Hunter Area Pathology Service v Cerner Corporation

[2001] APO 67

OFFICIAL NOTICE

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Application  :          No. 716069 in the name of HUNTER AREA PATHOLOGY SERVICE

Title:          Blood Processing System

Action:          Application for an extension of time by HUNTER AREA PATHOLOGY SERVICE to serve evidence in answer, and an objection thereto by CERNER CORPORATION PTY LTD

Decision:          Issued            .

Abstract

Extension of time from 2 September 2001 to 2 December 2001 granted.

The explanation provided by the applicant in support of its request did not justify an extension.  Furthermore, the conduct of the applicant indicates an apparent lack of diligence in assembling its evidence in answer.

However, the public interest would not be served if the applicant was shut out from filing evidence in answer, and the opposition was not decided on its merits.  Furthermore, there is no evidence to suggest that Cerner would be unduly disadvantaged by the extension being granted.

On balance, an extension of time is warranted.  However, the applicant appears not to have been diligent in gathering its evidence in answer.  If this situation were to continue, then, without a clear indication that significant progress had been made to filing evidence in answer, the Commissioner is likely to be unsympathetic to granting any further extensions.

Costs awarded against Hunter Area Pathology Service.

PATENTS ACT 1990

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Re:Patent Application No. 716069 by Hunter Area Pathology Service; Application for an extension of time by Hunter Area Pathology Service to serve evidence in answer, and an objection thereto by Cerner Corporation Pty Ltd.

BACKGROUND

Patent application 716069 in the name of Hunter Area Pathology Service ("Hunter") was filed on 24 April 1997 as PCT/AU97/00250 for a Blood Processing System.  The application was advertised accepted on 17 February 2000.  On 16 May 2000 notices of opposition were received from Cerner Corporation Pty Ltd ("Cerner") and Crown in Right of the State of Queensland, care of the Department of Health.  As this proceeding only concerns Cerner, I will only make mention of its actions.  Cerner completed service of its evidence in support on 2 March 2001.  Thus the final date for service of evidence in answer was 2 June 2001.  Hunter requested, and was granted an extension of time to 2 September 2001.  On 30 August 2001, Hunter requested another extension from 2 September 2001 to 2 December 2001.  This request was incorrectly filed in the name of DiaMed Pty Ltd.  Upon notification by the Patent Office, Hunter filed a corrected request on 5 September 2001.  On 10 September 2001, Cerner objected to the extension.

The request for the extension of time to file evidence in answer, and the objection thereto, was heard in Canberra on 16 October 2001.  Hunter filed written submissions in support of its objection, and did not appear.  Cerner appeared at the hearing and also supplied written submissions.  Mr Chris O'Sullivan, patent attorney of F B Rice & Co, Balmain, Sydney, represented Cerner.

THE APPLICATION FOR AN EXTENSION OF TIME

The grounds which Hunter relied on for the extension of time are:

"There was a particularly large volume of evidence supplied by Cerner Corporation in their evidence-in-support, much of which appears to have been obtained through a keyword search.  Reading and evaluating each of the prior art documents has proved a time consuming task.  Because Cerner Corporation has relied on their own system in their evidence, it has also been necessary to try to ascertain how the Cerner system operates. Negotiations are presently underway to meet with users of the Cerner system for this purpose.  In view of limited resources these actions have taken longer than may otherwise have been the case thereby delaying the preparation and service of the evidence-in-answer."

On the morning of the hearing, I received a copy of a statutory declaration by Jim Manolios, managing director of DiaMed Pty Ltd ("DiaMed"), Victoria, (filed on 12 October) expanding on the circumstances that lead to the request being filed.  In summary the points he makes are:

a)He has been the managing director of DiaMed for 6 years, and 18 years experience in the diagnostic pathology industry.

b)In 1986 Hunter developed a blood processing system, filed a provisional patent and followed this with a complete application.  DiaMed has a worldwide exclusive licence with Hunter to commercialise the blood processing system and pursue patent applications in the name of Hunter.  As such, he has been involved in instructing the patent attorneys in respect of the present oppositions.

c)DiaMed is a small company of 20 staff.  Only himself and an external consultant, George Lugosi, have the appropriate knowledge to drive the opposition.  George Lugosi has been unavailable due to other matters, and Mr Manolios has found it difficult to take care of two oppositions in light of his other obligations.

d)He has reviewed the evidence filed by Cerner and gained the initial impression that most of the documents filed are irrelevant.  It will take considerably more time to consider the documents in detail, supply comments to the patent attorneys so that they can prepare a draft statutory declaration for him to consider and finalise as evidence in answer.

e)The majority of Cerner's evidence relates to its own blood processing system which is not widely used in Australia, but is more a US-based system.  He considered that the US was the best place to source an expert from.  DiaMed has also tried to bring a US Food & Drug Administration (FDA) consultant in to ascertain the relevance of Cerner's evidence in support to the technology they claim to have FDA approval for.

f)While independent consultants in the blood banking industry are difficult to identify, DiaMed had identified such a consultant who indicated their willingness to offer comment and made initial contact in April 2001.  Due to distance, work and other commitments, immediate briefing and subsequent response has not been possible.

g)A meeting with the consultant was initially arranged to coincide with a planned trip in September 2001.  The trip was cancelled as a consequence of the World Trade Centre terrorist attack.  A new meeting was set for October 2001, but that meeting was suspended pending the outcome of this hearing.  If an extension is granted, the meeting is expected to occur in November 2001.

h)Despite the work already done reviewing the evidence and locating suitable consultants, a significant amount of work is still to be done.  Mr Manolios has done his best to handle two oppositions, find consultants, consider a large number of documents and attend to his usual workload as a managing director.

In his submissions, Mr O'Sullivan stated that I should not take into account the statutory declaration filed with Hunter's submissions.  He stated that the explanation filed with the request for the extension should be relied upon.  While I have some sympathy with this point of view, it is not supported by the case law.  As pointed out in Ferocem Pty Ltd v Commissioner of Patents (1994) 28 IPR 243, a satisfactory explanation is not mandatory. In addition, according to Genita Software plc v The Arbor Software Corporation (1999) 42 IPR 169, the explanation may be made by way of the application itself or in submissions at the hearing. While providing the explanation at the hearing may impact on costs, it cannot be ignored.

I also note here that DiaMed appears to have an exclusive licence for a patent that has not been granted yet.  While I cannot see how such a licence could exist before the patent is granted, Mr O'Sullivan made no mention of this is his submissions, appearing to have no problem with this.  I will proceed on the same understanding.  However, due to the inevitable crossover between Hunter and DiaMed, I shall merely refer to "the applicant" where necessary.

APPLICABLE LAW

According to regulation 5.8(2), the time for serving evidence in answer is three months from the date of service of the evidence in support.  This time may be extended under regulation 5.10(2) which states:

1. The Commissioner may extend the time within which the party may take a step prescribed in this Chapter (not being a step that is taken under regulation 5.3 or 5.3AA, paragraph 5.4(a) or subparagraph 5.8(1)(a)(i)):

   (a)on the application of a party in the approved form;  and

   (b)on such reasonable terms (if any) as the Commissioner specifies;  and

   (c)after the party has served the application on the other party."

This provision must be read in conjunction with regulation 5.10(5):

1. The Commissioner must not give a direction under subregulation (1) or grant an application under subregulation (2) or (4) unless the Commissioner: 

   (a)if he or she proposes to grant an application by a party -  is reasonably satisfied that the other party has been notified of the application; and

   (b)if he or she proposes to act on his or her own motion - ensures that the parties are notified of the proposed action; and

   (c)in either case: 

   (i)gives the parties a reasonable opportunity to make representations concerning the application or proposed action; and

   (ii)is reasonably satisfied that a direction, an extension of time or the serving of further evidence is appropriate in all the circumstances."

Thus the Commissioner, having given both parties the opportunity to make representations, may grant an extension only if reasonably satisfied that it is appropriate in all the circumstances.

Regarding the factors that must be considered in deciding whether or not the Commissioner should grant an extension of time, Burchett J in Ferocem Pty Ltd v Commissioner of Patents (1994) 28 IPR 243 stated:

"The idea that such a broad discretion can validly be reduced by a decision-maker to an insistence upon 'imperative' compliance with particular requirements has repeatedly been rejected by the courts."

He concluded that:

"The determination of an application for an extension of time under reg. 5. 10(2) involves a balancing exercise, in which competing considerations must be taken into account.  There are interests of the persons directly concerned in the application and opposition in question.  There are also public interests, which are not necessarily ranged on the same side.  They include the expeditious disposal of matters in the Patents Office, and questions of costs, of efficiency, and of insistence upon proper professional standards being maintained by those who deal with the office.  But they also include, as Kitto J pointed out in Kaiser Aluminium & Chemical Corporation v The Reynolds Metal Co (1969) 120 CLR 136 at 143, ' the public interest that a serious opposition by a person entitled in fact to oppose the grant of a patent should be dealt with on the merits, rather than it should be shut out in consequence of a failure of procedure, lamentable though the failure may be'. This proposition was cited by Bowen CJ in Vangedal-Nielsen v Smith (Commissioner of Patents) (1980) 33 ALR 144 (at 150), where he also set out some of the considerations involved upon an application for an extension of time."

These considerations were also raised in A Goninan & Co Ltd v Commissioner of Patents (1997) 38 IPR 213 where Sackville J adopted the position that the decision-maker was required to give proper, realistic and genuine consideration to the public interest generally and specifically to the opposition proceeding being determined on its merits. In respect of this point, he stated:

"In order for the Commissioner or his delegate to give proper, genuine and realistic consideration to the aspect of public interest I have identified, it is necessary to consider the nature of the evidence the opponent seeks to adduce and the significance of that evidence for the opposition proceedings. I do not mean to suggest that the evidence has to be scrutinised in the same way as would occur at a hearing on the merits. But unless the delegate forms a view as to the issues addressed by the proposed evidence, and whether that evidence is likely to be important in the opposition proceedings, it is difficult to see how proper consideration can be given to the public interest in having such proceedings being determined on its merits."

The relevant principles developed in these decisions may be summarised as follows:

(a)The broad discretion afforded by Regulation 5.10 cannot be reduced to insistence on imperative compliance with particular requirements;

(b)The exercise of this discretionary power requires proper, genuine and realistic consideration of all the relevant aspects that pertain to the application;

(c)The provision of a satisfactory explanation of the delay is a relevant consideration, but is not mandatory;

(d)The public interest in determining a serious opposition on its merits is a relevant consideration and must be balanced with the requirement that matters before the patent office should be dealt with in an efficient, orderly manner and not be unduly prolonged;

(e)The interests of the opponent, the applicant and any other parties are a relevant consideration.

These principles were echoed in the more recent decision in National Starch & Chemical Company v Commissioner of Patents [2001] FCA 33.

I will apply these general principles from the above cases to the present facts, recognising that I must not either grant the extension or refuse it without giving proper consideration to all, relevant circumstances.

RELEVANT CONSIDERATIONS

Explanation of the Delay

The explanation filed with the current request essentially states that:

a)reading and evaluating the large volume of prior art documents provided in the evidence in support has been time consuming;

b)as Cerner's evidence relies heavily on its own system, it has been necessary to ascertain how this system works,  To that end, negotiations are under way to meet with users of the system; and

c)the limited resources have delayed these actions.

I will deal with these individually.

Volume of Evidence

Regarding volume of evidence in answer, Mr O'Sullivan denied that the volume filed by Cerner was high.  He pointed out that there were only 30 prior art documents, which he stated were not novelty destroying but were "insurance, in case something came out of them later", 3 declarations going to prior use and one by Mr O'Sullivan himself, to put the citations into evidence.  Mr O'Sullivan stated that the evidence could not be considered to be of any considerable volume, and directed me to Steel Foundations Ltd v Soiltest Australia Pty Ltd [2001] APO 4, which said that 85 documents is not considered excessive. Mr O'Sullivan also took me to the first request for an extension of time, which indicated that the attorneys and the applicant had conducted an initial review of the evidence in support, and an analysis had been prepared. Thus, at this point, they had read the evidence.

The applicant pointed out that there were two oppositions running at this time.  They submitted that, as the two oppositions followed similar time frames and because it was "logical to have an understanding of the entire case", the evidence in support of each opposition had to be considered at the same time.  Thus, because the total quantity of evidence is relatively large, this has been a time consuming task.

It is not easy to say with certainty what is or is not voluminous as far as evidence goes.  To put a number on it is difficult.  While I note Mr O'Sullivan's comment on Steel Foundations Ltd (supra), I note that the hearing officer in that case said that 85 was not excessive because of "the applicant's likely familiarity with many of them".  I do not know if this is the case here.  While 30 documents and 4 declarations, on the face of it, does not seem excessive, this is not certain.  Mr O'Sullivan made the point that the fact that there is another opposition should be discounted.  I disagree.  I cannot see how it can be separated since it is bound to have an impact.  It is one of the circumstances that must be taken into account in considering whether to grant an extension.

However, I note that the same reason was raised in the applicant's last request for an extension of time to serve evidence in answer.  I also note that, at that time, an "initial review" had been conducted, and an analysis prepared.  Turning to the current request, I note in Mr Manolios's declaration that he states that he has reviewed the documents and that it will take more time "to consider the documents in detail".  This suggests to me that between the first extension, when an initial review had been done, and this extension, little, if any, detailed review of the evidence in support has occurred.  There was nothing in the explanation advanced for the current extension to indicate that the applicant had done anything more than review the evidence in support.  In this respect I disagree with the applicant's submission that the details provided are "not merely cursory or unsupported assertions" and "substantial".  While Mr Manolios has filed a declaration as evidence in answer setting out the results of his review of Cerner's patent documents, it is, as he indicates in his declaration for this proceeding, not in any great detail.

The applicant has now had the evidence in support, for both oppositions, for at least 6 months.  In my opinion, this would be more than enough time to review it in detail, even if the total evidence filed was voluminous.  Thus, the reason advanced, by itself, does not justify an extension of time.

Experts

Regarding the identification of relevant experts, the applicant states that they sought to source an appropriate expert from the US since that was where Cerner's system was well established.  They submitted that an expert was identified and an initial contact was made in April 2001 to confirm the availability and willingness of the expert to comment.  The expert had indicated a willingness to comment.  However, due to the distance between Australia and the US, as well as other professional commitments, an immediate briefing and response thereto had not been possible.  Mr Manolios had planned to meet with the expert in September 2001.  Mr Manolios was also attempting to bring in an FDA consultant to discuss certain aspects of Cerner's system.  This meeting was cancelled as a result of the terrorist attacks in America and rescheduled for October 2001.  That meeting was then postponed until the outcome of this hearing is known.  They submitted that, if the extension is granted, the meeting is likely to take place in November 2001.

Mr O'Sullivan made submissons that to source an expert in the US to argue a prior use in Australia was inappropriate.  This, he submitted, highlighted the incorrect analysis that the applicant had performed.  While this may or may not be correct, it is not for the opponent to decide how the applicant should go about the defence of its application.  The fact that Mr O'Sullivan didn't agree with what the applicant was doing does not impact here. 

Notwithstanding the above, the applicant's submission presents several problems to me, which Mr O'Sullivan also alluded to.  Firstly, the applicant clearly states that an expert was identified and contacted in April 2001.  It is not clearly stated whether this was the same expert mentioned in its first extension request or not.  In any case, there is absolutely no evidence of any other contact with this expert from April to September.  I would have thought that, given the deadline of 2 September 2001 in which to file evidence in answer, there would have been some other contact during this time to secure the expert's services and begin the preparation of evidence in answer, rather than waiting for a face to face meeting.  A deliberate decision to wait until the end of the period before even meeting the expert indicates a lack of diligence by the applicant in assembling its case.  While face to face meetings are helpful, I find it hard to believe, in this era of electronic communication that geographical separation makes briefing the expert, and the expert's response, impossible.  In addition, while other commitments do impact, it is still the responsibility of the applicant to make suitable arrangements to achieve the timeframes required by the regulations.  Secondly, while the terrorist attacks in America would have certainly disrupted travel plans, these attacks occurred after the final date for filing evidence in answer was to expire.  Generally, extensions of time are granted because of circumstances that arose before the time limit expired.  Effectively, the applicant is asking for an extension of time because of something that happened after the time expired.  Finally, the applicant has not demonstrated that the evidence in answer would be complete within the extension sought.  As the applicant submitted, any meeting between Mr Manolios and the expert will not take place until November.  This would be only one month before the extension being sought expired.  Indeed, it would appear that, even if this extension were granted, another extension would most likely be needed.

While securing the services of an expert is often time consuming and may give rise to circumstances which justify an extension of time, deliberately delaying this process, as the applicant appears to have done, does not.  Indeed, it is totally contrary to the reason for, and spirit of, regulation 5.10.  This reason does not justify an extension of time.

Resources

The applicant has made much of the fact that it has limited resources to devote to the oppositions.  The applicant's submissions pointed out the size of DiaMed, and the commitments of Mr Manolios, have meant that the tasks required to be completed have taken longer than expected.

In Vision Systems Ltd v Airsense Technology Ltd [1999] APO 61, the hearing officer said:

I consider it credible that if the applicant is a small company with limited resources the applicant may well find it challenging to organise the defense of its patent application and to identify and obtain evidence from skilled people in the art.  I do not consider though, that this reason is an adequate justification on its own for failing to complete service of evidence in answer during the previous extended period.

I agree.  It does not appear to me that the applicant has had considerable difficulties in persuading an independent expert to provide evidence on its behalf.  They appear to have clearly identified one and that there were others that they would contact.  As I noted above, it seems that the applicant has not made any further effort to review the evidence in support, and complete its evidence in answer during the previous extended period.  They appear to have not needed to allocate extra resources to find more experts, or to allocate resources for a detailed review of the evidence in support.  Rather, the applicant appears to have directed its resources to other tasks, to the point of not putting any resources into the opposition.  Limited resources or not, this is not acceptable.  The tardiness shown in relation to review the evidence in support as well as in securing the services of an expert counts against their claim of lack of resources.

In addition, while DiaMed's resources may be limited, the question has to be asked, why not use Hunter's resources?  As the actual applicants for the patent application, presumably they also have the expertise to review documents or locate experts.

I do not consider this reason justifies an extension of time.

Conclusion

The overwhelming impression that I am left with is that the applicant has not been diligent in preparing its evidence in answer.  I consider that the explanation given, including the submissions and declaration made by the applicant, does not justify an extension of time.

The Public Interest

The Commissioner has a duty to ensure that an opposition "does not take longer than was absolutely necessary".  In Genetics Institute Inc v Kirin-Amgen Inc (1999) FCA 742, the Federal Court clearly directed that opposition proceedings should be a swift and economical means of settling disputes.

The public interest requires a balancing act.  In Ferocem (supra) and Goninan (supra) it was stated that the public interest lies in a serious opposition being determined on its merits.

It is in the public interest that, while oppositions should be dealt with expeditiously, a serious opposition by a person entitled in fact to oppose the grant of a patent should be dealt with on its merits, rather than be shut out as a consequence of a failure of procedure, lamentable though the failure may be.  It also follows from National Starch (supra), where it was said:

"By failing to consider the significance of the evidence in respect of which the extension of time was sought in the context of the patent specification, the grounds of opposition and the particulars of the grounds and the material which had already been filed, the delegate failed to give proper, genuine and realistic consideration to the significance of that evidence, which had a flow on consequence in relation to the consideration of the public interest in determining a serious opposition on its merits."

that the nature and significance of the evidence being adduced is a relevant consideration. 

In this case, it is difficult to say what the evidence in answer will be.  Only one declaration has been filed and that merely sets out an initial review by Mr Manolios of the documents raised by Cerner.  However, the evidence in support clearly indicates a serious opposition.  In such circumstances, the public interest generally supports an extension, so that serious oppositions can be dealt with on its merits.  Nevertheless, expeditious handling of an opposition is also to be considered.  The actions of the applicant in this case throw doubt on whether such expeditious handling will occur.  As I noted above, it is highly likely that the applicant will need another extension after the one currently requested.

However, on balance, I believe that the public interest supports the extension due to the seriousness of the opposition.

Interest of the Parties

Mr O'Sullivan submitted that if the applicant's patent were granted, the applicant would be free to "tell the world" that Cerner's products infringed its patents.  He also submitted that the applicant could say now that they have a patent that was going to be granted, and Cerner's products were going to infringe it.  This would have a serious impact on Cerner, and it is unfair to leave Cerner in that situation for an uncertain period of time.  The time needed to be fixed so that "it doesn't go on forever".

The applicant submitted that they would be shut out.  They submitted that if I were to refuse the extension this would prevent them filing substantial evidence in answer, and they would be reduced to submissions at a substantive hearing.  They also submitted that since DiaMed wanted to commercialise its invention, both Hunter and DiaMed had a significant commercial reason to defend the application.

Clearly the interests of the applicant are in obtaining the extension in order to serve its evidence in answer.  While it is true that the interests of Cerner are clearly in not having the present proceedings delay the substantive opposition, and that Cerner may be disadvantaged, I am not aware of any special reasons, and Cerner did not provide any evidence to suggest the contrary, which would specifically disadvantage them if the present extension were granted.  In regard to Mr O'Sullivan's submissions, while commercial interests might play a part in deciding whether or not to oppose an application, they are not necessarily determinative.  In balancing the interests of the parties in this proceeding, the commercial interests of Cerner do not outweigh a three month extension to allow the applicant to prepare and file evidence in answer, and thereby have the opposition being determined on its merits.  Furthermore, if the extension was not granted this leaves Cerner in the advantageous position of having all its evidence filed.  The facts suggest that the applicant would be prejudiced if I were to refuse the extension and not allow filing of evidence in answer.

On balance, I believe the interests of the applicant in having the opportunity to present evidence in answer, outweighs the interests of Cerner in this instance.  I am mindful that I should give due consideration to the undue delay of the substantive opposition.  However, this is just one consideration, and is not, in my opinion, the overriding one in the present circumstance.

CONCLUSION

I find that the reasons advanced by the applicant do not make out a proper case in its application for an extension of time.  However, such an extension is in the public's interest since, if the extension was not allowed, the applicant would be shut out from filing evidence in answer, and the opposition would not be decided on its merits.  Furthermore, there is no evidence to suggest that Cerner would be unduly disadvantaged by the extension being granted.

Consequently, I am reasonably satisfied that an extension of time is appropriate in all of the circumstances.  I therefore allow the extension of time for the period requested, that is, from 2 September 2001 to 2 December 2001. 

However, I take this opportunity to note that it appears to me that the applicant has not been diligent in gathering its evidence in answer.  If this situation were to continue, then, without a clear indication that significant progress had been made to filing evidence in answer, the Commissioner is likely to be unsympathetic to granting any further extensions.

COSTS

The power to award costs is based on section 210 and regulation 22.8.  The normal practice is that costs should follow the event.

In this case, while I have granted the extension, it has been in spite of the lack of a satisfactory explanation from the applicant, and an apparent lack of diligence on the applicant's behalf to assemble its evidence in answer.  Such circumstance, I believe, should lead to a variation of the normal practice.

Therefore, I award costs against Hunter Area Pathology Service.

GREG POWELL
Delegate of the Commissioner of Patents

Patent attorneys for the applicant  :  Allens Arthur Robinson, Melbourne

Patent attorneys for the opponent   :  F B Rice & Co, Balmain