Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2)
[2018] FCA 1109
•27 July 2018
FEDERAL COURT OF AUSTRALIA
Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2) [2018] FCA 1109
File number: WAD 74 of 2014 Judge: BESANKO J Date of judgment: 27 July 2018 Catchwords: PATENTS – where relief claimed in connection with the infringement of claims in a patent – where liability determined separately from, and in advance of, all issues of the quantum of any pecuniary relief – whether respondents infringed claims in the patent – where all but one respondent, being the fourth respondent, admit infringement of claims in the patent – whether applicants have established that the fourth respondent has infringed the claims in the patent – whether fourth respondent was a direct infringer because it kept the infringing tools at its premises for one or more of the purposes of falling within the definition of “exploit” in the Patents Act 1990 (Cth) – whether fourth respondent is a direct infringer because it authorised the infringing acts by the first respondent – whether fourth respondent is liable as an indirect infringer because it was a joint tortfeasor with the other respondents – where validity of the patent is not in issue
PRACTICE AND PROCEDURE – whether proceeding constitutes an abuse of process – whether proceeding should be permanently stayed or dismissed – where onus on the respondents to establish an abuse of process – consideration of the doctrine of abuse of process – consideration of the inherent jurisdiction of a superior court to prevent an abuse of process as described in Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378 – consideration of the categories of abuse of process as described in Rogers v The Queen [1995] HCA 42; (1994) 181 CLR 251 – where categories of abuse of process are not closed – where estoppel is a distinct doctrine from abuse of process, although the doctrines may overlap on the facts of a particular case – where no Anshun or other estoppel
PATENTS – whether second applicant was the exclusive licensee of the patent prior to a particular date
Legislation: Copyright Act 1968 (Cth) ss 36, 101
Corporations Act 2001 (Cth) s 50AAA
Federal Court of Australia Act 1976 (Cth) ss 37M, 37N
Patents Act 1990 (Cth) ss 13, 18, 66, 67, 79B, 79C, 105, 117, 122, 130, 187
Patents Amendment (Innovation Patents) Act2000 (Cth)
Patents Regulations 1991 (Cth) reg 19.1
Cases cited: Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748; (2012) 293 ALR 272
Australian Mud Company Pty Ltd v Coretell Pty Ltd [2010] FCA 1169; (2010) 88 IPR 270
Australian Mud Company Pty Ltd v Coretell Pty Ltd [2011] FCAFC 121; (2011) 93 IPR 188
Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372
Australian Mud Company Pty Ltd v Coretell Pty Ltd [2016] FCA 830
Australian Mud Company v Coretell Pty Ltd (No 7) [2016] FCA 991
Australian Mud Company v Coretell Pty Ltd [2017] FCAFC 44
Coffey v Secretary, Department of Social Security [1999] FCA 375; (1999) 86 FCR 434
Collins v Northern Territory [2007] FCAFC 152; (2007) 161 FCR 549
Connelly v Director of Public Prosecutions [1964] AC 1254; [1964] 2 All ER 401
Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54; (2017) 250 FCR 155
Corporation of the City of Adelaide v Australasian Performing Right Association Ltd [1928] HCA 10; (1928) 40 CLR 481
Generics (UK) Limited (Trading as Mylan) v Warner-Lambert Company LLC [2016] EWCA Civ 1006; [2016] RPC 1
Henderson v Henderson (1843) 3 Hare 100; [1843‑60] All ER Rep 378
Johnson v Gore Wood & Co [2000] UKHL 65; [2002] 2 AC 1
Mead Corporation and Another v Riverwood Multiple Packaging Division of Riverwood International Corporation (1997) FSR 484
Morton Norwick Products Inc v Intercen Ltd (No 2) [1981] FSR 337
Nikken Kosakusho Works v Pioneer Trading Co [2005] EWCA Civ 906; [2006] FSR 4
Nokia GmbH v IPCom GmbH & Co KG [2011] EWCA Civ 6; [2011] FSR 15
O’Shane v Harbour Radio Pty Ltd [2013] NSWCA 315; (2013) 85 NSWLR 698
Playgro Pty Ltd v Playgro Art & Craft Manufactory Limited [2016] FCA 280; (2016) 117 IPR 489
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589
Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209
Reichel v Magrath (1889) 14 App Cas 665
Ridgeway v The Queen [1995] HCA 66; (1995) 184 CLR 19
Roadshow Films Pty Ltd & Others v iiNet Ltd [2012] HCA 16; (2012) 248 CLR 42
Rogers v The Queen [1995] HCA 42; (1994) 181 CLR 251
Schuster v Hine Parker & Co Ltd [1935] 52 RPC 345
Smith, Kline and French Laboratories Ltd v RD Harbottle (Mercantile) Ltd and Others [1980] RPC 363
Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574
Tomlinson v Ramsay Food Processing Pty Limited [2015] HCA 28; (2015) 256 CLR 507
University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1
Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378
Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59
Wong v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 242; (2004) 146 FCR 10
Woolworths Limited v BP plc (No 3) [2006] FCAFC 160; (2006) 70 IPR 270
Date of hearing: 26-29 June 2017 Registry: Western Australia Division: General Division National Practice Area: Intellectual Property Sub-area: Patents and associated Statutes Category: Catchwords Number of paragraphs: 198 Counsel for the Applicants/Cross-Respondents: Mr J Hennessy SC with Ms F St John Solicitor for the Applicants/Cross-Respondents: Gilbert + Tobin Lawyers Counsel for the Respondents and for the Cross‑Claimant: Mr A Ryan SC with Mr I Horak Solicitor for the Respondents and for the Cross-Claimant: Thompson Downey Cooper ORDERS
WAD 74 of 2014 BETWEEN: AUSTRALIAN MUD COMPANY PTY LTD (ACN 009 283 416)
First Applicant
REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD (ACN 124 204 191)
Second Applicant
AND: CORETELL PTY LTD (ACN 119 188 493)
First Respondent
MINCREST HOLDINGS PTY LTD (ACN 068 672 471)
Second Respondent
KLEYN INVESTMENTS PTY LTD (ACN 118 967 687) (and others named in the Schedule)
Third Respondent
AND BETWEEN: CORETELL PTY LTD (ACN 119 188 493)
Cross-Claimant
AND: AUSTRALIAN MUD COMPANY PTY LTD (ACN 009 283 416) (and another named in the Schedule)
First Cross-Respondent
JUDGE:
BESANKO J
DATE OF ORDER:
27 July 2018
THE COURT ORDERS THAT:
1.The applicants bring in draft minutes of order reflecting the conclusions in these reasons.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BESANKO J:
Introduction
The applicants in this proceeding are Australian Mud Company Pty Ltd (AMC) and Reflex Instruments Asia Pacific Pty Ltd (Reflex Instruments). They claim relief in connection with the infringement of claims in a patent owned by AMC and in respect of which Reflex Instruments is the exclusive licensee. These reasons address issues of liability which, by reason of an order of the Court, are to be heard and determined separately from, and in advance of, all issues of the quantum of any pecuniary relief.
The respondents admit that Reflex Instruments is entered on the Register of Patents pursuant to s 187 of the Patents Act 1990 (Cth) (Patents Act) and reg 19.1 of the Patents Regulations 1991 (Cth) (Patents Regulations) as having an entitlement by way of licence to exploit the patent in Australia and that that has been the case since 14 January 2016. However, they plead that they do not know and do not admit that Reflex Instruments was the exclusive licensee of the patent within the meaning of the Patents Act prior to that time. In other words, whether Reflex Instruments was the exclusive licensee of the patent prior to 14 January 2016 is an issue in the proceeding.
Four companies and an individual are the respondents to this proceeding. The corporate respondents in the order in which they appear in the proceeding are Coretell Pty Ltd (Coretell), Mincrest Holdings Pty Ltd (Mincrest Holdings), Kleyn Investments Pty Ltd (Kleyn Investments) and Goldview Asset Pty Ltd (Goldview). Mr Nicky Kleyn is the individual. He is the sole director and secretary of each of the corporate respondents. He is the sole shareholder of all but one of the corporate respondents. It is admitted that he is engaged in, and responsible for, directing the conduct, management, control and day-to-day operations of each of the corporate respondents. The corporate respondents admit that each of them is an associated entity of the other respondents within the meaning of s 50AAA of the Corporations Act 2001 (Cth).
The patent in suit is Australian Patent No 2010200162 entitled “Core Sample Orientation” (the Standard Patent). The application for the Standard Patent was made on 15 January 2010 and the complete specification of the Standard Patent was published and became open to public inspection on 2 April 2010. The Standard Patent was sealed on 13 March 2014. The Standard Patent is a divisional of Australian Standard Patent Application No 2005256104 filed on 5 September 2005 (the Parent Application) and it claims priority from Australian Provisional Patent Application No 20049050211 filed on 3 September 2004 (the Provisional Patent Application).
The applicants allege (among other allegations) that since 2 April 2010 or, in the alternative, 5 September 2005, each of the respondents has infringed claims in the Standard Patent.
The Standard Patent is one of a group or family of patents that involve an invention concerning core sample orientation. AMC and Reflex Instruments has brought other proceedings for the infringement of other patents in the family of patents. I set out the details of those proceedings later in these reasons. The respondents claim that when regard is had to those proceedings and certain other matters, the commencement and continuation of this proceeding was, and is, an abuse of process and that the proceeding should be permanently stayed or dismissed. In the alternative, they claim that the proceedings should be permanently stayed or dismissed because the applicants have failed to comply with their obligations to the Court arising under s 37N of the Federal Court of Australia Act 1976 (Cth) and that the maintenance of these proceedings is in breach of s 37M of the Federal Court of Australia Act. The respondents did not develop an argument based on those sections in the Federal Court of Australia Act. The contention that this proceeding is an abuse of process is the second issue in the proceeding.
The respondents, other than Goldview, admit infringement of the Standard Patent. On 16 June 2017, the solicitors acting for the respondents wrote to the solicitors acting for the applicants and said that each respondent, other than Goldview, admitted liability in relation to each of the bases of liability alleged against it in paragraphs 12 to 29 of the Amended Statement of Claim, but not in respect of claims 60 to 63 and 66 of the Patent, and not in respect of any period before 2 April 2010.
The applicants claim that Goldview is, and has been since 6 December 2007, the owner of a property at 6 Davison Street, Maddington, WA (Maddington Premises) at which tools which infringe the Standard Patent (infringing tools) have been kept since at least September 2010. The Maddington Premises consist of a workshop, warehouse and office. Goldview claims that it is has not infringed the Standard Patent. Whether Goldview has infringed the Standard Patent is the third issue in the proceeding.
There was potentially a fourth issue. The applicants made a claim in their Originating Application for additional damages under s 122(1A) of the Patents Act. There was only a passing reference to this claim in the applicants’ submissions, with the applicants asserting that I should find that the infringements were flagrant. The submissions were not developed in any detail and I would not make the finding that the applicants are entitled to additional damages. I am disposed to reject this claim.
The respondents brought a cross-claim against the applicants in which they alleged that the claims in the Standard Patent were invalid. They raised a number of grounds of invalidity including a lack of novelty, lack of inventive step and false suggestion. Those grounds are no longer pursued because of the outcome of other proceedings in the Court which I describe below. At the trial of this proceeding, the respondents maintained only one ground of invalidity and that was that the Standard Patent was invalid because it was secretly used in the patent area before the priority date of the claims by, or on behalf of, or with the authority of, the patentee or nominated person or the patentee’s or nominated person’s predecessor in title to the invention (ss 18 and 130(3)(b) of the Patents Act). This contention had been raised and rejected in proceedings in the New South Wales District Registry of this Court (Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372 (McKerracher J at [737]-[757]); Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54; (2017) 250 FCR 155 at [203]-[246] per Burley J, with whom Jagot and Nicholas JJ agreed). The respondents in the New South Wales proceeding lodged an application for special leave to appeal to the High Court of Australia with respect to that ground of invalidity. The respondents in this proceeding told the Court that should the High Court reject the application for special leave to appeal on that ground, then they would not pursue the matter in this proceeding. On 15 August 2017, the applicants advised the Court that the application by the respondents in the New South Wales proceeding for special leave to appeal was dismissed by the High Court.
The validity of the Standard Patent is not in issue in this proceeding. Infringement of the Standard Patent is admitted by all respondents to this proceeding, except for Goldview. Goldview was not a party to any of the earlier proceedings. It follows that there are three issues in this proceeding and they are as follows:
(1)Is the proceeding an abuse of process such that it should be permanently stayed or dismissed?
(2)Have the applicants established that Goldview infringed the claims in the Standard Patent?
(3)Has Reflex Instruments established that it was the exclusive licensee of the Standard Patent before 14 January 2016 and since 2 April 2010 or, in the alternative, 5 September 2005?
In summary, all respondents claim that the proceeding is an abuse of process and should be permanently stayed or dismissed. In addition to this contention, Goldview claims that, in any event, the applicants have not established that it infringed the claims in the Standard Patent. All respondents claim that the applicants have not established that Reflex Instruments was the exclusive licensee of the Standard Patent before 14 January 2016.
Before examining these issues, I must address the following matters:
(1)the family of patents held by AMC;
(2)the details of the court proceedings;
(3)the relationship between the respondents; and
(4)the witnesses in the trial.
The Family of Patents held by AMC including the Patent in Suit
On 3 September 2004, AMC filed the Provisional Patent Application and on 5 September 2005, AMC filed the Parent Application claiming priority from the Provisional Patent Application. The circumstances were such that, in order for a patent to be granted on the Parent Application, it needed to be accepted by 15 January 2010. That did not occur and, as a result, the application lapsed on 16 January 2010.
On 15 January 2006, AMC applied for a divisional innovation patent of the Parent Application, No 2006100113 (the Device Patent). The Device Patent was granted on 16 March 2006 and certified on 20 July 2006. It expired on 5 September 2013.
As I have said, on 15 January 2010, AMC applied for the Standard Patent as a divisional patent of the Parent Application. The Standard Patent was not granted and sealed until 13 March 2014. The evidence in the case establishes that the application was under examination by the Australian Patent Office between 23 July 2010 and 15 September 2011 when it was accepted. On 14 December 2011, Coretell wrote to IP Australia requesting a reconsideration of its acceptance of the application. A party unrelated to this proceeding filed a notice of opposition on 3 January 2012, but withdrew the notice on 27 March 2012. On 29 June 2012, AMC filed some voluntary amendments to the Patent Application that were accepted by IP Australia on 10 October 2012. Coretell filed a notice of opposition on 21 January 2013. AMC filed further amendments to the Patent Application on 15 October 2013, which were accepted by IP Australia on 25 November 2013. Further correspondence passed between patent attorneys for Coretell and IP Australia in December 2013 and January 2014.
On 2 December 2010, AMC applied for a divisional innovation patent of the Standard Patent before it was granted, No 2010101356 (the System Patent). The System Patent was granted on 6 January 2011 and certified on 15 September 2011. It expired on 5 September 2013.
On 16 August 2011, AMC applied for a second divisional innovation patent of the Standard Patent before it was granted, Australian Patent No 2011101041 (the Method Patent). The Method Patent was granted on 29 September 2011 and certified on 10 November 2011. It expired on 5 September 2013.
The applicants produced a diagram showing the family of patents. I am satisfied that it is accurate and I reproduce it as Annexure A to these reasons.
The Proceedings in this Court
There are three relevant proceedings in this Court, including this proceeding.
WA Proceeding (WAD 132 of 2007)
The WA Proceeding was brought by AMC and its parent company, Imdex Limited (Imdex) against Coretell and Mincrest Holdings for alleged infringement of claims in the Device Patent.
The applicants’ tool (the Ace Core Tool or ACT) was released onto the market in late 2004. The market was the mineral exploration drilling industry. Version 1 of the respondents’ ORIshot tool (Orishot tool) was released into the market in September 2006 and the first letter of demand in relation to the respondents’ tool was sent to Mincrest Holdings on or about 16 November 2006.
The proceedings were commenced on 2 July 2007 and proceeded to a trial on liability in April 2010. Judgment was delivered on 29 October 2010 and the applicants’ claims for infringement were dismissed as was the respondents’ cross-claim that the Device Patent was invalid (Australian Mud Company Pty Ltd v Coretell Pty Ltd [2010] FCA 1169; (2010) 88 IPR 270). An appeal by the applicants in the proceeding was dismissed (Australian Mud Company Pty Ltd v Coretell Pty Ltd [2011] FCAFC 121; (2011) 93 IPR 188). The applicants were ordered to pay costs and subsequently paid the respondents $500,000 by way of costs. Putting the matter generally, the applicants’ claim failed because the respondents’ equipment which was in two separate and separated parts did not fall within the scope of the monopoly which was limited to a tool in one piece.
That was not the end of the WA Proceeding because in addition to finding that the respondents’ tool did not infringe the Device Patent and rejecting the claims of invalidity, the primary judge found that the respondents’ cross-claim for unjustified threats within s 128 of the Patents Act was made out. The inquiry as to damages was heard by the primary judge in December 2014 and, on 19 August 2016, the applicants were ordered to pay the respondents the amount of $1,506,859 in damages, together with interest and costs (Australian Mud Company v Coretell Pty Ltd (No 7) [2016] FCA 991). That judgment was the subject of an appeal which was allowed in March 2017. Coretell’s claim for damages was dismissed and the respondents were ordered to pay the applicants’ costs of the appeal and of the inquiry (Australian Mud Company v Coretell Pty Ltd [2017] FCAFC 44).
As I have said, the respondents contend that these proceedings are an abuse of process. They put their application on three grounds, considered either individually or cumulatively. Two of those grounds rely on the matters that relate to the first instance proceeding in the WA Proceeding.
First, the respondents claim that the applicants could have and should have diligently prosecuted and secured acceptance of the Parent Application and then brought the resulting patent into the first instance proceeding in the WA Proceeding. As I have said, the Parent Application was filed on 5 September 2005 and lapsed on 16 January 2010.
Secondly, the respondents claim in the alternative, that the applicants should have divided out of the Parent Application, the System Patent, the Method Patent and, to the extent necessary, the Standard Patent at the same time as they did that in relation to the Device Patent and then brought those patents into the first instance proceeding in the WA Proceeding.
NSW Proceeding (NSD 2082 of 2011)
These proceedings were brought by the present applicants against the present respondents other than Goldview for alleged infringement of claims in the System Patent and the Method Patent.
The proceedings were commenced on 23 November 2011 and there was a trial on liability in April (starting 14 April 2014), May and July 2014. The System Patent and the Method Patent had expired before the commencement of the trial. The primary judge delivered judgment upholding the applicants’ infringement claims and dismissing a cross-claim alleging invalidity (Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372). Unlike the Device Patent, the Method Patent and the System Patent were not restricted to a unitary device. There was an appeal to the Full Court of this Court by the respondents which was successful as to one aspect of the primary judge’s decision relating to the date of infringement of the patents, but the appeal was otherwise dismissed with the appellants being ordered to pay 90% of the respondents’ costs (Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54; (2017) 250 FCR 155).
As I have said, the unsuccessful respondents (appellants in the appeal) then sought special leave to appeal from the High Court seeking to raise an issue concerning the secret use provisions in the Patents Act. I have already addressed the fate of that application and what it means in terms of the validity challenge in this case.
As I have said, the Standard Patent (the patent in suit) was granted on 13 March 2014. By letter dated 28 March 2014, the applicants’ solicitors gave the respondents’ solicitors notice of the grant of the Standard Patent. On 4 April 2014, these proceedings were commenced (WAD 74 of 2014) and the proceedings were allocated to the docket of McKerracher J who was the judge due to hear the trial in the NSW Proceedings commencing on 14 April 2014.
The sequence of events just described gives rise to the third ground upon which the respondents allege that this proceeding is an abuse of process. The respondents contend that the claims in suit in the present proceeding (i.e., the claims in the Standard Patent) should have been brought into the NSW Proceeding.
In connection with the NSW Proceeding, the evidence establishes the following. First, the respondents raised an abuse of process allegation in the NSW Proceeding and then withdrew it. On 30 March 2012, the respondents pleaded in the NSW Proceeding that the proceeding was an abuse of process or subject to an estoppel because of the WA Proceeding (at first instance and on appeal) and then withdrew the allegations when it filed and served an Amended Defence on 25 May 2012. Secondly, the respondents never took any steps to consolidate this proceeding with the NSW Proceeding, rather they consented to an adjournment of this proceeding pending the outcome of the NSW Proceeding. Thirdly, the respondents sought an order in this proceeding that the abuse of process allegations be dealt with as a separate question. I refused to make such an order (Australian Mud Company Pty Ltd v Coretell Pty Ltd [2016] FCA 830). In the course of my reasons, I said the following (at [9](3)):
The point that the respondents wish to raise by way of their abuse of process argument appears to be a novel one. They accept that what the applicants have done is “entirely permissible” under the Patents Act 1990 (Cth). However, they claim that “the abuse arises when divided out patents are then used as a basis for litigation in this Court”. They claim that the difficulties with what the applicants have done is “a worldwide problem, this issue of divisionals”. They claim that it raises “a serious policy issue”. It seems to me that the more novel the issue sought to be raised as a separate question, the more likely it is that there may be appeals which would have the potential to delay the overall resolution of the proceeding. I think that is undesirable.
Although the applicants were successful in the NSW Proceeding, as I have said, the System Patent and the Method Patent had expired before the trial. They were not available to form the basis for ongoing relief, including injunctive relief.
The Present Proceeding
The present proceeding involves claims for the infringement of a Standard Patent and claims for declaratory and injunctive relief, orders for delivery up and damages, including additional damages.
The Corporate Structure of, and the Relationship between, the Respondents
As I have said, Mr Kleyn is the sole director of Coretell (incorporated 25 March 2006), Mincrest Holdings (incorporated 17 March 1995), Kleyn Investments (incorporated 29 March 2006) and Goldview (incorporated 22 May 1997). He is the sole shareholder of Coretell, Kleyn Investments and Goldview, and an equal shareholder with Ms Aileen Kleyn of Mincrest Holdings.
Mincrest Holdings is the trustee of the Kleyn Family Trust (established 13 June 1994) and it owned the registered business name “Camteq Instruments” between 3 March 1998 and 4 August 2016. Kleyn Investments is the trustee of the Kleyn Investment Trust (established 25 May 2006) and it owned the registered business name “Camteq International Services” between 23 November 2009 and 29 November 2013.
Goldview is the trustee of two trusts: the Hicam Trust (established 16 June 1997) and the Kleyn Asset Trust (established 18 May 2004).
In terms of the properties from which the companies have, over the years, conducted business, the position is as follows. Coretell’s principal place of business prior to September 2010, was Mr Kleyn’s residence at Reservoir Road, Orange Grove (the Orange Grove Premises) and after September 2010, it was the Maddington Premises. The Maddington Premises was owned by Goldview as trustee for the Kleyn Asset Trust from approximately 14 December 2007 to November 2016 when it sold the Maddington Premises to Boreline Pty Ltd (Boreline). The two directors and shareholders of Boreline are sons of Mr Kleyn.
According to the public records (i.e., Australian Securities and Investments Commission (ASIC) records), Coretell’s principal place of business between 25 May 2006 and 25 July 2012 was the Orange Grove Premises and thereafter, the Maddington Premises; Mincrest Holdings’ principal place of business was the Orange Grove Premises from 15 March 2004 to 25 July 2012 and thereafter, the Maddington Premises; Kleyn Investments’ principal place of business was the Orange Grove Premises from 29 March 2006 to 25 July 2012 and thereafter, the Maddington Premises; and Goldview’s principal place of business was the Orange Grove Premises from 28 November 2003 to 25 July 2012 and thereafter, the Maddington Premises. It seems clear that from September 2010, or perhaps January 2011, the whole operation had been moved to the Maddington Premises and that the principal place of business of each of Coretell, Kleyn Investments and Goldview was the Maddington Premises. It is not clear why the public records indicate a date in 2012.
The applicants’ particulars of infringement against Goldview are that it has infringed various claims in the Standard Patent by reason of the fact that it is the owner of premises at which infringing tools are kept (i.e., the Maddington Premises) (paragraph 11(iv)), has authorised, procured, induced or joined in a common design with persons to whom the infringing tools have been supplied to use those infringing tools and such persons have used the infringing tools in core sample orientation activities (paragraph 12), and has been an accessory to acts of infringement by Coretell (paragraph 28). The applicants plead that Camteq International (i.e., Kleyn Investments) is the lessee of the Maddington Premises used by Coretell for the purpose of exploiting the infringing tools.
In terms of the pleadings, the respondents’ response is to the effect that from approximately December 2010, Coretell has rented from Goldview a section of the Maddington Premises at which it has from time to time kept for the purpose of sale or hire the alleged infringing tool and that Kleyn Investments has also rented a section of the Maddington Premises.
The effect of a Notice to Admit and Notice to Dispute is that there is an admission by the respondents that Goldview has been the owner and lessor of the Maddington Premises since December 2007.
Again, the applicants produced a diagram showing the corporate structure of, and the relationship between, the respondents. The diagram is accurate and I reproduce it as Annexure B to these reasons.
Witnesses
The applicants called five witnesses.
Professor Jonathan Craig Tapson is an engineer and he is Professor of the School of Computing, Engineering and Mathematics at the University of Western Sydney. He examined the respondents’ tools. He said that the tools included the features of claims 1 to 58, 64 to 65 and 67 of the Standard Patent. There were four different versions of the respondents’ Orishot tool. Professor Tapson said, and I accept, that in terms of a comparison between the claims in the Standard Patent and the alleged infringing tools, each version of the respondents’ tool was materially the same. He was not cross-examined by the respondents.
Mr Kelvin Laurence Brown is the Global Products Manager of Reflex Instruments. He has been involved in the industry for 20 years and has had dealings with the respondents’ business since 2006. Mr Brown gave evidence about a number of matters, including the corporate background of the parties; the nature of core orientation and the invention in suit; and the respondents’ infringing tools and their marketing material. Mr Brown was cross-examined about the applicants’ strategy in pursuing its patent rights and the allegation that Reflex Instruments was the exclusive licensee of the Standard Patent prior to 14 January 2016, and I will discuss his evidence in the context of considering those matters. Mr Brown was a satisfactory witness.
Mr Stephen David Budiselic is the Regional Manager for the Asia Pacific Region at Reflex Instruments. He has worked in the mining industry since the early 1970s. He has known Mr Kleyn for approximately 25 to 30 years. He had dealings with Mr Kleyn and he gave evidence of his contact with Mr Kleyn’s “Camteq business”. He gave evidence of conversations with Mr Kleyn in July or August 2009 about his (Mr Kleyn’s) business structure. He gave evidence about his knowledge of the use of the words “Camteq”, “Camteq International” and “Coretell”. He gave evidence about the use of the Maddington Premises by Coretell and Camteq International (Kleyn Investments) and the distributors and customers of the respondents’ business. Mr Budiselic was challenged in cross-examination about the conversation he said he had with Mr Kleyn in July or August 2009 and with Mrs Kleyn shortly thereafter. Mr Budiselic’s evidence was largely directed to the liability of the respondents, other than Goldview. Any dispute about that evidence has been overtaken by the admission made by the respondents, other than Goldview. Neither party addressed Mr Budiselic’s evidence in any detail and I do not propose to seek to resolve the dispute about the alleged conversations in July and August 2009, in circumstances where neither party addressed that issue in any detail and neither suggests that it is critical to the resolution of their respective cases that I do so.
Mr Christopher Edmund Duvall Williams is the applicants’ solicitor. Mr Williams produced documents discovered by the respondents in the NSW Proceeding, including invoices, delivery notes, and supply agreements from the respondents to customers for the supply, hire, sale or use of the tools; documents relating to the manufacture or repair of the tools; and instructions, inducements and promotional materials relating to the tools. He also gave evidence about the history of the applicants’ patents and of the proceedings between the parties. He was briefly cross-examined by the respondents. He was a satisfactory witness and I accept his evidence.
Mr Andrew Murray Ross is a chartered accountant. He examined a number of documents about the respondents’ business or businesses. He prepared two reports in the NSW Proceeding which were to the effect that the respondents in the NSW Proceeding conducted a single business and do not operate independently. Those two reports were tendered in this proceeding, together with a third report to the effect that Goldview is a part of the single business. Mr Ross prepared two further reports which were tendered relating to Goldview’s role in the respondent group of companies. Mr Ross was cross-examined briefly. Mr Ross was a satisfactory witness and I accept his evidence.
The respondents called two witnesses. Mr Darren James Pratt gave evidence about the applicants’ patents and patent applications and of the various proceedings between the parties. He was not cross-examined by the applicants.
Mr Nicky Kleyn gave evidence about a number of matters. He was cross‑examined at some length. The applicants submitted that Mr Kleyn was an untruthful witness and that his evidence should not be accepted without independent corroboration. I find that Mr Kleyn’s evidence was unsatisfactory in a number of respects. His evidence is discussed below.
Abuse of Process
This Court has the power to prevent its procedures from being abused. The Court can strike out or dismiss a claim or defence which is an abuse of process.
In Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378 (Walton v Gardiner), Mason CJ, Deane and Dawson JJ described the inherent jurisdiction of a superior court to prevent an abuse of its processes in the following terms (at 392-393):
The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness. Thus, it has long been established that, regardless of the propriety of the purpose of the person responsible for their institution and maintenance, proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail. Again, proceedings within the jurisdiction of a court will be unjustifiably oppressive and vexatious of an objecting defendant, and will constitute an abuse of process, if that court is, in all the circumstances of the particular case, a clearly inappropriate forum to entertain them. Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings. The jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v. Chief Constable of the West Midlands Police as “the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people”.
(Citations omitted.)
In this passage, their Honours identify a class of case where a proceeding is unjustifiably vexatious and oppressive because, although not giving rise to an estoppel, the plaintiff or applicant seeks to litigate anew a case which has already been disposed of by an earlier proceeding. Their Honours referred to two authorities in connection with that class of case which I refer to in turn below.
In Reichel v Magrath (1889) 14 App Cas 665, the plaintiff unsuccessfully brought an action for a declaration that he had not resigned as vicar of a benefice. His successor to the benefice, who had not been a party to the first action, brought a claim against the plaintiff for relief in relation to the benefice. The plaintiff sought to defend the action on the same basis he had advanced in the original action. It was held that his defence was frivolous and vexatious and an abuse of process. Lord Halsbury LC said the following:
My Lords, I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again. It cannot be denied that the only ground upon which Mr. Reichel can resist the claim by Mr. Magrath to occupy the vicarage is that he (Mr. Reichel) is still vicar of Sparsholt. If by the hypothesis he is not vicar of Sparsholt and his appeal absolutely fails, it surely must be in the jurisdiction of the Court of Justice to prevent the defeated litigant raising the very same question which the Court has decided in a separate action.
I believe there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure and I therefore think that this appeal must likewise be dismissed.
The other case their Honours referred to in Walton v Gardiner was a case involving criminal offences: Connelly v Director of Public Prosecutions [1964] AC 1254; [1964] 2 All ER 401. The House of Lords applied a similar principle saying that the doctrines of autrefois acquit and autrefois convict did not exhaust the powers of the Court to prevent a person from being convicted twice in relation to the same matter.
The doctrine of abuse of process is not restricted to defined and closed categories. As Gaudron J said in Ridgeway v The Queen [1995] HCA 66; (1995) 184 CLR 19 at 74-75, this is because:
… notions of justice and injustice, as well as other considerations that bear on public confidence in the administration of justice, must reflect contemporary values, and, as well, take account of the circumstances of the case.
Her Honour went on to say that at the same time the concept of “abuse of process” is not at large or, indeed, without meaning.
(See also Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [34] per French CJ.)
In Rogers v The Queen [1995] HCA 42; (1994) 181 CLR 251 (Rogers) at 286, McHugh J said that although the categories of abuse of process are not closed, abuses of procedure usually fall into one of three categories which he identified as follows:
… (1) the court’s procedures are invoked for an illegitimate purpose; (2) the use of the court’s procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court’s procedures would being the administration of justice into disrepute.
Estoppel is a distinct doctrine from abuse of process, although the doctrines may overlap on the facts of a particular case. There is no plea or argument in this case of res judicata or judgment estoppel, or issue estoppel, strictly so called. The third type of estoppel is Anshun estoppel and it means that an estoppel may arise in relation to an issue, which although not raised in earlier proceedings, should have been raised in those earlier proceedings in the sense that it was unreasonable for the party not to raise it. In Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 (Anshun), Gibbs CJ, Mason and Aickin JJ said (at 602-603):
In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.
(See also Wong v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 242; (2004) 146 FCR 10 at [36]-[37].)
In Tomlinson v Ramsay Food Processing Pty Limited [2015] HCA 28; (2015) 256 CLR 507 (Tomlinson), the High Court explained the difference between estoppel and abuse of process and the fact that they may overlap in a particular case. The Court said (at [24]-[26]):
To explain contemporary adherence to the comparatively narrow principle in Ramsay v Pigram, it is appropriate also to explain the relationship between the doctrine of estoppel and the doctrine of abuse of process as it has since come to be recognised and applied in Australia. The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding.
Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel . Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.
(Citations omitted.)
This case does not involve Anshun estoppel. It was not pleaded or argued by the respondents. In any event, it could not be made out. The Parent Application could not have been brought into the WA Proceeding because it had not resulted in the grant of a patent at the time of the WA Proceeding and, in fact, did not result in the grant of a patent. The System Patent and the Method Patent had not been granted at the time of the trial in the WA Proceeding and could not have been brought into that proceeding. As I will explain later, it was not unreasonable for the applicants not to bring this proceeding into the NSW Proceeding.
I return to the categories of abuse of process identified by McHugh J in Rogers. The first category is not said by the respondents to be relevant. There is no suggestion that the applicants have instituted this proceeding for any purpose other than the legitimate purpose of enforcing their intellectual property rights. It is difficult to see how it falls within the third category which to date has been primarily directed at collateral attacks on earlier judgments, or inconsistent findings (O’Shane v Harbour Radio Pty Ltd [2013] NSWCA 315; (2013) 85 NSWLR 698 at [226]; Rogers at 256-257). There is no possibility of inconsistent findings in this case because infringement is admitted by all respondents other than Goldview, which is a new respondent and, as far as it is concerned, there is a factual issue about its involvement.
The case does not fall within the class of case identified by Mason CJ, Deane and Dawson JJ in Walton v Gardiner and discussed above. When the applicants instituted the NSW Proceeding, they had litigated a case about the Device Patent. They were unsuccessful in that case because of the terms of the patent and they paid the costs of that proceeding. They had not litigated a case about the System Patent and the Method Patent. They were not seeking to litigate anew a case which had already been disposed of by earlier proceedings.
It is important to note that the applicants pursued their applications for further patents in relation to a complete application for a patent in a manner permitted by the Patents Act. The respondents did not argue to the contrary.
“Patent” is defined in the Dictionary in the Patents Act to mean a standard patent or an innovation patent. Chapter 6 of the Patents Act deals with the grant of patents and the terms of patents. The term of a standard patent is 20 years from the date of the patent, and the term of an innovation patent is 8 years from the date of the patent (ss 67 and 68 of the Patents Act).
Chapter 6A deals with divisional applications prior to the grant of a patent. Section 79B provides that if a complete application for a patent is made and it is not a divisional application for an innovation patent provided for in s 79C, the applicant may make a further complete application for a patent for the invention disclosed in the specification filed in relation to the first application. The further application can only be made during certain periods and relevant in this case, is the period starting on the day that the first application was made and ending when the first application lapses (s 79B(3)(b)(i)).
Section 79C provides that a patentee of an innovation patent may make a complete application for another innovation patent for a further invention disclosed in the first innovation patent if the invention was disclosed in the complete specification filed in respect of the application on which the first patent was granted.
The system of innovation patents was introduced into the Patents Act in 2000 (Patents Amendment (Innovation Patents) Act2000 (Cth)) and it replaced the petty patent system. In the Second Reading Speech for the Act, the Minister referred to the innovation patent system, as a “second tier” patent system designed to better address the needs of business, particularly small to medium size enterprises. The Minister said that the innovation patent will be relatively inexpensive, quick and easy to obtain. The Minister said that it will provide the same scope of protection as a standard patent, but that it will require a lower inventive threshold than that required for a standard or petty patent. The maximum patent term for an innovation patent will be eight years compared to a 20-year term for a standard patent. The Minister stated that a substantive examination of an innovation patent will only occur if directed by the Commissioner of Patents, or is requested by the patent owner or a third party. An owner of an innovation patent may only take action to exercise their rights if their patent has been substantively examined.
In Coretell v Australian Mud Company [2017] FCAFC 54; (2017) 250 FCR 155, Burley J (with whom Jagot and Nicholas JJ agreed) identified benefits in filing divisional applications. His Honour said (at [33]):
There are several benefits to a patentee in filing divisional applications. One is that where the claims of the divisional are fairly based on matters disclosed in the parent (or, where relevant, the grandparent) the priority date of a divisional mirrors that of its ancestor; reg 3.12(1)(c) and (2C); Bodkin C, Patent Law in Australia (2nd ed, Thomson Reuters, 2014) (Bodkin) at [11120]. Another concerns the procedure for filing patents. As the author of Bodkin explains, the most obvious reason for filing a divisional application is to accommodate the requirement that the claims of a patent relate to a single invention only pursuant to s 40(4) of the Act. If a standard or innovation patent application filed is found upon examination to claim more than one invention, the applicant or patentee must delete or remove claims. The provisions in relation to divisional applications then permit the applicant or patentee to apply for a patent in respect of the invention disclosed, but no longer claimed; Bodkin at [11120]. Another benefit arises where patent applicants have not gained acceptance of their patent application within the available time from the date of the first examination report (normally within 12 or 21 months of the first examination report, depending on when examination was requested; reg 13.4). By filing a divisional application near the due date for acceptance of the parent, a further time extension is effectively granted; Bodkin [11130].
A summary of my conclusions to this point is as follows. There is no Anshun or other estoppel in this case. Furthermore, the case does not fall within the class of case identified in Walton v Gardiner of attempting to relitigate an issue or dispute which has been determined in earlier proceedings, as to which see also Coffey v Secretary, Department of Social Security [1999] FCA 375; (1999) 86 FCR 434 at 443. The manner in which the applicants have pursued their intellectual property rights has been in accordance with the Patents Act.
In support of their case of an abuse of process, the respondents placed great reliance, by way of analogy, on the approach taken by the English Courts to an application by a patentee to amend a patent after an unsuccessful defence to a challenge to the validity of a patent. Notions of abuse of process have been employed by the English Courts, either on a challenge to the making of the application for leave to amend, or as part of the consideration of whether the application for leave should be granted.
The respondents pointed out, correctly, that each of the patents claim a priority date from the Provisional Patent Application and each of them derive from the invention disclosed in the Parent Application. The respondents submit that suing in multiple proceedings on multiple divisional patents arising from the same original disclosure is, in substance, no different from suing in multiple proceedings on one patent which is continually amended.
In Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59 (Windsurfing International), claims in a patent were held to be invalid because they were anticipated by prior use and were obvious in light of a prior written article. The patentee then sought leave to amend the claims, but the primary judge refused leave to amend. The Court of Appeal dismissed an appeal against the primary judge’s exercise of discretion to refuse leave to amend. The Court held that the primary judge had not erred in refusing the application for leave to amend under the statutory power to allow an amendment (Patents Act 1949 (UK) s 30). The Court did so having regard to a number of considerations, including the fact that the issue was not raised previously and would necessitate a substantial second hearing. The Court said (at 81-82):
In the first place, as Mr Young has pointed out, it was for the plaintiffs, if they wished to support their claim to monopoly on some alternative basis, to raise the point and adduce the appropriate evidence for that purpose at the trial. In fact, however, no-one, from first to last, advanced or considered the specialised qualities of a surfboard as an inventive concept and the suggestion that there should be an adjournment for this now to be raised and investigated as the basis for the claim to monopoly involves, in effect, a fresh trial, the recalling of most, if not all, of the most important witnesses, and a considerable degree of recapitulation of the evidence as well as the calling of fresh evidence on an issue never previously suggested either in the specification or a pleadings. We would require considerable persuasion that the imposition upon a successful defendant of such a manifestly inconsistent and oppressive course would be a proper exercise of discretion even in an otherwise strong case. But, if it is to be justified at all, there must at least be ground for some degree of confidence in that such an exercise is capable of yielding a useful result and that, in our judgment, is conspicuously lacking here.
In Generics (UK) Limited (Trading as Mylan) v Warner-Lambert Company LLC [2016] EWCA Civ 1006; [2016] RPC 1, the patentee, after a trial which resulted in a number of claims in its patent being held invalid, sought leave to amend the patent by (relevantly) rewriting one of the claims. The application for leave to amend was opposed and the primary judge held that the application for leave to amend was an abuse of process without deciding the merits of the amendment application.
The abuse of process argument was based on the proposition that the Court may regard it as abusive for a party to seek to raise in a second set of proceedings matters which should have been raised in earlier proceedings between that party and the same adversary. Floyd LJ (with whom Patten and Kitchin LJJ agreed) referred at length to the decision of the House of Lords in Johnson v Gore Wood & Co [2000] UKHL 65; [2002] 2 AC 1. In that case, Lord Bingham made the observation that there will rarely be a finding of abuse unless the later proceeding involves what the Court regards as unjust harassment of a party and that the correct approach is to ask if, in all the circumstances, a party’s conduct is an abuse (at 31). Lord Millett said (at 59-60):
It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen’s right of access to the court conferred by the common law and guaranteed by art 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4 November 1950; TS 71 (1953); Cmd 8969). While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression. In Brisbane City Council v A G for Queensland [1978] 3 All ER 30 at 36, [1979] AC 411 at 425 Lord Wilberforce, giving the advice of the Judicial Committee of the Privy Council, explained that the true basis of the rule in Henderson v Henderson is abuse of process and observed that it—
‘ought only to be applied when the facts are such as to amount to an abuse, otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation’.
There is, therefore, only one question to be considered in the present case: whether it was oppressive or otherwise an abuse of the process of the court for Mr Johnson to bring his own proceedings against the firm when he could have brought them as part of or at the same time as the company’s action. This question must be determined as at the time when Mr Johnson brought the present proceedings and in the light of everything that had then happened. There is, of course, no doubt that Mr Johnson could have brought his action as part of or at the same time as the company’s action. But it does not at all follow that he should have done so or that his failure to do so renders the present action oppressive to the firm or an abuse of the process of the court. As May LJ observed in Manson v Vooght [1999] BPIR 376 at 387, it may in a particular case be sensible to advance claims separately. In so far as the so called rule in Henderson v Henderson suggests that there is a presumption against the bringing of successive actions, I consider that it is a distortion of the true position. The burden should always rest upon the defendant to establish that it is oppressive or an abuse of process for him to be subjected to the second action.
Floyd LJ then considered the application of this rule in the context of a patentee who seeks leave to amend claims in a patent after judgment on the issue of validity. His Lordship referred to the reasons for judgment of Jacob LJ in Nokia GmbH v IPCom GmbH & Co KG [2011] EWCA Civ 6; [2011] FSR 15 and Nikken Kosakusho Works v Pioneer Trading Co [2005] EWCA Civ 906; [2006] FSR 4 and identified the following principles. First, the onus is on the party claiming an abuse of process to establish the abuse. Secondly, there is a general procedural rule that a party should normally not be allowed to advance in a second proceeding a matter he could have advanced in the first and this applies in patent litigation so that a party must bring before the Court the issues he seeks to have resolved so as to enable the Court to conclude the litigation between the parties. Thirdly, the Rules of Court which require the early identification of issues and the parties to face up to their cases at an early stage, not a later stage, reinforce the importance of the general procedural rule. Furthermore, not only are the private interests of the parties relevant, but there is an important public interest in the approach embodied in the general procedural rule. Fourthly, if a party fails to advance a case he could have advanced much earlier and does so without any real justification, then that can be an abuse of process because it is not normally procedurally fair to subject the other side to successive cases when that party could readily have put them at the same time. Finally, a finding that a claim or defence is an abuse of process will ordinarily lead to an order for striking out or dismissal and is only discretionary in a limited sense. Nevertheless, it is an evaluation by the primary judge of a number of factors and an appeal court will only interfere with the evaluation on limited grounds.
The Full Court of this Court considered the English approach in Woolworths Limited v BP plc (No 3) [2006] FCAFC 160; (2006) 70 IPR 270 (Woolworths v BP). In that case, the trade marks of an applicant for registration had been amended and then the amended trade marks had been contested, both at first instance and on appeal to this Court. The Full Court held that the trade marks had been amended contrary to the terms of s 65 of the Trade Marks Act 1995 (Cth). The applicant for registration sought an order from the Full Court that the applications for the trade marks in their unamended form be remitted to the primary judge for further consideration. The Court refused to make such an order. The Court said (at [7]-[12]):
Assuming (which was not seriously disputed) that there is available jurisdiction, we do not propose to make the orders sought by BP. It would not be consistent with the proper administration of justice to do so, and it would be quite unfair to put Woolworths to the trouble, risk and expense of a further trial (and, more likely than not, a further Full Court appeal). Mr Shavin said that the initiative for the amendments came from the registrar but that would not have prevented BP resisting them and appealing any adverse decision by the registrar. At all times the amendments were opposed by Woolworths, and BP chose to assert before the registrar, the primary judge and on the appeal to the Full Court the validity of the marks in their amended form.
In Nikken Kosakusho Works v Pioneer Trading Co [2005] All ER (D) 350 the English Court of Appeal was faced with a similar application. An integer of a patent claim was “an annular groove of predetermined depth”. The trial judge construed this to mean “a groove whose depth the maker has decided in advance” and not, as the patentee argued, “approximately 3–5mm”. The trial judge found the claim as so construed lacked novelty. After judgment the patentee sought an amendment to delete “predetermined depth” and substitute the 3–5mm measurement. The trial judge’s refusal was upheld by the Court of Appeal.
The leading judgment was that of Jacob LJ. His Lordship (at [13]) pointed out that the proposal would lead to two trials instead of one. An exercise of discretion to allow the amendment would be improper for three reasons. First, there was the “straightforward application” of the principles of Henderson v Henderson (1843) 3 Hare 100; [1843‑60] All ER Rep 378. In Australia the corresponding authority, following Henderson, is Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; 36 ALR 3. Generally speaking, after judgment a party to litigation will not be permitted to raise an issue which, acting reasonably, it should have raised in the proceedings before they were finally determined.
Second, there was the particular strictness with which courts have applied the Henderson rule in patent litigation: Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59.
Third, there was the overriding objective in the Civil Procedure Rules of saving expense. In answer to the argument that all these matters could be dealt with by compensation in costs, Jacob LJ said (at [22]):
[22]Moreover I am not satisfied that this case is only about costs. Always when the question of patent validity is in issue commercial uncertainty is created, not only for any of the parties involved but the public in general. The court is particularly entitled to have regard to that.
Mutatis mutandis, we think the same considerations apply to trade mark litigation and to the present case.
Goldview was closely involved with the other companies within the group as shown by the offer as to the use of its assets and the actual use of those assets, its registration as the shareholder of Coretell International and the movement of monies within the group of companies.
Mr Kleyn, at all material times, controlled and directed each of the respondent companies, including Goldview.
Goldview placed a good deal of reliance on the fact that the applicants had pleaded that it was a lessor of the Maddington Premises. It also referred to the Notice to Admit and Notice of Dispute. Furthermore, it placed reliance on the fact that Mr Brown and Mr Ross said, or proceeded on the basis, that Goldview was a lessor of the Maddington Premises.
There was no written lease. If there was a lease, it was because Mr Kleyn as the directing mind and will of Goldview, Coretell and Kleyn Investments decided that there was a lease. He was fully cross-examined on the issue and I do not think there would be a denial of procedural fairness if I was to find that there was no lease. It seems to me that the evidence was complete and that it would be contrary to the interests of justice to find that there was a lease when the facts clearly indicate that there was not.
It seems to me that, in any event, whatever right of occupancy there was, it does not provide an answer to the applicants’ claims. Mr Kleyn controlled all the relevant companies and if his agreement on behalf of one company with himself on behalf of another company gave rise to an “obligation”, it is, as I have said, an obligation of a vague and indefinite nature and entirely within the discretion of Mr Kleyn.
I do not think that there was a lease of the Maddington Premises, or at least the type of lease that might provide an answer to the applicants’ claims. Further, and in any event, any “lease” was entered into to facilitate the conduct which constituted the infringements and was maintained – bearing in mind that even on the respondents’ case it could have been brought to an end at any time – for that purpose.
The infringing tools were kept by Goldview in the Maddington Premises for trade purposes with the intention of them being used in trade and Goldview thereby infringed the Systems Claims in the Standard Patent.
For similar reasons, Goldview authorised the infringement of the Systems Claims and, in addition, its conduct amounted to infringement of the Core Drill Claims and the Method Claims. As I have said, even if there was an informal oral lease of some nature over the Maddington Premises, Goldview authorised the infringement of the three sets of claims. Mr Kleyn was the directing mind and will of the whole business and of the legal structures used in it. Goldview, through Mr Kleyn, knew precisely how the Maddington Premises were to be used and were used and, in fact, facilitated the arrangement(s) in the sense of causing it to be entered into and carried out. Goldview, though Mr Kleyn, could have brought the arrangement(s) to an end at any time.
This case bears no similarity to cases in which the question is whether an independent lessor who fails to act, authorises an infringement of a patent or other intellectual property right. Goldview, though Mr Kleyn, sanctioned, approved and countenanced the relevant acts of infringement by causing an arrangement(s) to be put in place and maintained which involved the acts of infringement.
In addition or in the alternative, Goldview was a joint tortfeasor in the infringement of the System Claims, the Core Drill Claims and the Method Claims. Mr Kleyn, acting through the various entities he controlled, pursued a course of action or common design which infringed those claims. The corporate entities were parties to that concerted action or common design. Again, I make the point that I reach the same conclusion, for the same reasons I have given in the context of whether Goldview authorised the infringements, even if there was an informal oral lease of some nature.
The Term of the Exclusive Licence
As I have said, there is no dispute about the standing of Reflex Instruments as exclusive licensee of the Standard Patent on and from 14 January 2016. It is the period before that date which is in issue. Reflex Instruments claims an entitlement to sue from 2 April 2010 or, in the alternative, 5 September 2005.
An entitlement as a licensee is a prescribed particular which must be registered for the purposes of s 187(1) of the Patents Act (reg 19.1 Patent Regulations). A failure to register does not prevent an exclusive licensee from asserting his or her rights under the licence. An exclusive licence does not need to be in writing (Morton Norwick Products Inc v Intercen Ltd (No 2) [1981] FSR 337 at 342-343; Terrell T, Terrell on the Law of Patents (18th ed, Sweet & Maxwell, 2016 [16.35])).
In order to address the issue of whether Reflex Instruments had an exclusive licence before 14 January 2016, the applicants adduced evidence from Mr Brown. He produced a document entitled, “Confirmatory Patent Licence Deed” dated 13 January 2016 between AMC, Imdex and Reflex Instruments. The Deed relates to the Standard Patent, the Device Patent, the System Patent, the Method Patent, and another patent about which there is no direct evidence.
The recitals in the Deed are as follows:
A AMC is the exclusive owner of the family of patents listed in Schedule 1.
BAMC granted Imdex an exclusive licence to Exploit the exclusive right in Australia to Exploit the invention the subject of Australian Innovation Patent No 2006100113, entitled “Core Sample Orientation” (‘113 Patent) on 16 May 2007.
CPursuant to the Licence and Agent Agreement AMC revoked from Imdex and granted to Reflex the exclusive right in Australia to Exploit the invention the subject of the ‘113 Patent with effect from 1 July 2007.
DThe parties intended by reason of their entry into the Licence and Agent Agreement that all of AMC’s rights in and to the Patents including any applications or patents derived from or claiming priority from the provisional application for the Patents were solely and exclusively granted to Reflex in Australia.
EOn 11 November 2011 AMC confirmed that Reflex is the exclusive licensee of Australian Innovation Patent Nos 2011101041 and 2010101356, each being entitled “Core Sample Orientation”.
FFor recordable purposes, the parties have decided to enter into this Deed to record the exclusive licence in a recordable instrument.
Clause 1 contains a definition of the Licence and Agent Agreement as the agreement entered into by AMC, Reflex Instruments and Imdex on or about 13 June 2007.
Clause 2(a) provides that pursuant to the Licence and Agent Agreement, AMC has granted Reflex Instruments in Australia an Exclusive Licence to exploit:
(i) the Patents, including any and all inventions claimed therein, in Australia; and
(ii)any divisional patent applications derived from or claiming priority from Australian Patent Application No 2013201201, including any and all inventions claimed therein in Australia,
during the Exclusive Licence Period, to the exclusion of all other persons (Reflex Exclusive Licence).
Clause 2 goes on to provide the following:
(b)To the extent that the Reflex Exclusive Licence does not constitute an exclusive licence to any of the Patents, AMC grants Reflex in Australia an exclusive licence to exploit:
(i)the Patents, including any and all inventions claimed therein, in Australia; and
(ii)any divisional patent applications derived from or claiming priority from Australian Patent Application No 20132011201, including any and all inventions claimed therein, in Australia,
during the Exclusive Licence Period, to the exclusion of all other persons (Deed Exclusive Licence).
Clause 3 defines the Exclusive Licence Period as a period commencing on 1 July 2007 and terminating on the date that the last of the Patents expires, is surrendered, lapses or is revoked, whichever is the later (Exclusive Licence Period).
The Licence and Agent Agreement is, in fact, a document in letter form of just over a page. The letter refers to Australian Innovation Patent No 2006100113 which is the Device Patent. The document provides that it sets out the agreement in place between AMC and Imdex in relation to the Device Patent. The document states that AMC is the registered proprietor of the Device Patent and it provides that as and from 5 September 2005, Imdex has been and continues to be entitled on an exclusive basis to exploit in Australia the invention, the subject of the Device Patent. Imdex is appointed as AMC’s agent and attorney to assert for the benefit of and at the expense of AMC, as licensee, whatever claims and rights AMC, as licensor, may have arising from any actual or apparent infringement of the Device Patent within Australia and is entitled to the proceeds of, relevantly, any judgment made in any action brought by it. The document provides that as and from 1 July 2007, Reflex Instruments will be entitled on an exclusive basis to exploit in Australia the invention, the subject of the Device Patent. Further, as and from 1 July 2007, Reflex Instruments will be appointed as AMC’s agent and attorney to assert for the benefit of and at the expense of AMC as licensee whatever claims and rights AMC as licensor may have arising from any actual or apparent infringement of the Device Patent within Australia and is entitled to the proceeds of, relevantly, any judgment made in any action brought by it. Accordingly, as and from 1 July 2007, Imdex will no longer be entitled on an exclusive basis to exploit in Australia the invention, the subject of the Device Patent.
The Licence and Agent Agreement deals only with the Device Patent. As to the other patents, the relevant clause seems to be clause 2(b) in the Confirmatory Patent Licence Deed. That Deed purports, on 13 January 2016, to grant Reflex Instruments an exclusive licence to, among others, the Standard Patent on and from 1 July 2007.
Mr Brown was asked about his understanding of the arrangement between AMC and Reflex Instruments in relation to the use of patents. Mr Brown said that his understanding was that AMC would give a licence to the Reflex Instruments’ business to commercialise and manage everything to do with a product that resulted from a patent. Mr Brown said that he gained his understanding from his attendance at regular financial meetings. He said that he was not a senior manager, but that members of the senior management group would sit in on these meetings and that he would be called on to provide technical assistance and market intelligence. He said that it was inevitable that in these meetings intellectual property and strategy would be one of the things that would be discussed around the group. There would be line managers, senior managers and others and, during the course of the discussions, the best way forward in terms of managing the intellectual property would be discussed. He said that AMC is primarily a drilling fluid-based business. He said that a strategy developed whereby it was considered more advantageous to the business for the Reflex Instruments’ business and the Ace Drilling business to manage an instrument as opposed to having a drilling fluid’s business licence and manage intellectual property. Mr Brown said that there were discussions about who would bear the costs associated with the product and it was suggested that it should be allocated to the “right part” of the business, being the business that was managing and was licensed to manage the intellectual property, and that was Reflex Instruments. He said that it was seen as being unfair on the AMC side of the business which had no involvement in the managing of such product line or the IP that they should bear the costs or receive any revenue from the product. He said “that should all be managed by that entity that is licensed to do so”.
The respondents’ submission was that the Licence and Agent Agreement executed on 13 June 2007 related to, and only related to, the Device Patent. The Confirmatory Patent Licence Deed dated 13 January 2016 related to all the patents. However, clause 2(a) cannot change the meaning of the Licence and Agent Agreement which related to the Device Patent only. Furthermore, it is not possible to “backdate” the licence of the Standard Patent. In other words, the attempt to do so in clause 2(b) is not effective.
The applicants’ submission was that Mr Brown’s evidence was sufficient to prove the existence of the licence. He has worked for Reflex Instruments since 2004 and he understood that Reflex Instruments had the right to deal with the tools, which were the subject of the patents. He was not seriously challenged in that evidence and there is no evidence of any other party lawfully exploiting the invention described in the Standard Patent. Furthermore, it is unlikely that different companies in the Imdex Group would be exploiting rights under patents forming part of the same family of patents.
Not without some hesitation, I am persuaded by the applicants’ submissions and find that Reflex Instruments was the exclusive licensee of the Standard Patent from 1 July 2007.
Conclusion
I reject the respondents’ abuse of process argument. I hold that the respondents, including Goldview, infringed the relevant claims in the Standard Patent. I hold that Reflex Instruments was the exclusive licensee of the Standard Patent on and from 1 July 2007.
I will direct that the applicants bring in draft minutes of order reflecting the conclusions in these reasons.
I certify that the preceding one hundred and ninety-eight (198) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate:
Dated: 27 July 2018
SCHEDULE OF PARTIES
WAD 74 of 2014 Respondents
Fourth Respondent:
GOLDVIEW ASSET PTY LTD (ACN 078 643 428)
Fifth Respondent:
NICKY KLEYN
Cross-Respondents
Second Cross-Respondent
REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD (ACN 124 204 191)
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