British-american Tobacco Company Limited v Philip Morris Limited

[2000] APO 32

OFFICIAL NOTICE

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Application  :          Nos. 670732 in the name of BRITISH-AMERICAN TOBACCO COMPANY LIMITED

Title:          Improvements relating to smoking articles

Action:          Application by British-American Tobacco Company Limited for an extension of time under Regulation 5.10(2) to serve evidence-in-answer and objection thereto by Philip Morris Limited

Decision:          Issued  .

AbstractThe applicant cited the illness of an expert witness as a major reason for needing the extension of time.  It was also asserted that a refusal of the extension would be a gross denial of natural justice, as the opponent had had over thirty-one months in which to serve their evidence in support.

The mere fact that an opponent needed several extensions of time to finalise their evidence does not necessarily imply that the applicant should automatically receive the same consideration or benefit.  Natural justice varies with the whole circumstances, and is primarily about fair, not identical, treatment.  This argument was accorded very little weight in reaching this decision.

The extension of time to serve evidence in answer was granted.  The applicant had made out a proper case to justify the need for an extension.  The seriousness of the applicant in defending the opposition, and the public interest also supported the grant of the extension of time. In particular, the undertaking by BAT to complete service of their evidence by 3 May 2000 weighed heavily in favour of the grant.

PATENTS ACT 1990

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Re:Patent Application No. 670732 by British-American Tobacco Company Limited, an application by British-American Tobacco Company Limited for an extension of time under Regulation 5.10(2) to serve evidence in answer and objection thereto by Philip Morris Limited.

BACKGROUND

Patent application 670732 in the name of British-American Tobacco Company Limited (hereinafter referred to as BAT) was filed on 6 April 1995 as a divisional of 573088.  The application was advertised accepted on 25 July 1996.  A notice of opposition to the grant of a patent was filed by Philip Morris Limited (hereinafter referred to as PML) on 25 October 1996.  A statement of ground and particulars was served on 28 January 1997.

Evidence in support was due to be completed by 28 April 1997.  PML filed eleven successive applications for an extension of time, and these were allowed without objection.  Service of evidence in support was completed on 3 May 1999.

Evidence in answer was then due to be completed by 3 August 1999.  On 2 August 1999 BAT filed an application for an extension of time of three months from 3 August 1999 to 3 November 1999 to serve evidence in answer.  The extension of time was granted without objection.  On 2 November 1999 BAT sought a further extension of three months but this was opposed by PML and the matter was set down for a hearing on 8 December 1999.  The delegate issued a decision on 17 December 1999 that allowed an extension of three months to 3 February 2000.

On 2 February 2000 the patentee filed a further request for an extension of time.  PML objected to this extension on 18 February 2000.  The matter came to a hearing in Canberra on 28 March 2000.  Mr Peter Heathcote, patent attorney of Baldwin Shelston Waters, Sydney, and Mr Phillip Kerr, solicitor of Allen Allen & Hemsley, represented BAT.  PML was represented by Mr Robert C Kelson, patent attorney of Callinan Lawrie, Kew.  Both parties appeared by telephone.

THE APPLICATION FOR EXTENSION OF TIME

The application provides the following reasons for the need for further time in which to serve evidence in answer:

“Collection and preparation of evidence-in-answer is continuing.  Our legal representatives in Australia and United States responsible for the appeal on the parent application No. 573088 of the present application are working with our expert witnesses in reviewing and preparing a response to the Philip Morris Limited evidence.  Further time is required to complete this task.

Our representatives have been liaising with three experts as follows:

1. Robert Cundiff

   Our representatives have commenced preparation of an Affidavit of Bob Cundiff and have forwarded a first draft to Bob Cundiff for review.  Our representatives are still awaiting Mr. Cundiff’s comments.  Mr. Cundiff is based in the United States.

1. Lance Reynolds

   Our representatives have commenced preparation of an Affidavit of Lance Reynolds but have not, as yet, prepared a first draft.  Mr. Reynolds is based in the United States.

1. Paul Howard

   Our representatives met with Paul Howard on 22 December, 1999 and discussed at length his involvement in the development of the reduced circumference cigarette, CAPRI, in Australia and his knowledge of the cigarette industry in general.  Mr. Howard was very unwell at the time and the information our representatives obtained from that meeting was not overly useful.  It was agreed that our representatives would put together a kit containing various questions and supporting documentation for him to respond to in writing.  Our representatives forwarded that kit to Mr. Howard on 24 January, 2000.  The kit contains a letter explaining the background of the Australian proceedings, numerous questions in relation to the matter in general and, in particular, Mr. Howard's response to the Henriksen Affidavit, and the state of common general knowledge in Australia as at the Priority Date.  Our representatives also included the original BAT patent application and specification, the "Table A" cigarettes and the Affidavit of Allan Maxel Henriksen dated 1 June, 1999.  Our representatives have not yet heard back from Mr. Howard who is based in the United Kingdom.

Mr. Howard has been absent from his office, on sick and/or annual leave, for a substantial period throughout the last couple of months and this has presumably contributed to a delay in preparation of evidence-in-support.”

SUBMISSIONS

Written submissions were provided by both parties prior to the hearing.

I will refer to relevant submissions where appropriate in the body of my decision.

DECISION

The law on extensions of time under Regulation 5.10

The time for serving evidence in answer to an opposition is three months from the date on which evidence in support is served.  This time may be extended, and regulation 5.10(2) provides that:

(2)       The Commissioner may:
(a)       on the application of a party in the approved form; and
(b)       on such reasonable terms (if any) as the Commissioner specifies;

extend the time within which the party may take a step prescribed in this chapter, not being a step that is taken under regulation 5.3 or paragraph 5.4(1)(a).

Regulation 5.10(5) provides:

(5)       The Commissioner must not give a direction under subregulation (1) or grant an application under subregulation (2) ... unless the Commissioner:
           ...
(c)       ...

(i)        gives the parties a reasonable opportunity to make representations   concerning the application or proposed action; and

(ii)is reasonably satisfied that a direction, an extension of time or the serving of further evidence is appropriate in all the circumstances.

A thorough consideration and summary of the law, as it stands, on the extension of time provisions was given by Burchett J in Ferocem Pty Ltd v Commissioner of Patents (1994) 28 IPR 243 and more recently by Sackville J in A Goninan & Co Ltd v Commissioner of Patents (1997) 38 IPR 213.  It is clear from these decisions that regulation 5.10 confers a broad discretion, which cannot be reduced to an imperative compliance with particular requirements.  On the contrary it is necessary to give proper, genuine and realistic consideration to all relevant aspects of the case.  Relevant aspects include:

(a)The provision of an explanation or justification for the delay in completing the evidence in answer

The reasons why the evidence was not served in time are a relevant consideration, but a satisfactory explanation is not a mandatory requirement.

(b)       The public interest

The public interest in determining a serious opposition on its merits is a relevant consideration.  There is also the efficient and orderly administration of matters before the Patent Office to consider.

(c)       The interests of the parties involved in the opposition

Disadvantages to either the applicant or opponent are relevant considerations.

If I am to be reasonably satisfied that an extension of time is appropriate in all the circumstances, then I must take into account all matters relating to the above aspects when deciding the issue.

Application of the law to the facts

(a)       The provision of an explanation or justification for the delay;

The major reason provided by the applicant for the extension has been the recent illness of a third expert witness with an understanding of the common general knowledge in Australia.  The statutory declaration of Alison Shana Laurie, solicitor of Allen, Allen & Hemsley, notes that:

“AAH has been engaged in the preparation of the Applicant's evidence in answer to the Respondent's evidence in the Federal Court proceedings.  One of the potential declarants, Paul Howard, was very unwell and was unable to provide any useful evidence or provide a response to the information sent to him.  For this reason BAT, on 25 February 2000, applied for and was granted an extension of time to 24 March 2000 to prepare and file its evidence in the Federal Court proceedings.”

Mr Heathcote emphasised how Mr Howard’s illness had inhibited the preparation and serving of evidence in answer.  Mr Kerr provided further elaboration, stating that “…indeed, in the Federal Court proceedings his evidence is not relied on, and won’t be relied on in the present case because he is too ill to assist.”  From comments made at the hearing, it would appear that BAT have sought to obtain evidence of the common general knowledge from other experts when it became evident that Mr Howard would be unable to assist.

My attention was then directed to the case of Dominion Mining Ltd v M.I.M. Holdings Ltd and Highlands Gold Properties Pty Ltd [1997] APO 27 (11 June 1997), where problems with access to declarants was one of the reasons justifying the grant of an extension. It was stated at page 3 that:

“I accept the withdrawal of declarants, at this stage of the proceedings, would cause significant disruption to the applicant’s preparation of evidence in answer.  This factor could entitle the applicant to an extension of time.”

I agree with the submission by BAT that the illness of a potential declarant is an analogous situation.  Clearly, the inability of the applicant to obtain evidence from an ill witness is as deleterious to the progress of their case as the sudden withdrawal of a declarant.  Consequently, I believe that the applicant should not be penalised over an unpredictable and unfortunate circumstance such as this.  On this ground, I feel an extension is justified.

At the hearing, BAT provided a brief explanation of progress to date.  I was referred to the application for extension, which details the declarants and the efforts made to complete their evidence.  The Laurie declaration of 27 March 2000 states that:

“On 24 March 2000 AAH delivered copies of Affidavits by John Luke (sworn), Robert Cundiff, Lance Reynolds and Graeme McGregor (all unsworn in final form) in the Federal Court proceedings.  BAT proposes to use substantially the same evidence in the opposition proceedings with the Federal Court affidavits being modified to allow for the differences between the proceedings.

In view of this, I am confident that the evidence in the opposition proceedings will be completed by the presently requested extension date of 3 May 2000.”

It is apparent from this declaration that significant progress has been made by BAT in the preparation of evidence in respect of the Federal Court appeal, and that this provides one possible explanation for the delay in filing evidence in answer in the present case.

However, whilst the need to prepare evidence for invalidity proceedings before the Federal Court may be a factor that the Commissioner ought take into account, those proceedings are independent and do not automatically justify delays in separate actions brought before the Commissioner.  This situation has previously been addressed in Abb Engineering Construction Pty Ltd v A. Goninan & Co Limited [1998] APO 46 (21 August 1998) and is also covered in paragraph 8.6.3.2 of Volume 3 of the Patent Office Manual of Practice and Procedure.  To some extent, I consider that part of the delay in serving evidence in answer has resulted from BAT’s decision to focus on the Federal Court proceedings rather than the actual progress of the evidentiary stages in the present matter.

Though no evidence has yet been filed, Mr Heathcote assured me that service of evidence in answer would be completed within the three month extension sought.  BAT stated that they will limit their evidence in answer to declarations from Messrs Luke, Cundiff, Reynolds and McGregor, which will require only minor amendments to the affidavits already filed by the same in the Federal Court.  I am satisfied that no further extensions of time will be required.

Mr Kelson argued that “The Grounds do not demonstrate diligence in preparation and service of copy Evidence-in-Answer.”  In particular, no reasons have been provided to explain why both Mr Cundiff and Mr Reynolds, who have had access to the evidence in support since June 1999, have not yet filed their evidence in answer.  I have some sympathy for this view, and believe that the application for extension provides few details explaining why no evidence has been served to date.  Nevertheless, it is conceivable that the illness of Mr Howard has inhibited the preparation of evidence in answer as a whole.  It is logical to expect that the evidence required from each declarant would depend to a large extent on the evidence already obtained from others.  Overall, I believe that the illness of Mr Howard has meant that BAT has encountered real difficulties that necessitate the need for an extension of time. 

BAT submitted that the opponent had had over 28 months from the date of filing their notice of opposition in which to prepare and serve the whole of its evidence in support.  This required 11 extensions of time, none of which were contested by BAT.  The extension of time to 3 May 2000 would if granted provide the applicant with a total of twelve months in which to serve its evidence in answer.  Furthermore, it was asserted by the applicant that:

“According to the principles of natural justice, each party in adversarial proceedings should be given a fair opportunity to state its case.  Neither party should be given an undue advantage by the arbiter of the proceedings.  If the Opponent is allowed a total of 31 months in which to prepare and serve its evidence, and B-A-T is shut out after only 9 months, this would be a gross denial of justice.”

A similar argument was considered by the delegate in Iowa State University Research Foundation, Inc et al v Boehringer Ingelheim GmbH [1998] APO 61 (30 October 1998), to which I was referred to by Mr Heathcote. This case also concerned an application for an extension of time in which to serve evidence in answer. As I understand it, part of the applicants justification for an extension of time was that if it was to be granted, the period for serving evidence in answer would only be 9 months as opposed to the 8 months which the opponent took to serve their evidence in support.

In his decision, the delegate stated that:

“I consider the fact that the opponent has successfully obtained several extensions of time in which to serve evidence gives a context for assessing the effect of granting a further extension of time to the applicant on the opposition process but does not otherwise provide an argument for granting an extension.”

I see no reason to depart from this approach.  The mere fact that an opponent needed several extensions of time to finalise their evidence does not necessarily imply that the applicant should automatically receive the same consideration or benefit.  In my opinion, natural justice varies with the whole circumstances, and is primarily about fair, not identical, treatment.  Therefore, I have accorded very little weight to this argument in reaching my decision.

In summary, the major reason provided by the applicant for the extension has been the recent illness of a third expert witness with an understanding of the common general knowledge in Australia.  The inability of Mr Howard to assist with evidence, and the need to find an expert witness to replace him, are factors which I believe justify the grant of the extension. 

(b)       The public interest;

The question of the public interest in the granting of extensions of time by the Commissioner has been considered in a number of Federal Court decisions.  From these decisions it is apparent that the public interest is ascertained by weighing often conflicting concerns.  For example the public has an interest in both the need for expeditious disposal of matters in the Patent Office and the concern expressed by Kitto J in Kaiser Aluminium & Chemical V. The Reynolds Metal Company (1969) 120 CLR 136 at 143, viz a serious opposition should be dealt with on its merits rather than be shut out as a consequence of a failure of procedure."  It is also the case that the public has an interest in encouraging innovation and so it follows that the applicant should have the opportunity to defend its patent application on its merits and not have its defence shut out as a consequence of a failure in procedure.

In weighing up these factors, I am mindful that granting this third extension will cause a further delay of three months before the substantive hearing.  I am also mindful that BAT have undertaken to complete filing of their evidence within the extended period currently sought, and that there is a public interest in the applicant not being entirely shut out from presenting any of its evidence. 

It follows from A Goninan & Co Ltd V Commissioner Of Patents (1997) 38 IPR 213 that the nature of the evidence the applicant seeks to adduce and the significance of it for the opposition proceedings are factors that should be given proper consideration. Mr Heathcote submitted that:

“Included in the evidence sought to be adduced by B-A-T is expert evidence regarding the state of the common general knowledge in Australia.  This is clearly relevant to a balanced consideration of inventiveness and is therefore potentially critical to a hearing of the opposition on its merits.”

Though no evidence in answer has yet been filed, a brief perusal of the evidence in support makes it clear that a large part of the opponent’s case relates to grounds where establishing the common general knowledge could be very important.  Establishing the common general knowledge in
opposition proceedings was discussed in Nalco Chemical Company v W.R. Grace and Co. –Conn. [1998] APO 65 (23 November 1998). I find the delegate’s comments at page 10 particularly apposite:

“These statement are made in the context of arguments about inventive step which depend on evidence of what is the common general knowledge of an ordinary worker in the art in Australia.  Statements about common general knowledge made by one individual are very liable to a criticism that they are unrepresentative.  In this context statements from other independent declarants, ie statements which corroborate those of another witness, as argued by the applicant, are likely to have an important bearing on the outcome of the case.  I do not believe it is necessary for me to go beyond this and to consider directly the applicant's other evidence.  Stephenson's statements go to the important issue of inventive step and are likely to have an important bearing on the outcome of the case whether they stand alone or whether they provide corroboration of the evidence on common general knowledge of another witness.”

I believe that a similar argument applies in this instance, and that evidence as to the common general knowledge will have a significant impact on this case.  I also consider that the difficulty in finding expert witnesses who can assist in establishing the common general knowledge partly explains the delay to date.

Seriousness of the opposition:

Mr Heathcote asserted that the opposition is serious, and made mention of the current proceedings in the Federal Court of Australia.  He also directed my attention to the decision in Exxon v Lubrizol (1998) 41 IPR 126 in which the delegate stated that:

“… when dealing with the requirement that a serious opposition be dealt with on its merits, the correct approach in the present circumstances is to consider whether Exxon is mounting a serious defence to the opposition.”

I agree with this approach, and believe that I need to consider whether BAT is mounting a serious defence to the opposition.  On the whole, I am satisfied that the applicant is serious in its defence of the opposition.  Even though no evidence in answer has yet been served, and the explanation for the delay is not entirely satisfactory, the pursuit of the expert witnesses whose declarations are likely to be accorded some weight in the substantive opposition attest to a serious undertaking by BAT to defend its patent application.

Overall, I think the public interest in this instance favours the applicant being granted an extension of time to complete evidence in answer.  In particular, the undertaking by BAT to serve all of their evidence by 3 May 2000 weighs heavily in favour of the extension.

(c)       The interests of the parties involved in the opposition;

The interests of the opponent, PML, are clearly in not having the opposition proceedings unduly delay the hearing of the substantive opposition.  I am not aware of any other special circumstances that would specifically disadvantage the opponent if the present extension were granted.

Clearly the interests of the applicant, BAT, are in obtaining the extension in order that it may have the opportunity to serve evidence in answer in the opposition.  The facts of the case clearly indicate that the applicant's case would be seriously prejudiced if I were to refuse the extension and preclude it from adducing evidence to address the matters raised in the evidence in support.

On balance, I think the interests of the applicant in having the opportunity to present relevant evidence that would allow the opposition to be decided on its merits outweigh the interests of the opponent in these circumstances.  Though I am mindful of the opponent’s submission that I should give due consideration to the undue delay of the opposition proceedings, this is just one consideration and is not in my opinion the overriding one in the present case.

CONCLUSION

The applicant has made out a proper case justifying the extension.  The illness of Mr Howard, and the need to obtain further evidence when it became evident that he would be unable to assist mitigate towards grant of the extension.  I also consider that the evidence to be served is likely to have an important influence on the outcome of the case.  I believe that the public interest is best served by granting the extension, and note that the undertaking by BAT to complete service of their evidence by 3 May 2000 weighs heavily in their favour.   Consequently, I feel that the extension is appropriate in all of the circumstances.

Accordingly, I grant the applicant BAT an extension of time from 3 February 2000 to 3 May 2000 in which to serve its evidence in answer.

COSTS

The opponent has submitted that if I decline the extension costs should be awarded against the applicant.  The power of the Commissioner to award costs is based on section 210 and regulation 22.8.  The power to award costs is discretionary, so I must take into account all relevant considerations.

In the present case BAT has succeeded in obtaining an extension of time under regulation 5.10(2).  However, I have found that to a certain extent, the success of their application for an extension was based on material presented at the hearing.  In this situation, I consider that it is appropriate to make no award of costs.

R.W.J. FINZI

Delegate of the Commissioner of Patents

Patent attorneys for the applicant:  Callinan Lawrie, Kew 

Patent attorneys for the opponent:  Baldwin Shelston Waters, Sydney