Great Western Corporation Pty Ltd v Grovehill Pty Ltd

[1998] APO 51

official notice

decision of a delegate of the commissioner of patents

Application  :          No. 678130 in the name of Great Western Corporation PTY LTD

Title:          Improvements in or in relation to a Row Cultivator

Action:          In relation to the extension of term of petty patent and Section 28 notice by Grovehill Pty LTD, request by the patentee to defer hearing the Section 28 notice and objection thereto by Grovehill Pty LTD

Decision:          Issued            .

Abstract

Great Western Corporation Pty Ltd, the patentee, requested a stay of proceedings in the Section 28 / extension of term matter based on an action for revocation in the Federal Court. The informant formally objected to the deferral of the Section 28 hearing.

The Federal Court proceedings will resolve all the Section 28 issues. Where there would be only a short delay in awaiting the outcome of the Federal Court proceedings, it would be in the public interest to await them because the Commissioner will not have the full material relied on in the Federal Court. However a long delay would not be in the public interest and would place a significant disadvantage on the informant.

In these circumstances a deferral of the hearing into the Section 28 matters is not appropriate. Therefore the Section 28 hearing will be set down for early 1999. However if the patentee can show by 31 December 1998, that trial dates for the Federal Court proceedings have been set and these dates show the trial will occur in early 1999, for example before the end of February 1999, then the Section 28 hearing will be deferred until one month after the decision of the Federal Court.

patents act 1990

decision of a delegate of the commissioner of patents

Re:Petty Patent No. 678130 by Great Western Corporation PTY LTD, request by Patentee to defer hearing the Section 28 Notice and objection thereto by the Informant Grovehill Pty LTD

background

Petty Patent No. 678130 (70615/96) in the name of Great Western Corporation Pty Ltd (hereafter GWC) was filed on 6 November 1996 as a divisional of 81703/94 filed 22 December 1994. The petty patent was granted on 15 May 1997.

Grovehill Pty Ltd (hereafter Grovehill) filed notices under Section 28 on 20 October 1997 and 15 April 1998. Also on 15 April they filed a Section 223 request for an extension of time to serve additional evidence. The additional evidence was filed on 15 May 1998.

The patentee filed a request for the extension of term of the petty patent on 18 March 1998. On 16 April, they requested a stay of proceedings in the Section 28 / extension of term matter based on an action for revocation in the Federal Court (QC 144 of 1997). The reasons given were “the Commissioner will not have the full material relied on in the Federal Court. Consequently any decision by the Commissioner may ultimately be skewed and not be in the public interest.”

On 9 June 1998 the office issued proposed directions to defer hearing the Section 28 notice until one month after a decision issued in the Federal Court because:

• “the patentee had requested deferral;

• the Federal Court action will resolve the Section 28 issues; and

• the time frame involved in the Federal Court, while likely to be seven months, is similar to when the Commissioner could have made a decision on this case (given the pending Section 223 request to file further evidence)”.

Grovehill, the informant under Section 28, objected to the deferral of the Section 28 hearing. The matter was set for hearing on 7 August 1998 in Canberra. The date for the patentee to file evidence in response was set to one month after a decision issues on the deferral of the hearing.

The informant withdrew their Section 223 application on 10 July due to their client’s strong desire that the Section 28 matter be handled expeditiously. They also requested that the Commissioner exercise his discretion under Section 28(3)to allow consideration of the informant’s evidence filed on 15 May 1998.

Mr Peter Fisher of Fisher, Adams, Kelly appeared for the informant (Grovehill) assisted by Mr Mark Smith. Mr Trevor Dredge of Intellpro, appeared by telephone for the patentee (GWC).

SUBMISSIONS

The main submissions of the informant are:

• It is unlikely that the Federal Court will be in a position to allocate trial dates until January or February 1999, which trial is estimated to be of 2 weeks duration in the third quarter of 1999. Therefore a decision of the Federal Court may not be handed down until late 1999 or early in the year 2000. This time frame is well outside that in which the Commissioner could decide the matter.

• As per Ferocem v High Tech Auto Tools. (1993) 29 IPR144, the deferral of consideration of the petty patent places the public at a significant disadvantage providing what has been referred to as a “de facto extension of term” for the patentee. The patentee obtains a clear advantage in delaying the hearing until after a decision in the Federal Court, which is a disadvantage to the informant’s and more importantly the public interest. The public interest transcends that of both patentee and the informant.

• The present informant has a more compelling case because the evidence filed with the Section 28 notice is substantially the same as that filed in the Federal Court. There is presently no evidence of a confidential nature which has been withheld from the Commissioner but filed with the Federal Court as was the case in Ferocem (above).

• From Kaiser Aluminium and Chemical Corporation case (quoted in Ferocem):

  “there is judicial advantage in the courts having the benefit of the commissioner’s expertise and that the use of proceedings before the commission may act as a filter to reduce the burden on the courts”

There is a strong likelihood that the patentee may decide not to continue with the court action if a decision of the Commissioner is against the validity of the petty patent.

• Regardless of the outcome of the Federal Court the Commissioner is still bound to hold the Section 28 proceeding. Therefore it is not a matter of avoiding the duplication of costs but in delaying them. Ultimately all costs will be incurred.

The main submissions of the patentee are:

• Grovehill agreed to orders and a timetable set down by Drummond J which was the basis for the patentees original request for deferral in terms of the time frame involved. The trial date previously indicated (December 1998) can still be achieved with the co-operation of Grovehill. It is not the patentee who is in default of the original timetable. The informant is seeking to draw out as long as possible the Federal Court proceedings in order to persuade the Commissioner to hold the Section 28 hearing.

• In relation to the assertion that the patentee had contributed to the delay in the Federal Court proceedings. The timetable is set and managed by the judge and not by the parties. The informant agreed to the original timetable. Then the informant appointed Mr Hess who completely revised their statement of claims and amended cross claims were submitted. The informant has contributed substantially to the delay in the Federal Court proceedings and can continue to delay.

• Taking into account all the circumstances the public interest in having the Commissioner proceed with the determination of the extension of term is practically zero since the final outcome enabling third parties to conduct their business in the invention is outside the scope of the current determination. This is because interested third party will not only have to consider the petty patent itself but any other related patents that may affect their business. In this case there is a related standard patent (not yet accepted) and a related granted US patent. The patentee submitted that third parties have to commercially consider the likely outcome of the standard patent as well as the petty. Quite often third parties would use the US patent to give guidance as to the likely outcome of the standard patent. In the current situation interested third parties will have to conduct their business on the assumption that they have a risk in relation to the standard patent application dating from the day on which it became open to public inspection. In the public interest, resolution of the standard patent will be of greater relevance because the standard patent may have additional claims, claims which have been tightened in the light of examination processes and the Federal Court proceedings. It is unlikely that any third party would take an isolated view of the petty patent.

• The issues being decided in the actions are the same. The statement of grounds and particulars in both cases are identical.

• The Commissioner’s decision is based on material filed to date. However the informant is preparing extra evidence and interviewing fresh witnesses to submit in the Federal Court matter. The Commissioner will not have all the evidence that is before the court.

• While the case is not exclusively an obviousness case, it is largely an obviousness case. Obviousness is best tested under court conditions where witnesses can be cross-examined before a judge. There is a particularly advantageous practicality in processing the issue of obviousness through the Federal Court rather than through the Patent Office.

• In relation to the statement in Ferocem (above) that the Commissioner may have some persuasive role to play in the benefit of the parties is speculation as to the attitude of the parties should the outcome go against either of the parties. This is particularly so as the Commissioner’s decision can be appealed to the same court, the Federal Court, and the issues reheard before the Judge as a new hearing.

• It would seem there are two proceedings dealing with the same issues in two separate venues, requiring duplication of work and costs for ultimately the same outcome - either the petty patent is good or it is bad. The informant submitted that ultimately costs would not be avoided. This is not the case. When the standard patent is accepted the petty patent will be surrendered. And if this happens before the Section 28 hearing there would be no need to proceed.

DECISION

Section 69 of the Patents Act 1990 relates to the extension of term of a petty patent of which s.69(1)-(3) are relevant.

1. (1) A patentee of a petty patent may apply to the Commissioner, in accordance with the regulations, for an extension of the term of the petty patent.

(2) The Commissioner must decide an application in accordance with the regulations.

(3) The Commissioner must not grant an extension without giving each person who has given the Commissioner a notice under section 28 in relation to the petty patent a reasonable opportunity to be heard.

There are several points to note from these provisions. Firstly, there is nothing (including in the regulations) which specifies when the matter must be decided. Secondly, the procedure for hearing such matters is not prescribed, but is governed by the Commissioner in accordance with regulation 22.24. Thirdly, there is no provision in the Act or Regulations concerning the procedure to adopt where court proceedings are co-pending.

From this it appears that the Commissioner has a broad discretion in the conduct of the hearing.

Mr Dredge submitted that the informant had deliberately sought to delay the Federal Court proceedings in order to force the Commissioner into not deferring the Section 28 hearing. He submitted that the Commissioner should not reward the informant who is in default of the agreed Federal Court timetable by not providing the deferral sought by the patentee. If circumstances come to the attention of the Commissioner that clearly establish that a party is not acting in good faith before him, the Commissioner cannot reasonably exercise a discretionary power in that party’s favour. I do not believe that the patentee has shown that the informant has not acted in good faith. The informant has demonstrated reasons why the delays have been caused that appear to me to be in line with the normal process of prosecuting cases before the Federal Court. The informant has also shown that the patentee has caused some of the delays. In this case I don’t think that it is manifestly clear that there has been a lack of good faith.

It seems to me that the facts in this case are akin to Ferocem v High Tech Auto Tools (1993) 29 IPR144. In that case the delegate stated

“As a general proposition, where there is a pending court action of direct relevance to a matter before the Commissioner, the Commissioner prefers the court action to be concluded before determining the matter before him.

This would seem to particularly apply where the matters in dispute are strictly between the parties, and have no significant consequential effect on third parties. Thus if the effect of the court action was in a practical sense confined to the parties, I think the Commissioner would be fully justified in deferring a hearing until the court action is determined - providing neither party would be significantly disadvantaged.

However … for an application for the extension of term of a petty patent, there is a significant public interest involved. Celotex orders are not relevant to petty patent extensions of term. As a result, there is a clear advantage in a patentee seeking to defer the determination of the extension if the validity of the patent is in dispute; until the extension has been determined by the Commissioner, interested third parties will probably have to conduct their business on the assumption that the petty patent is valid and the term will be extended. In my view this situation is not in the public interest.”

It follows that it is incumbent on me to consider whether the pending court action is of direct relevance; that is whether the Federal Court action will resolve the Section 28 issues. I will then need to consider the interests of each of the parties as well as the public interest. Finally I will need to consider whether the time frames involved in the Federal Court issuing a decision are similar to when the Commissioner could have made a decision on this case. That is to say whether there would be a significant deferral required.

Will the Federal Court action resolve the Section 28 issues?

Both parties agreed that the issues in suit in both proceedings are the same. Hence it is common ground that the Federal Court case will resolve all the Section 28 issues. I will proceed on this basis.

Interests of the parties

Mr Dredge submitted that his client GWC is “extremely concerned at the additional costs in parallel proceedings being conducted in the Patents Office”.

The informant submitted that even if the Commissioner deferred the Section 28 hearing until after the Federal Court decision, the Commissioner must still proceed with the Section 28 hearing. Therefore it is not a matter of avoiding the duplication of costs but in delaying them. They further submitted that there is a strong likelihood that the patentee may decide not to continue with the court action if a decision of the Commissioner is against the validity of the petty patent.

The patentee submitted that both parties have a large investment in the Federal Court proceedings. The patentee has made it clear that it will continue with the Federal Court proceedings in order to obtain the injunctive relief it seeks. While the parties could settle the matter beforehand, the patentee submitted that it seems unlikely that the parties will settle. When the standard patent, which is related to the petty patent in question is accepted, they submit that the petty patent will be surrendered. If this happens before the Section 28 hearing there would be no need to proceed.

The patentee sought to show that costs would be saved. The informant submitted that ultimately costs would not be avoided. It seems to me that there is a possibility that whichever of the Section 28 or Federal Court proceedings is heard first, then depending on the outcome, the other may or may not proceed. I do not wish to preempt either of these proceedings. Hence while I accept that the patentee’s interests in reducing their costs would best be served by deferring the Section 28 hearing, the interests of the informant would be best served by holding an immediate hearing of the Section 28 issue for the reasons stated under “Public Interest” below.

I further note the decision in FA Faulding & Company LTD v Bristol-Myers Squibb Co 40 IPR 511 where it stated at 512:

“The principle is that someone who brings a legitimate, genuinely arguable claim to the court is entitled to have that claim heard as soon as the court can conveniently arrange it, consistently with the demands of other litigants.”

I believe that this principle is also applicable to matters before the Patent Office. Hence it would be in the informant’s interest to have their claim heard without undue delay.

Public Interest

The informant submitted that in line with Ferocem (above) the deferral of consideration of the petty patent places the public at a significant disadvantage providing what has been referred to as a “de facto extension of term” for the patentee. The patentee obtains a clear advantage in delaying the hearing until after a decision in the Federal Court, which is a disadvantage to the informant’s and more importantly the public interest. The public interest transcends that of both patentee and the informant.

The patentee sought to show that in this case, the public interest in having the Commissioner proceed with the determination of the extension of term is much reduced due to the existences of a related standard patent. This related patent would also cause uncertainty to interested third parties.

I accept that it is likely that third parties will take into account the existence of the standard patent. However I believe that there is still a significant public interest in determining the outcome of the extension of term of the granted petty patent. While mindful of the risks imposed by a standard patent application, it is not a granted patent and may not ever come to grant or may be granted in terms of a much more restricted monopoly. Hence while third parties must remain in some doubt as to the final disposition of the standard patent, it would still be a significant disadvantage to them if they were required to wait for an indefinite period for the extension of the petty patent to be determined.

The patentee also sought to show that it was in the public interest to grant the deferral because “the Commissioner will not have the full material relied on in the Federal Court. Consequently any decision by the Commissioner may ultimately be skewed and not be in the public interest.” At the hearing the patentee argued that the case is largely an obviousness case and that obviousness is best tested under court conditions where witnesses can be cross-examined before a judge.

The informant argued that it is misleading to suggest that the Section 28 notice should be deferred because of the incapacity of the delegate of the Commissioner to properly consider matters of obviousness. The Commissioner has a long history of considering obviousness based on prima facie evidence and in many cases the cross-examination of witnesses. However they also stated that they were not intending to call witnesses at the Section 28 hearing.

As stated above there will be different material before the court and the Patent Office because any extra material that will be lodged in the Federal Court will not be lodged in the Patent Office. It would appear also that there would not be cross-examination of witnesses. If there were no or only a short delay it would appear to be in the public interest to have the Commissioner await the Federal Court decision in order to ensure the best decision outcome. However if there is a significant delay in awaiting the court’s decision these benefits would be outweighed by the significant disadvantage faced by the informant and any interested third parties.

Time frame for the Commissioner to issue a decision

Initially there was a request under Section 223 to file additional evidence in the Section 28 matter. The informant has withdrawn the application for an extension of time under Section 223 to avoid any unnecessary delay to the substantive hearing. During the hearing they further submitted that to avoid the prospect of a submission by the patentee that the Section 28 proceedings will be unduly protracted the informant intends to rely on the Section 28 evidence lodged to date.

There still remains the time for the patentee to file their evidence in response. The Commissioner needs to consider the material filed on 15 May 1998 and decide whether to issue a notice under Section 28(3). If the Commissioner issues a notice under Section 28(3) the patentee will require time to file their evidence in response to the material. After this a date needs to be set for the hearing. Under these circumstances it would appear that if the Section 28 hearing is not deferred it is most likely be held in about January or February 1999 with a decision being issued by about April or May 1999.

Time frame for the Federal Court to issue a decision

In regards to the timing of the Federal Court trial, the informant submitted that the matter would not come to trial before the third quarter of 1999. They submitted that the original request for deferment was based on trial dates (in December 1998) that were the minimum expectation of Drummond J as at the directions hearing in March 1998. Further it related to the hearing in the matter not the time in which an actual decision would be handed down. Therefore a decision of the Federal Court may not be handed down until late 1999 or early in the year 2000.

The patentee submitted that with the co-operation of Grovehill, trial dates in line with the original Drummond orders are quite possible. That is a trial date in December 1998. They further submitted that the informant’s estimates of time for trial are unnecessarily conservative and that the informant was deliberately trying to delay the Federal Court proceeding.

Both parties have divergent views on the likely date of trial in the Federal Court. I have no information before me as to which date is more probable. I will consider the effect of deferring the Section 28 in each of two scenarios. Firstly if trial dates are not significantly delayed from the original Drummond J orders. Secondly, if trial dates are significantly delayed.

If the Federal Court decision issues within the time frame estimated by the patentee.

If the Federal Court trial occurs within the time frame suggested by the patentee, or indeed a short period after this, it would appear that the Federal Court decision would issue either before or within a very short time frame of when the Commissioner could issue a decision. In this case there would be no great public disadvantage in awaiting the result of the Federal Court decision as this would not cause any significant delay. Similarly there would be no real private disadvantage. However it would be in the public interest for the Commissioner to have the benefit of the Federal Court’s decision in determining the Section 28 matters. Even if the Commissioner’s decision were not deferred at all the Federal Court would not have the benefit of the Commissioner’s decision as this would not issue prior to the suggested trial dates of December 1998. Costs may or may not be avoided in this scenario.

In this scenario it would be appropriate to await the Federal Court’s decision as it would be in the public interest to ensure a better decision. There would be no significant disadvantage to either the informant or the public as any delay in the Commissioner’s decision issuing would be quite short.

If the Federal Court decision is delayed.

If the Federal Court decision is delayed as suggested by the informant, it would not be in the public interest to defer the Section 28 hearing as discussed above. The informant would also suffer a significant disadvantage. While deferring the Commissioner’s decision would mean that the Commissioner would have the advantage of the court’s decision, this benefit would be outweighed by the significant disadvantages faced by the public and the informant. If the case were not deferred, the Federal Court would have the benefit of the Commissioner’s decision as per Kaiser Aluminium and Chemical Corporation case (above). Once again costs may or may not be avoided. Hence in this scenario it would not be appropriate to defer hearing the Section 28 matters.

Conclusion

I accept the parties’ submissions that the Federal Court proceedings will resolve all the Section 28 issues. Where there would be only a short delay in awaiting the outcome of the Federal Court proceedings, it would be in the public interest to await them. However a long delay would not be in the public interest and would place a significant disadvantage on the informant.

Given the differing views of the parties I cannot determine when it is most likely for the Federal Court case to be heard. In these circumstances I believe that a deferral of the hearing into the Section 28 matters is not appropriate. Therefore I direct that the Section 28 hearing be set down for early 1999. A date in February 1999 would be appropriate.

However if the patentee can show the Commissioner by 31 December 1998, that trial dates for the Federal Court proceedings have been set and these dates show the trial will occur prior to or in early 1999, for example by the end of February 1999, I direct that the Section 28 hearing be deferred until one month after the decision of the Federal Court in QC 144 of 1997.

The patentee has stated that they expect the trial to proceed in December 1998. Thus the patentee must be expecting to have their evidence ready to file prior to this date They have also stated that their evidence in response to the Section 28 matter is likely to be the same as the evidence filed in the Federal Court case. Hence I expect that they will be well able to file their evidence in response to the Section 28 matter by the end of November. In order to progress the Section 28 matter, I direct GWC to serve its evidence in response by 30 November 1998. I also note that the Commissioner needs to determine whether the material filed on the 15 May 1998 should be the subject of a notice under Section 28(3). It would seem appropriate, if the material is made the subject of a notice under Section 28(3), for the delegate of the Commissioner to consider this material at the same time as the Section 28 hearing.

Costs

It is normal in these circumstances for costs to follow the event. I have decided that the Section 28 hearing should not be deferred. Hence I award costs against the patentee, GWC.

Jodi Lawler
Delegate of the Commissioner of Patents

Patent attorneys for the patentee  :  Intellpro, Brisbane

Patent attorneys for the informant  :  Fisher, Adams, Kelly, Brisbane