Innovia Security Pty Ltd v Visual Physics LLC - [2014] APO 39

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Innovia Security Pty Ltd v Visual Physics LLC [2014] APO 39

Patent Application: 2010226869

Title:Micro-optic security and image presentation system

Patent Applicant:  Visual Physics LLC
Opponent:  Innovia Security Pty Ltd
Delegate:  Matthew Lee
Decision Date:  17 June 2014
Hearing Date:  Written submissions filed on 15 May 2014 and 22 May 2014
Catchwords:  PATENTS – Further evidence – reg 5.10(4) – no change in application of reg 5.10(4) because of Raising the Bar – previous rejection under reg 5.9 does not weigh against application for further evidence – nature and significance of evidence supports further evidence – further evidence allowed.

Representation: Patent applicant: Shelston IP
Opponent:Watermark

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2010226869

Title:Micro-optic security and image presentation system

Patent Applicant: Visual Physics LLC
Date of Decision: 17 June 2014
DECISION
I grant leave allowing Innovia to file the further evidence.
I allow Visual a period of 2 months from the date of this decision to file responding evidence.
Costs are awarded according to Schedule 8 against Visual.
REASONS FOR DECISION
Background

Patent application 2010226869 was filed by Visual Physics LLC (“Visual”) on 30 September 2010 as a divisional of 2004294182. The present application was advertised as accepted on 17 November 2011 and a notice of opposition to the grant of a patent was filed in the name of Securency International Pty Ltd on 17 February 2012. A statement of grounds and particulars was served on 17 May 2012 and the evidence in support completed on 24 May 2013 after several extensions of time were obtained. The opponent advised the Commissioner of its change of name to Innovia Security Pty Ltd (“Innovia”) on 19 March 2013.
On 8 August 2013 Visual filed a request to amend the complete specification together with a request for the Commissioner to stay the opposition proceedings. The latter request was refused. On 22 August 2013 Visual filed a further statement of proposed amendments and it then completed its evidence in answer on 26 August 2013.
On 16 September 2014 Innovia requested a stay of the opposition proceedings pending the outcome of the amendment requests of 8 August 2013 and 22 August 2013. The delegate refused to grant a stay finding that the scope of the proposed amendments did not warrant a delay in the filing of evidence.
Evidence in reply was due by 26 November 2013, and Innovia filed a declaration by Dr Bruce Alfred Hardwick as part reply evidence on 25 November 2013 together with a request for an extension of time of two months for the completion of its evidence. The delegate however was not convinced that an extension was justified and on 29 November 2013 invited Innovia to address the concerns that he had raised. Innovia responded to that invitation on 6 December 2013 and on 16 December 2013 the delegate notified the parties of his intention to refuse the request, subject to the parties requesting a hearing.
On 23 December 2013 Innovia requested a hearing for the extension which was held via written submissions completed on 14 February 2014. On 3 January 2014 Innovia filed a further declaration by Dr Hardwick completing their evidence in reply. The decision for that hearing was issued on 5 March 2014 refusing the extension on the basis that the Deputy Commissioner was not satisfied that the failure to file evidence in reply on time occurred despite Innovia acting promptly and diligently at all times (see Innovia Security Pty Ltd v Visual Physics LLC [2014] APO 15).
On 1 April 2014 Innovia filed a request for further evidence regarding the final declaration by Dr Hardwick, and Visual requested a hearing on the matter on 15 April 2014. Written submissions were received from both parties on 15 May 2014, and submissions in reply were received on 22 May 2014. The request for further evidence is the subject of this decision.
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 “New Regulations”) as they apply to patent oppositions. Pursuant to subregulation 23.36, item 2, an application to file further evidence in this opposition is governed by subregulations 5.10(4) and 5.10(5) as they existed immediately before 15 April 2013 (the “Old Regulations”). This is because the notice of opposition was filed before 15 April 2013. These subregulations state:
(4) The Commissioner may:
(a) on the application of a party; and
(b) on such reasonable terms (if any) as the Commissioner specifies;
permit the party to serve further evidence on the other party.
(5) 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.
Both parties have filed submissions in relation to the application for further evidence and I am therefore satisfied that they have been notified and have made representations concerning this application.
The discretion under subregulation 5.10(4) is broad and should not be limited by an imperative compliance with a particular requirement such as a satisfactory explanation of delay. Rather the discretion should be exercised if it is appropriate in all the circumstances and thus even if a satisfactory explanation of delay is not given it is within the public interest that the nature and significance of the evidence needs to be considered. This follows from the construction of subregulation 5.10(5) by Burchett J in Ferocem Pty Ltd v Commissioner of Patents [1994] FCA 981; 28 IPR 243 at 247 and also by Sackville J in A Goninan & Co Ltd v Commissioner of Patents [1997] FCA 424; 38 IPR 213. The interests of the parties should also be considered (Ferocem at 247, Goninan at 222).
The effect of the Raising the Bar changes
The applicant has submitted that amongst the circumstances that must be considered as per subregulation 5.10(5) the new statutory regime introduced by the Amendment Regulation should be included. The thrust of this submission is that if parties could successfully reintroduce evidence previously refused under regulation 5.9 of the New Regulations as further evidence it would undermine the legislative intent of the Amendment Regulation.
The transitional provisions of the Amendment Regulation make it clear that subregulation 5.10(4) of the Old Regulations is still available to parties where the opposition was commenced before 15 April 2013. For oppositions commencing on or after this date the ability to apply for leave to file further evidence has been removed. No other amendments have been made to the provisions governing the filing of further evidence. This sits in direct contrast to changes to the extension of time test which is explicitly excluded from the scope of the transitional provisions and apply immediately to evidentiary periods (under regulation 5.8) that began on or after the commencement date of the Amendment Regulation. It therefore appears to me that the legislative intent of the amendments, by preserving the further evidence provisions in an unfettered state for oppositions commenced before 15 April 2014, is to continue the operation of 5.10(4) as it had been previously administered, including the tests as previously applied in 5.10(4) matters (for example the tests developed in Ferocem and Goninan above).
As noted above the subregulation 5.10(5) requires that the discretion only be exercised if the Commissioner is reasonably satisfied that the allowing further evidence would be “appropriate in all the circumstances”. Once genuine and proper consideration of each of the circumstances is given any competing factors are weighed against each other. In consideration of the ‘circumstance’ of the Raising the Bar amendments, the key question is this: if evidence that was previously excluded due to the failure of a party to obtain an extension of time under regulation 5.9, should that weigh against any application for that evidence to be filed as further evidence from being granted?
I do not believe so. In my opinion if it was the intention of the legislature to prevent evidence previously excluded by a failure to obtain an extension of time from being introduced as further evidence then I believe such an explicit exception would have been included in the Amendment Regulation. In the absence of such an explicit exception I cannot agree with the applicant’s assertion that allowing such further evidence undermines the legislative intent of the Amendment Regulation. As it stands, there is nothing that can be read into the New Regulations that would provide a negative or positive weight when considering the merits of a further evidence application. The Explanatory Statement accompanying the Amendment Regulation recites an intention to speed up the opposition process by eliminating aspects such as further evidence applications for oppositions commencing on or after 15 April 2013, but is otherwise silent on the operation of the transitional provisions relating to further evidence. As such, I cannot come to a conclusion where the amendments provide weight for or against a further evidence application made under the rules as they have always previously stood.
This is not to say that the reasons for the previous refusal under regulation 5.9 are irrelevant – on the contrary, the reason for the previous refusal should be taken into account when considering the explanation of the delay, and will be dealt with below. However the policy aspects of hastening opposition proceedings which is the basis for some of the amendments in the Amendment Regulation is of no effect on further evidence applications made under the transitional provisions.
Therefore having considered changes introduced in the Amendment Regulation, I believe that it does not exert any influence on whether I should grant or deny leave to Innovia to file further evidence.
The explanation of delay
The need to file further evidence arises from the failure of Innovia to obtain an extension of time to file evidence in reply. That extension was not allowed because the Deputy Commissioner was not satisfied that Innovia had acted promptly and diligently and he also found that there were no exceptional circumstances. However the test of promptness and diligence is not the test to be applied to the further evidence request, and instead I must form a broader view of whether I have been provided with an adequate explanation of the delay in seeking to file the further evidence.
As highlighted by the Deputy Commissioner’s decision at paragraphs 21-24 although some explanations were given for the delay such as Dr Hardwick being unavailable or work performed addressing the amendments proposed by Visual, other matters such as waiting for the outcome of other processes such as submissions to IP Australia or offers to settle with a view to avoiding work as well as significant periods of inactivity proved to be decisive in the eyes of the Deputy Commissioner. In the submissions for the present hearing, no explanation has been provided for these periods of inactivity or any further explanations given for the delay in filing the evidence.
Therefore although not bound by the same tests of promptness and diligence, I am also of the opinion that no satisfactory explanation of the delay has been provided, and this weighs against granting leave to file further evidence.
Nature and significance of the evidence
The nature and significance of the further evidence is apparent as the evidence has already been filed on 3 January 2014. Dr Hardwick’s final declaration is mainly directed towards providing comments on the Radclyffe Declaration filed as part of the evidence in answer. Dr Hardwick’s declaration includes evidence on the state of the art before the priority date, for example at paragraphs 12-13 where Dr Hardwick discusses the development of security features using Moiré magnification with reference to a newly attached exhibit BAH-27, which is a conference paper dealing with security documents using Moiré intensity profiles. Other parts of the declaration appear to refute Mr Radclyffe’s opinion of the common general knowledge in the art and the validity of the claims in light of this common general knowledge. I believe that this information in Dr Hardwick’s declaration is relevant and contains evidence that is likely to be significant to the opposition matter at hand. The nature and significance favours allowing the further evidence.
The interest of both parties
As is often the case the parties have legitimate interests that lie in conflict with each other on opposite sides of the balance. Visual have submitted that the further evidence would cause further time, effort and resources to be expended to respond to the evidence. They also submit that allowing the further evidence would prolong the proceedings. Innovia have submitted that not allowing the evidence would be detrimental to the opponent and would weigh against a correct determination of the opposition on its merits. They also submit that the potential delays in filing further evidence are mitigated as no further delays would be caused by the opponent in preparing the evidence since the evidence has already been filed.
I find that these considerations submitted by both parties are balanced against each another in equal measure.
Balance of the considerations
The nature and significance favours allowing the further evidence, but the explanation of delay does not. As noted above even in the absence of a satisfactory explanation of the delay the discretionary power should be exercised if it is appropriate to do so after consideration of all the circumstances, and on balance, I am of the opinion that the nature and significance of Dr Hardwick’s final declaration outweighs the issues of the delay. Therefore I grant leave to file the further evidence.
I also allow Visual a period of 2 months from the date of this decision to file responding evidence.
Costs
I see no reason to depart from the normal outcome that costs should follow the event. I award costs in accordance with Schedule 8 against Visual.
Matthew Lee
Delegate of the Commissioner of Patents