Globaltech Corporation Pty Ltd & Anor v Australian Mud Company Pty Ltd & Anor

[2020] HCATrans 45

[2020] HCATrans 045

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S302 of 2019

B e t w e e n -

GLOBALTECH CORPORATION PTY LTD ACN 087 281 418

First Applicant

GLOBALTECH PTY LTD ACN 086 012 393

Second Applicant

and

AUSTRALIAN MUD COMPANY PTY LTD ACN 009 283 416

First Respondent

REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD ACN 124 204 191

Second Respondent

Application for special leave to appeal

BELL J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 20 MARCH 2020, AT 10.49 AM

Copyright in the High Court of Australia

____________________

MS K.J. HOWARD, SC:   If the Court pleases, I appear with MR A.D.B. FOX for the applicants.  (instructed by Watermark Intellectual Property Lawyers)

MR A.J.L. BANNON, SC:   May it please the Court, I appear with my learned friend, MS F.C. ST JOHN, for the respondents.  (instructed by Gilbert + Tobin)

BELL J:   Yes, Ms Howard.

MS HOWARD:   This application raises the question of the proper approach to the construction of a patent.  This question is of central importance in patent law.  It determines whether a claim of a patent will be valid, and it also determines, if it is valid, what will be the scope of the monopoly right granted to the patentee, such right being the right to exclude others from infringing the monopoly.

In this case, the primary judge construed the words of the patent as covering the allegedly infringing article.  The primary judge began not by determining the nature of the invention described in the specification before considering the words of the claim.  The primary judge construed the claim only after considering the allegedly infringing device in detail and this was despite the fact that his Honour accepted that there was no description or suggestion of such a device in the description of the invention in the specification.  As there was nothing in the patent that described or suggested a claim that defined an invention that included the infringing device, the primary judge could not have arrived at his construction without knowledge of, and reference to that device.

BELL J:   Ms Howard, even if your contention is right, what is the point of principle?  One would think the law was settled in terms of Welch Perrin.  If there was an error in that consideration was given to the suggested infringing device before determining the nature of the claim, what does that give rise to in terms of an issue before this Court?  Are you asking us to restate a very well‑established principle?

MS HOWARD:   Your Honour, the principle in Welch Perrin, the High Court decision in 1961, we accept stated the principle clearly that the High Court explained that you have to determine what is the nature of the invention before you construe the claim.  However, that principle has not been applied rigorously by the Full Federal Court.

BELL J:   In this case you say there has been a failure to comply with a principle that is well established?

MS HOWARD:   Absolutely. 

BELL J:   So beyond that asserted error, what would justify the grant of special leave?

MS HOWARD:   Well, your Honour, we say that it is a very important principle and the effect ‑ ‑ ‑

EDELMAN J:   Do you accept that the statement of legal principle at paragraphs 91 to 96, at pages 181 to 183, was an impeccable statement of the legal principles to apply?

GORDON J:   Especially 96?

MS HOWARD:   Yes.  There is a reference to Welch Perrin in paragraph 93 as being the “leading authority on the principle” as to how:

claims are to be construed in the context of the specification as a whole –

That, we say, is an impeccable statement of principle.  But it was not applied in this case, and as a result of not applying it in this case there is now confusion – or could lead to confusion, we would say, between different approaches that the Full Federal Court has taken.

So recently, last year, the Full Court – there was an appeal in the case in Nichia v Arrow, and special leave was refused in that case.  We say that in Nichia v Arrow the primary judge and the Full Court followed the approach in Welch Perrin.  There was also a decision in the Davies v Lazer Safe case, again where the court had followed Welch Perrin.  But this case, which is the latest decision from the Full Federal Court, we would say is completely inconsistent ‑ ‑ ‑

EDELMAN J:   So what your submission is, basically, is that the statement of law in this decision of the Full Court in paragraphs 91 to 96 was correct.  The Full Court has been correctly applying those same principles of law, but just that in the application to the facts something went wrong in this case.

MS HOWARD:   No, your Honour – well, your Honour, the point is that in this case the wrong principle was applied.

GORDON J:   But where is the wrong principle stated that you are complaining about?  If you accept 91 to 96 is right, where is the error?

MS HOWARD:   Well, for example, if you look at paragraph 114 in the Full Court decision, this is where the Full Court is talking about the primary judgment and they acknowledge that it is true that in the section of the reasons dealing with infringement – so before the primary judge came to the question of construction:

his Honour described in some detail each of the Orifinder tools.  In particular, the primary judge set out a description of the Orifinder v5 drawn from the joint experts’ report . . . It was appropriate for his Honour to consider how Globaltech’s products worked in order to frame the construction issues that needed to be determined.

We say that is not the correct approach.  If that approach is applied it will lead to a number of adverse consequences.  It is not appropriate to look at the allegedly infringing device in order to frame a construction issue.

EDELMAN J:   But is not 114 to say no more than there are questions of construction that are raised by the specification, one does not need to examine every single imaginable question of construction that arises.  Before one turns one’s mind to what the questions of construction are that arise, one needs to look at what is in dispute between the parties.

MS HOWARD:   We would say not because when one looks at the judgments, and certainly the primary judge, his approach, which was accepted by the Full Court, his Honour begins by looking at the devices before his Honour even frames the construction issue.

GORDON J:   But he is looking at it in order to determine what the issues are.  That is different from determining whether or not it is a question of construction.  That is what the Full Court is saying in paragraph 114 in the fifth line, as any trial judge does.  The trial judge sits there and says what do I have, what are the issues, identifies what the issues are and then says let us construe the patent.

MS HOWARD:   But that is not what the High Court did in Welch Perrin.

GORDON J:   Well, it may not have done it explicitly, but we are talking about a method in determining an approach to construction.  You are complaining about the way in which the construction was undertaken in terms of the order in which the steps have been set out, not the principle.

MS HOWARD:   Your Honour, we do say that it is that question of principle and it is the principle on the one hand, do you read the specification, work out what the invention is and then construe the claim in that context or, do you look at the infringing device and then construe the claims in that context, which is what is said ‑ ‑ ‑

EDELMAN J:   I will give an example.  It is not uncommon at all for questions to arise in the context of, say, a 400‑page specification about the meaning of seven words in that specification.  You are not suggesting, are you, that the Court needs to forget about the dispute being those seven words, and engage in a lengthy construction of the entirety of the specification and then, as a secondary step, turn to those particular seven words?

MS HOWARD:   I am not suggesting that but, in this case, in fact, the specification was ignored in construing the claims of the patent.

GORDON J:   Well that is a separate point, is it not? 

MS HOWARD:   Well, it may be a separate point, but it is a related point, and it is a very important point because ‑ ‑ ‑

GORDON J:   What did they ignore?

MS HOWARD:   There was an acceptance by both the primary judge and the Full Court that there was nothing in the patent specification that supported the construction of the claim whereby it covered the allegedly infringing article.  The only thing that was relied on was a consistory clause which was in exactly the same terms.

GORDON J:   As claim 1.

MS HOWARD:   Yes, and therefore just raised the same issue of construction.  So there was agreement - there was no dispute that there is nothing in the specification that describes the invention in the way that covers Globaltech’s device.  We say that is a very important departure from the construction principles in Welch Perrin that, if followed, whereby you can construe a claim so that it does not have any consistency with the invention described in the specification, that is a dangerous course, if followed, in terms of the public importance of patents to innovation and research and development, and for all the other reasons we have said in our submission.  So this, we say, is a very significant departure from Welch Perrin.

GORDON J:   So that is in response to what is set out at paragraphs 119 and following of the Full Court’s decision – that is, their construction.  That is what this argument is addressing?

MS HOWARD:   Yes.

GORDON J:   Where is the error there from 119 onwards?  They go through the patent, they go through the steps in the claim, they analyse claim 1.

MS HOWARD:   Yes.

GORDON J:   They look at other aspects of the patent consistent with established principle.  What is wrong with that?

MS HOWARD:   What is wrong with that is is that looking at the patent they come to the conclusion that there is nothing in there that describes the invention in the way that AMC put it.  So, for example, in paragraph 127, the court said that it can:

be accepted that the best method section . . . contemplates a system of synchronisation –

which was not something that was described in the specification – sorry, which was not used in the Globaltech product.  I just wanted to take you to those paragraphs where they accept that there is no description.  One is - perhaps if I could just ask you to look at application book 54 first, to see where the primary judge said that.  So at application book 55, paragraph 204, there at about line 12:

it may be said that the statements in the best method section contemplate synchronisation or, at least, counting forwards.

Then the same point is made that I just took you to at 127.  Also, if I could ask you to go to paragraph 148, and paragraph 148 is where the Full Court decides that the claims are fairly based.  They say:

The specification contains a “real and reasonably clear” disclosure of the invention –

referring to Lockwood:

The claims follow the terms of the description . . . and there is nothing in the balance of the description suggesting that the invention is narrower –

So the point there is that in terms of finding a real and reasonably clear disclosure of a construction of the claim which covered Globaltech’s device, the only thing that the court could point to was a sentence in the specification which was exactly in the same words as the claim.  So we say that that is not the purpose of a consistory clause.

Even the High Court in Lockwood v Doric said that you do not just look at a statement in the same terms to find fair basis.  So it was acknowledged that there was nothing there that described how the claim would be construed, and that really leads into the point that this is inconsistent completely with Welch Perrin and with the decision of the Full Court in Nichia v Arrow because in those cases the Court looked at the patent and they said this is what is the invention, this is what the patent is about.  Then they came to the claim and they looked at the words of the claim and they said when read in context this is what it means whereas here, if the court had followed Welch Perrin and adopted the same approach as in Nichia, the court would have concluded there is nothing in the specification that describes the claim being construed in that way and they would have come to the conclusion that Globaltech’s construction was right and that the claim should be limited to be consistent with the specification.

So the danger that comes about by reason of this approach is that it gives the patentee the ability to extend their monopoly beyond what is described in the patent.

GORDON J:   Really your submission is that the patent is drawn so broadly that it covers a larger field than it should.  In a sense, that is where you get to. 

MS HOWARD:   Our submission is, just to maybe put it slightly differently, that here the patent was describing a particular invention and when one gets to the claim, the wording of the claim was not particularly clear.  It was construed in this case to include things that were not described or suggested in the body of the specification.  So the result is that the inventors have invented one thing and now they have a monopoly that covers over things.

EDELMAN J:   You did not bring any challenge to the sufficiency of the description under section 40(2)(a), did you?

MS HOWARD:   No.

EDELMAN J:   So what do you say was covered, if not this?

MS HOWARD:   We say that what is covered is where you have two timers at the surface, started at the one time, called the initial reference time and then there is a counting forward from that place.  Sufficiency did not really come up.  I mean, the point is, in terms of section 40, there is an obligation to describe your invention in the patent – and the claims, according to section 40, must define that invention.  Here, we have one invention described in the body of the patent, and a different invention defined according to the construction that was given to it.

Having accepted that there was no description of such a device in the body of the specification we say it is an extraordinary place to end up that one sentence with the same words as the words of the claim meant that that claim could be interpreted in such a broad way to encompass devices that were not contemplated by the patent.

We say that this really is a very important matter because this will create uncertainty in terms of construing patents.  It is also an approach that is not only inconsistent with prior authority in this Court and the approach of the Full Federal Court in other cases; it is also inconsistent with the approach in other jurisdictions.

So this matter is considered so important, for example, in the US that they have a separate court convened to hear and determine the construction of a patent before the validity and infringement issues are determined.  Now, the High Court in Welch Perrin made it clear that they were to be separated.  But when one looks at the primary judgment here, and the Full Court’s approach, there is a complete intermingling of the construction and infringement issues. 

It is also inconsistent with the approach taken in the UK where you look at the purpose of the specification so that if the purpose of the invention is to describe a particular thing then you must confine the claims to that particular thing described and it is not contemplated by the Act, because section 40 says that the invention you describe must be the invention you define. 

So really the key point here is how did the courts - both courts come to the conclusion that these claims included things that were not described in the patent as the invention and the only conclusion can be is they did that by having reference to the infringing device.  That, we say, offends every – well, the principles, another principle that was applied by the High Court in Welch Perrin.  So for those reasons we say that this is a case that is worthy of a grant of special leave.  There are no disputed facts.

BELL J:   Yes.

MS HOWARD:   Simply a pure question of principle. 

BELL J:   Yes.  Yes, Mr Bannon.

MR BANNON:   Your Honours, none of the special leave questions arise.  There is no issue of principle to be resolved and any appeal would have insufficient prospects of success.  If one looks at the first special leave question at 203 of the application book, question 1(a) is framed as:

Should the Court determine the nature of the invention described in the specification and properly construe . . . before considering the allegedly infringing product –

The correct principle is that which has been observed, and which your Honours have been taken to in the Full Court judgment, namely that the patent should not be construed by reference to the infringing article, or one eye on the infringing article.

The proposition framed in 1(a), that should not consider the infringing article, obviously cannot be right.  Trials proceed on the basis, not only in the way described in the discussion with your Honours, but you receive evidence about various matters, one of which includes common general knowledge, one includes the infringing article and then you have final submissions in relation to the patent. 

Of course you are going to consider generally the infringing article because you are going to hear evidence about it.  But the issues will be confined, and one will construe the disputed issues of construction at the end and provided the court is careful to construe the patent independently of the infringing article, then that is fine – and that is exactly what the court did here. 

My friend cannot point to any passage which demonstrates an infection, in my respectful submission, either of the trial judge or the Full Court falling foul of that principle.  Then the next part of that proposition relies on ‑ ‑ ‑

GORDON J:   Question 1(b) is related to the fact that the patent is in broad to general terms and does not extend to the specifics of the article.

MR BANNON:   Yes, and this is a rehash of Lockwood No 1.  Lockwood No 1 was not actually ground breaking.  It simply applied Kimberly‑Clark, which in turn applied Chief Justice Barwick’s reasoning in dissent on the application in Olin v Cartridge.  But the principle was in accordance with the other members of the Court, namely that the only question under section 40(3), namely the fair basis requirement, is that the claims not travel beyond the disclosure in the specification. 

In Lockwood, almost exactly the same argument was raised – the terms of the claims were too wide.  It was suggested lock retaining means was the key integer.  There was only one specific lock retaining means identified in the preferred embodiment and the alleged infringer sought to confine the interpretation of the claims by reference to the preferred embodiment.  In that case, as here, the Court examined the specification and found that the disclosure of the invention for the purpose of fair basis was in the same terms as the claims.

EDELMAN J:   How does one get beyond the two timers at the surface, then?  What is the prior art or the background or the circumstances or the matters in the specification that take the invention beyond two timers at the surface?

MR BANNON:   The invention is addressed at skilled addressees.  The purposive construction proposition, which the courts have adopted over and over again, and including in Kirin-Amgen – the purposive construction applies in this way, namely, it is to understand that it is an invention directed to persons skilled in the art who can understand matters skilled in the art.

EDELMAN J:   Yes.  Well, taking all of the combined arts in this case, it is a combination of several skilled persons.

MR BANNON:   Yes.

EDELMAN J:   Taking all of them, how do you get beyond the two timers at the surface?

BELL J:   You have two timers and the initial reference time, the counting forward.

MR BANNON:   Yes.  If I can perhaps describe in very brief terms how these things work, and then I will answer that question if I may.  This is to produce core samples which are about three metres long, which are drilled out of the ground to search for oil bodies.  They can be hundreds of metres down in the ground.  You have an outer tube which has a rotating drill head, which carves out the cylindrical core sample and that is fed, as it is drilled, into an inner tube.  The inner tube does not rotate by reference to the core sample, once it is created.  It is broken off and pulled out, and they examine the core sample and they want to know, when they pull the core sample out, in which orientation the core sample lay under the ground. 

So what the invention discloses is that you attach to the inner tube an orientation device which you turn on and it intermittently records as it goes under the ground its orientation – and that records that data at regular intervals.  What the patent discloses, and the claims of the invention is, you take that information and you do something else. 

When the core sample is broken off from the material underneath, it is in the same alignment as it was in the strata and that is the information you know - and that break off is undertaken by the person on the surface via mechanical means.  The patent says you work out that time when that breaks off, and you correlate that to the times on the inner tube, which is logging times consistently while it is in the ground, and you work out which one of those times matches the time which you have worked out from the surface.

So the issue then becomes, in answer to your Honour Justice Edelman’s question, simply the point raised in the Federal Court judgment at 134 ‑ ‑ ‑

GORDON J:   This is the Full Court?

MR BANNON:   Full Court judgment at 134 at 193.

EDELMAN J:   That step 2 could never take place other than via downhole timer.

MR BANNON:   Correct, and the only debate between the parties on this issue, and this goes to insufficient prospects of success as well, is whether, when the Full Court said - where they say:

It is therefore apparent that step 2 refers to, at least the downhole timer.  The real issue is whether the time recorded on the surface timer must also be referable to the initial time reference.

There are arguments one way or another.  But in terms, it does not suggest that there has to be another timer.  If one looks at the actual terms of the claim ‑ ‑ ‑

GORDON J:   That was by reference to taking into account the other steps in the claim?

MR BANNON:   Exactly.

GORDON J:   That is, you could not look at step 2 without having regards to steps 3, 4 and 5.

MR BANNON:   Exactly.  So what step 2 indicates, that yes, you will definitely have – and everyone was in furious agreement - you have to have a timer, started by an initial reference time on the thing, the inner tube going down the hole.  Everyone agrees that there is a specific timer, because you have to work out when the thing has broken off, because that is the coincidence of what the orientation will be under the ground.  But there is nothing in the claims which dictates how you do that correlation. 

The claims make it clear that there has to be a specific time, which is one of the later steps.  Everyone agrees that that is something which is organised from the top.  But the patentee has not confined itself as to the way you do that correlation.  The arguments put before below said you interpret synchronisation; that you have to have two watches at the same time.  One of the experts said that is ridiculous, you can have two timers at a different time, you just have to know the offset.

Our friends put it as counting forwards or counting backwards.  That is just two ways of doing the correlation.  What the patentee puts at large is the way you do that correlation and that is the invention and persons skilled in the art understand that.  They get one explanation, which my friends described as counting forwards, but it is described as one embodiment.

So the disclosure of what the invention is which matches the claim is clear, there is no argument about clarity.  The disclosure is sufficient, and it supports for fair basis reasons and it becomes down to a narrow issue as to whether the construction, which four members of the Federal Court have agreed in, was right or not and we would say it is clearly right.  But if it is not clearly right, there are insufficient prospects of success on appeal, and that is what it comes down to.

To take up a matter raised by your Honour Justice Edelman, yes, there was no argument about lack of full description, which was the key argument – one of the key arguments in Welch Perrin, which is one of the reasons why they focused a lot in that introductory passage about looking at the whole thing. 

Yes, you look at the whole thing for the claims as well, but the key element of Welch Perrin, which everyone follows, is, are the claims clear?  If they are clear you do not go to the specification including the preferred embodiment, to confine them and court after court, Interlego in this Court, Kimberly‑Clark, confirm that.  Nichia applied exactly the same principle.  But in Nichia, the Court found that the word “contains” was ambiguous.

GORDON J:   They had to go further.

MR BANNON:   Exactly.  There was nothing different on principle.  So for those reasons, I respectfully submit special leave should be refused.

BELL J:   Thank you.  Yes, Ms Howard.

MS HOWARD:   If the Court pleases.  We say that the error of the Full Federal Court is to interpret Welch Perrin in a wholly new and different way whereas we say it should be applied so that you start with the rigour of construing the specification and looking at the claims in that context before considering the infringing device.

What the primary judge said here, the primary judge said that the body of the specification was not of assistance in construing the claims.  That is the only context for construing a claim.  The primary judge said at application book page 54, paragraph 203:

I start with the body of the Specification.  I do not think that it provides a great deal of assistance . . . I do not consider that this advances the task of properly construing the claims.

But Welch Perrin tells you that is all you have in construing the claims, the specification.  The primary judge then proceeded to consider individual phrases in claim 1 by reference to the allegedly infringing device.  The claim should be construed as a whole – you do not just take out small phrases and work out what they mean.  So the primary judge disregarded the context of the specification and he construed phrases, separate phrases in claim 1 with reference to the allegedly infringing method.

GORDON J:   I had understood those paragraphs were dealing with the synchronisation question, were they not?  That is why they – that comment at paragraph 203 is dealing with the contention about synchronisation, is it not?  It is dealing with a specific question.

MS HOWARD:   No, your Honour.  It is dealing with the whole question of any assistance gained by the specification.

GORDON J:   I had not read that by reference to paragraph 195 which preceded it.

MS HOWARD:   Well, his Honour did not take account – what his Honour decided, as I mentioned before, was that there was nothing in the description that suggested an invention that worked the way that Globaltech’s device did.  That was accepted.  So before coming to that conclusion, his Honour said that I do not find assistance with the specification.

The point is, once the primary judge accepted that the specification only described a system where you had two timers at the surface, and each noted the same initial reference time at the beginning of operations and counted forward, the compelling conclusion was that the claim had to be construed to that invention. 

That was consistent with the wording of the claim.  The phrase in the claim is “initial reference time”.  Once you understand the claim, that the process involves two timers at the surface, then to construe “initial reference time” as referring to one only, or possibly two, we say is not construing it in context.  The words could only then be construed in the context of having two timers at the surface.

BELL J:   Well, this is the argument that was addressed by their Honours at application book 193, paragraph 134 that Mr Bannon took us to, was it not?

MS HOWARD:   Yes, and what the Full Court did here was go through the individual phrases again, without doing what Welch Perrin tells you to do which is what is the invention as a whole?  What does the claim describe?  What the Full Court does here is do exactly what the primary judge did, pluck certain phrases out of the claim and said what do they mean?

This was after the findings at application book 187, which I took you to, at lines 20 to 22 – the court accepts that the only embodiment describes two timers started contemporaneously.  Then in the next paragraph, the Court refers to the very last passage in the patent, which is not part of the embodiment; it is a general statement of the invention, and where you read that, it says:

From the forgoing (sic), it is evident that the present invention provides an orientation device which does not require physical marking –

Indeed in the embodiment it is “particularly convenient” for use:

All that is required is for the operator to start the orientation device prior to the inner tube assembly 36 being inserted into the drill hole, and contemporaneously start a timer for recording the time duration –

That is summarising the invention as having two timers at the surface.  When you look at the claim, you read the claim as having two timers, then the initial reference time, we say, could only be read as referring to two timers.  It was not possible to restrict it to being one particular timer.

BELL J:   Thank you, Ms Howard.

The Court is not persuaded that the application raises any question of principle warranting the grant of special leave.  Special leave is refused with costs.

Adjourn the Full Court until 10.00 am on 15 April 2020 by video link.

AT 11.26 AM THE MATTER WAS CONCLUDED