A'Van Campers Pty Ltd v Camoflag Pty Ltd

[2003] FCA 353

FEDERAL COURT OF AUSTRALIA

A’Van Campers Pty Ltd v Camoflag Pty Ltd [2003] FCA 353

PATENT  - registered design - infringement proceedings –cross claims for revocation – amendment of particulars of grounds of invalidity – whether an Earth Closet or a See v Scott-Paine order is appropriate – consideration of circumstances in which such orders are not appropriate

Wimmera Industrial Minerals Pty Ltd v RGC Minerals Sands Ltd (1998) AIPC 91-406 – referred to
Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1999) 46 IPR 173 – referred to
Baird v Moule’s Patent Earth Closet Co Ltd - cited
Edison Telephone Co v India Rubber Co (1881) 17 Ch D 137 – cited
See v Scott-Paine (1933) 50 RPC 56 - cited
GEC Alstom Limited’s Patent [1996] FSR 415 - considered

A’VAN CAMPERS PTY LTD v CAMOFLAG PTY LTD

V1190 OF 2001

MERKEL J
MELBOURNE
23 APRIL 2003

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V1190 OF 2001

BETWEEN:	A'VAN CAMPERS PTY LTD APPLICANT
AND:	CAMOFLAG PTY LTD RESPONDENT

AND BETWEEN:	CAMOFLAG PTY LTD CROSS-CLAIMANT
AND:	A'VAN CAMPERS PTY LTD CROSS-RESPONDENT

JUDGE:	MERKEL J
DATE OF ORDER:	23 APRIL 2003
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.   The respondent have leave to amend its defence, cross-claim and Particulars of Invalidity in the manner set out in Exhibit “JST 1” to the affidavit of James Stefan Tobin sworn on 19 December 2002.

2.   The respondent pay the applicant’s costs thrown away by reason of the amendments.

3.   The applicant pay 75 per cent of the respondent’s costs of and incidental to the respondent’s motion filed on 20 December 2002.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V1190 OF 2003

BETWEEN:	A'VAN CAMPERS PTY LTD APPLICANT/CROSS RESPONDENT
AND:	CAMOFLAG PTY LTD RESPONDENT/CROSS CLAIMANT

AND BETWEEN:	CAMOFLAG PTY LTD CROSS CLAIMANT
AND:	A'VAN CAMPERS PTY LTD CROSS RESPONDENT
JUDGE:	MERKEL J
DATE:	23 APRIL 2003
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. The applicant has issued a proceeding against the respondent for infringement of a patent entitled “Campervan” and of a design in respect of a “Campervan”.  The proceeding was commenced on 19 November 2001.  A defence and cross-claim for revocation of the patent and the design on the ground of invalidity was filed on 28 February 2002.  By a motion filed on 20 December 2002 the respondent sought leave to file and serve an amended defence, an amended cross-claim and amended Particulars of Invalidity.

2. The proposed amendments that are in contention on the present motion relate to the Particulars of Invalidity.  The amendments fall into three categories.  The first category concerns amendments adding claims 2-8 made by the applicant on 14 March 2001, which was shortly prior to the registration of the patent.  The respondent, which only became aware of the amendments to the claims in March 2002, alleges that those claims were not fairly based on the specification and, as a consequence, the applicant is not entitled to rely on its claimed priority date. 

3. The second category relates to prior art which is now sought to be relied upon in addition to the prior art upon which the applicant had previously relied.  The additional prior art is a picture and caption concerning the Chalet Campervan published in RV Business Vol 44 No 9 December 1993 in the United States and made available to the public in Australia, and a New Zealand Patent Application 165930 (“the NZ application”) for an invention entitled “A Collapsible Gable Roof Caravan” published at the Intellectual Property Office of New Zealand on 26 November 1974.  The NZ application is only relied upon as prior art in respect of the patent claims.  The additional prior art was not identified by the respondent until September and October 2002 and was first provided to the applicant’s solicitor on 2 November 2002.

4. The third category of amendment provides further particulars of the allegation that the applicant was not the inventor of the patent or author of the design and was not claiming through the inventor or author.  The amendment identified the person alleged by the respondent to be the inventor and author.  The respondent first became aware of that information in about October 2002.

5. Although the applicant formally opposed the proposed amendments no ground has been put forward for disallowing them.  The real contest between the parties related to whether the amendments should be allowed only upon the making of what is known as an Earth Closet or a See v Scott-Paine order:  see the unreported case of Baird v Moule’s Patent Earth Closet Co Ltd which appears as a note in Edison Telephone Co v India Rubber Co (1881) 17 Ch D 137 at 139; See v Scott-Paine (1933) 50 RPC 56; and Wimmera Industrial Minerals Pty Ltd v RGC Minerals Sands Ltd (1998) AIPC 91-406 and the authorities there cited. In substance, the effect of such orders is to allow the amendments but then to give the applicant a period of time in which to consider, in light of the amendments, whether it wishes to maintain that the patent or design in suit is valid and continue with the infringement action or whether it wishes to consent to the revocation of the patent or design. In the event that the applicant wishes to maintain the validity of the patent or design and continue with the infringement action then the only order for costs is the ordinary order for costs upon amendment namely, that the respondent should pay the costs thrown away by reason of the amendment. However, if the applicant elects to consent to revocation of the patent or the design, then an order is made giving the respondent the costs of the proceeding up until the date of filing its original particulars of grounds of invalidity but giving the patentee the costs of the proceeding thereafter.

6. The rationale for such an order is said to be that if the respondent had exercised reasonable diligence prior to filing its original particulars of invalidity it would have uncovered and pleaded the prior art or relied upon the other amendments which it now seeks to plead by way of amendment.  The applicant, at that early stage, may have elected to give up the patent or design rather than to waste time and money on the proceeding for the period between the date of the respondent’s original pleading and the date of the amended pleading. 

7. Until recently Earth Closet or See v Scott-Paine orders were made as a matter of course upon an application to amend particulars of invalidity.  However, in GEC Alsthom Limited’s Patent [1996] FSR 415, Laddie J declined to make a See v Scott-Paine order pointing out that such an order can cause injustice in some cases. Laddie J observed at 418-419:

   “It is a matter of common experience amongst those who act in the patent field, and it was certainly my experience at the Bar, that a See v. Scott-Paine order could seriously affect the freedom of a party attacking the validity of a patent to run the best possible case. Not infrequently a plaintiff would allege infringement of a patent the validity of which was seriously in doubt. It nevertheless obtained significant commercial advantage by suing its competitor.  The patentee could prepare his case at his own speed and then, when thoroughly ready, could serve the writ, statement of claim and particulars of infringement on the competitor. The competitor would then try to put together, within a timetable set by the rules of court, an attack on validity. In a majority of cases this could only be the first stab at mounting an attack.  Searching for prior art is frequently time consuming and difficult, not because the prior art is difficult to find, in the sense of being hidden, but because there is now so much material which is available to search through in most areas of technology that it is logistically impossible to do it instantly. ... Furthermore, even if material is found, it cannot, or should not, be pleaded unless the attacking party can show that it was made available to the public prior to the priority date of the patent. 

   The result is that in the overwhelming majority of cases, the attacking party has little practical alternative to putting forward additional prior art as the case proceeds towards trial. In the case of a patent which is really weak, the existence of the possibility of a See v. Scott-Paine order can act as a serious impediment to the attacking party. He will know that if he seeks to plead the new prior art, the patentee, who already is aware that his patent is seriously at risk or may even have decided that it is virtually bound to be revoked on the basis of the existing pleaded material, can seek an order which will allow him to bend to the inevitable and relinquish the patent while making the other party pay most of the costs of the action. He will have obtained the commercial advantage of, having held a patent, which he now concedes is invalid, over his competitor’s head for months or years and, in addition, obtained an order from the court that the competitor must pay for the legal costs incurred while trying to get the threat removed. The result is simple and, in my view, worrying.  Where there is already a good attack on validity, the existence of the risk of a See v. Scott-Paine order may well force the attacking party to elect not to plead the more recent, and probably better, art. The consequence is that the court may well have to decide on the validity of a monopoly which affects the public at large on what may be the second-best case. This is not a merely theoretical possibility.  I know from my own experience at the Bar that the threat of a See v. Scott-Paine order has sometimes significantly embarrassed defendants’ legal teams in patent infringement actions into having to decide whether to try to put forward the best case or take the financially more conservative option of pressing ahead with the particulars of objection in their unamended form.

   And at 420:

   “[T]he existence of See v. Scott-Paine orders are frequently seen as a gift from heaven by patentees with very weak patents. They take the benefit of the order for costs even though, in reality, in many cases it is not the newly added prior art which has made them abandon the patent.
   …
   There is one other way in which the too-ready imposition of See v. Scott-Paine orders may result in hardship. It is common knowledge that most patent proceedings threatened or commenced do not reach trial. Sometimes, just as in other areas of litigation, infringement proceedings are a ‘try-on’ by the plaintiff. If See v. Scott-Paine orders are imposed without proper, careful and sensible regard to what, in all the circumstances, can reasonably be expected by way of preparation by the defendant/petitioner, he may feel obliged to engage in a massive world wide search for prior art, with attendant increase in costs, at an early stage. If this happens, the fear of See v. Scott-Paine orders may increase rather than decrease the cost of litigation.”

   And at 421 :

   “[I]t appears to me that I am obliged to exercise my discretion in relation to the appropriate order as to costs by taking into account all the relevant facts presented to me. I must not simply approach this on the basis that See v. Scott-Paine orders have frequently been made in the past.  Furthermore it seems to me that the overwhelming obligation on me is to try to do justice as between the parties on the basis of the evidence available.  I must consider, as Slade L.J. indicated, whether there has been unnecessary wastage of cost. Also, for the reasons set out above, I have to bear in mind that See v. Scott-Paine orders, unless really justified, may work a considerable injustice. However I decline to follow Mr Mellor’s [counsel for the defendant] suggestion that I should look now at the strength of the original attack on the patent and decide that to have continued to assert validity this far indicated mala fides on GEC’s part. I cannot engage in such a mini-trial at this stage. All that I can do is bear in mind, as must be the case, that it is possible that the patent would have been held invalid even on the unamended particulars of objection and that GEC realise that. 

   In deciding what to do, I think that I should give consideration to, inter alia, the timetable of the proceedings, how late the amendment is, the extent to which the petitioner has explained that lateness and to what extent the respondent is likely to have been taken by surprise by the reliance on the new prior art.”

   In Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1999) 46 IPR 173 at 176 Sundberg J summarised the current state of the authorities as follows:

   “(a)A See v Scott-Paine order is made when a defendant who is challenging the validity of a patent is permitted to amend its pleadings to include, for example, prior art which was not contained in its original particulars of objections.  The order gives the patentee the right to elect, within a specified period, to proceed with or discontinue the action.  If the patentee discontinues, it must pay the defendant’s costs up to the ‘switchover’ date (usually the date of delivery of the original particulars of invalidity), and the defendant must pay the patentee’s costs after that date.  If the patentee proceeds with the action, the defendant must pay the costs of the application to amend, and in other respects the matter proceeds in the usual way.  See Baird v Moule’s Patent Earth Closet Co reported in Edison Telephone Co v India Rubber Co (1881) 17 Ch D 137 and See v Scott-Paine (1932) 50 RPC 56.

   (b)The purpose of the order is to impose on a party attacking the validity of a patent the obligation to take reasonable steps to ensure that the full attack is put before the patentee at the earliest time.  The imposition of that obligation is said to be justified by the ‘notorious expense and legal complexity’ of patent actions.  See Williamson v Moldline Ltd [1986] RPC 556 at 563, 565.

   (c)When a defendant seeks to introduce by amendment objections of obviousness or want of novelty, an important consideration is whether, by making reasonably diligent inquiries, the defendant could have discovered the availability of such defences when the original pleading was served.  The defendant will not be found to have failed the diligence test where a search of prior art would have involved doing things out of the ordinary, or when prior use comes to the defendant’s attention ‘by chance in circumstances where it could not be properly suggested that he should have found it at an earlier date’: La Baigue Magiglo v Multiglow Fires [1994] RPC 295 at 298. The onus of proving that the new material could not have been found with reasonable diligence lies on the defendant: see Moldline at 564 and Josiah Wedgwood & Sons Ltd v Stained Glass Systems Ltd  (HC(Ch), 16 October 1996, (unreported).

   (d)Apart from the reasonable diligence inquiry, other relevant factors are the timetable of the proceedings, how late the amendment is, the extent to which the defendant has explained any lateness, and to what extent the patentee has been taken by surprise by the reliance on the new prior art:  see Re GEC Alsthom Ltd’s Patent [1996] FSR 415 at 421.

   (e)Whatever the position might once have been, the order is not made as of course or ‘almost invariably’ when a defendant seeks to raise objections to validity which are not contained in its original particulars.  The matter is entirely within the discretion of the court, and depends on the facts of the particular case:  see GEC at 421and Wimmera at AIPC 37,224.

   (f)In exercising its discretion the court should be aware that the order is capable of working an injustice to a defendant, by enabling a patentee with what it knows to be a weak patent to discontinue largely at the defendant’s cost.  The court should bear in mind the possibility that the patent would have been held invalid even on the unamended particulars:  see GEC at 421and Wimmera at AIPC 37,224.”

8. Although Earth Closet or See v Scott-Paine orders are usually made in patent cases such orders have also been made in the United Kingdom in registered design cases:  see Morris Wilson & Co v Coventry Machinists Company [1891] 3 CH 418; In the Matter of Designs of John Glen & Sons (1933)] 50 RPC 41; and Rose & Hubble Limited v L Hart (Stockport) Limited [1966] RPC 217. I see no reason in principle for differentiating between patent and registered design cases in respect of such orders.

9. The first question relates to whether, by making reasonably diligent enquiries, the respondent could have discovered the availability of the prior art and the other defences upon which it now relies.  In the present case correspondence was exchanged between the parties concerning the matters presently in issue well before the commencement of the proceeding.  Thus, by the time the respondent filed its original defence and cross-claim it had already made extensive enquiries concerning prior art and the other defences available to it.  As a result of those enquiries but, in particular, evidence that became available concerning prior art from two witnesses, Sinclair and Finnegan, the respondent considered it had a strong case of invalidity.  Subsequently, the respondent concluded that Sinclair was unreliable and that it was no longer able to rely upon Finnegan.  As a consequence of that conclusion, the respondent undertook further enquiries which led to it becoming aware of, and now seeking to rely upon, the additional prior art.  It is unnecessary for present purposes to go into the detail of how the respondent came to be aware of the additional prior art.  It is sufficient to state that, had the respondent not chosen to rely on the evidence it believed it was able to adduce through Sinclair and Finnegan, the additional prior art would probably have become available to the respondent had it continued to pursue its earlier enquiries. 

10. I am also satisfied that upon reasonably diligent enquiry the respondent would have been aware of the amendments to the patentee’s claims made prior to the registration of the patent and therefore would have been in a position to raise its fair basis ground.  However, as fair basing is essentially an argument based on the patent rather than on evidence, there is some force in the respondent’s contention that the amendment to the patent was based entirely upon material and evidence within the applicant’s knowledge, rather than upon evidence of which the applicant could not be expected to be aware. 

11. While the identity of the inventor and author had been put in issue in the original cross-claim it is unclear whether the information now relied upon in that regard could have been ascertained by the respondent had more diligent enquiry been made concerning that matter at an earlier point of time. 

12. However, the general failure of the respondent to make more diligent enquiries is mitigated to some extent by its explanation as to why the amendments are being sought at this late stage.  There are, however, a number of other matters that also bear upon whether the cost orders being sought by the applicant should be made. 

13. The first of those matters concerns whether the applicant was taken by surprise by the respondent’s reliance on the new prior art and the other defences.  While the applicant has stated that it has been taken by surprise by those matters being raised that is not a complete picture of what has occurred in the present case.  The applicant’s patent and registered design is based upon a campervan which was sold in the United States prior to the priority date.  The existence of prior art concerning the campervan in the United States, some of which may have found its way to Australia, is hardly surprising.  Prior to issuing the proceeding the respondent put the applicant on notice that it expected that there would be a “plethora of material” that may be unearthed in respect of the campervan.  While it does not follow that such material would become available the applicant should be taken to have been aware of the risk of further prior art emerging during the course of the case. 

1. The amendments concerning fair basing stand in a different category.  There is some force in the applicant’s claim that it was entitled to expect that no real challenge would be mounted on fair basing because the Patent Office had registered the patent.  However, if the mere raising of the fair basing claim at this stage is capable of having the consequence of the applicant considering accepting revocation of the patent by reason of such a claim (which is the implicit assumption underlying the See v Scott-Paine order sought by the applicant) it could not say that, properly advised, it would have been unaware of that risk. 

2. The information concerning the inventor and author was obtained from a search of a web-site made as a result of the respondent’s endeavours to make further enquiries in support of its defences.  In my view the inventor and author amendments are of a kind that can be expected to be made in the course of a patent or design proceeding when more detailed enquiry is made as to the evidence to be adduced on that issue at trial.  Therefore, I do not accept that the applicant would be unaware of the risk of such an amendment.

3. As explained above I have accepted that there has been an explanation as to why several of the proposed amendments to the cross-claim are now being sought and, as a result of that explanation, I am not satisfied that the failure to rely on the prior art and other defences at an earlier stage has arisen as a result of neglect or lack of diligence on the part of the respondent.  Therefore, the present case is not one in which a respondent is merely seeking to overcome a lack of due diligence in relation to its earlier searches by adding prior art and making the amendments which ought to have been added or made at an earlier point of time.  Thus, the present case differs in significant respects from the usual case in which an Earth Closet or a See v Scott-Paine order is made. 

4. There is another matter of significance which appears to be common ground between the parties.  The additional American prior art supplements prior art already relied upon in another American publication and therefore may not be critical to the issue of novelty in respect of the patent.  The significance of that additional prior art is its publication in Australia.  However, publication of that prior art in Australia is not an issue in relation to novelty in respect of the patent claims but can be significant to the outcome of the design claims.  The NZ application is relevant to the patent claims but is not relevant to the design claims.  Similarly, the fair basing amendments only relate to the patent claims.  Finally, in my view the additional particulars of inventorship and authorship are not amendments of a kind which, alone, would warrant an Earth Closet or a See v Scott-Paine order.  The question of the inventor and of the author was already squarely raised as an issue of fact in the proceeding and the applicant should have expected that further particulars of that allegation would be provided in the course of the proceeding.

5. Thus, the amendments concerning prior art and fair basing are not determinative of the issue of invalidity in respect of the patent and the design and the amendment concerning the inventor and the author would not, alone, justify the cost orders now being sought by the applicant.  If the applicant accepts revocation of its patent and design by reason of the latest amendments it will not be possible to identify which of the amendments led to that result.  As some of the amendments relate only to claims concerning the patent, others relate essentially to claims concerning the design and one of the other amendments does not warrant an Earth Closet or a See v Scott-Paine order, the justification for such an order in the present case is problematic.  The position might be otherwise if some of the amendments were not bona fide, but no such suggestion has been made in the present case.

6. In summary, I accept that reasonably diligent enquiry at an earlier point of time would probably have resulted in most, if not all, of the present amendments being made at an earlier stage, but I am not satisfied that the amendments have come about as a result of any neglect or lack of diligence on the part of the respondent.  Further, the additional matters to which I have referred above but, in particular, the explanation given by the respondent; the applicant’s awareness of the risk of such amendments; the fact that the prior art and fair basing amendments only relate to part of the proceeding; and the fact that the inventor and author amendments do not warrant the cost orders sought, have led me to conclude that it is inappropriate to make those cost orders in the present case. 

7. Of course, the refusal to make such orders at this stage does not preclude the applicant from making such application to the Court as may be appropriate in respect of costs in the event that it decides to discontinue its claim and accept revocation of its patent and design.  That, however, is a matter that does not presently arise.

8. Accordingly, I propose to allow the amendments sought and to order that the respondent pay the applicant’s costs thrown away by reason of the amendments.  As the respondent has succeeded on the substantive aspects of its application concerning the question of whether an Earth Closet or a See v Scott-Paine order should be made, but the respondent has sought an indulgence in respect of its amendments, it is appropriate that the applicant pay 75 per cent of the respondent’s costs of and incidental to the Notice of Motion filed on 20 December 2002. 

I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel.

Associate:

Dated:             22 April 2003

Counsel for the Applicant:	Mr B J Hess with Dr L J Duncan
Solicitor for the Applicant:	Younger & Swinburne
Counsel for the Respondent:	Mr A J Ryan
Solicitor for the Respondent:	Griffith Hack Lawyers
Date of Hearing:	7 April 2003
Date of Judgment:	23 April 2003