Damorgold Pty Ltd v Blindware Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Damorgold Pty Ltd v Blindware Pty Ltd (No 2) [2018] FCA 364

File number: VID 403 of 2015
Judge: MIDDLETON J
Date of judgment: 19 March 2018
Catchwords:

COSTS – costs following the event – responding party successful on infringement claim and other party successful on cross-claim upholding validity of patent – incidence of costs – whether to consider claim and cross-claim globally – whether the relevant event is the successful defence of infringement claim – apportioning costs – offers of compromise – conduct prior to and in litigation

COSTS – Patents – Certificate under s 19(2) of the Patents Act 1990 (Cth) – operation of s 19(3) direction – different ground of attack on invalidity of Patent than previous proceeding – whether Court should exercise discretion under s 19(3)

PATENTS – s 19 of the Patents Act 1990 (Cth) – costs – direction under s 19(3) – exercise of discretion

PRACTICE AND PROCEDURE – overarching purpose – case management – genuine steps to resolve disputes – court’s duty to determine matter – successful party not to be punished or deprived of costs in pursuing a court determination

Legislation:

Civil Dispute Resolution Act 2011 (Cth)

Federal Court of Australia Act 1976 (Cth)

Federal Court Rules2011 (Cth)

Patents Act 1990 (Cth)

Cases cited:

Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) [2014] FCAFC 126

AstraZeneca AB v Alphapharm Pty Ltd [2014] FCA 419

Australian Skills Quality Authority v Western Institute of Technology Pty Ltd [2017] FCAFC 183

Cementech Pty Ltd v Boral Masonry Ltd [2014] FCA 794

Damorgold Pty Ltd v Blindware Pty Ltd [2017] FCA 1552

Damorgold Pty Ltd v JAI Products Pty Ltd [2014] FCA 150

Damorgold Pty Ltd v JAI Products Pty Ltd [2015] FCAFC 31

DSI Australia (Holdings) Pty Ltd v Garford Pty Ltd [2013] FCA 268

H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118

Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7

JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (No 2) [2007] FCAFC 6

Kismet International Pty Ltd v Guano Fertilizer Sales Pty Ltd (No 2) [2013] FCA 705

Novozymes A/S v Danisco A/S (No 2) [2013] FCAFC 55

Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128

The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174

Ruddock v Vadarlis (No 2) (2001) 115 FCR 229

Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58

Date of hearing: Determined on the papers
Registry: Victoria
Division: General Division
National Practice Area: Intellectual Property
Sub-area: Patents and associated Statutes
Category: Catchwords
Number of paragraphs: 86
Counsel for the Applicants and Cross-Respondents: Mr B N Caine QC with Dr W A Rothnie
Solicitor for the Applicants and Cross-Respondents: Phillips Ormonde Fitzpatrick Lawyers
Counsel for the Respondent and Cross-Claimant: Mr T D Cordiner QC
Solicitor for the Respondent and Cross-Claimant: Herbert Smith Freehills

REASONS FOR JUDGMENT

VID 403 of 2015
BETWEEN:
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Details
Case
[2018] FCA 364
Decision Date

CaseChat Overview and Summary

In the case of Damorgold Pty Ltd v Blindware Pty Ltd (No 2), the dispute involved a patent infringement claim brought by Damorgold against Blindware, with Blindware mounting a cross-claim for revocation of the patent and ancillary claims for groundless threats and misleading and deceptive conduct. The Federal Court of Australia was tasked with determining the incidence of costs following the successful defence of the infringement claim and the upholding of the patent's validity in the cross-claim. The central legal issues revolved around whether the court should consider the claim and cross-claim globally, the appropriate event for cost allocation, the apportionment of costs, and the effect of offers of compromise and conduct prior to and during litigation.

The court deliberated on the principles of patent law and costs, particularly under section 19 of the Patents Act 1990 (Cth). The Federal Court held that the appropriate approach was to consider the claim and cross-claim globally, reflecting the overall success and failure of the parties. The court reasoned that while Blindware was successful on its cross-claim, it was not entirely successful overall due to its lack of success on ancillary claims. The court also noted the importance of Blindware's early stance on non-infringement and its attempts to resolve the dispute amicably, including offers of compromise and efforts to narrow the issues. The court exercised its discretion under section 19(3) of the Patents Act, directing that costs be taxed on a party/party basis, effectively nullifying the impact of section 19(2) in the context of the cross-claim.

The court concluded that Blindware, having been successful on the key issue of patent validity, was entitled to its costs, subject to a deduction to reflect its overall lack of success. The court emphasised the overarching purpose of case management and the importance of making judicial determinations where necessary, while also considering the conduct of the parties and the public interest in the validity of patents. The final orders included a costs direction that recognised Blindware's success in establishing the validity of the patent but also accounted for the global nature of the litigation and the conduct of both parties.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

In summary, Blindware contended that such a costs order was appropriate given the following matters:(a)On a proper application of the legal principles that emerge from the case law, section 19 of the Patents Act 1990 (Cth) (the Patents Act) does not warrant a departure from the appropriate costs position: i.e., that Blindware is entitled to a costs award in its favour as the successful litigant.(b)In accordance with authority and the Federal Court practice note on costs, the appropriate course is to apply a deduction to the costs that Blindware is entitled to recover to reflect its overall lack of success in the outcome of its cross-claim, taking into account other matters such as the conduct of the parties, as follows. This is not a case in which it is appropriate to make a separate order for costs on the cross-claim.(c)Blindware has maintained the same position on non-infringement since as early as 2010. Damorgold did not engage with the substance of Blindware’s non-infringement argument before commencing proceedings, and instead pursued proceedings in which the Court ultimately vindicated Blindware’s position.(d)Blindware was drawn into the proceedings (which it tried to avoid by clearly setting out its position on non-infringement prior to commencement of the action) and only mounted its validity attack as a defensive position and substantially in light of the broad claim construction Damorgold adopted in an attempt to maintain its claim for infringement. Blindware’s cross-claim for groundless threats and misleading and deceptive conduct were ancillary to its non-infringement argument.(e)Blindware served two offers of compromise early in the proceeding (well before any substantial costs could have been incurred by Damorgold on the cross-claim), neither of which were accepted by Damorgold. Both the First Offer … and the Second Offer … were more favourable to Damorgold than the final result.(f)Blindware made various attempts to narrow the issues in dispute and reduce legal costs throughout the proceeding, including by way of a Notice to Admit dated 27 May 20161 … which were rejected by Damorgold.(g)Blindware was in fact successful in establishing a number of key factual issues to which much of the cross-claim evidence was directed (and in respect of which it attempted to narrow the issues in dispute with Damorgold).Background facts Blindware has filed an affidavit of Ms Rebekah Frances Gay dated 1 February 2018 which it relied upon in support of its submissions. Ms Gay was a partner of Herbert Smith Freehills with carriage and conduct of litigation on behalf of Blindware. That affidavit provided an overview of the litigation as a whole, including the correspondence between the parties leading up to the commencement of the proceeding by Damorgold, and steps taken by Blindware to resolve and narrow the dispute at different stages throughout the litigation, including by way of a notice to admit and the two offers of compromise. I do not need to detail all the correspondence but I will refer to one particular letter. A 2 February 2015 letter in response from Blindware’s then patent attorneys explained to Damorgold (underlining in original, bold emphasis added):Independent claims 1 and 3, from which all other claims of the Patent depend, recite essential features of the invention in the following clause:“... biasing means connected to said cylinder and being responsive to rotation of said cylinder in a blind extending direction to store energy, and being responsive to rotation of said cylinder in a blind retracting direction to release said stored energy and thereby apply a turning force to said cylinder tending to rotate the cylinder in said blind retracting direction, ... (emphasis added)In our view, the spring assist mechanism of our client’s product clearly described by Mr Marsh’s words, as follows;“The RollEase mechanism does not fix the non-clutch-side of the spring (ie biasing means) to the inside of the tube (ie cylinder) and does not rely on the rotation of the tube and adapter to wind the spring. Instead, the RollEase mechanism floats freely inside the tube and relies on the rotation of the clutch pulley to wind the spring.”obviates the requirement of biasing means connected to the cylinder and being responsive to rotation of the cylinder to store or release energy, ie wind/unwind the spring. Our client’s spring assisted roller blind may include a cylinder for carrying a blind but the cylinder has no interworking functional relationship with the spring biasing means of the mechanism such that the spring is responsive to rotation of the cylinder. In fact, the cylinder of our client’s product is not capable of engaging the spring biasing means of the roller blind to impart, store or release energy by means of the cylinder rotating.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In light of the above approach, Order 5 is in terms of the costs being taxed on a party/party basis, which is to be read as a direction under s 19(3), effectively directing in the circumstances of the cross-claim that s 19(2) has no effect at all. CONCLUSION For the above reasons, I made the Orders 4 and 5 pronounced on 20 February 2018.

Ratio Decidendi

Legal Principle Established

As is apparent, Blindware relied upon a global approach to costs, and referred to a number of patent disputes in which both parties were not wholly successful in their respective infringement claim and revocation cross-claim, including Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) [2014] FCAFC 126, Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58, DSI Australia (Holdings) Pty Ltd v Garford Pty Ltd [2013] FCA 268, H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 and JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (No 2) [2007] FCAFC 6. I do not need to consider each of the cases: they all turn on their own facts and circumstances, and do not ‘confine’ or educate the manner of the exercise of discretion in this proceeding. There is no doubt that a global approach could be taken – the question is whether that approach is appropriate in the circumstances of this proceeding.Consideration Before proceeding further I make these observations. Parties are encouraged to make offers to settle all disputes to the extent appropriate and practicable. However, sometimes a dispute requires a judicial determination and the constitutional function of the Court is to make such a determination. A successful party should not be punished or deprived of costs if that party proceeds appropriately in seeking a judicial determination. Further, in the present case there was a public interest in establishing the validity or otherwise of the Patent, although by the nature of litigation in the Federal Court, any determination on validity would be binding only inter partes. Of course, if a patent is revoked, then the revocation would be effective beyond the parties to any specific proceeding. Having said this, there is no doubt that all the matters raised by Blindware are relevant to the making of a cost order, either individually or in aggregate. Failure to comply with pre-litigation “genuine step” obligations and the “overarching purpose” duty, and putting unmeritorious arguments to the Court, are all important matters to take into account in the overall assessment of costs orders. However, each matter must be considered in the context of the dispute between the parties, the nature of the litigation, and the overriding duty of the Court to arrive at a judicial determination where a matter is before the Court. The Court expects, and the parties are under a responsibility to follow, what are now universally regarded as case management imperatives; for instance, to take to trial only the critical point or points in issue and make appropriate admissions. However, the parties are entitled to consider their own legal, personal and commercial interests, provided they do adhere to the principles now enshrined in the CDRA and the Act. In this proceeding, the parties were represented by experienced, competent and senior legal practitioners. There is a public interest in ensuring that invalid patents are removed from the Register, which is a consideration relevant to the exercise of the discretion to award costs where the invalidity of a patent is put in issue. Important issues were at stake for the parties, including not only the validity of the Patent and but also the position of the parties in the market place.