Factor Financial Analytics Pty Ltd v Xero Limited
[2021] APO 2
•13 January 2021
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Factor Financial Analytics Pty Ltd v Xero Limited [2021] APO 2
Patent Application: 2017305494
Title:Network-based automated prediction modeling
Patent Applicant: Xero Limited
Requestor:Factor Financial Analytics Pty Ltd
Delegate:Dr S.D. Barker - Deputy Commissioner of Patents
Decision Date: 13 January 2021
Hearing Date: 18 December 2020, in Canberra (by videoconference)
Catchwords: PATENTS – directions in relation to a matter under section 36 of the Patents Act – whether to give direction for the filing of details of the case of each party – direction given – whether to give direction treating late filed material as evidence – direction not given – whether to give direction that further evidence cannot be filed without leave – direction not given – award of costs on normal basis
Representation: Counsel for the applicant: A Lang SC
Solicitor for the applicant: Gilbert & Tobin
Patent attorney for the applicant: FB Rice
Counsel for the opponent: C Dimitriadis SC and W H Wu
Patent attorney for the opponent: Krouzer IP
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2017305494
Title:Network-based automated prediction modeling
Patent Applicant: Xero Limited
Date of Decision: 13 January 2021
DECISION
I make the following directions.
First, Factor Financial Analytics Pty Ltd are to file a statement summarising their case. Particularly they are to set out who they contend are the inventors, who they contend are the applicants, when the inventive concept was conceived and how the applicants obtain entitlement from the inventors. This statement is to be no longer than one (1) page, and is to be filed within two (2) weeks of the date of this decision.
Second, Xero Limited are to file a responding statement setting out their contentions on these points. This statement is to be no longer than one (1) page and is to be filed within one (1) week after the Commissioner advises Xero that Factor have filed their statement.
I award costs in relation to the directions hearing according to Schedule 8 against Factor Financial Analytics Pty Ltd.
The supplemental evidence is not evidence that can be relied on by the parties.
REASONS FOR DECISION
Patent application 2017305494 was filed by Xero Limited (Xero) under the provisions of the Patent Cooperation Treaty. The filing date of the application is 3 August 2017. The inventors are listed as Alistair Grigg and Martin Kemka. Factor Financial Analytics Pty Ltd (Factor) filed an application under section 36 of the Patents Act (the Act) and an application under section 113. Both applications have the same effect – that Factor be named as a co-applicant.
1 The entitlement dispute
Factor assert that the inventors are Kemka in conjunction with Aaron Wallace and Paul Reynolds. Factor also assert that the applicants should be Xero and Factor.
2 Who are the players
To aid understanding of this decision, I will explain the role of the people who are mentioned in this decision.
Grigg was a General Manager at Xero at the relevant times.
Kemka was a product research and development analyst at Factor.
Krouzecky is a patent attorney at Krouzer IP, acting on behalf of Factor.
Reynolds was the Chief Executive Officer and Managing Director of Factor.Wallace was a Director of Factor. He described himself as an "accounting data specialist" with "accounting data knowledge".[1][1] Wallace declaration dated 23 October 2018 at para [5].
3 The evidence
A large amount of evidence has been filed by the parties. There is also evidence that has been filed by Factor outside the formal evidentiary stages and has not otherwise been included as evidence. This is referred to as "supplemental evidence" in the correspondence. It is not presently material that can be relied on in the dispute. The supplemental evidence is:
Declarant Date of declaration Exhibits Paul Anthony Reynolds 2/3/2020 PAR-1 to PAR-18 Stephen George Krouzecky 4/5/2020 SGK-1 to SGK-18 4 The current matter
Xero has objected to the Krouzecky declaration and the Reynolds declaration being treated as evidence in this matter, and have raised several other concerns on which it seeks directions. In summary, Xero seek directions as follows:
a.that Factor file a particularised statement of the grounds on which they rely;
b.that the supplemental evidence is not available to the Commissioner in deciding the matter;
c.that factor must not file any further evidence except as expressly directed by the Commissioner; and
d.that Factor pay costs in relation to this directions dispute.
The present matter concerns whether to treat the Krouzecky and Reynolds declarations as evidence. In addition, I must decide whether to make the directions sought by Xero.
5 The procedural law on disputes under section 36
Disputes under section 36 are not covered by the procedures in Chapter 5 of the Regulations. Rather, such disputes are governed by the powers conferred on the Commissioner by regulations 22.22 and 22.24:
22.22 Exercise of discretionary powers by Commissioner
(1) The Commissioner must give a person an opportunity to be heard before exercising a discretionary power under the Act or these Regulations adversely to the person.
(2) The Commissioner must give the person an opportunity to be heard by:
(a) asking the person for written submissions; or
(b) notifying the person that, on request to the Commissioner, the person may be heard by way of an oral hearing on a date, and at a time and place, determined by the Commissioner; or
(c) notifying the person of the date, time and place of an oral hearing.(3) The Commissioner may exercise the discretionary power if the person:
(a) notifies the Commissioner that the person does not want to be heard; or
(b) does not file written submissions if requested under subregulation 22.23(1); or(c) does not attend an oral hearing if notified under subregulation 22.23(2).
(4) If the Commissioner exercises discretionary power in any of the circumstances mentioned in subregulation (3), the Commissioner must notify the person of the Commissioner's decision.
22.24 Practice and procedure other than for opposition proceedings
(1) Subject to these Regulations:
(a) if the Act or these Regulations authorise the Commissioner to hear and decide an application or matter that is not an opposition; or
(b) in a matter being decided on the motion of the Commissioner;the practice and procedure to be followed for the purposes of enabling the application or matter to be decided is to be determined by him or her.
(2) A person to be heard at a hearing may apply to the Commissioner in respect of the practice and procedure in relation to the hearing to be determined by the Commissioner.
In addition, it is relevant to note that the Commissioner has a broad power to issue directions:
22.14 Directions not otherwise prescribed
If the Commissioner reasonably believes that it is necessary for the proper prosecution or completion of proceedings for a person to perform an act, file a document or produce evidence that is not provided for by the Act or these Regulations, the Commissioner may give notice to the person requiring him or her to perform the act, file the document or produce the evidence, specified in the notice.
In essence, the practice and procedure is determined by the Commissioner, applying normal principles of fairness. The Commissioner can issue directions as a tool to manage the proceedings.
In dealing with the supplemental evidence, the delegate has been using principles that have been developed in relation to regulation 5.23. Regulation 5.23 does not apply to the present matter as these proceedings are not under Chapter 5, but there is sense in applying consistent principles in relation to different types of disputes, but modifying those principles where the nature of the dispute makes that appropriate. The approach of the Commissioner in dealing with regulation 5.23 is set out in Reflex Instruments Asia Pacific Pty Ltd v Minnovare Limited:[2]
"Thus in order for me to determine if I should invoke regulation 5.23, I must form a broad view of the circumstances and potential implications should I decide to invoke or not to invoke regulation 5.23.
To form this view, I will do so by considering the following matters:
1.The circumstances leading up to the evidence not being filed earlier
2.What does the evidence show
3.Is the information likely to be crucial to the delegate's decision
4.The public interest in having the information considered
5.The balance of convenience of the parties if the information is considered"
[2] [2017] APO 8, 128 IPR 173 (Reflex Instruments) at [51] - [52].
The importance of the third consideration was made clear in Merial Limited v Bayer Intellectual Property GmbH:[3]
"If the new information is not likely to change the outcome of the opposition in a significant way, there is little advantage gained by bringing it into the opposition."
[3] [2015] APO 16 at [25].
Where evidence is filed out of time in a proceeding such as the present matter, these principles provide a sensible way to assess whether to treat the new evidence as part of the proceeding.
6 The supplemental evidence
The supplemental evidence relates to the Professional Services Agreement (PSA) between Xero and Factor, and contains copies of material that is said to be part of without prejudice discussions between the parties.[4] It is clear that at least some parts of the supplemental evidence can be characterised as without prejudice material. I will apply the approach adopted by the Delegate in Reflex Instruments.
[4] Xero identified the parts that they assert are without prejudice in an email dated 18 December 2020.
6.1 The circumstances
Factor attempted to file the Reynolds declaration earlier. The material was filed in a password protected form. IP Australia were not able to open the filed material. After protracted correspondence the Krouzecky and Reynolds declarations were filed. At least in part the delay in filing the evidence arose from technical problems when first attempting to file.
6.2 What does the evidence show
The evidence relates to the PSA and the various statements of works under the PSA.
6.3 Is the evidence likely to be crucial
The relevance of the evidence was attacked on two bases: without prejudice material is inherently irrelevant, and the particular evidence is irrelevant having regard to the subject matter of the evidence. I will deal with the second matter first.
I asked Factor to explain the way that the PSA relates to the entitlement case. The PSA regulates ownership of intellectual property created after 1 September 2016. The PSA also recognises that ownership of pre-existing intellectual property is not altered. I understand that Xero view the PSA the same way.
Factor stated that they consider that the inventive concept was conceived after the PSA came into operation. It follows that Xero could obtain intellectual property rights by operation of the PSA. Xero indicated that the inventive concept was conceived before the PSA came into operation, so the PSA would not be relevant. I asked Mr Dimitriadis whether this indicated that a detailed consideration of the PSA was unlikely to be necessary in this situation. Mr Dimitriadis suggested that it might become relevant in the future, for instance if it was necessary to decide the ownership of parts of the subject matter of the application. I can see that this is a possibility. However, these are hypothetical matters at the present, which are unlikely to be resolved in the present dispute. The ultimate determination of this dispute will decide when the inventive concept was conceived, and this determination will enable the parties to decide for themselves the answers to these hypothetical scenarios. Should the parties be unable to reach agreement, they can return to the Commissioner for further determinations. I conclude that if the relevance of the supplemental evidence relates to resolving hypothetical scenarios that may, or may not, arise in the future, then the evidence has a very limited relevance.
It follows that it is unnecessary to consider the issue of without prejudice relevance. However, given the extent of discussion of the issue by the parties, I will make a short observation. It is well established that the Commissioner is not bound by the rules of evidence, but this does not give her licence to do as she pleases. The Commissioner must apply general principles of fairness and equity. The principles applying to without prejudice communications, set out in White v Overland[5] for instance, make it clear that there is a strong public policy underlying the protection of without prejudice privilege. The Commissioner should be extremely cautious in overriding the privilege in without prejudice communications.
[5] [2001] FCA 1835.
6.4 The public interest
There is a public interest that invalid patents are not granted. In the present case the matter relates to who is entitled to a patent, not whether the patent would be valid. There is a small public interest in relation to the supplemental evidence.
6.5 The balance of convenience
The circumstances surrounding the late filing of the evidence support having regard to the evidence. The other considerations do not. Importantly the nature of the evidence is such that it is of low relevance. I am not satisfied that the supplemental evidence should be treated as evidence in the dispute.
7 The other directions
Xero have sought a direction that Factor provide a statement of the particulars of their case. At the hearing I stated that I considered that this would assist both Xero and the Hearing Officer who ultimately has to deal with this matter. I will direct that Factor provide a summary of their case, critically setting out who they contend are the inventors, who they contend are the applicants, when the inventive concept was conceived and how the applicants obtain entitlement from the inventors. Xero will also provide a responding statement setting out their contentions on these points.
Xero have asked for a direction that Factor must not file any further evidence without leave of the Commissioner. Factor gave me the very clear impression that they do not have any further evidence that could be filed, so this point is probably moot. However, I consider that I do not have the power to prevent a person filing material. But any new information that is filed would only be treated as evidence if a delegate considers it appropriate.
Xero also sought a direction that the Commissioner will not have regard to the supplemental evidence. I have previously expressed doubt whether the Commissioner can give a direction to herself.[6] In any event, a direction is unnecessary as it would be inconsistent with principles of fairness for the Commissioner to consult the supplemental evidence without giving a direction that it be treated as evidence, and giving the parties the opportunity to comment.
[6] Mobay Corporation v The Dow Chemical Company [1992] APO 25, 24 IPR 379 at 394.
Xero have asked for costs, and have indicated that the Schedule should be varied. It is the practice of the Commissioner that costs can be awarded in a procedural matter such as this directions hearing. However, only a limited number of items in Schedule 8 apply to a directions hearing.
Xero have been successful in the main issue – whether the declarations should be treated as evidence. Consequently I consider that Xero are entitled to an award of costs. The Commissioner will not depart from an award of costs on the basis of Schedule 8 "unless the circumstances clearly warrant doing so".[7] Xero indicated a sense of frustration due to delay in progressing the matter, but this is not a matter that is sufficient to justify a variation of the Schedule.[8] I will award costs in accordance with Schedule 8.
[7] Amgen, Inc v Genentech, Inc [2016] APO 15 at [6].
[8] Similar to Sterling Drug, Inc v The Boots Company PLC [1996] APO 31, (1996) AIPC 91-275. I make no comment on whether these matters might be more relevant to the question of costs in the ultimate matter.
8 Conclusion
I am satisfied that a direction should be given in relation to a statement of particulars. I am not satisfied that the other directions should be given. I will award costs against Factor.
Dr S.D. Barker
Deputy Commissioner of Patents
6
0