BASF SE v The Lubrizol Corporation - [2017] APO 10

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
BASF SE v The Lubrizol Corporation [2017] APO 10

Patent Application: 2010248022

Title:Quaternary ammonium amide and/or ester salts

Patent Applicant:  The Lubrizol Corporation
Opponent:  BASF SE
Delegate:  Dr S.D. Barker
Decision Date:  27 February 2017
Hearing Date:  Written submissions filed on 16 January 2017 and 24 January 2017

Catchwords: PATENTS – extension of time to file evidence in support – regulation 5.9 – whether opponent has acted promptly and diligently – whether opponent has made all reasonable efforts to meet filing requirements – extension of time granted.

Representation: Patent attorney for the applicant: Houlihan²
Patent attorney for the opponent: Griffith Hack

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2010248022

Title:Quaternary ammonium amide and/or ester salts

Patent Applicant: The Lubrizol Corporation
Date of Decision: 27 February 2017
DECISION
The opponent has met the requirements of paragraph 5.9(2)(a) of the Patent Regulations. I grant an extension of the time for filing evidence in support until 31 January 2017.
For the purposes of subregulation 5.8(2), this decision represents notice that all of the evidence in support has been filed. The time for filing evidence in answer is 3 months from the date of this decision.
I award costs according to Schedule 8 against The Lubrizol Corporation.
REASONS FOR DECISION
Background

This matter relates to patent application 2010248022, in the name of The Lubrizol Corporation (Lubrizol), which was advertised as accepted on 10 March 2016. A notice of opposition to the grant of the patent was filed by BASF SE (BASF) on 10 June 2016. The statement of grounds and particulars was filed on 9 September 2016. BASF was directed to provide further and better particulars on 25 October 2016, and an amended statement of grounds and particulars was duly filed on 8 November 2016. Evidence in support was due to be completed by 9 December 2016. Part evidence in support was filed on 2 December 2016 and 9 December 2016.
BASF filed an application for an extension of time of three months to file evidence in support (the application) on 8 December 2016. Lubrizol requested to be heard on 12 December 2016 and a delegate of the Commissioner of Patents requested further information on the application on 14 December 2016, indicating that Lubrizol’s request to be heard would be held pending the delegate’s decision on the extension. BASF responded with the requested further information (the further information) on 21 December 2016, and on 3 January the delegate indicated that he intended to grant BASF an extension of two months to file evidence in support, and provided a timeline for hearing Lubrizol’s objection to the extension of time by means of written submissions. Written submissions were filed by Lubrizol on 16 January 2017 and by BASF on 24 January 2017.
The law
On 15 April 2013 the Intellectual Property Legislation Amendment (Raising the Bar) Regulation 2013 (No 1) (the Amendment Regulation) commenced. The Amendment Regulation significantly amended the Patents Regulations 1991 (the Regulations) as they apply to patent oppositions. The law governing extensions of time to file evidence in a patent opposition depends upon the date on which the opposition commenced. Where the evidentiary period commenced on or after 15 April 2013, as in the present case, the extension is governed by regulation 5.9 of the Regulations as in force on 15 April 2013.
Subregulation 5.9(2) states:
The Commissioner may extend the period only if the Commissioner is satisfied that:
(a) the party who intended to file evidence in the period:
(i) has made all reasonable efforts to comply with all relevant filing requirements under this Chapter; and
(ii) despite acting promptly and diligently at all times to ensure the appropriate evidence is filed within the period, is unable to do so; or
(b) there are exceptional circumstances that warrant the extension.
Exceptional circumstances are defined in subregulation (5):
In this regulation:
exceptional circumstances includes the following:
(a) a circumstance beyond the control of a party that prevents the party from complying with a filing requirement under this Chapter;
(b) an error or omission by the Commissioner that prevents a party from complying with a filing requirement under this Chapter;
(c) an order of a court, or a direction by the Commissioner, that the opposition be stayed pending the completion of a related proceeding or action under the Act.
These provisions have been considered by the Commissioner in TRED Design Pty Ltd v Julie- Anne McCarthy and Bradley McCarthy[1] (the TRED decision) and Merial Limited v Novartis AG[2] (the Merial decision). The principles applied in those decisions, which I accept as correct, are that I must ask myself the following questions:
1. Has the party (and their attorney or agent) made all reasonable efforts to comply with all relevant filing requirements?
2. Was the failure to file the evidence in time despite the party (and their attorney or agent) acting promptly and diligently at all times to ensure the evidence is filed in time?
3. Were there exceptional circumstances that warrant the extension?
[1] [2013] APO 57; (2013) 105 IPR 291.
[2] [2013] APO 65; (2013) 105 IPR 133.
I can extend the time for filing evidence only if I am satisfied that the answer to questions 1 and 2 is YES, or if I am satisfied that the answer to question 3 is YES. If I am so satisfied, then I must consider whether there are any discretionary reasons why the extension should not be granted.
The Explanatory Statement accompanying the Amendment Regulation confirms the seriousness of this test:
"A major cause of protracted opposition proceedings is extensions to the various time periods for providing evidence. The law has developed in such a way as to significantly narrow the Commissioner's discretion to disallow extensions. As a result, oppositions are normally subject to multiple extensions of time and extend over many years, contrary to the interest of the public and parties in resolving oppositions faster.
New subregulation 5.9(2) addresses this issue by introducing a new test for determining whether an extension of time for filing evidence is justified. The Commissioner will not be able to extend time periods unless one of these conditions was made out. The party seeking the extension will bear the onus of convincing the Commissioner of this. Once the conditions in subregulation 5.9(2) are met, the Commissioner still has the discretion to consider whether or not it is appropriate that an extension of time be granted. In applying the test, the Commissioner will not be required to give a direction to extend a period solely because of delays caused by a legal representative failing to act promptly or diligently, by difficulties in obtaining expert evidence that could have been anticipated and acted on or by attempts to settle the proceedings.
Where a party cannot satisfy the Commissioner that an extension is justified under the test, the Commissioner will not have the power to give a short extension to allow the filing of evidence immediately available or to validate evidence filed out of time."
If the Commissioner is satisfied that an extension is appropriate, the Commissioner must then determine the length of the extension (subregulation (3)):
The Commissioner must determine the length of the extended period having regard to what is reasonable in the circumstances.
The application for extension of time
Information filed by BASF in the application and in the further information will be identified as necessary as part of this decision. I will provide a general summary of the actions taken by BASF in the preparation of the evidence in support.
BASF filed their Notice of Opposition on 10 June 2016 and subsequently BASF and their Australian attorney, Dr Morris, discussed the types of experts required, with a decision made to use more than one Australian expert. After contacting a number of potential Australian experts but not identifying any able to assist, BASF asked Dr Morris to provide some options. Dr Morris provided a list of potential experts on 7 September 2016, and BASF selected two options on 9 September 2016, the day the Statement of Grounds and Particulars was filed. After some initial difficulty contacting the selected experts (Expert 1 and Expert 2), agreement of terms of engagement for each expert was completed on 29 September 2016.
Initial questions were provided to these experts on 17 October 2016. After finalising answers to the questions Expert 1 was provided with the accepted specification on 17 November 2016 and the prior art documents on 28 November 2016. Expert 1 had not previously been involved in patent opposition proceedings as an expert and so multiple telephone conferences were held with him to discuss the questions and approach to assessing the opposed application and novelty and concurrently with these discussions the comments provided were being incorporated into a draft declaration.
Expert 2 withdrew his services on 18 October 2016. On 20 October 2016 Dr Morris approached another Australian expert for assistance but they were not available. After searching for alternative Australian and non-Australian experts, BASF decided on 18 November 2016 to brief an in-house expert (the replacement for Expert 2). The replacement for Expert 2 provided his answers to questions relating to the technical field in a telephone conference on 25 November 2016 and was provided with the accepted specification and prior art documents on 28 November 2016.
A further in-house expert (Expert 3) performed experiments equivalent to those set out in prior art document D1 prior to the evidentiary period, with further analysis undertaken during the evidentiary period. Expert 3’s declaration was filed as part evidence in support on 2 December 2016.
In the further information BASF explained that each of the three experts were necessary, in view of the claims of the opposed specification and the experimental examples in the specification and the prior art. That is, the specification includes claims directed to quaternary ammonium salts and methods for making them, as well as their use as a detergent fuel additive. Accordingly, one of the experts is providing comments on quaternary ammonium salts and their preparation while another is providing comments on detergent fuel additive applications. Expert 3 had ready access to the facilities and starting materials required to perform experiments required.
Has the party made all reasonable efforts to comply with all relevant filing requirements?
The requirement in paragraph 5.9(2)(a)(i) imports a consideration of reasonableness of the relevant party’s conduct over the totality of the opposition proceedings, rather than its compliance with the particular evidentiary period in question, which is addressed by the specific requirement of paragraph 5.9(a)(2)(ii). [3] If a party has been prompt and diligent in relation to the preparation and filing of evidence, it will normally have made all reasonable efforts to comply. It is therefore unnecessary to consider separately whether the opponent has made all reasonable efforts to comply with the evidentiary time limit.
[3] Innovia Security Pty Ltd v Visual Physics LLC [2014] APO 15; (2014) 106 IPR 568 at [18].
Following the timely filing of the Notice of Opposition, the filing of the Statement of Grounds and Particulars was the first requirement under Chapter 5 with which BASF was required to comply. BASF filed the Statement of Grounds and Particulars in time on 9 September 2016.
BASF was directed to provide further and better particulars, and did so within the time specified in the direction. Lubrizol submitted that, like in the TRED decision, this suggests a failure to act reasonably to comply with the filing requirements associated with the statement of grounds and particulars. BASF responded:
“Lubrizol requested further and better particulars for the Statement, essentially as the particulars for each prior art document were provided by highlighting the relevant portions of each document on the copy provided. This manner of providing particulars has been used in other oppositions (by BASF as well as other opponents) without issue. The further particulars provided the same information albeit presented in a different (if more traditional) form.”[4]
[4] BASF’s submissions at 2.6.
While the amendments made to the statement include a large amount of new text, considered in the context explained by BASF they can be viewed as relatively minor. The present situation is somewhat analogous to that considered by the Deputy Commissioner in Clarus Therapeutics, Inc. v Lipocine, Inc.[5], where a direction for further and better particulars was issued, but the amendments required to the statement were relatively minor and did not establish a lack of reasonable efforts to comply with the requirement for filing the statement of grounds and particulars. Similarly, I am not persuaded that in the present circumstances the requirement for further and better particulars establishes a failure of BASF to make reasonable efforts to comply with filing requirements. I am satisfied that BASF has made all reasonable efforts to comply with the relevant filing requirements prior to the evidentiary period.
[5] [2014] APO 50; (2014) 108 IPR 404 at [18].
Was the failure to file the evidence despite acting promptly and diligently?
Lubrizol allege that a lack of promptness and diligence on the part of BASF can be seen in several areas, which I will consider in turn. I observe at the outset that the requirement that a party act promptly and diligently is not setting a standard of perfection;[6] there needs to be behaviour that is within the range of what could be considered prompt and diligent.[7] An opinion as to the reasonableness, promptness and diligence of a party can be formed based on an explanation of what the party has done, when it was done, and how long it took, and an explanation of any significant delays.[8]
(a) delay in initially engaging experts
[6] Mineral Technologies Pty Ltd v Orekinetics Investments Pty Ltd [2014] APO 63 at [33].
[7] Osmose New Zealand v Zelam Limited [2014] APO 49; (2014) 108 IPR 398 at [18]-[22].
[8] [2013] APO 57; (2013) 105 IPR 291 at [76].
BASF explained that they experienced difficulty in identifying experts for this opposition, despite discussing the types of experts that were required and making initial efforts to do so from shortly after the Notice of Opposition was filed, as outlined above. In the application BASF outlined their efforts to identify experts as follows:
“The types of experts required was discussed with Dr Morris shortly after filing the Notice of Opposition and in view of the very specialised technical field, we decided it may be difficult to find one expert that was skilled in both the chemistry of quaternary ammonium salts and their preparation as well as being an expert in fuel additives. We then decided on an approach of using more than one Australian expert.
During the next couple of weeks we sought advice from our in-house experts both in Germany and in Australia as to suitable experts that may be approached to assist us with our evidence. We identified and contacted a number of potential Australian experts but were not able to find candidates that were able to assist us.
After exhausting our network of potential experts, we asked Dr Morris to investigate potential experts and provide us with some options. Dr Morris did so and provided us with a list of potential experts that may be able to assist us on 7 September 2016. We identified two experts from the list to approach for assistance. This was shortly before the Statement of Grounds and Particulars was filed.
While a number of attempts to contact the experts by telephone over the next week were unsuccessful, contact was made after email correspondence was sent and both experts indicated that they thought that they had the required expertise and were able to assist us. Over the next few weeks, the terms of engagement for the two experts was agreed and their assistance confirmed.”
Lubrizol provided a declaration from Paul Warden-Hutton in support of their submission that BASF has been aware of the opposed patent family since at least mid-2013, and submitted that in view of this awareness BASF should have been seeking experts even before filing the Notice of Opposition. Accordingly, Lubrizol submitted that the late identification of suitable experts represents an unacceptable delay.
I am satisfied that consideration of suitable experts at an early stage, prior to finalising the grounds and particulars of the opposition, reflects a diligent approach to the preparation of the evidence. I do not accept that promptness and diligence in this case required that BASF seek out experts prior to the deadline for making a decision on whether or not to oppose the application. While the process of identifying and retaining experts was clearly lengthy, I am satisfied that BASF have adequately explained the efforts they made to identify suitable experts and I do not consider that there are significant unexplained delays in this process.
(b) delays in the preparation of Expert 1’s evidence
In relation to the preparation of Expert 1’s evidence Lubrizol submitted:
“The agreement for the participation of Expert 1 was not completed until 29 September 2016 and then questions not sent to Expert 1 until 17 October 2016. Expert 1 was not provided with the Opposed specification until 17 November 2016. The protracted periods of time between items does not satisfy requirements (i) and (ii). Moreover, there has been no evidence or even comments in either the cover letter or the second letter from the Opponent of the reasonableness of using the two-stage process.”[9]
[9] Lubrizol’s submissions at page 3.
The delay between finalising Expert 1’s agreement to participate and providing the questions was two and a half weeks. In that time Dr Morris developed and agreed with BASF the questions to be provided to Expert 1 and Expert 2, based on their specific expertise. This seems to be a reasonable time period for undertaking this work. There was then a one month period between Expert 1 being given the initial questions and being provided with the opposed specification. During this time Expert 1 considered the questions provided and participated in several telephone conferences (27 October 2016, 2 November 2016, 8 November 2016), while comments were being put into a draft declaration. Even without the consideration that Expert 1 had not been involved in opposition proceedings before, this does not seems to be outside the range of reasonable time periods for an expert to provide information of this type. I am not satisfied that the delays identified by Lubrizol establish a failure of BASF to act promptly and diligently.
After being provided with the opposed specification, Expert 1 was provided with the prior art documents on 28 November 2016 and Expert 3’s declaration, which is relevant to the assessment of at least one prior art document, on 5 December 2016. In their submissions, BASF indicated that further actions in relation to Expert 1 subsequent to the provision of the further information included collecting evidence relating to the prior art, and preparation, finalisation and execution of a declaration, which was filed on 18 January 2016. This seems a reasonable period of time in which to complete these actions.
I accept that a party who adopts a two stage preparation of evidence must show that approach was reasonable, and that it was done diligently and promptly. I am satisfied that this was the case; BASF explained in the application and reiterated in their submissions that the two stage approach was adopted in view of the inventive step ground in the application and the consequent importance of evidence as to the common general knowledge.
(c) delay in the preparation of Expert 3’s declaration

It is apparent that the information on which Expert 3’s declaration is based was collected at an early stage (telephone conferences regarding crude data and detailed analysis were held on 5 September 2016 and 28 September 2016, respectively). From 4 to 9 November 2016 Dr Morris prepared a draft declaration assembling the experimental protocols and analytical data, and Expert 3 and the analytical team reviewed and revised the draft declaration from 9 to 21 November 2016. After further revisions and a telephone conference, Expert 3’s declaration was forwarded for execution on 1 December 2016 and filed as part evidence in support on 2 December 2016
Clearly there was a delay between the collection of the information on which Expert 3’s declaration is based and the preparation and execution of the declaration. However, in the further information BASF indicates that Dr Morris considered the experimental details in D1 and the analytical results in October 2016, and it is apparent that other tasks relevant to the preparation of the evidence as a whole were undertaken during this time, such as the preparation of questions for Expert 1 and Expert 2. Expert 3’s declaration was filed before the due date for filing evidence in support, and although Expert 3’s declaration was provided to Expert 1 very close to the due date for filing evidence, there does not appear to have been any significant delay in finalising the evidence as a whole resulting from this, since the declaration was provided to Expert 1 only one week after the prior art documents.
(d) delay in engaging the replacement for Expert 2 and persisting with this expert despite his unavailability over the Christmas period
The withdrawal of Expert 2 could not have been anticipated, and BASF quickly commenced efforts to identify a replacement, as set out in the application:
“One Australian expert, after receiving the questions we wished him to consider, advised Dr Morris on 18 October 2016 that he had reconsidered and did not feel he could provide us with expert comments as requested. Dr Morris immediately advised us and we asked Dr Morris to approach alternative experts from the list identified earlier. Dr Morris also corresponded with the first expert and asked him if he was able to recommend other experts that might assist us.
On 20 October 2016, Dr Morris approached another Australian expert for assistance. However, this potential expert was not available over the time period required. Dr Morris asked if the expert could recommend other experts.
Although Dr Morris followed up with both potential experts, neither expert could recommend a further potential expert to assist us. At this point we had to change our strategy and seek assistance of a non-Australian expert. We then investigated whether any of our in-house technical experts could recommend non-Australian potential experts that may assist us. Although we made these investigations, we were not able to identify a suitable expert at that time. Dr Morris also investigated potential non-Australian experts and provided us with further options one of which was promising. However, when we approached this non-Australian expert he declined to assist us. Upon review of other potential experts, we did not believe they had the required expertise. After extensive searching for alternative experts without success, we decided on 18 November 2016 to brief one of our in-house experts to assist with the preparation of evidence. This expert has now considered the questions relating to the technical field and his answers to the questions have been discussed in a telephone conference of 25 November 2016. He was then provided with a copy of the accepted specification and the prior art on 28 November 2016 and has been asked to consider these documents and provide comments as soon as possible.”
This expert subsequently advised that he was unable to review the specification and prior art documents until 5 January 2017 due to other commitments, but would be available during January and February to complete the evidence. In their submissions, BASF indicated that following the provision of the further information the initial evidence collected from this expert was put into declaratory form for review, and I note that completed evidence in support was filed on 31 January 2017. Completion of the replacement for Expert 2’s evidence in this time frame appears indicative of prompt and diligent efforts.
While in retrospect it may be apparent that an in-house expert could have been engaged as soon as Expert 2 withdrew, this does not make BASF’s approach unreasonable, or demonstrate a lack of promptness and diligence in seeking a replacement for Expert 2. Having engaged the replacement for Expert 2, evidence preparation commenced quickly while this expert was available, and given the difficulty experienced by BASF in identifying experts, it seems reasonable to have persisted with this expert despite their unavailability over the Christmas and New Year period.
Summary
The question of whether a party has been prompt and diligent is assessed by looking at the behaviour of the party as a whole. BASF began looking for experts early, and the failure to retain appropriate experts until relatively late was despite diligent investigations. The late withdrawal of Expert 2 does not reflect on BASF’s promptness or diligence, and the investigation for a replacement was undertaken in a reasonable fashion. I do not consider that there are any significant unexplained delays. I am satisfied that BASF has acted promptly and diligently.
Were there exceptional circumstances?
It is unnecessary to consider whether there were exceptional circumstances, and BASF made no submissions to that effect, as I have determined that the criteria of paragraph 5.9(2)(a) have been satisfied.
Discretionary matters
Once the mandatory requirements of paragraph 5.9(2)(a) have been met, an extension is not automatic; the Commissioner “may” extend the period for filing evidence. I can see no reason not to exercise that discretion.
Conclusion
I have concluded that BASF has met the requirements of paragraph 5.9(2)(a). I then need to consider what length of extension is reasonable in the circumstances. BASF completed their evidence in support on 31 January 2017 and I consider that an extension to this date is appropriate.
Costs
Both parties sought their costs. I see no reason to depart from the normal approach that costs follow the event. I will award costs according to Schedule 8 against Lubrizol.
Dr S.D. Barker
Delegate of the Commissioner of Patents