Danby Pty Ltd v Rib Loc Group Limited

[1987] APO 21

In the Matter of the Patents Act 1952

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In the Matter of Patent Application No. 558128 in the Name of DANBY PTY. LTD.

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In the Matter of an Application by RIB LOC GROUP LIMITED for an Extension of Time under Section 160 to Lodge Notice of Opposition.

DECISION OF A SUPERVISING EXAMINER OF PATENTS:
Background
         Application No. 42585/85 was lodged on 16 May, 1985 by DANBY PTY. LTD. for a patent for an invention entitled "Method of Lining a Sewer Pipe".  The specification became Open to Public Inspection on 21 November, 1985, and two notices under sub‑section 57(1) were lodged on 9 May, 1986 and 1 September, 1986 by Johannes Carl Schmidt, a consultant to the firm Collison & Co.  A request for examination was lodged on 16 October, 1986, accompanied by a regulation 19(2) request for expedition of examination.  The application was advertised as accepted on 22 January, 1987 and was given the serial No. 558128.  The three‑month period allowed by ss.59(1) for lodging notice of opposition expired on 22 April, 1987, and on 1 July, 1987 Mr. Schmidt applied in his own name under paragraph (a) of ss.160(2) for an extension of time of three months to 22 July, 1987 in which to lodge the notice of opposition.  On 8 July, 1987 a notice was received from Grant Adams & Co., representing DANBY PTY. LTD., objecting to the granting of the

extension of time.  On 10 July, 1987 a substitute application for extension of time in the name of RIB LOC GROUP LIMITED was lodged by Collison & Co. and Grant Adams & Co. confirmed Danby's objection thereto by a notice lodged on 16 July, 1987.  A notice of opposition was lodged by Rib Loc also on 16 July, 1987.
         Evidence in support of the application for extension of time was lodged with the first application, the substitute application and on 24 July, 1987.  The matter came to a hearing in Canberra on 27 July, 1987 at which evidence in answer was presented by Grant Adams & Co.  Because there was a substantial amount of documentary evidence presented by each of the parties, and because it was presented only either at the hearing or three days beforehand, each party was given fourteen days from the date of the hearing in which to lodge submissions about the other party's late lodged documentation.  Mr. P. Kildea, patent attorney, appeared for Collison & Co. representing Rib Loc, and Mr. B. O'Donnell of Counsel appeared for Grant Adams & Co. representing Danby.  On 7 August, 1987 evidence in reply was lodged by Mr. Kildea on behalf of Rib Loc.
Evidence
         Evidence lodged in support of the application for extension of time comprises the following:

1.Two declarations dated 1 July, 1987 and 10 July, 1987 by Mr. Schmidt in which he indicated that his client had issued instructions to lodge a notice of opposition and that Mr. Schmidt "believed that a watch was being kept by Mr. Alun Thomas who is normally in charge of watching services at Collison & Co.".

2.A declaration by Alun Thomas, patent attorney with Collison & Co., dated 23 July, 1987 in which he states, in referring to Mr. Schmidt's instruction:

"I cannot now recall receiving the instruction referred to ... but say that if such an instruction was given either I did not hear it or I did not understand it and a watching search instruction was not prepared nor was the watching search carried out."

3.A declaration by Stanley William Otto Menzel from Rib Loc, dated 23 July, 1987, in which he referred to an instruction to Mr. Schmidt "to take whatever action may be necessary to oppose the grant of the Danby application."

4.A third declaration by Mr. Schmidt, dated 23 July, 1987.  An exhibit attached thereto is a copy of a report dated 16 April, 1986 prepared by Mr. Schmidt "to summarize the rights of the companies associated with Mr. Menzel".  It is stated therein:

"we have been instructed to take whatever steps are necessary to contest the Patents and any Claims made by Danby to be the author of this system, and if necessary to initiate action against Danby Pty. Ltd. to prevent them using any of a number of patents, both on the machine and strip, which have been granted to Mr. Menzel and his associated companies."

5.A second declaration by Mr. Menzel, dated 5 August, 1987.  Exhibit SWOM1 attached thereto is a copy of a letter from a patent attorney, not involved in the current proceedings, expressing an opinion that the Danby application would fail if challenged in a court.  Exhibits SWOM3 and SWOM4 are copies of sets of letters between Collison & Co. and associates overseas indicating that Rib Loc were considering, in late 1986 and early 1987, filing material with the US and European Patent Offices relating to Danby's applications in those Offices, both before and after examination in those Offices.

Evidence lodged by the applicant for the patent objecting to the extension of time comprises a declaration by Sydney Molyneux, director of Danby, dated 27 July, 1987.  He suggested that Rib Loc's failure to lodge notice of opposition "was a result of lack of interest on the part of Rib Loc and Mr. Menzel in pursuing or a conscious decision on their part not to pursue the opposition ...".
He went on to explain how Danby used machines leased from Rib Loc and pipe lining strip the supply of which was controlled by Rib Loc via a third party.  Also he presented some evidence to show that Rib Loc had invented and was marketing its own system of pipe relining; and in paragraph 10 of his declaration he states:

"I verily believe that Rib Loc determined not to pursue its opposition to the Application for the following reasons:

(a)It invented its own system in respect of which it filed a patent application;

(b)It believed that it could force Danby out of the market place by cutting off the supply of the Rib Loc machines which were used by Danby for relining purposes;

(c)It believed that it could cut off the supply to Danby of the strip necessary in the relining process."

Following on, he suggested that Rib Loc's belated objection to the application was because of their discovery that Danby had invented and applied for patents for their own form of machine and strip.
         In paragraph 16 of his declaration he outlines the disadvantages suffered by Danby due to, inter alia, the late lodging of the application for the extension of time by Rib Loc:

"These negotiations are now considerably progressed.  For example, one of the parties with whom Danby is negotiating in Australia is a large public company which wishes to purchase a 60% interest in Danby for a substantial sum of money ... Recent negotiations with this company have proceeded on the basis that the sealing of the Australian patent is imminent which was indicated to Grant Adams by the Patents Office when he telephoned that office on 29th June, 1987.  In the event that the Australian patent is delayed, it will have a marked effect on these negotiations and I verily believe that they will come to a standstill."

Also of some relevance is exhibit SM5 accompanying Mr. Molyneux's declaration, being a copy of a letter from Collison & Co. signed by Mr. Schmidt to Danby, drawing the latter's attention to Rib Loc's industrial property; it is accompanied by a schedule of patent, trade mark and registered design numbers.  The letter is dated 10 April, 1987 and the last paragraph thereof states:

"At the same time we advise that should there by any infringement of the industrial property listed, or, any action which damages the reputation of our clients in relation to their industrial property, including the extensive "goodwill", our clients have indicated that they will not hesitate to take such action as is appropriate."

Extension of Time
In deciding whether there is a proper case for the grant of an extension of time under para 160(2)(a) there are two matters which must be considered. The first of these is whether the applicant for extension of time has established that failure to meet the time limit is due to error or omission on the part of the person concerned or of his agent or attorney. Once this test has been satisfied the Commissioner does have jurisdiction to grant an extension of time. The second matter which must be considered is that the Commissioner has a true discretion whether to grant or refuse the extension of time. The Commissioner must take all relevant considerations (and no others) into account in deciding how to exercise this discretion: Board of Control of Michigan Technological University v. Deputy Commissioner of Patents (1982) 40 ALR 577 and Lehtovaara v. Commissioner of Patents (1981) 39 ALR 103.
Error or Omission
Mr. Kildea submitted that there "was some confusion between Schmidt and Thomas as to exactly what took place between the two of them" but that "it is not relevant that we don't know exactly where in the attorneys' office the error or omission occurred". Similar instances of breakdowns in attorneys' offices have been reported in Liquid Air Australia v. C.I.G. (1983) 1 IPR 145, Firmaframe Nominees v. Automatic Roller Doors (1984) 4 IPR 137, Dow Chemical Co. v. I.C.I. (1983) 1 IPR 541 and Dentsply International v. Bayer (1986) 7 IPR 408.
          Regarding the ground stated on Rib Loc's application for extension of time "that the notice of acceptance ... was inadvertently missed ...", Mr. O'Donnell suggested that this was misleading since no watch was instigated at all; and considering the evidence he suggested that it was "too vague to decide whether an error or omission has occurred".  He argued that there was no evidence to show a link between the error or omission and a failure to lodge notice of opposition in time; there was no proof that the watch would have found the Journal notice, and no details given of how watching services are carried out in Collison & Co.  He also sought to distinguish the present circumstances from those in Liquid Air v. C.I.G. by referring to the part in that case which indicated that there was evidence to show that specific instructions, recorded in writing, had been made to instigate a watch.
Regarding this argument that the evidence was too vague to decide whether an error or omission has occurred, I am guided by the cases previously referred to. In the Firmaframe Nominees case a watch was kept and the pertinent application found but an employee delayed checking the matter before the prospective opponent was informed; in the Dow Chemical case the attorney merely "failed to take action immediately he became aware of the acceptance"; and in the Dentsply International case the attorney misread the date of advertisement of acceptance. Also in Smith v. Bonel (1986) 7 IPR 184 the patent applicant argued that the alleged facts in the prospective opponent's supporting declarations were insufficient and that there were "no supporting or corroborating declarations". Mr. O'Donnell presented a similar argument in this case. However it is apparent from these four decisions, inter alia, in all of which the extension of time under ss.160(2) was allowed, that the criteria for deciding whether an error or omission has occurred, are not as rigid as suggested by Mr. O'Donnell. In this case it is not necessary to infer that the watch would have discovered the acceptance of Danby's application, since the failure to instigate the watch can in itself be interpreted as an error or omission.
Mr. O'Donnell referred to the decision in Toyo Seikan v. Nordson (1985) 5 IPR 388. Therein evidence presented by the prospective opponent as to why the notice of opposition was lodged later than the three months allowed under ss.59(1) gave details of an INPADOC search done by an employee in the prospective opponent's patent department. An error in logic produced the wrong search result, and this was presented as the "error" under ss.160(2). However the extension of time was not allowed since the date at which the search was done was outside the initial three month period, and it was decided that no error had occurred within that initial three month period provided by ss.59(1). Parallels were drawn between circumstances in that case and the present circumstances, however I do not see the circumstances in that case as being close enough to those before us. In the Toyo Seikan case the search was done on a specific date outside the initial three month period, but in this case the failure to instigate a watch, which can be construed as an omission for this argument, can be construed as having occurred over a long period of time, and significantly part of that period was within the initial three month period after advertisement of acceptance. This time factor distinguishes circumstances in the Toyo Seikan decision from the present circumstances.
In deciding whether an error or omission has occurred, I agree with Mr. O'Donnell in that it is not merely a matter of proving that unless exceptional circumstances exist, the extension of time should be granted; a proper case has to be made out by the applicants for the extension of time, see Vangedal‑Nielsen v. Commissioner of Patents and Gelphen Nominees (1981) 33 ALR 144. However I am satisfied that a proper case has been made out by Rib Loc and that Collison & Co.'s failure to instigate a watch was an error or omission within the meaning of ss.160(2). Communications seem to have broken down within Collison & Co. in this case and too much reliance was placed on verbal instructions, but the evidence shows that either Mr. Schmidt or Mr. Thomas or both made an error or omission in not following Mr. Menzel's instructions.
Discretion
         Having concluded that the application for extension of time satisfies para 160(2)(a) of the Act, I must now consider whether I should exercise my discretion favourably towards the applicant for extension of time.  Mr. Kildea submitted that "once the grounds in ss.160(2) have been made out the Commissioner has got a very limited discretion ... he should grant the extension".  He cited the Dow Chemical and Liquid Air decisions.  However I find it difficult to accept the reasoning in those decisions on this point of law.  It does not follow that because there are some grounds specified in ss.160(2) and none in ss.59(1), then there should be "less discretion" applied under ss.160(2); the grounds specified are only a prerequisite to the Commissioner being able to apply his discretion.
         Also, in applying discretion I believe that the decision of the Federal Court in the Vangedal Nielsen case should be taken into account despite the fact that section 160 was not under consideration.  In not allowing an extension of time to lodge notice of opposition under ss.59(1), the Court had regard to the following criteria:

(a)whether a serious opposition was foreshadowed,

(b)whether there were any unreasonable delays, and

(c)the respective interests of the patent applicant, the prospective opponent and the public.

If we are not to take these criteria into account when considering an application for extension of time under ss.160(2) as indicated in the Dow Chemical and Liquid Air decisons, then it would be more difficult for a prospective opponent to obtain an extension of time under ss.59(1) than it would under ss.160(2).  A prospective opponent who applied under ss.59(1) within three months of advertisement of acceptance would be at a disadvantage compared to a prospective opponent who applied much later under ss.160(2).
         Looking at the first of these criteria, I consider that enough evidence has been presented to conclude that a serious opposition was foreshadowed.  Mr. Schmidt's report to Mr. Menzel in April 1986, the ss.57(1) notices lodged in May and September 1986, exhibits SWOM1 in November 1986, SWOM3 and SWOM4 from November 1986 to May 1987, and exhibit SM 5 in April 1987 of Danby's evidence, inter alia, suggest that there has been a continuous interest on Rib Loc's part to pursue the Danby application.  Opposition per se was not referred to in every instance, but I have no difficulty in arriving at the conclusion that a clause such as "our clients have indicated that they will not hesitate to take such action as is appropriate" in exhibit SM 5, when drafted by a patent attorney, in this case Mr. Schmidt, could be construed to include opposition as one of the available actions. 
         In summarizing the main points of Mr. Molyneux's declaration, Mr. O'Donnell's submission on this matter was that: "Rib Loc felt that it didn't need to oppose the patent, that is, it was able to counter Danby effectively in the marketplace by cutting off its use of the machine and the strip and by Rib Loc introducing its own system."  The evidence in general suggests that after the breakdown in negotiations between the two companies a serious dispute had developed and actions such as described by Mr. Molyneux could hardly be seen as improbable, however I find it difficult to translate these allegations into an indication that Rib Loc had lost interest in the Danby patent application and that there was no need to oppose.
         With regard to whether there were any unreasonable delays involved in applying for the extension of time it may be of some significance to note that the application was not lodged at the Patent Office until approximately two and one half months after the end of the initial three month period provided by ss.59(1).  However the law in this regard has developed such that the delay considered when applying discretion is the period of time from the discovery that an error or omission has occurred to the lodgement of the application for extension of time.  Under this definition, the delay was only a matter of several days; Mr. Thomas was informed on 29 June, 1987 that Danby's application had been accepted.  Also of some significance in this matter is the relatively short period between examination being requested and acceptance being advertised in the Official Journal, viz. a few days more than three months.  I suspect that the expedited examination and the quicker than usual acceptance of the Danby application caught Collison & Co. somewhat off‑guard.
                    I turn now to the interests of the various parties.  Firstly, if an extension of time is granted, the patent applicant would be adversely affected since the sealing of their patent would be further delayed.  As discussed above there was no delay on Rib Loc's part, within the meaning of delay which has been derived from the Vangedal‑Nielsen decision and the subsequent ss.160(2) decisions based on that decision, however the relatively long period of time which elapsed between the advertisement of acceptance of Danby's application and Rib Loc's lodging of the application for extension of time I believe has seriously inconvenienced the applicant for the patent.  This is indicated in Mr. Molyneux's declaration and was confirmed by Mr. Adams.  Secondly, the interests of the prospective opponent could also be affected if an extension of time was not granted, since they may find themselves restricted in their activities by a patent which has questionable validity and which they can then only challenge through the courts to protect their interests.  Rib Loc have adequately demonstrated their interest in pursuing Danby's application and this has to be given due consideration.  Finally, the public interest is overwhelmingly directed to ensuring that granted patents are prima facie valid, although it could be said that in circumstances where the opposition was not potentially serious the public would benefit from sealing the patent as soon as possible.
         Mr. O'Donnell referred to several matters relating to applying discretion in favour of the patent applicant; two of these matters are worth some comment.  Firstly he referred to the Smith v. Bonel decision as indicating that where there is evidence of inadequate office procedures and neglect on the part of the patent attorneys, then discretion should be in the other party's favour.  The part he referred to begins in line 17 page 188 of 7 IPR:

"There is no indication of inadequate office procedures in general, or negligence by the attorneys concerned, factors which if they existed could count against Bonel."

In this case I don't believe that there is any indication that the general office procedures in Collison & Co. are inadequate, nor has there been any negligence.  Mr. Thomas specifically stated in his declaration that usual procedures in Collison & Co. involve written instructions for a watching search and that where he does receive a verbal request his practice is to make personally a written record; although unfortunately in this particular case those procedures were not followed.  Similar circumstances had occurred in fact in the Smith v. Bonel case.  Secondly, he suggested that it was in the public interest to seal Danby's application because the material accompanying the ss.57(1) notices had already been considered and "passed" by the examiner, and therefore that opposition would be unnecessary.  This argument seems to be based on Rib Loc not attempting to show that the evidence to be relied upon under opposition is an improvement on the ss.57(1) material.  In this matter I have doubts as to whether such an action should be necessary since it would tend to pre‑empt the opposition proceedings which should be treated separately.  All that is necessary for consideration under ss.160(2) in this matter is that it should be shown that a serious opposition is foreshadowed.
Decision
         There is adequate evidence to show that Rib Loc intended to pursue the Danby application both before and after acceptance, and that Collison & Co.'s failure to properly instigate a watch at the appropriate time was an error or omission within the meaning of ss.160(2).
         In applying my discretion, taking into account the factors as discussed above, I conclude that Rib Loc's interest in not being restricted by the Danby application considered with the public's interest in valid patents outweighs the inconveniences suffered by Danby.  Accordingly I allow the extension of time to 22 July, 1987 in order to validate the notice of opposition lodged on 16 July, 1987.
         On the question of costs, which would normally follow the event, in this case I am taking into account the reasons for the decision in Rib Loc's favour, the inconvenience caused to Danby by the late lodging of the application for the extension of time under ss.160(2) and the fact that some of the more pertinent evidence relied upon by Rib Loc was served only three days before the hearing.  I thus make no award of costs in this matter.

(J.I. WELSH)

Patent attorneys for the patent applicant : Grant Adams & Co.

Patent attorneys for the applicant for the extension of time: