Fonterra Co-Operative Group Ltd v Meiji Dairies Corporation - [2014] APO 11

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Fonterra Co-operative Group Limited v Meiji Dairies Corporation [2014] APO 11

Patent Application: 2006288405

Title:Milk material with good flavor and physico-chemical properties and process of producing the same

Patent Applicant:  Meiji Dairies Corporation
Opponent:  Fonterra Co-operative Group Limited
Delegate:  Dr S.D. Barker
Decision Date:  21 February 2014
Hearing Date:  Written submissions completed on 10 February 2014
Catchwords:  PATENTS – extension of time to file evidence in reply – regulation 5.9 of the Regulations as amended – misunderstanding of relevant provisions – exceptional circumstances not established – extension refused

Representation: Patent applicant: Spruson & Ferguson
Opponent:A J Park

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2006288405

Title:Milk material with good flavor and physico-chemical properties and process of producing the same

Patent Applicant: Meiji Dairies Corporation
Date of Decision: 21 February 2014
DECISION
Extension of time refused.
The declaration of Dennis Charles Hurren filed on 17 January 2014 does not form part of the evidence in reply.
REASONS FOR DECISION

This matter relates to patent application 2006288405 in the name of Meiji Dairies Corporation (Meiji). The application was advertised as accepted on 19 May 2011 and a notice of opposition to the grant of a patent was filed by Fonterra Co-operative Group Limited (Fonterra) on 19 August 2011.
Fonterra served a statement of grounds and particulars on 18 November 2011. Evidence in support was completed on 26 October 2012. Evidence in answer was completed on 18 September 2013. Evidence in reply is due to be filed by 18 December 2013. Fonterra has requested an extension of the time for filing evidence in reply until 18 January 2014. On 17 January 2014 a declaration by Dennis Charles Hurren was filed.
The Commissioner advised on 3 January 2014 that she was not satisfied with the reasons in support of the application, and Fonterra has asked for a hearing.
The hearing was conducted by means of written submissions. Submissions by both parties were received on 28 January 2014. On 4 February 2014, Meiji withdrew their submissions and filed a chronology and comment instead. On 10 February 2014 Fonterra filed further comments. In this decision I have not considered Meiji's submissions of 28 January 2014.
The law
On 15 April 2013, the Intellectual Property Legislation Amendment (Raising the Bar) Regulation 2013 (No 1) (the Amendment Regulation) commenced. The Amendment Regulation significantly amended the Patents Regulations (the Regulations) as they apply to patent oppositions. The law governing extensions of time to file evidence in a patent opposition depends upon the date on which the relevant evidentiary period commenced. Where the evidentiary period commenced before 15 April 2013, the extension is governed by regulation 5.10 of the Regulations as in force immediately prior to 15 April 2013. Where the evidentiary period commenced on or after 15 April 2013 in any opposition commenced before 15 April 2013, or in a substantive opposition commenced after 15 April 2013, the extension is governed by regulation 5.9 of the Regulations as amended by the Amendment Regulation. This follows from regulation 23.36(2), item 2, of the Regulations.
The present evidentiary period (for filing evidence in reply) commenced on 18 September 2013, i.e. on or after 15 April 2013. Consequently the extension of time is governed by regulation 5.9 of the Regulations as amended. Subregulation 5.9(2) states:
The Commissioner may extend the period only if the Commissioner is satisfied that:
(a) the party who intended to file evidence in the period:
(i)has made all reasonable efforts to comply with all relevant filing requirements under this Chapter; and
(ii)despite acting promptly and diligently at all times to ensure the appropriate evidence is filed within the period, is unable to do so, or
(b) there are exceptional circumstances that warrant the extension.
Exceptional circumstances are defined in subregulation (5):
In this regulation:
exceptional circumstances includes the following:
(a)    a circumstance beyond the control of a party that prevents the party from complying with a filing requirement under this Chapter;
(b)   an error or omission by the Commissioner that prevents a party from complying with a filing requirement under this Chapter;
(c)    an order of a court, or a direction by the Commissioner, that the opposition be stayed pending the completion of a related proceeding or action under the Act.
These provisions have been considered by the Commissioner in TRED Design Pty Ltd v Julie‑Anne McCarthy and Bradley McCarthy [2013] APO 57 and Merial Limited v Novartis AG [2013] APO 65. The principles applied in those decisions, which I accept as correct, are that I must ask myself the following questions:
1.Has the party (and their attorney or agent) made all reasonable efforts to comply with all relevant filing requirements?
2.Was the failure to file the evidence in time despite the party (and their attorney or agent) acting promptly and diligently at all times to ensure the evidence is filed in time?
3.Were there exceptional circumstances that warrant the extension?
I can extend the time for filing evidence only if I am satisfied that the answer to questions 1 and 2 is YES, or if I am satisfied that the answer to question 3 is YES. If I am so satisfied, then I must consider whether there are any discretionary reasons why the extension should not be granted.
Clearly this is an onerous test. This is confirmed by the Explanatory Statement accompanying the Amendment Regulation which states:
"The Commissioner will not be able to extend time periods unless one of these conditions was made out. The party seeking the extension will bear the onus of convincing the Commissioner of this. Once the conditions in subregulation 5.9(2) are met, the Commissioner still has the discretion to consider whether or not it is appropriate that an extension of time be granted. In applying the test, the Commissioner will not be required to give a direction to extend a period solely because of delays caused by a legal representative failing to act promptly or diligently, by difficulties in obtaining expert evidence that could have been anticipated and acted on or by attempts to settle the proceedings.
Where a party cannot satisfy the Commissioner that an extension is justified under the test, the Commissioner will not have the power to give a short extension to allow the filing of evidence immediately available or to validate evidence filed out of time."
If the Commissioner is satisfied that an extension is appropriate, the Commissioner must then determine the length of the extension (subregulation (3)):
The Commissioner must determine the length of the extended period having regard to what is reasonable in the circumstances.
The application for extension of time
The application for extension of time states:
"The evidence-in-answer was available to the opponent shortly after 18 September 2013. This was reviewed in depth. As a result of that review, the opponent offered a without prejudice settlement to the applicant. This was rejected. The time taken to do so was a month. Since that time Dennis Hurren, one of the experts that provided evidence in support, has provided a reply to Dr Smither's evidence. That is now being considered by the opponent.
I am on leave along with the majority of the litigation department on our firm, from 21 December to 5 January 2014. Dennis Hurren has similar restrictions on his time. Despite this we will be making every endeavour to meet the deadline of 18 January 2014 but because of this disruption we may not be able to do so.
The applicant's attorneys have informed us that they will consent to this month's extension."
Fonterra filed a declaration by Denis Eng Tuffery on 28 January 2014. This declaration says that Mr Tuffery believed that the provisions governing the extension of time were those applying immediately prior to 15 April 2013. Fonterra stated that IP Australia did not correct this misunderstanding.
Has the party made all reasonable efforts to comply with all relevant filing requirements?
Fonterra submitted that they have made all reasonable efforts to comply with filing requirements because they acted promptly and diligently. In this case it is reasonable to consider these two requirements together.
Was the failure to file the evidence despite acting promptly and diligently?
The facts of this case are simple. Upon receipt of the evidence in answer on 19 September 2013, that evidence was considered by Fonterra and a decision was made (in early October 2013) to file evidence in reply and to formulate a settlement proposal. A "thorough review of the evidence" was commenced on 20 November 2013, and the declarant Dennis Hurren was engaged on 9 December 2013. An initial comprehensive report by Mr Hurren was provided on 17 December 2013. Mr Hurren's evidence was filed on 17 January 2014. The delay between early October and late November occurred because a settlement proposal was sent to Meiji on 16 October 2013. On 3 December 2013 the proposal was rejected, and Meiji consented to an extension of one month.
It is clear that, except for the period from early October to late November Fonterra was acting promptly and diligently. During the October – November period the only relevant action was the settlement, and the Explanatory Statement makes it clear that settlement discussions are not a proper basis for an extension of time:
"In applying the test, the Commissioner will not be required to give a direction to extend a period solely because of … attempts to settle the proceedings"
Viewed objectively, the evidence in reply was not being prepared promptly and diligently.
Fonterra said that the question of whether they had acted promptly and diligently should be evaluated as an objective/subjective test: "it requires a consideration of the conduct and effort that would have been made by a hypothetical reasonable opponent (objective) but with the actual knowledge of the opponent (subjective)". The actual knowledge that Fonterra asserts is relevant is the belief that the extension of time was governed by the former provisions. That is, Fonterra acted promptly and diligently if you take into account that they thought that requirement did not apply to them. As Fonterra put it:
"The extension of time should be allowed because a hypothetical reasonable opponent with the actual knowledge of this opponent would have acted just as the opponent did."
The Explanatory Statement provides no support for an objective/subjective approach. In the Merial decision the patent applicant stated that there was a (subjective) expectation that the evidence of Dr Rowe could be completed in time (at [19]), but difficulties prevented this. The Deputy Commissioner considered that it was "highly unlikely" that the evidence could have been prepared in time "even with the most favourable circumstances" (at [20]). The Deputy Commissioner rejected the subjective opinion of the applicant. While a misunderstanding of the law may be the cause of a failure to act promptly and diligently, I do not accept that it can make the actions of a party prompt and diligent where they otherwise would not have been.
It is appropriate to take an objective view of the actions of the opponent, and in this case that leads to the conclusion that they have not acted promptly and diligently. The better question is whether there were exceptional circumstances.
Were there exceptional circumstances?
Fonterra argued that exceptional circumstances existed in the form of an error by IP Australia. The relevant chain of events is as follows.
In early October 2013 Mr Tuffery contacted IP Australia:
"Once it was apparent that Fonterra wished to file evidence in reply I telephoned an official in the Opposition Division at IP Australia to check what regulations applied in early October 2013. I recall that the advice was that the deadline for filing evidence was 18 December 2013. The advice did not extend to advising on the rules applying to extensions of time. But I immediately thought that if the deadline was in December (and not November) the Regulations in force before the RTB Act came into force must be applicable. This was because the new Regulations allowed two months for filing evidence in reply while the former allowed three months. I was not then aware that the transitional provisions were to the effect that the former regulations applied insofar as specifying the deadlines, but the new regulations applied insofar as extensions are concerned."
Mr Tuffery says that he was still uncertain which regulations applied:
"I was still uncertain on which Regulations applied, so in our letter to IP Australia dated 15 October 2013 recording Fonterra's desire to file further evidence I noted my understanding that the procedures under the RTB Act did not apply. I wanted to ensure that I was correct that the time spent in negotiations was a valid reason for seeking an extension of time."
The letter of 15 October 2013 relevantly states:
"I am uncertain about what Regulations are applicable to this procedure.
I understand from my telephone discussions with you that the procedures under the Raising the Bar Amendment Act/Regulations do not apply.
We therefore have a time limit of 18 October 2013 to advise you if the opponent wishes to file evidence and 18 December 2013 for filing such evidence.
Furthermore the deadline of 18 December 2013 is subject to the Regulations applicable before the Raising the Bar Amendment Regulations came into force."
The response sent two days later (to both parties) says:
"We acknowledge the opponent notice of intention to file evidence in reply on the 15 October 2013. A copy is attached for the applicant.
The Opponents Evidence in Reply is due to be filed 18 December 2013."
Mr Tuffery states in relation to this response:
"I received from IP Australia a letter dated 17 October 2013 recording the fact that the evidence in reply was due by 18 December 2013.
I assumed from this deadline that my understanding of the position as set forth in my letter of 15 October 2013 was correct, namely that the RTB Act and Regulations relating to extensions of time for filing evidence did not apply to this deadline. IP Australia did not correct my statement of my understanding that the RTB Act did not apply."
In its submissions, Fonterra said:
"It is submitted it is clearly unusual or extraordinary for an Attorney to contact IP Australia by telephone with regard to the deadline for filing evidence, to then state the resultant understanding in a letter to IP Australia and for IP Australia to respond, but not correct the clear misunderstanding. As a result of that unusual circumstance, the Attorney then relies on that understanding, only to find out after the deadline has expired that different regulations apply"
In the TRED decision I stated that exceptional circumstances were:
"matters outside the normal evidentiary process, and outside the control of the party, where it would be unreasonable to insist on a party filing their evidence"
It is clearly not outside of the control of practitioners to know the law that applies to extensions of time, but that is not a complete answer in the present case. Based on the evidence, I conclude that:
- IP Australia did not state that regulation 5.10 as in force immediately before 15 April 2013 applied to this case;
- Mr Tuffery did not ask the direct question - which extension of time provisions apply in relation to this case; and
- Mr Tuffery came to the erroneous conclusion that regulation 5.10 as in force immediately before 15 April 2013 applied.
The question is whether IP Australia should have advised Mr Tuffery that any extension of time would be governed by regulation 5.9 as amended, and whether the failure to do so is an exceptional circumstance. It is only with hindsight that I can see that what Mr Tuffery was asking in his letter of 15 October 2013 was whether extensions of time to file evidence in reply (if needed) would be governed by the former regulation 5.10 or the new regulation 5.9. Bearing in mind the nature of exceptional circumstances, I am not satisfied that the failure to appreciate that question and provide an answer is an exceptional circumstance.
Conclusion
I note that Meiji consented to the extension of time. However, this is not a relevant consideration.
I am not satisfied that an extension of time to file evidence in reply is appropriate.
Dr S.D. Barker
Delegate of the Commissioner of Patents