Davies v Lazer Safe Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Davies v Lazer Safe Pty Ltd (No 2) [2018] FCA 971

File number: WAD 670 of 2015
Judge: MCKERRACHER J
Date of judgment: 28 June 2018
Catchwords: COSTS – costs of patent proceeding – where both the claim for infringement and cross-claim for invalidity were dismissed – appropriate costs order following the judgment as to liability – assessment of the relative success of the parties – Calderbank and other offers made – effect of those offers
Legislation: Federal Court Act 1976 (Cth) s 43
Cases cited:

Davies v Lazer Safe Pty Ltd [2018] FCA 702

GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100

Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58
Date of hearing: Determined on the papers
Date of last submissions: 22 June 2018 (Applicants)
15 June 2018 (Respondent)
Registry: Western Australia
Division: General Division
National Practice Area: Intellectual Property
Sub-area: Patents and associated Statutes
Category: Catchwords
Number of paragraphs: 19
Counsel for the Applicants: Mr ADB Fox
Solicitor for the Applicants: DLA Piper Australia
Counsel for the Respondent: Mr GJ Fitzgerald QC
Solicitor for the Respondent: Wrays Lawyers Pty Ltd

ORDERS

WAD 670 of 2015
BETWEEN:

KEVIN STEPHEN DAVIES

First Applicant

TRICLOPS TECHNOLOGIES PTY LTD (ACN 117 350 464)

Second Applicant
AND:

LAZER SAFE PTY LTD (ACN 090 113 572)

Respondent

JUDGE:

MCKERRACHER J

DATE OF ORDER:

28 JUNE 2018

THE COURT ORDERS THAT:

1.The applicants pay the respondent’s costs of the proceeding, to be taxed if not agreed and to the extent of:

(a)30% of the respondent’s costs of the proceeding on a standard or party/party basis up to 3 August 2016; and

(b)after that date for the remainder of the proceeding, 30% of the respondent’s costs of the proceeding on an indemnity basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

MCKERRACHER J:

  1. These reasons deal with the question of costs following a judgment delivered in Davies v Lazer Safe Pty Ltd [2018] FCA 702 (the Liability Judgment).  By the Liability Judgment I dismissed the claim for infringement and the cross-claim for invalidity and made directions for the parties to file submissions on costs to be determined on the papers.

    THE APPLICANTS’ POSITION

  2. The applicants seek an order that ‘each party bear its own costs of and incidental to the claim and the cross‑claim’.

  3. The applicants argue that such an order is appropriate even though the costs of a cross‑claim as to invalidity are almost invariably in patent proceedings greater than the costs incurred in the infringement suit.  Nonetheless as each party failed in its respective applications it is contended to be appropriate that each party should bear their own costs.  Alternatively, the applicants say that a separate order could be made as to costs reflecting the ordinary rule that costs should follow the event, but they acknowledge that such an order would be…

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Details
Case
[2018] FCA 971
Decision Date

CaseChat Overview and Summary

In Davies v Lazer Safe Pty Ltd (No 2), the respondent sought costs of the proceeding following the dismissal of both the claim for infringement and the cross-claim for invalidity. The respondent argued that it had been successful on the construction and infringement issues, and in a practical and commercial sense, it had won because it was free to market its products. The applicants, on the other hand, submitted that the respondent’s costs claim should be reduced to reflect the relative success of the parties and that each side should bear its own costs. The court was required to assess the relative success of the parties and decide on the appropriate costs order in light of the Calderbank and other offers made during the proceedings.

The court considered the submissions of both parties, particularly the respondent's contention that it had won on two of the three main issues, construction and infringement, with the applicants winning on invalidity. The court also examined the practical and commercial success of the respondent, noting that it was free to market its products despite the patent claim. However, the court rejected the notion that there were three separate events or cases and held that the construction issue had general relevance. The court found that the invalidity case on which the respondent failed was multi-faceted and substantial. Despite the failure to accept reasonable offers, the applicants had instigated the litigation and should bear some portion of the respondent's costs to recognise its success. The court concluded that the appropriate costs order was a version of the orders sought by the respondent but substituting 30% rather than 50% in each of the paragraphs.

The court ordered that the applicants pay the respondent’s costs of the proceeding, to be taxed if not agreed and to the extent of: (a) 30% of the respondent’s costs of the proceeding on a standard or party/party basis up to 3 August 2016; and (b) after that date for the remainder of the proceeding, 30% of the respondent’s costs of the proceeding on an indemnity basis. The entry of orders was dealt with in Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The applicants pay the respondent’s costs of the proceeding, to be taxed if not agreed and to the extent of:

(a) 30% of the respondent’s costs of the proceeding on a standard or party/party basis up to 3 August 2016; and

(b) after that date for the remainder of the proceeding, 30% of the respondent’s costs of the proceeding on an indemnity basis.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The respondent suggests that ‘the event’, for the purpose of determining the issue of ‘costs following the event’, cannot solely be resolved by reference to infringement and invalidity. In addition to the infringement and invalidity issues, there was a third substantive issue decided in the proceeding and addressed in the Liability Judgment, namely, the proper construction and scope of the claims of the Patent. On that issue, the respondent contends that it was wholly successful as the applicants’ broad construction of the Patent was rejected. See particularly at [235]‑[238] of the Liability Judgment where I said:3.5 Conclusion on construction235Integer 1.5 and integer 1.6 of claim 1 require the safety system as claimed to engage in recognition of regions of obstructions by reference to shadow maps and their shapes, and require the comparison with either stored known safe or unstored unknown hazardous shadows of obstructions.236This reading is based on references to ‘recognition’, ‘boundaries’ and ‘regions’ in the claim, the disclosures in the specification discussed above and is also supported by Mr Appleyard’s evidence. 237The construction was also supported in part by Mr Acheson’s acceptance in cross-examination that: (a)a ‘shadowed region’ is an ‘area’ and that an area is a two‑dimensional construct; (b)the word ‘boundary’ or ‘boundaries’ of a shadowed region involves establishing the perimeter or outline of the shadowed region; and (c)an ‘edge’ is part of a boundary.238Further, and even if this construction, which is narrower than that advanced by the applicants, is wrong, the proper construction of claim 1 requires the boundary determination of an obstruction claimed by recognising a realistically substantial portion or part of the shadowed region, so as to determine a sizable portion of the outline or shape of the obstruction, in contrast to a dot, spot, point or edge of any such region. It follows, the respondent says, that it won on two of the three main issues, construction and infringement; with the applicants winning on only invalidity. The respondent also contends that in a practical and commercial sense it won because it is free to market its products despite the asserted patent monopoly: Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58 per Allsop CJ, Greenwood and Nicholas JJ at ([13]). Adopting a broad and global approach to determining the costs of the proceeding as urged by some authorities, the respondent submits that it was the winner in the case with a judgment in its favour on construction and infringement and freedom to market its products. Nonetheless it accepts having lost on validity that some deduction to its costs claim is appropriate. The respondent says that its case on validity was relatively narrow. It relied primarily on two prior art patents and one prior art patent/use. The latter was the subject of a late amendment in the event the Court accepted a broad construction of claim 1 of the Patent as further evidence was adduced for the applicants. The witnesses (except for Mr Berry for the respondent, who did not deal with validity) gave evidence on infringement, construction and validity. The respondent says that, sensibly viewed, this was not a case where the majority of the time was spent on validity, rather time was mostly spent on construction and infringement. It points to the considerable time and expense spent in answering interrogatories administered by the applicants, preparing a detailed product description and preparing evidence addressing the manner of operation of the respondent’s products, as well as the background to the relevant art. The respondent argues the case was more about construction and infringement than validity. The respondent contends it would be fundamentally unfair for the respondent to be deprived recovery of any costs at all on the basis that it brought the cross‑claim, which it submits it would not have brought but for the infringement claim against it. I accept this submission.Indemnity costs

Ratio Decidendi

Legal Principle Established

The respondent contends that the applicants’ proposal that each side bears its own costs fails to reflect the relative success of the parties. CONSIDERATION As the Full Court (Middleton, Nicholas and Burley JJ) stated yesterday in a similar patent dispute outcome in GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100 (at [6]-[7]): 6Every case must be decided on its own facts. There is no doubt that this Court could address the costs of the appeals and the cross appeals compendiously. In Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) [2014] FCAFC 126 (‘Sanofi-Aventis’) the Full Court addressed the costs of the appeal and cross-appeal together at [26], despite Apotex failing in its challenge to validity on various grounds (see at [8]). In Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58 (‘Tramanco’) the Full Court similarly dealt with costs compendiously (at [13]), and noted the difficulties with disentangling the costs of different issues (at [12]).7Further, a percentage reduction approach may also be appropriate in some cases. Such an approach was adopted in Idenix and in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158. In my view, while the respondent has acted reasonably, its submissions overstate the position in a number of respects. I consider that the respondent is entitled to a contribution to its costs, but at a more modest level than initially sought. The reasons for that reduction are that while I accept that the respondent has had ‘commercial success’, I do not accept that there were three events or three cases. ‘Construction’ has general relevance. Further, the invalidity case on which the respondent failed was multi‑faceted and substantial. But for the various offers, a costs order as sought by the applicants would be closer to the mark. But the failure to accept a Calderbank or similar offer should have consequences, especially when it is supported by the very reasoning on which the ultimate outcome turned. It is not sufficient an answer for the applicants to say that they were still seeking more information on the respondent’s product. The applicants instituted the proceedings based on infringement. The invalidity cross‑claim was clearly defensive only. Acceptance of the applicants’ 28 May 2017 offer to compromise would never have solved the respondent’s difficulty of having to contend with the applicants’ claim, which ultimately failed. The infringement claim, based as it was on a broad construction of the Patent claims, had the consequence that there would be a cross-claim as to validity if such broader construction were upheld. The broad construction was not upheld. In circumstances where the applicants instigated this litigation and failed to accept any of the reasonable offers which were advanced, the applicants should bear some portion of the respondent’s costs to recognise its success. In my view the appropriate order which takes all those matters into account is a version of the orders sought by the respondent but which substitutes in each of paras (a) and (b) 30% rather than 50%.