Watson v Kriticos

Federal Court of Australia|2023-07-14|Before: Perram J

The trial due to commence on 11 September 2023 be vacated.
Prayer 1(c) of Mr Watson's interlocutory application dated 4 July 2023 be stood over generally with an entitlement to all parties to have it relisted for directions on 7 days' notice.
By 4.00 pm on 21 July 2023, the parties provide a form of orders providing for further discovery in relation to the FlowSurf machine and inspection of the other machines.
In the event that agreement cannot be reached, the parties provide their competing orders by 4.00 pm on 21 July 2023.
The parties provide short written submissions of no more than three pages dealing with the form of the orders by 4.00 pm on 28 July 2023.
That question be dealt with on the papers.
Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PERRAM J: 1 The liability phase of this matter is listed for a 15-day trial scheduled to commence on 11 September 2023. The applicant (Mr Watson) now contends that the second respondent ('Whitewater') has failed to give proper discovery of financial documents and the way in which its various surf machines work. He also says that his expert witness is unable to produce his report in time for a trial on 11 September 2023 since he must care for his wife who has recently been diagnosed with cancer. He submits that for these two reasons the trial dates should be vacated. This course is opposed by both respondents.

Discovery of financial documents 2 During the hearing, it became apparent that the discovery of the financial documents was not material to the adjournment application. Principally this was because those documents go only to the issues of quantum which have been severed from the trial scheduled for 11 September 2023 and which will be determined at a later date. There is a liability issue to which they do relate that concerns a restraint fee which Whitewater promised to pay Mr Kriticos for not competing with it outside Australia and New Zealand. This fee was related to the number of surf machines sold by Whitewater. Mr Watson alleges that he is entitled to be remunerated by Mr Kriticos for his work as a patent attorney in securing patent protection for Mr Kriticos's invention (to which invention I will shortly return). He claims an entitlement to a share of the restraint fee as a result. The principal issue for trial on liability is the nature of the restraint fee. 3 However, whether the fee was paid is also an issue and, to that extent, the quality of the discovery given by Whitewater is potentially relevant to the liability trial. During the hearing, however, Mr Campbell of counsel, for Mr Watson, accepted that there was sufficient evidence that the restraint fee had been paid to allow this issue to be resolved and that it was not necessary from Mr Watson's perspective to obtain further discovery of financial materials to enable the determination of this issue. 4 Consequently, whilst Whitewater's allegedly deficient discovery may be relevant to the quantum hearing, it has no direct bearing on the liability trial or, hence, on Mr Watson's application to vacate that trial. The appropriate course in relation to prayer 1(c) of Mr Watson's interlocutory application dated 4 July 2023 is therefore to stand it over generally with an entitlement to all parties to have it relisted for directions on 7 days' notice.

Discovery of how Whitewater's surf machines work 5 Mr Watson says that he helped Mr Kriticos obtain patent protection for an invention and that in return Mr Kriticos agreed to give him an interest in the invention. The agreement providing for this is known as the patent share agreement and is a complex contractual arrangement consisting of various written and oral communications. I described the agreement in Watson v Kriticos (Summary Judgment) [2021] FCA 261. The invention upon which the agreement fixes is defined in such a way that it includes Mr Kriticos's inventive concept and also any patents or patent applications filed for an apparatus or method using that inventive concept. 6 Whilst in patent law the invention is defined by the claims of the patent, the nature of Mr Watson's allegations is such that they apply beyond the claims of any patent to capture the use of Mr Kriticos's inventive concept. That aspect of Mr Watson's case is therefore not quite the same as would arise in ordinary patent litigation. 7 During the course of the hearing the nature of Mr Kriticos's inventive concept came into view. It requires some explanation for the purposes of this application. Surf machines use a lot of water. Without dwelling too much on the details, there seem to be at least two broad kinds of surf machine. In the first kind, water is pumped across and up a sheet upon which a person may then surf. In the second, water is pumped from underneath the surfer upwards and a computer system detects where the rider is at any particular moment so that water is only pumped upwards at that location. The surf rider is effectively atop a moveable fountain. There may be other systems too. 8 In both cases, large amounts of water are moved around using pumps. In addition to using a lot of water, the pumps which operate these machines also use a lot of electricity. Mr Kriticos's invention is directed to making surf machines more energy efficient. This is done by capturing some of the energy contained in the water. During the hearing, I asked Mr Campbell for a precise description of the inventive concept which can be distilled in these terms: The invention is at least one energy projection device, at least one energy recovery device and a structure for transporting the energy recovered from the energy recovery device back to one or more energy projection devices in the context of a surf machine. 9 This appears to be drawn from a patent to which I will refer in due course. However, for present purposes what matters is that this is the inventive concept the revenues from which Mr Watson says Mr Kriticos agreed to share with him in return for his work as a patent attorney. 10 It is convenient to refer to this idea as an energy recycling mechanism. Obviously enough, surf machines also do a lot of water recycling. The water pumped upwards towards the surfer (whether from in front in the form of a sheet or from underneath) is recaptured and recycled. I will refer to this as water recycling. 11 Mr Watson's complaint, in broad terms, is that whilst Whitewater has given discovery of the water recycling features of its surf machines it has not given discovery of any energy recycling mechanisms. 12 It is not in dispute that Whitewater has given two kinds of discovery detailing how its surf machines work. The first was the provision of a list of documents which included 355 drawings said to detail the design of the various surf machines subject to complaint. These were produced in what Mr Campbell called an 'accessible and understandable' format on 24 March 2023. These drawings are not easy to interpret for the lay reader and I directed Whitewater to produce, by way of discovery, verified product statements which was done by 16 June 2023. 13 By the end of the hearing of the further discovery application it was common ground that neither the drawings nor the product statements disclosed any energy recycling mechanisms although they do disclose water recycling features. 14 Mr Watson submits that Whitewater's machines do have an energy recycling mechanism and that the discovery it has given is therefore deficient. If this be correct, then it entails that there are further drawings which include this energy recycling mechanism which have not been discovered. Since it is not in dispute that the product statements accurately state what is in the drawings the real issue lies in Mr Watson's contention that there must be missing drawings.

Relevant principles 15 The matter is governed by r 20.21 of the Federal Court Rules 2011 (Cth): 20.21 Order for particular discovery (1) If a party (the first party) claims that a document or category of documents may be or may have been in another party's control (the second party), the first party may apply to the Court for an order that the second party file an affidavit stating: (a) whether the document or any document of that category is or has been in the second party's control; and (b) if the document or category of documents has been but is no longer in the second party's control - when it was last in the second party's control and what became of it. (2) The first party seeking an order under subrule (1) must identify the document or category of documents as precisely as possible. 16 Formerly, further discovery was regulated by O 15 r 8 of the Federal Court Rules 1979 (Cth) which was in these terms: Order 15 Discovery and inspection of documents … 8 Order for particular discovery Where, at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party: (a) to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and (b) to serve the affidavit on any other party. 17 For some time there was controversy about whether the affidavit of discovery was conclusive and whether the deponent of the affidavit could be cross-examined. However, even under the former O 15 r 8 it had come to be accepted that: (a) the affidavit of discovery is not conclusive; (b) the usual remedy for deficient discovery, where it is demonstrated, is the ordering of a further affidavit of discovery; but (c) in limited circumstances, cross-examination of the verifying deponent may be ordered. See Procter v Kalivis [2009] FCA 1518; 263 ALR 461 ('Procter') at [29]-[41] per Besanko J. The approach in Procter has been followed in numerous cases: see, for example, Voxson Pty Ltd v Telstra Corporation Limited (No 10) [2018] FCA 376; 134 IPR 99 at [17] per Perram J; Edwards v Nine Network Australia Pty Ltd (No 2) [2022] FCA 1332 at [45]-[49] per Wigney J. 18 Thus r 20.21 should be understood as a statement of the principles in Procter. There then arises the question of the appropriate standard to be applied on an application such as the present. That standard would appear to be that there are reasonable grounds for being fairly certain that there are other relevant documents. This test has its origins in a decision of Viscount Haldane LC in British Association of Glass Bottle Manufacturers Ltd v Nettlefold [1912] AC 709 at 714 (for a useful discussion of the authorities see Beecham Group Ltd v Bristol Myers Co [1979] VR 273 at 279 per Menhennitt J). This was the standard applied by Besanko J in Procter at [33]. It has since been applied in several decisions of the Court: see Guy Carpenter & Company Pty Ltd v Grove (No 2) [2011] FCA 1190 at [5] per Jagot J; Basetec Services Pty Ltd v Leighton Contractors Pty Ltd (No 3) [2015] FCA 767 at [9] per Besanko J; Shoreform (Qld) Pty Ltd v Millenium Coal Pty Ltd [2013] FCA 645 at [18] per Robertson J. None of these cases explicitly referred to r 20.21 but I do not think that this alters their significance. 19 There is an alternate line of cases which suggests that the appropriate standard to be applied is whether there are grounds for belief for the probability of a document's existence. This was the standard applied by Lander J in Metcash Trading Limited v Bunn [2010] FCA 8; 263 ALR 132 ('Metcash') at [18]-[19] and by Logan J in Fig Tree Developments Ltd v Australian Property Custodian Holdings Ltd [2008] FCA 1041 ('Fig Tree') at [15]-[16]. This standard appears to be lower than the standard under Procter. It is apparent this standard emerges from language used in O 15 r 8 which is missing from r 20.21. 20 The explanatory statement which accompanied the making of the new Federal Court Rules 2011 (Cth) discloses that it was not the intention that the new rules should have any different operation to the former rules: The new Rules do not substantially alter existing practice and procedure but rather explain it in a way that can be more easily followed and applied. 21 Despite that statement, I do not think that this is what r 20.21 does and, at least in the case of this rule, I am not prepared to say on the strength of the explanatory statement that r 20.21 operates in the same way as O 15 r 8: Voxson Pty Ltd v Telstra Corporation Limited (No 7) [2017] FCA 267 at [11]. As such, the appropriate standard to be applied is the standard stated in Procter. The standard referred to in Metcash and Fig Tree is not the standard under the current rule. 22 It follows that the standard to be applied is whether there are reasonable grounds for being fairly certain that there are other relevant documents.

Evidence 23 As finally advanced during the hearing, Mr Watson's case about this was based on eight items of evidence: (a) United States Patent 9,878,255 B2 ('the 255 Patent'); (b) A four email chain commencing on 3 May 2018 between Mr Marshall Myrman (the President of Whitewater), Mr Erikson Squier (Senior Counsel at Buchalter) and Mr Kriticos; (c) A printout from Whitewater's website dated 10 July 2023 which, without objection, was Exhibit One; (d) Another printout from Whitewater's website dated 28 October 2021; and (e) Paragraph [29] of Mr Myrman's affidavit dated 14 June 2023. 24 It is necessary to consider these separately.

The 255 Patent 25 Amongst other allegations, Mr Kriticos alleges that the 255 Patent obtained by Whitewater includes Mr Kriticos's inventive concept. As the argument was developed on the hearing of the application, Mr Watson sought to define Mr Kriticos's inventive concept by reference to this patent and, in particular, by reference to the concept of an energy recycling mechanism which he alleges it embodies. The 255 Patent is entitled 'Surfing Device and Method'. The background to the patent describes the invention as relating 'to the water sports of surfing and skiing and in particular to surfing or skiing simulation.' The summary to the 255 Patent says this: The present invention is related to water surfing or skiing simulation. In one embodiment, a surfing device may comprise at least one energy projecting means for projecting energy on a surface, at least one energy recycling means for recycling at least some energy of the projected energy, and at least one corresponding energy projecting structure. 26 The patent has two independent claims, claims 1 and 8. Claim 8 is as follows: 8. A surfing device comprising: a support structure comprising a front end and a rear end, a ride surface comprising a first end and a second end, at least one energy projector configured to adjustably project a first energy on the ride surface wherein the energy provides a surfing surface located at a distance from the ride surface, at least one energy recycling mechanism configured to adjustably project a second energy on the ride surface wherein the second energy comprising at least a portion of the first energy, an energy relief mechanism configured to adjustably remove the first energy and/or second energy from the ride surface, and a planar object for surfing comprising an upper surface, an underneath surface, a data receiving terminal, and a data emitting terminal; the data receiving terminal is configured to receive a plurality of data comprising the planar object's location and/or spatial orientation; the data emitting termination is configured to emit the plurality of data for adjusting the at least one energy projector, the at least one energy recycling mechanism, and/or the energy relief mechanism; the ride surface being supported by connecting the first end to the front end of the support structure and connecting the second end to the rear end of the support structure; the at least one energy projector being located substantially flush with the ride surface, and being configured to project the first energy at an angle relative to the ride surface; the at least one energy recycling mechanism is located proximal to the front end of the support structure and/or proximal to the at least one energy projector, wherein the second energy interacts with the first energy. 27 It will be seen that claim 8 includes an energy recycling mechanism (integer 4) and a data receiving terminal (integer 6), and locates the energy recycling mechanism proximal to the front end of the support structure and/or the at least one energy projector (integer 9). Mr Campbell's statement of Mr Kriticos's inventive concept is drawn from the summary of the 255 Patent. For present purposes, that inventive concept may be said to be the use of an energy recycling mechanism in surf machines. 28 There was also discussion during the hearing of another patent held by Whitewater, United States Patent 9,254,428 B2. Whilst this patent relates to surfing machines it does not disclose an invention utilising an energy recycling mechanism of the kind disclosed in claim 8 of the 255 Patent. I do not think it bears usefully on the present application. 29 Mr Watson alleges the 255 Patent is one of the fruits of Mr Kriticos's inventive concept. He says that the effect of the patent share agreement is that he is entitled to share in those fruits with Mr Kriticos and that Mr Kriticos has deprived him of this entitlement by providing the inventive concept to Whitewater. In turn, he says that Whitewater has obtained patent protection for the inventive concept and made surf machines using it. He also submits that Whitewater is implicated in various ways (mostly in equity) in Mr Kriticos's failure to fulfil the promises he made to Mr Watson. It is thus central to this part of Mr Watson's case that he demonstrate that Whitewater's surf machines use Mr Kriticos's inventive concept.

The four email chain commencing on 3 May 2018 30 The subject of these emails is 'Kriticos IP'. The chain of emails began on 3 May 2018 with an email from Mr Myrman to Mr Squier (and Mr Kriticos) which was in these terms: Hi Erik Early in the Kriticos relationship, we filed a patent I believe, for a deep flow wave that was specifically tied to "water recycling." Do you recall this, and: 1. Please confirm we filed an application for it 2. Let us know the status We are in the midst of spending, for us, a large chunk on a prototype we are going to build up at the mothership. If successful, I will want you and/or Rick to jam up (sometime in June) to check it out, brainstorm any other "novel, non obvious, or distinct" elements to expand upon the existing IP. We are looking most likely at late June, but I will keep you guys posted. Thanx, Marsh 31 This email suggests that Whitewater was about to spend a significant sum on constructing a prototype. Mr Myrman was looking for patent protection for it and was raising whether Mr Squier recalled anything about a patent for a 'deep flow wave' tied to water recycling which had been filed in the early part of the relationship between Mr Kriticos and Whitewater. It is open to infer from this that Mr Kriticos's invention had involved water recycling in the context of a deep flow wave machine. It is also open to infer that the prototype to which Mr Myrman was referring may have been a deep flow wave machine which was going to use water recycling as well. I say this because Mr Myrman's evident concern was to protect Whitewater's expenditure on the prototype and the protection he had in mind was the patent relating to a deep flow wave machine tied to water recycling. I do not infer, however, that water recycling necessarily entails an energy recycling mechanism. 32 On 14 May 2018 Mr Squiers replied to Mr Myrman (and Mr Kriticos) in these terms: Hi Marsh - Per your email below, I believe the application you are referring to is titled "Surfing Device and Method" and recently issued earlier this year as US Pat. No. 9,878,255 (see attached). This patent was filed on Nov. 14, 2016 (claiming priority to Provisional Patent Application 62/255,159, filed on Nov. 13, 2015). Please let me know if you have any other questions at all. Erikson Squier 33 The patent referred to is the 255 Patent discussed above. 34 This email appears to have been forwarded by Mr Myrman to Mr Kriticos on 15 May 2018 in a single line email with the query 'does this cover us?'. 35 Mr Kriticos replied to Mr Myrman's email on the same date and it is this email Mr Watson particularly relies upon. The email is as follows: Hi Marsh, The claims have been cut back a lot from what I filed with Dale originally. The description is sound but the claims aren't great. We can look at what is disclosed in the description and hope to file a child that better covers the FlowSurf more specifically perhaps? The priority date would be as per the patent that was attached today but that still has a long run. The claim 1 seems to limit it a bit, it also maybe a little too hinged on the board detection which is not relevant. I can understand they may have tried to limit the argument to the examiner but without anyone asking me for clarity it's now lost a fair bit of potency in my opinion, it may well of had to but I haven't seen any of the examiners reports. It seems the attourney believes the LatiTube relies on board detection, as we know just an option but not part of any model we are selling and not part of the deepflow. This being said I don't know all the ins and outs of patents, I do know that if there are 4 features to the main claim, someone using 3 can still be argued to infringe. I think we send them the FlowSurf fact sheet and ask them to read this in light of it and see if a child can be filled to more specifically hone in on FlowSurf. FlowSurf is disclosed in this patent but the claims don't function to protect it well in my opinion. Cheers, Steve 36 I would draw from this email the following propositions: first, the prototype referred to in Mr Myrman's email was for the machine known as the FlowSurf and FlowSurf was being discussed in May 2018; secondly, the features of the FlowSurf were largely encompassed within the 255 Patent but were not perfectly protected by its claims and a further child patent application that better covered it was being contemplated; thirdly, the FlowSurf did not have a need for board detection (i.e. detecting where the surfer was so that water could be pumped underneath the board); fourthly, whilst board detection could be used on the LatiTube, it was not part of any machine that Whitewater was selling; and fifthly, 'deepflow' did not involve board detection. 37 This may be further unpacked. Mr Kriticos was accepting that the FlowSurf machine was covered by the 255 Patent but the coverage was not ideal. One of the ways in which it was not ideal was that it provided for board detection (i.e. claim 8 integer 6) which the FlowSurf machine did not have. Thus, when the FlowSurf machine lacked features which were present in the claims of the 255 Patent, Mr Kriticos pointed them out. It is open to infer that had the FlowSurf machine lacked an energy recycling mechanism of the kind referred to in claim 8 integer 4 of the 255 Patent he would have pointed this out in the email too just as he had done in relation to board detection. 38 His concern instead appears to have been that FlowSurf had features which were additional to those claimed in the 255 Patent and that these needed protection which the patent did not provide. Apart from board detection, Mr Kriticos's concern does not appear to have been that the claims of the 255 Patent protected features which the FlowSurf machine did not have; rather his concern was that FlowSurf had additional features which the patent did not protect. Put another way, apart from the issue of the non-utilised board detection feature, the problem Mr Kriticos apprehended was under-inclusion not over-inclusion. 39 For the interlocutory purposes of this application, given that the 255 Patent discloses an energy recycling mechanism, it is therefore more than open to infer from Mr Kriticos's email of 15 May 2018 that the FlowSurf machine involves an energy recycling mechanism.

Exhibit One: a printout from the Whitewater website dated 10 July 2023 40 This printout concerns the FlowSurf machine. It contains a depiction of a FlowSurf machine described as a 'FlowSurf Render' from which one might infer that the FlowSurf machine does not yet exist. It also includes this statement: 'An innovative new way to surf, FlowSurf is FlowRider's most efficient deep flow wave stationery machine'. The render looks like this: 41 It is open to infer from this that the FlowSurf was not yet in production on 10 July 2023 and that it is a deep flow wave machine. One possible interpretation of the render is that the water travels down the machine rather than up (which might make more sense of the energy recycling mechanism though I reach no view on this on the current state of the evidence).

The printout from Whitewater's webpage dated 28 October 2021 42 This printout is five pages in length. It is not entirely clear which part of the website it shows as the rendering of the HTML into a print format has caused the relocation of some buttons and features. There is also a partial exclusion of part of the text on the first page. The first page, however, seems to be a general discussion of what Whitewater does. It contains this statement: We have been building waves for over 30 years, and have installed over 400 wave pools, wave rivers, and stationary surf simulators in almost every corner of the globe. From playing with friends in the wave pool to chilling out on a lazy river, these are high capacity water park essentials. Our wave systems are energy efficient, using 80% less power to make a wide variety of waves. Add a FlowRider® stationary wave to draw in teens with the cool surf vibe and drive food and beverage sales as spectators soak up the surfing spectacle. 43 Mr Campbell placed particular reliance on the words 'Our wave systems are energy efficient, using 80% less power to make a wide variety of waves'. This is followed by the statement 'Add a FlowRider® stationary wave to draw in teens with the cool surf vibe and drive food and beverage sales as spectators soak up the surfing spectacle.' In the context, I would read this as an invitation to a waterpark operator not only to purchase a wave machine but also a FlowRider. While Mr Campbell conceded during argument that he had in fact surfed on a surf machine he did not accept, and I do not find, that he is one of the teens with a cool surf vibe referred to in this document. 44 On the following pages, there then follow depictions of various classes of Whitewater's products, specifically devices for surfing, wave pools and rivers. It ends with a quote from a satisfied customer which is partially obscured but which seems to suggest contentment with the FlowRider machine. 45 From this I would infer that the various products sold by Whitewater are energy efficient and include mechanisms for reducing power consumption. This would include the FlowRider.

Paragraph [29] of Mr Myrman's affidavit dated 14 June 2023 46 This affidavit has been filed with a view to its use in the trial. Paragraph [29] is as follows: Since the dates of first release outlined above, there have been incremental changes to the technology used in our FlowRider Rides, including in particular (i) the development of our drop-stitch, inflatable ride surface (for WaveOz, FlowRider Triple, FlowRider Edge and the FlowRider Mobile) in about 2013, (ii) the development of an improved suction inlet (with a lower profile) in about 2015, (iii) the incorporation of safety padding along the side walls of the rides in about 2008 and (iv) the adoption of new grating materials, which we developed inhouse and call the Max Recovery System, for front and back recovery areas in 2013 (to replace the hollow tube matting used in earlier versions). 47 Mr Campbell placed particular reliance on the reference to the new grating materials. I would infer that the FlowRider rides use the new grating materials in the front and back recovery areas. It is however unclear to me how the grates relate to an energy recycling mechanism. Mr Campbell submitted that the drawings which had been discovered revealed the existence of grates which was not disputed by Mr Bedrossian SC for Whitewater. Mr Campbell submitted that the drawings did not 'include any real detail of what happens underneath those grates through the recovery of the water' which I accept. 48 I certainly accept that the grates are involved in the recovery of water and its recycling. Mr Campbell referred me to a patent held by Whitewater known as the 611 Patent. This is a patent for a water grating system. The abstract for the patent describes the grating system in these terms: A padded grating system comprising sheets of multiple composite members secured together with multiple support bars or battens, wherein each composite member preferably consists of an elongated rigid bar with a foam layer adhered thereto which are encapsulated by a PVC or plastic water impervious tube or sleeve that has been heated and shrunk thereon. The sheets are specifically designed to be used in connection with water rides such as the FlowRider® and can be modularly installed on site to cover certain drainage areas. The composite members are preferably made by gluing the rigid bars onto a sheet of foam and cutting the foam sheet to form the composite members, and after the tube or sleeve has been heat shrunk around each one, the ends of the composite members are then cut and sealed. 49 This does not appear to be an energy recycling invention. Thus the presence of padded grates on the FlowRider devices provides little basis from which to infer that FlowRider devices have an energy recycling feature. The devices certainly have grates and water certainly drains through them but, without something more, I do not see how this is evidence that the FlowRider machines have an energy recycling feature. It may be, in due course, that the evidence shows some connection between the grates and an energy recycling mechanism but in its current state I am not satisfied that the evidence does so on this application. My inability to understand Mr Campbell's submissions about the grates may reflect a lack of acuity on my part but, whatever the cause of my present non-comprehension of this point, the fact remains that I am unpersuaded.

Assessment of the evidence 50 I would infer from the evidence that the FlowSurf machine which is in development uses an energy recycling mechanism of the kind described in the 255 Patent. I would also infer for the purposes of this application that the energy recycling mechanism in the 255 Patent is a manifestation of Mr Kriticos's inventive concept and hence is subject to Mr Watson's allegations. 51 Mr Myrman's evidence at [28(k)] of his affidavit says that the FlowSurf machine has not yet been finalised or commercialised which I would accept for present purposes, noting that it would be difficult to conceal the public sale of the FlowSurf machine. I would accept that complete and final drawings for it may not yet be available. 52 Mr Myrman's evidence at [28(k)] also suggests development of the FlowSurf only began in 2022. For the purposes of the present application, it suffices to note that there is evidence to the contrary. It consists of Mr Myrman's own email of 3 May 2018 which referred to Whitewater being 'in the midst of spending, for us, a large chunk on a prototype we are going to build up at the mothership'; Mr Kriticos's email of 15 May 2018 identifying that Mr Myrman was seeking patent protection for a machine called 'FlowSurf' (so that there is on the face of it a powerful argument that the prototype referred to by Mr Myrman and the FlowSurf machine referred to by Mr Kriticos are one and the same); Mr Kriticos's knowledge on 15 May 2018 that there existed a 'FlowSurf fact sheet'; Mr Kriticos's knowledge on 15 May 2018 that the FlowSurf fact sheet was sufficient in detail both to permit him to assess whether it fell within the claims of the 255 Patent and to be worth sending to lawyers ('attourney') which it may reasonably be inferred were patent attorneys. 53 There may therefore be some reason to doubt the accuracy of Mr Myrman's evidence that FlowSurf began development in 2022 and to conclude instead that it had sufficiently advanced by May 2018 such that its essential features for patent purposes were understood and were clear enough to enable the construction of a prototype. Making the reasonable assumption that development continued between 15 May 2018 and 2022 it seems to me unlikely that the FlowSurf is now in a protean state of development even allowing for the effects of the pandemic on human technical endeavour. 54 This more advanced stage of preparation is consistent with the fact that the machine is being advertised on Whitewater's website which suggests that Whitewater does not perceive the existence of substantial design or manufacturing obstacles in bringing the machine to market. 55 I would therefore be unwilling to conclude from the fact that the FlowSurf machine has not been finalised or commercialised that there are unlikely to be documents in existence dealing with its energy recycling feature. For example, there is at least the FlowSurf fact sheet referred to by Mr Kriticos on 15 May 2018. 56 Further, it would seem unlikely that there are no other such documents. The only way this could be so is if there were some other reading of the emails of Mr Myrman and Mr Kriticos in May 2018. Those emails were raised by Mr Campbell during the course of argument and Whitewater did not attempt to advance such an alternate reading. 57 For completeness, this conclusion does not exclude the possibility that when the proceedings are tried Mr Myrman's statement at [28(k)] that the FlowSurf has been in development since 2022 will prove correct. Or it may appear that [28(k)] involves an innocent mistake. My only point, at this stage, is that there are reasonable grounds for thinking that the FlowSurf machine has been in development since at least 2018. 58 Thus I accept that it has been shown, in relation to the FlowSurf machine, that there are reasonable grounds for being fairly certain that Whitewater has drawings and other documents which disclose the energy recycling mechanism in the FlowSurf machine. A good place to start would be the FlowSurf fact sheet that evidently exists. 59 On the other hand, I am not persuaded on the material presently available that it has been shown that any of the other Whitewater machines use an energy recycling mechanism of the kind disclosed in the 255 Patent. In particular, I do not accept, on the current state of the evidence, that a general statement made about all of Whitewater's products that they are 'energy efficient, using 80% less power to make a wide variety of waves' is sufficient, at this stage of the proceeding, to draw an inference that all of those systems use the energy recycling mechanism disclosed in the 255 Patent. This is not a finding about the machines but merely a statement of what has been proved on this interlocutory application. 60 Once further discovery is given in relation to the FlowSurf machine then, depending on the outcome of that process, I would be willing to give this issue further consideration. In particular, were it then to appear that a deliberate attempt to conceal the energy recycling mechanism in the FlowSurf machine had taken place then this might be an additional fact bearing on the assessment of the position of the other machines. It might also bear on the Court's assessment of the worth of the various affidavits of discovery. However, that is not presently the case. 61 In the course of the hearing, Mr Bedrossian indicated that Whitewater had not received a request from Mr Watson to inspect any of its machines in person but that there was 'no suggestion Whitewater would stand in the way' of such an inspection. 62 There is a certain absurdity in the present debate. The machines either have an energy recycling feature or they do not. The easiest way to cut through this procedural fandango would be for Mr Watson's expert, Mr Hunter, to look at the machines for himself. In these circumstances, I consider it appropriate to make an order for inspection of the non-FlowSurf machines by Mr Hunter for the limited purpose of identifying whether they use an energy recycling mechanism. There are many water parks in Australia including several here in Sydney. It is possible that none or perhaps not all of Whitewater's surf machines are present in these water parks. If that be so, it is a problem which can be confronted. Even if it were possible to examine only a limited selection of the machines this would advance the debate out of the muddy trenches in which it is presently mired. 63 Assuming it to be possible, inspection would be a relatively minor imposition on Whitewater and of utility in resolving the issues in this case. Therefore, in my view, such an order is justified and strikes an appropriate balance: see Orient Overseas Container Line Ltd v ANL Singapore Pte Ltd [2020] FCA 921 at [28]-[34] per Stewart J, citing Norm Engineering Pty Ltd v Digga Australia Pty Ltd [2005] FCA 1378 at [21] per Greenwood J. Whilst an application under r 14.01 of the Federal Court Rules 2011 (Cth) has not been made, the Court is able to make such an order of its own motion pursuant to r 1.40(a). 64 Mr Watson advanced the orders he sought in relation to further discovery in terms which captured all of the machines, not just the FlowSurf machine, and sought matters going beyond the energy recycling mechanism. The appropriate orders will need to reflect the conclusions which I have drawn and be more narrowly tailored.

Adjournment of the proceedings 65 The trial of the proceedings cannot proceed until this discovery is given and it would not be fair on Mr Watson to make him proceed to trial whilst a significant question mark hangs over the FlowSurf product statement and related documentation. For that reason, the trial will need to be vacated. It is not necessary in that circumstance to enter upon the significance of when Mr Watson retained Mr Hunter or the unfortunate circumstances now confronting his wife. There are reasonable grounds for being fairly certain that the primary materials for consideration by Mr Watson's expert have not yet been disclosed by Whitewater. 66 I make the following orders: (1) The trial due to commence on 11 September 2023 be vacated. (2) Prayer 1(c) of Mr Watson's interlocutory application dated 4 July 2023 be stood over generally with an entitlement to all parties to have it relisted for directions on 7 days' notice. (3) By 4.00 pm on 21 July 2023, the parties provide a form of orders providing for further discovery in relation to the FlowSurf machine and inspection of the other machines. (4) In the event that agreement cannot be reached, the parties provide their competing orders by 4.00 pm on 21 July 2023. (5) The parties provide short written submissions of no more than three pages dealing with the form of the orders by 4.00 pm on 28 July 2023. (6) That question be dealt with on the papers. (7) Costs be reserved. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.

Federal Court Rules 1979(Cth)

Federal Court Rules 2011(Cth)rr 1.40(a), 14.1, 20.21

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