's objections were withdrawn when the University clarified its position and, as his Honour observed, "no doubt further issues were resolved between the parties prior to the hearing"; The University of Sydney v ResMed (No 3) [2009] FCA 527 at [25]. In any event, on 21 May 2009, his Honour gave leave to the University "to file and serve the second further amended statement of claim in the form that was before the Court on 13 May 2009". 8 ResMed's concerns about the adequacy of the University's particularisation of its pleading flowed into issues about the regime for discovery. Discovery was the subject of extensive discussion at the case management conference before Lindgren J on 8 September 2009. The transcript of the case management conference shows that the differences between the discovery required under categories 5, 5A and 5B and under category 8 were discussed. Those categories are included in the list of agreed categories of documents for discovery by ResMed which is annexed to the orders made on 16 September following the case management conference. Categories 5, 5A and 5B and 8 are: 5. All documents recording or evidencing the disclosure, between 1 January 1990 and 31 December 1991, of any information from the University, Professor Colin Sullivan or Mr Jakob Bruderer to ResMed concerning the Membrane Mask, or what is described by ResMed as the "Bubble Mask" or "Bubble Cushion", including without limitation: (a) any prototype or example of such a mask; and (b) any information concerning the development of the mask, the development of any prototype of the mask, the operation, features or benefits of the mask, or any methods or materials for the construction or manufacture of the mask. 5A. All documents recording or evidencing meetings between ResMed and Colin Sullivan or Jakob Bruderer, or attendance of ResMed personnel at Colin Sullivan's laboratory, workshop, sleep clinic or other offices between 1 January 1990 and 31 December 1991. 5B. All documents recording or evidencing communications during the period 1 January 1990 and 31 December 1991 between ResMed and any third party responsible for the manufacture of the Membrane Mask, or what is described by ResMed as the "Bubble Mask" or "Bubble Cushion", regarding the development, modification or refinement of the Membrane Mask. … 8. All documents created before 31 December 1998 recording, evidencing or concerning the development of the Original Mirage Mask, or any prototype of that mask, including documents recording, evidencing or comprising any comparison between the Membrane Mask, or what is described by ResMed as the "Bubble Mask" or "Bubble Cushion", and any of the Mirage Masks, but excluding documents concerning only the materials for use, the manufacturing process, the development of straps or retaining devices, the forehead support, the inlet for the air pipe, the vent and the oxygen ports. 9 It would appear from the transcript of the case management conference on 8 September 2009 that the parties contemplated that discovery in categories 5, 5A and 5B would be given before the University put on its evidence about the Information and the prototypes they allege were given to ResMed and that discovery under category 8 would be given after that evidence. It is a little difficult to understand the transcript but there seems to have been some discussion about date limitations probably in relation to categories 5, 5A and 5B. The transcript at page 32 records Mr Bannon, senior counsel for ResMed saying: This is the plaintiff's case of saying they will plead a positive case in which they say, "We told you specific information". The only reason 55A [sic] and B is there is because it is apparent they have got no idea what they told us. So this is the greatest leg-up the plaintiff gets, is to accept that we have argued this once before; to accept that they can have this leg-up, as it were, to put on their case … … And so we say 5, 5A and 5B, is a fair old generous category, and yet they impose on us some wider restrictions, not withstanding the reasonable search. We say it is entirely unreasonable. And if it is going to have this debate … let's go back to the point where they put on their statements now in a month … and, quite frankly, that will make our task a lot easier, because we will then see what the parameters of the real debate are …We will know what we will be looking for then, because Professor Sullivan will tell us, "I had these meeting on certain days, and I disclosed these sorts of things", and the reasonable assertion will become a lot more sensible. 10 While there are obviously errors of transcription in the above extract it is nevertheless tolerably clear that ResMed regarded its agreement to give the limited discovery in categories 5, 5A and 5B as a concession and that it was contemplated, apparently on both sides, that the bulk of ResMed's discovery, in particular category 8, would be given after the University put on its evidence as to Information and prototypes. This is also apparent from the transcript of the hearing on 13 May 2009, which was before the categories were agreed. At that hearing ResMed's submission that it should give only limited discovery before the University filed its evidence on disclosure of Information and prototypes was accepted by Lindgren J. Relevant extracts from the transcript of that hearing were quoted in the affidavit of Mr Anthony Muratore sworn on 2 November 2010. At the hearing on 16 September 2009 orders reflecting the position reached at the case management conference were considered. The transcript of that hearing records Mr Moore, counsel for the University, as saying: …your Honour will recall at the case management conference there was discussion of ResMed giving discovery of the document was [sic] relating to the disclosure of information. That was categories 5, 5A and 5B. And at one point, Mr Bannon indicated that he had instructions that that could be done within six weeks, and then there was a suggestion that Professor Sullivan would then put on his evidence in relation to the disclosure information, and in the meantime the balance of the discovery would occur. We agreed with that proposal. We continue to agree with it, and we seek orders in that form being made. 11 The orders made by Lindgren J on 16 September 2009 and 7 October 2009 reflected that agreement. His Honour ordered that, by 1 December 2009, ResMed provide discovery and production in respect of the ResMed Discovery Categories 5, 5A and 5B. Order 5 of the orders made on 16 September 2009 (the Information Evidence Order) required the University to file and serve by 26 February 2010 any affidavits in chief relating to the disclosure of Information and prototypes to ResMed as pleaded in paragraphs 11B and 11C of the Second Further Amended Statement of Claim. On 7 October 2009 his Honour ordered ResMed to provide discovery and production in the remaining ResMed Discovery Categories, being categories 1-3, 8-11, 12, 14, 16-24, 25A, 25B and 27-35 by 31 March 2010. While this order was not expressed to be conditional on the University's compliance with the Information Evidence Order, it is clear that all parties contemplated that the evidence referred to in that order would be filed before ResMed was required to provide discovery in any of the categories other than 5, 5A and 5B. 12 The time for compliance with the Information Evidence Order has been extended a number of times, generally with the consent of ResMed. The University's key witness on this point was to be Professor Sullivan, however, at a directions hearing on 29 July 2010, Mr Moore advised the Court that for some time Professor Sullivan had been reluctant to co-operate and had recently announced that he did not intend to give any evidence on behalf of the University. In her affidavit sworn on 22 November 2010, Kim Anne O'Connell, a partner of Mallesons Stephen Jaques, solicitors for the University, states that Professor Sullivan's position was communicated to Mallesons on 18 June 2010. Mr Moore said that the University was seeking alternative witnesses who could depose to the disclosure of Information and prototypes to ResMed. On 29 July 2010, the date for the University to provide this evidence was extended to 23 September 2010 and on 6 October 2010 the time was further extended to 7 October 2010. 13 By letter dated 7 October 2010 Mallesons informed the solicitors for ResMed that the University intended to subpoena Professor Sullivan and provided an outline of the evidence it expected him to give. By cover of that letter and emails of 7 October 2010 Mallesons also provided an unsworn affidavit of Karen Ann Waters, an affidavit of David William Harold Forbes and an affidavit of Neil Robert Wilson. 14 In response to the letter of 7 October 2010 ResMed's solicitors, Jones Day, wrote to Mallesons, on 21 October 2010 and stated: The three affidavits provided by your client are, plainly and on their face, insufficient to establish the matters alleged in paragraphs 11B and 11C of the Third Amended Statement of Claim. Furthermore, the Outline, and your proposal to subpoena Professor Sullivan, do not comply with the Order. You have not suggested any basis on which the Court would dispense with such compliance, or any basis for your client's expectation that the Outline reflects the evidence which Professor Sullivan would give. Accordingly, in our view your client's claim in respect of the matters pleaded in paragraphs 11B and 11C of the Third Amended Statement of Claim is liable to be struck out or summarily dismissed. Our client will be filing a motion seeking orders to that effect. 15 Further doubt was cast on the reliability of the outline as a reflection of the evidence that Professor Sullivan would give, by a letter dated 18 November 2010 from MWA Lawyers, who act for Professor Sullivan. The letter, which was sent to both Mallesons and Jones Day states that "our client has not formally provided an outline to the University of Sydney of the evidence he will give". It asks to be provided with a copy of the outline and adds: In the interim, so there is no doubt about the matter, despite whatever may be stated in the outline, please be aware that this should not in anyway be taken as the evidence Professor Sullivan would necessarily give if a subpoena to give evidence (and issued for a legitimate forensic purpose) was served upon him. Our client reserves his rights, including the right to apply to have any such subpoena set aside. 16 On 2 November 2010 ResMed filed a notice of motion seeking to have aspects of the Statement of Claim relating to these issues (the Information Claims) struck out. The notice of motion was amended several times and in the form in which it came on for hearing on 10 December 2010 it included as the primary relief sought the following orders: 1. That, in compliance with order 5 of the orders made by Justice Lindgren on 16 September 2009 as extended by the Court from time to time, the Applicant file and serve, by a date to be fixed by the Court, an affidavit in chief of Professor Colin Sullivan of the University of Sydney relating to the disclosure of Information and prototypes to the Respondent as pleaded in paragraphs 11B and 11C of the Third Further Amended Statement of Claim (the Disclosure). 2. In the alternative to order 1, that, pursuant to section 46 of the Federal Court of Australia Act 1976 (the Act) and Order 24 rule 1(1)(a) of the Federal Court Rules, Professor Colin Sullivan of the University of Sydney to be examined on oath or affirmation in relation to the Disclosure before an examiner appointed by the Court, at a time and place to be fixed by agreement or by further order of the Court, and in accordance with such further directions as may be given. 3. That order 1 of the Orders made on 7 October (as subsequently varied by orders made on 12 May 2010, 29 July 2010 and 6 October 2010) be varied so that the obligation of the Respondent/Cross-Claimant to provide discovery and production in relation to Category 8 of the ResMed Discovery Categories (as defined in the orders of 16 September 2009) be deferred to a date after the date fixed for the purposes of order 1, or alternatively, order 2. 17 In paragraphs 4 and 5 of the notice of motion, ResMed sought, in the alternative to orders 1 and 2, orders that the Information Claims be struck out or dismissed on the basis of the University's failure to comply with the Information Evidence Order. In the further alternative it seeks judgment for ResMed on the basis that ResMed has no reasonable prospect of successfully prosecuting those claims. In written submissions in support of its motion, ResMed said that, at this stage, it was not pressing the strike-out or summary dismissal relief but that it reserved its right to do so at a later stage. Consequently, the hearing on 10 December 2010 was confined to the first three paragraphs of the notice of motion. 18 As noted above, at [11], the University consented to the timetable for evidence and discovery imposed by Lindgren J in the orders made on 16 September 2009 and 7 October 2009. It is clear that, at the time, all parties expected that Professor Sullivan would be a key witness for the University in relation to Information and prototypes and that he would co-operate with the University in preparing that evidence. It should be noted, however, that at no time has the Court ordered the University to provide an affidavit of Professor Sullivan. The Information Evidence Order referred to the University's evidence concerning the disclosure of Information and prototypes to ResMed as pleaded in paragraphs 11B and 11C of the Second Further Amended Statement of Claim. Irrespective of the parties' expectations it was not directed to the evidence of any particular deponent. 19 The University submitted that ResMed had not complied with the orders of the Court requiring discovery in accordance with the agreed categories and that it should be ordered to provide discovery without further delay. This submission ignores the fact that the orders made on 16 September 2009 and 7 October 2009 contemplated that the various steps would occur in the following order: