Bitech Engineering v Garth Living Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Bitech Engineering v Garth Living Pty Ltd (No 2) [2011] FCA 526

Citation: Bitech Engineering v Garth Living Pty Ltd (No 2) [2011] FCA 526 
Parties:

BITECH ENGINEERING v GARTH LIVING PTY LTD (ACN 111 145 432) and COHEN NOMINEES PTY LIMITED (ACN 008 526 994)

BITECH ENGINEERING v BUNNINGS GROUP LIMITED (ACN 008 672 179)

BITECH ENGINEERING v HOTPOINT (AUST) PTY LTD (ACN 082 599 086)
File numbers: NSD 1681 of 2006
NSD 43 of 2007
NSD 2056 of 2007
Judge: FOSTER J
Date of judgment: 19 May 2011
Catchwords: PRACTICE AND PROCEDURE – patents – whether leave to amend its Statement of Claim should be granted to a patentee to raise new types of infringement of its patent after a separate trial on liability but before the damages trial – whether consequential orders for further discovery should be made
Legislation: Federal Court of Australia Act 1976 (Cth), s 37M
Federal Court Rules, O 15 r 2 and r 6
Cases cited: Bitech Engineering v Garth Living Pty Ltd [2011] FCA 357 related
AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 applied
Date of hearing: 12 May 2011
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 64
Counsel for Bitech Engineering: Mr C Dimitriadis, Mr PA Maddigan
Solicitor for Bitech Engineering: DLA Piper Australia
Counsel for Garth Living Pty Ltd, Bunnings Group Limited and Cohen Nominees Pty Limited: Ms J Rawlings
Solicitor for Garth Living Pty Ltd and Bunnings Group Limited: Eales & Mackenzie Melbourne
Solicitor for Cohen Nominees Pty Limited:  Bradley Allen Lawyers
Counsel for Hotpoint (Aust) Pty Ltd: Mr B Hatfield (initially but then excused)
Solicitor for Hotpoint (Aust) Pty Ltd: Rutland’s Law Firm

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1681 of 2006
BETWEEN:

BITECH ENGINEERING
Applicant
AND:

GARTH LIVING PTY LTD (ACN 111 145 432)
First Respondent

COHEN NOMINEES PTY LIMITED (ACN 008 526 994)
Second Respondent

JUDGE:

FOSTER J

DATE OF ORDER:

19 MAY 2011

WHERE MADE:

SYDNEY

THE COURT:

1.GRANTS leave to the applicant to amend its Statement of Claim in accordance with the proposed Third Further Amended Statement of Claim, a true copy of which is annexed to the affidavit of Neil Garfield Sadler sworn on 20 April 2011 and filed herein and marked with the letter “A”.

2.ORDERS that any Third Further Amended Statement of Claim to be filed pursuant to the leave granted in par 1 above be filed and served by 25 May 2011.

3.ORDERS that, by 30 June 2011, provided that the applicant files and serves its Third Further Amended Statement of Claim in accordance with par 2 above, the respondents provide to the applicant verified discovery in accordance with O 15 r 2 and r 6 of the Federal Court Rules of all documents in the Categories for Discovery listed in the Schedule to these Orders.

4.ORDERS that inspection of documents discovered in conformity with par 3 above…

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Details
Case
[2011] FCA 526
Decision Date

CaseChat Overview and Summary

The case of Bitech Engineering v Garth Living Pty Ltd (No 2) involved Bitech Engineering, an Irish company and patentee of an Australian patent for an invention described as "Apparatus for simulating flames," seeking to amend its Statement of Claim to include additional types of alleged infringement by the respondents, Garth Living Pty Ltd and others. The respondents opposed the grant of leave to amend and the making of any consequential orders for discovery. The court was required to decide whether Bitech should be granted leave to amend its Statement of Claim to include additional types of infringement of its patent and whether consequential orders for further discovery should be made.

The court considered the principles articulated by the High Court in AON Risk Services Australia Ltd v Australian National University, which emphasised the discretionary nature of the power to grant leave to amend a pleading, taking into account factors such as substantial delay, wasted costs, the demands of case management, and the nature and importance of the amendment to the party applying for the amendment. The court also noted the potential prejudice to the respondents if the amendment was allowed, given the passage of time since the commencement of the proceedings and the lack of access to samples of the heaters and relevant documentation. Despite these considerations, the court found that Bitech had not acted tactically by delaying the inclusion of additional heaters and that the proposed amendments would not cause any prejudice to the respondents which could not be substantially remedied by an appropriate order for costs. Consequently, the court granted leave to the applicant to amend its Statement of Claim and made consequential orders for discovery, requiring the respondents to provide verified discovery of specified documents by certain dates. The applicant was also ordered to pay the respondents' costs occasioned by the making of the amendments.

Orders

Orders of the court

1. GRANTS leave to the applicant to amend its Statement of Claim in accordance with the proposed Third Further Amended Statement of Claim, a true copy of which is annexed to the affidavit of Neil Garfield Sadler sworn on 20 April 2011 and filed herein and marked with the letter “A”.

2. ORDERS that any Third Further Amended Statement of Claim to be filed pursuant to the leave granted in par 1 above be filed and served by 25 May 2011.

3. ORDERS that, by 30 June 2011, provided that the applicant files and serves its Third Further Amended Statement of Claim in accordance with par 2 above, the respondents provide to the applicant verified discovery in accordance with O 15 r 2 and r 6 of the Federal Court Rules of all documents in the Categories for Discovery listed in the Schedule to these Orders.

4. ORDERS that inspection of documents discovered in conformity with par 3 above take place by 13 July 2011.

5. ORDERS that the applicant pay the respondents’ costs occasioned by the making of the amendments, leave for which has been granted in par 1 above.

6. ORDERS that the costs of and incidental to the Notice of Motion filed by the applicant on 20 April 2011 be reserved.

7. ORDERS that the proceeding be listed for directions before Foster J at 9.30 am on 20 July 2011.

SCHEDULE HEREINBEFORE REFERRED TO

CATEGORIES OF DOCUMENTS FOR DISCOVERY

In these categories, “Additional Heaters” means the heaters particularised under paragraph 2.4.12 of the proposed Third Further Amended Statement of Claim and any other heaters which incorporate the features pleaded in paragraph 6.1 of the proposed Third Further Amended Statement of Claim:

1 Instruction manuals and specifications for each of the Additional Heaters.

2 All other documents recording or evidencing the internal construction or features of any of the Additional Heaters.

3 All documents recording or evidencing amounts charged and received in respect of each instance of the hire, sale, supply or other disposal by or on behalf of the respondents or either of them of any Additional Heaters during the period from January 2006 to June 2010.

4 All documents recording or evidencing any agreements, terms, conditions or other arrangements pursuant to which the hire, sale, supply or other disposal of any Additional Heaters took place during the period from January 2006 to June 2010.

5 All documents recording or evidencing any sales or promotional material or activity in respect of any Additional Heaters (whether alone or together with other products or services) during the period from January 2006 to June 2010.

6 All documents recording or evidencing any pricing decisions taken by or on behalf of the respondents or either of them in respect of any Additional Heaters during the period from January 2006 to June 2010.

7 All documents recording or evidencing any defects, complaints or other feedback in respect of any Additional Heaters.

8 All documents, including without limitation documents relating to the importation or purchase of any Additional Heaters by or on behalf of the respondents or either of them, which record or evidence any model number or other identifying characteristic of any Additional Heaters.

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

Background

Background to the litigation

The respondents oppose the grant of leave to amend and the making of any consequential orders for discovery.BACKGROUND In Bitech Engineering v Garth Living Pty Ltd [2011] FCA 357 (Bitech 2011) delivered on 12 April 2011, at [1]–[13], I said:1The applicant is a company incorporated in the Republic of Ireland. It was the patentee of Australian Patent No 621713 for an invention described in the patent as “Apparatus for simulating flames” (the Patent). The essential object of the invention is to achieve a realistic simulation of flames emanating from a simulated combusting log or coal fire. The Patent had application in electric and gas fired domestic room heaters. The patentee made twenty claims in the Patent with Claim 1 being the broadest and most important claim. The Patent expired on 9 February 2010. 2In late 2006, the applicant became aware that certain models of electric flame effect heaters were being sold by various retailers and suppliers which the applicant believed infringed the Patent. As a result, the applicant instituted five separate proceedings against the suppliers and retailers of the allegedly infringing electric flame effect heaters. 3I heard four of those five sets of proceedings together and delivered judgment in those proceedings on 26 November 2009 (Bitech Engineering v Garth Living Pty Ltd (2009) 84 IPR 78). The proceedings which were determined by that judgment were: (1)Bitech Engineering v Garth Living Pty Ltd (ACN 111 145 432) and Cohen Nominees Pty Limited (ACN 008 526 994); Garth Living Pty Ltd (ACN 111 145 432) v Bitech Engineering – NSD 1681 of 2006; (2)Bitech Engineering v Bunnings Group Limited (ACN 008 672 179) – NSD 43 of 2007; (3)Bitech Engineering v Flameglow Pty Ltd (ACN 117 672 518); Flameglow Pty Ltd (ACN 117 672 518) v Bitech Engineering – NSD 105 of 2007; and (4)Bitech Engineering v Hotpoint (Aust) Pty Ltd (ACN 082 599 086); Hotpoint (Aust) Pty Ltd (ACN 082 599 086) v Bitech Engineering – NSD 2056 of 20074The applicant was unsuccessful before me as far as its claims for infringement of the Patent were concerned. However, on appeal, the Full Court concluded that the Patent had been infringed and upheld the appeal (Bitech Engineering v Garth Living Pty Ltd (2010) 86 IPR 468). The Full Court also dismissed the Cross-Appeal. As yet, there has been no special leave application to the High Court. The matters were remitted to me by the Full Court for the purpose of dealing with the applicant’s claims for damages or, in the alternative, an account of profits. The Full Court did not grant any injunctive relief to the applicant presumably because, by the time that it delivered its judgment, the Patent had expired. 5Since the four sets of proceedings referred to at [3] above were remitted to me, the applicant has discontinued the whole of the proceeding which it brought against Flameglow Pty Ltd (In Liquidation) (NSD 105 of 2007). Flameglow Pty Ltd (In Liquidation) was placed into liquidation in June 2009. 6On 28 July 2010, which was the first listing before me after the proceedings were remitted to me by the Full Court, I made orders against each of the respondents in the remaining three sets of proceedings. Those orders were in the following terms:1.ORDERS that, without prejudice to the applicant’s right to seek discovery from [the respondent(s)] on the question of the quantum of pecuniary relief (including for the purpose of making an election as between damages and an account of profits), the first respondent file and serve an affidavit by 8 September 2010 providing full details of:(a)all instances of the hire, sale, supply or other disposal by it or on its behalf of any of:(i)the heaters known at the trial before Foster J as the [there was here inserted the relevant model numbers] heaters; and(ii)any other heater incorporating an apparatus within the scope of Claim 1 of Australian Patent No 621713 (the Patent).(b)the revenue received by it or on its behalf in respect of each such instance of hire, sale, supply or other disposal;(c)the costs incurred by it or on its behalf in respect of each such instance of hire, sale, supply or other disposal; and(d)such overheads as it would contend should be taken into account in the calculation of its profits should the applicant elect for an account of profits,and annexing or exhibiting copies of documents in its possession, custody or power recording or evidencing the above matters.7The model numbers inserted into par 1(a)(i) in proceeding NSD 1681 of 2006 and also in proceeding NSD 43 of 2007 were BH1, BH2, BH4, BH5, BH6, BH7, BH9, BH10 and BH12. In the first of those proceedings, an order in identical terms was also made in respect of the MS-5 heater. The model number inserted in the corresponding paragraph in proceeding NSD 2056 of 2007 was HP1. 8Subsequently, the applicant elected to claim damages rather than an account of profits from the respondents in the remaining proceedings.9On 30 September 2010, I made orders in each of the extant proceedings designed to ready those proceedings for the damages hearing in each case. Included in those orders were orders requiring the parties to give discovery. 10Subsequently, disputes arose between the applicant, on the one hand, and the respondents, on the other hand, as to the extent to which the respondents were obliged to provide discovery. It became apparent that, at the heart of the parties’ disagreement about discovery was a difference of opinion as to whether, in addition to the specific models of heaters which were found by the Full Court to have infringed the Patent, the applicant was entitled to pursue the respondents in respect of other models of heaters which had not to date been considered either by me at trial or by the Full Court on appeal. I considered that there was a question of principle which underlay the parties’ dispute concerning discovery. I took the view that the best way of resolving that question of principle was to order in each of the extant proceedings that a separate question be heard separately from and before any further trial of any of those proceedings. Accordingly, on 17 March 2011, I made an order in the following terms in each of proceedings NSD 1681 of 2006, NSD 43 of 2007 and NSD 2056 of 2007:1.Pursuant to O 29 r 2(a) of the Federal Court Rules, the following question be heard separately from and before any further trial in the proceedings, namely:Whether, upon the basis of the pleadings as they currently stand and in light of the judgments of this Court in Bitech Engineering v Garth Living Pty Ltd [2009] FCA 1393, Bitech Engineering v Garth Living Pty Ltd (No 2) [2009] FCA 1460, Bitech Engineering v Garth Living Pty Ltd [2010] FCAFC 75 and Bitech Engineering v Garth Living Pty Ltd (No 2) [2010] FCAFC 93, it is open to the applicant to claim damages for infringement of its patent being Australian Patent No 621713 in respect of the importation, distribution or sale of electric flame heaters bearing model numbers [there was here inserted the relevant model numbers]. 11The model numbers covered by the orders which I made on 17 March 2011 were model numbers BH3, BH8, BH11, BH13 and BH14 which the applicant alleged were imported and/or sold by the respondents in proceedings NSD 1681 of 2006 and NSD 43 of 2007 and model number DBL-2000-DZ which the applicant alleged was sold by the respondent in proceeding NSD 2056 of 2007. On 17 March 2011, I also fixed 4 April 2011 as the date for the hearing of that separate question in each case and also the hearing of all other discovery applications which the applicant wished to make. 12The applicant subsequently abandoned its claims for further and better discovery. The only discovery orders which it now seeks are orders requiring the respondents to give discovery in respect of all other potentially infringing electric flame effect heaters imported, sold or distributed by them during the life of the Patent. 13These Reasons for Judgment determine the separate questions which I referred to at [10]–[11] above and the applicant’s application for appropriate consequential orders for discovery.

Evidence

Evidence Before The Court

In an endeavour to support the proposition that the applicant had an arguable case in respect of the specified additional heaters, Mr Naughton also said: 19As explained above, since Bitech began manufacturing and selling Optiflame Fires over 20 years ago and became the market leader, the only material variation in the flame effect apparatus has been the option of incorporating either moving ribbons or a rotating spindle of reflective material, either of which are features in claim 1 of the Patent. Taking the BH3, BH8, BH11, BH13 and BH14 models as an example, the fact that those models are presented as part of the same range of flame effect heaters makes it very likely, in my experience, that they contain the same type of apparatus for simulating flames. In my experience, the internal apparatus for simulating flames is the same within a given range and the casings and other external features which differentiate particular models are added for cosmetic or aesthetic reasons.20I cannot envisage any reason why a new entrant to the market would want or need to introduce a range of heaters that incorporated different flame effect apparatus. This is particularly so where the products are sourced from the same factory or the same manufacturer. In such circumstances, it does not make commercial sense for different models to incorporate different apparatus, or to produce a flame effect by different means. That would require additional investment in tooling and disruption in the factory for the construction of the additional products, and thereby increase costs.21For these reasons, it is very likely in my opinion that the BH3, BH8, BH11, BH13 and BH14 models and the DBL-2000-DZ model incorporate the same type of apparatus for simulating flames as the other models sold by the Respondents, as described in the Court’s reasons for judgment dated 26 November 2009. The Respondents’ Evidence The respondents asserted that none of them now had possession of any of the specified additional heaters and that they did not have a full set of manuals in respect of those heaters. The evidence revealed, however, that some documentation relating to the specified additional heaters was in the hands of one or more of the respondents. The respondents said that the late inclusion of additional heaters at this stage of the proceedings would prejudice them because they could not fairly meet the applicant’s contentions that the specified additional heaters infringed the Patent in the absence of having access to samples of the heaters and access to operating manuals and other documentation relating to those heaters. For Hotpoint this was very likely going to be impossible. CONSIDERATIONThe Applicant’s Submissions Counsel for the applicant submitted that:(a)The applications for leave to amend should be viewed in their context. The three sets of proceedings with which I am currently dealing involve claims of patent infringement. Where certain types of alleged infringement have not been particularised and so have not been the subject of findings at the liability stage, additional questions of infringement may be dealt with as preliminary questions either prior to or at the hearing of the inquiry as to damages. The applicant was not obliged to track down and examine, prior to the liability hearing, every single model of electric flame effect heater which it alleged infringed the Patent. I did not hold otherwise in Bitech 2011 (see [40]–[43] in Bitech 2011); (b)At all relevant times in 2006, 2007 and 2008, the applicant and its lawyers all believed that the proceedings as constituted by the Applications and Statements of Claim in the form in which those documents existed at the trial before me were sufficient to enable the applicant to claim pecuniary relief in respect of all infringing heaters in due course as part of the damages hearings;(c)At no time did the applicant intend to abandon any claim of infringement in respect of the additional models of electric flame effect heaters which it now seeks to include as infringing items in the proceedings by means of the proposed amendments;(d)There is no suggestion on the part of the respondents that they would have conducted the trial before me or the appeal in the Full Court any differently had the additional claims of infringement been included in the proceedings prior to the original hearing on liability; (e)A refusal of leave to amend will lead to substantial injustice being suffered by the applicant because, amongst other things, if it is compelled to commence fresh proceedings in order to raise its claims of infringement in respect of the additional models of electric flame effect heaters, it may be confronted with defences from the respondents of res judicata or Anshun estoppel. These defences could not be raised in the present proceedings if leave to amend were granted; (f)Although some delay in the final disposition of the proceedings may possibly be occasioned by reason of the amendments, such delay should not weigh heavily in the balance against the grant of leave to amend given the history of the matter to date and the relatively small delay likely to be occasioned by reason of the amendments; and(g)The proposed amendments will not cause any prejudice to any of the respondents which cannot be substantially remedied by an appropriate order for costs.The Respondents’ Submissions

Decision

Reasons for decision

Counsel for Hotpoint adopted the submissions made on behalf of the other respondents. In addition, Counsel contended that, if leave to amend were granted, there would be further substantial delay in the final resolution of the proceedings. Counsel also submitted that the cost and complexity of procedural matters raised by the applicant in support of its vigorous and single-minded pursuit of pecuniary relief had become entirely disproportionate to any potential or likely award of damages. Counsel submitted that the interests of justice and adherence to the overarching purpose of the civil practice and procedure provisions of the Court set out in s 37M of the Federal Court of Australia Act 1976 (Cth) require that leave to amend should be refused. It was also submitted on behalf of Hotpoint that, given the passage of time since the commencement of the proceeding brought by the applicant against it, its relationship with the Chinese manufacturer of the electric flame effect heaters sold by it which the applicant alleged infringed the Patent had become strained and was no longer workable. This additional factor was likely to visit significant prejudice upon Hotpoint in meeting any fresh allegations of infringement because it would not have the cooperation of the manufacturer of the infringing items.Discussion and DecisionAmendment In AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, the High Court clarified and explained the principles which govern the exercise of the Court’s discretion to grant leave to amend a pleading. Consideration of such an application involves the exercise of a discretionary power. The party seeking leave to amend has no entitlement to raise all arguable cases subject to payment of costs by way of compensation (AON at [111] per Gummow, Hayne, Crennan, Kiefel and Bell JJ). All matters relevant to the exercise of the power should be weighed (AON at [111]). The fact of substantial delay and wasted costs and the demands of case management will be important in the Court’s consideration of the amended application (AON at [111]). In the present case, Counsel for the applicant fairly summarised the relevant principles articulated by the High Court in AON as follows:(a) An award of costs to compensate the other party for the inconvenience of the trial dates being vacated as a consequence of the amendment to the pleadings is not a panacea (AON at [5], [100]);(b)The Court should recognise any ill-effects of resultant delay upon the parties to the proceedings and the effects on other litigants who are also seeking a resolution to their proceedings (AON at [101]);(c)The nature and importance of the amendment to the party applying for the amendment cannot be overlooked (AON at [102]);(d)The exercise of the discretion requires an explanation to be given where there is delay in applying for amendment. The party seeking amendment will need to bring the relevant circumstances to the Court’s attention, so that they may be weighed against the effects of any delay (AON at [102]–[103]);(e)The nature of the amendment requires consideration, including whether it introduces new and substantial claims (AON at [104]); (f) An inference drawn by the Court that the raising of new claims not previously agitated is because of a deliberate tactical decision not to do so militates against the grant of leave to amend pleadings (AON at [4]);(g) There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead its case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates (AON at [102]). Issues of case management in the judicial system are not to be disregarded—the resolution of disputes serves the public as a whole, not merely the parties to the proceedings (AON at [5]–[6], [113]); and (h)The timing of the application for amendment is a salient issue, and limits will be placed upon the ability of parties to effect changes to their pleadings, particularly if litigation is advanced (AON at [106], [112]);

Ratio Decidendi

Legal Principle Established

The respondents said that the late inclusion of additional heaters at this stage of the proceedings would prejudice them because they could not fairly meet the applicant’s contentions that the specified additional heaters infringed the Patent in the absence of having access to samples of the heaters and access to operating manuals and other documentation relating to those heaters. For Hotpoint this was very likely going to be impossible. CONSIDERATIONThe Applicant’s Submissions Counsel for the applicant submitted that:(a)The applications for leave to amend should be viewed in their context. The three sets of proceedings with which I am currently dealing involve claims of patent infringement. Where certain types of alleged infringement have not been particularised and so have not been the subject of findings at the liability stage, additional questions of infringement may be dealt with as preliminary questions either prior to or at the hearing of the inquiry as to damages. The applicant was not obliged to track down and examine, prior to the liability hearing, every single model of electric flame effect heater which it alleged infringed the Patent. I did not hold otherwise in Bitech 2011 (see [40]–[43] in Bitech 2011); (b)At all relevant times in 2006, 2007 and 2008, the applicant and its lawyers all believed that the proceedings as constituted by the Applications and Statements of Claim in the form in which those documents existed at the trial before me were sufficient to enable the applicant to claim pecuniary relief in respect of all infringing heaters in due course as part of the damages hearings;(c)At no time did the applicant intend to abandon any claim of infringement in respect of the additional models of electric flame effect heaters which it now seeks to include as infringing items in the proceedings by means of the proposed amendments;(d)There is no suggestion on the part of the respondents that they would have conducted the trial before me or the appeal in the Full Court any differently had the additional claims of infringement been included in the proceedings prior to the original hearing on liability; (e)A refusal of leave to amend will lead to substantial injustice being suffered by the applicant because, amongst other things, if it is compelled to commence fresh proceedings in order to raise its claims of infringement in respect of the additional models of electric flame effect heaters, it may be confronted with defences from the respondents of res judicata or Anshun estoppel. These defences could not be raised in the present proceedings if leave to amend were granted; (f)Although some delay in the final disposition of the proceedings may possibly be occasioned by reason of the amendments, such delay should not weigh heavily in the balance against the grant of leave to amend given the history of the matter to date and the relatively small delay likely to be occasioned by reason of the amendments; and(g)The proposed amendments will not cause any prejudice to any of the respondents which cannot be substantially remedied by an appropriate order for costs.The Respondents’ Submissions