Microsoft Corporation v InterTrust Technologies Corporation
[2004] APO 9
•20 April 2004
OFFICIAL NOTICE
DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS
Application : No. 756500 in the name of InterTrust Technologies Corporation
Title: Systems and methods using cryptography to protect and secure computer environments
Action: Opposition under section 59 by Microsoft Corporation and objection to an extension of time to file evidence in answer under regulation 5.10(2)
Decision: Issued 20 April 2004.
Abstract
None of the reasons outlined in the applicant's extension of time application under regulation 5.10(2) provide a satisfactory explanation of the delay in the preparation of evidence in answer. The applicant also failed to provide evidence which indicated any real effort by them in progressing their evidence.
However, their letter of 18 March 2004 in relation to their co-pending regulation 5.10(1) request suggests that the main reason for the delay might be the applicant's belief that amendments currently proposed to the specification would obviate a key novelty citation. While this approach appears to have been misguided, it does demonstrate the applicant's interest in defending their application. In such a case, the public interest lies in dealing with the opposition on its merits. The interests of the applicant and the public in having the hearing determined on its merits outweigh any disadvantages to the opponent in delaying evidence in answer.
The extension of time to file evidence in answer was therefore allowed.
PATENTS ACT 1990
DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS
Re:Patent Application No. 756500 in the name of InterTrust Technologies Corporation, Opposition under section 59 by Microsoft Corporation and objection to an extension of time to file evidence in answer under regulation 5.10(2)
BACKGROUND
Patent Application 756500 (57835/01) was filed on 6 August 2001 in the name of InterTrust Technologies Corporation ("InterTrust") as a divisional application of 36815/97 which in turn claimed priority from US basic application 08/689754 filed on 12 August 1996.
Patent Application 756500 underwent modified examination based on a granted US patent 6,157,721 which is now subject to infringement/revocation action in the United States. The Australian application was advertised accepted on 16 January 2003 and a notice of opposition was filed on 16 April 2004 by Microsoft Corporation ("Microsoft") who served their statement of grounds on 16 July 2003. Evidence in support was completed on 11 November 2003 after the opponent applied for (and was granted) a one month extension of time to complete their evidence. Evidence in answer was therefore initially due on 11 February 2004.
On 11 February 2004, the applicant requested a first three month extension of time until 11 May 2004 to serve their evidence in answer. The opponent objected to this request and the matter was set for hearing in Canberra on 23 March 2004. The opponent was represented by Stephen Burley of counsel instructed by Kim O'Connell and John Stinson of Mallesons Stephen Jaques who appeared by phone. The applicant filed written submissions rather than attend the hearing.
RELEVANT 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:
"(2) 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)):
on the application of a party in the approved form; and
on such reasonable terms (if any) as the Commissioner specifies; and
after the party has served the application on the other party."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'."
These "competing considerations" were also discussed 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:
· The broad discretion afforded by Regulation 5.10 cannot be reduced to insistence on imperative compliance with particular requirements;
· The exercise of this discretionary power requires proper, genuine and realistic consideration of all the relevant aspects that pertain to the application;
· The provision of a satisfactory explanation of the delay is a relevant consideration, but is not mandatory;
· 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;
· The interests of the opponent, the applicant and any other parties are a relevant consideration.
These principles were echoed 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.
APPLICATIONS FOR EXTENSION OF TIME UNDER REGULATION 5.10(2)
In their application for an extension of time to serve evidence in answer under regulation 5.10(2), the applicant provided the following reasons to justify their request:
(a)The opposed application is a large one with a large number of claims. Considerable work is involved in analysing the Opponent's evidence with respect to each of the claims.
(b)The opponent has filed a very extensive and detailed amount of evidence. Considerable work has been involved in analysing this evidence.
(c)After filing the evidence, the Opponent applied to amend its Statement of Grounds and Particulars. Numerous detailed amendments were made to the statement.
(d)Over the past 3 months, the applicant has engaged in substantial efforts in identifying persons suitable for giving expert evidence, and planning evidence in answer. However, further time is required for the Applicant to complete declarations and serve and file the evidence in answer.
CO-PENDING REQUEST FOR AN EXTENSION OF TIME UNDER REGULATION 5.10(1)
On 22 January 2004, the applicant requested a direction under regulation 5.10(1) to extend the time to serve evidence pending the outcome of a request for leave to amend the specification filed on 15 December 2003. I advised the parties on 30 January 2004 that my prima facie view of the amendments were that they were minor and unlikely to affect the case that the applicant has to answer. As a consequence, I advised that a direction under regulation 5.10(1) appeared to be inappropriate but invited the applicant to provide further information on how the amendments would affect their case if they wished to pursue the direction. The applicant responded to my invitation filing further submissions on 18 March 2004 (i.e. shortly before the current hearing).
Because a decision on regulation 5.10(1) will adversely affect one or other of the parties and they have to be given a reasonable opportunity to be heard on the request, I am unable to determine the regulation 5.10(1) request as part of this hearing since there was inadequate time for the Commissioner to respond to the applicant's letter and refer it to hearing. I will deal therefore deal with this request separately once this decision is issued on the current matter.
Having said that, the decisions in Goninan and Ferrocem [supra] require me to consider whether an extension is "appropriate in all the circumstances". According to Goninan, a highly relevant factor in the consideration of regulation 5.10(2) is the relevance of the evidence sought to be adduced. While this issue was not specifically canvassed in the applicant's extension of time under regulation 5.10(2), some of the applicant's points made in relation to the regulation 5.10(1) refer to the "substance of the applicant's evidence in answer". These points are also highly relevant to the current consideration under regulation 5.10(2) and so I have referred to them where relevant in my discussion below. The opponent was provided an opportunity to comment on those points at the hearing.
DISCUSSION
Has there been a satisfactory explanation of the delay?
Even though this is only the first extension of time to serve evidence in answer, the Commissioner still needs to be satisfied that an extension is appropriate in all the circumstances. As the opponent submitted, the regulations prescribe a specific time period for completing evidence in an opposition and the onus is on the party requesting the extension to justify why that extension is required.
The applicant argued that they required an extension of time because the opposed application is a "large one with a large number of claims" and that as a consequence, "considerable work is involved in analysing the opponent's evidence with respect to each of the claims". I note that a lengthy specification is not always a complicated one and will not always involve a "considerable amount of work" as the applicant has alleged. Further, as the opponent noted, there is no evidence that the applicant has done any work analysing the claims and hence there is nothing to show me that the length of specification has actually delayed proceedings. In any event, I do not agree that the opposed specification is unduly long as the applicant has claimed. It is not unusual to have patent specifications with 37 pages of description (excluding drawings) and 41 claims. Given this, I am not satisfied that the length of the specification is a factor that has caused delays in the current case.
The applicant also submitted in their application for an extension of time that the opponent has filed a very extensive and detailed amount of evidence and that "considerable" work has been involved in "analysing" this evidence. I agree that the statement of grounds and particulars (as amended) is unusually long and complicated. There are 25 alleged prior publications and 7 allegations of prior use under the ground of novelty. Under the ground of obviousness, there are 54 pieces of common general knowledge which the opponent alleges are combinable with the 25 prior publications to establish a lack of inventive step. There are also 19 allegations of insufficiency of description and 43 allegations that the claims are not clear or fairly based.
However the applicant did not explain what "considerable work" was involved in "analysing" the evidence. Without such information, I am unable to determine what progress had been made to date in the preparation of evidence in answer. Thus, while I accept the possibility that the complexity of the opposition potentially could have delayed the preparation of evidence, there is no evidence before me that this was a real reason for the current delays. The applicant claimed that they have been engaged in "substantial efforts" in identifying persons suitable for giving expert evidence and "planning" evidence in answer but they failed to substantiate these claims by elaborating what steps they had taken in the intervening period to prepare their evidence, what difficulties they had encountered and what progress they had made to date with the preparation of their evidence.
The applicant also suggested that the amendments to the statement of grounds and particulars delayed their evidence. However, its seems to me that preparation of evidence in answer should have been based on the evidence in support rather than the statement itself. While the opponent might have amended their statement to more accurately reflect their case, this is a matter of "house keeping" and should not have caused any delay in the opposition especially, as the opponent pointed out, many of the changes simplified the opposition.
In any case, the onus is on the applicant to explain how the amendments to the Statement of Grounds and Particulars would have contributed to the delay. The submissions provided by the applicant for the hearing were totally silent on any real progress made by the applicant in preparing their evidence. In fact, there is nothing before me to indicate that the applicant has been diligent in their attempts to prepare evidence. I am therefore not satisfied that the amendments caused the applicant any real problems in the preparation of their evidence and as a consequence, I find that the applicant has failed to provide a satisfactory explanation of the delay in the preparation of evidence in answer.
While this might suggest that the applicant has not been serious to date about preparing their evidence, I also note that the applicant has proposed several amendments to the specification one of which included a cross reference to US patent number 5,982,891 into the specification. The applicant failed to mention the amendments in their application under regulation 5.10(2) and their submissions for the current hearing. However, according to the applicant in their letter of 18 March 2004, this amendment will determine "the substance of the applicant's evidence in answer" and would obviate a novelty objection based on Australian Patent 711,733 (which is the family equivalent to 5,982,891).
Unfortunately, if the applicant had either raised the issue in their application under regulation 5.10(2), responded more timely to our earlier letter or attended the current hearing, these arguments could have been properly clarified before or during the hearing. Based on the material currently before me, I admit I am somewhat perplexed by their argument. As I understand their submissions, the applicant considers the amendment to include a cross reference as addressing a key citation. As a consequence, they believe that their currently proposed amendments are critical to their defence in which case their current lack of progress in the preparation of evidence in answer may not due to a lack of diligence but a lack of certainty in the case they have to answer pending the outcome of the amendments.
In my view, this approach is fundamentally flawed. While I accept that Australian Patent 711,733 is a key citation (and the opponent conceded as much in paragraph 3.3 of their submissions), the type of amendment currently proposed cannot overcome an alleged novelty objection based on that document. I am not aware of any principle under Australian law which allows an applicant to avoid a novelty citation by merely cross referencing a particular piece of prior art in a specification. I therefore cannot see that the amendments as currently proposed have the effect the applicant apparently intended. As a result, their decision to defer their evidence pending the outcome of amendments seems misguided (at least based on the information currently before me).
However, the applicant appears genuinely to believe they are addressing a novelty citation with the proposed amendments. This appears to be a type of "misunderstanding" which was discussed in Race Lotto Pty Ltd v AWA Limited [1998] APO 72. In the Race Lotto case, a genuine misunderstanding was found to justify an extension although further extensions could not be sought based on the same rationale. In the current case, and given that this is only the first extension, I am prepared to give the applicant the benefit of the doubt that they were genuinely trying to avoid the prior art with their currently proposed amendments and while this was not mentioned in their extension of time application, this was the real reason for the delay in evidence in answer.
Interests of the parties
The opponent noted that the corresponding US patent of this case (6,157,721) is also undergoing litigation proceedings in the US. The opponent claimed that the applicant should have been aware of the issues in dispute because of the proceedings in the US which have been on-going since 2002 and therefore delays in the Australian proceedings are both inexplicable and inexcusable.
I am not convinced that the overseas litigation is relevant to the current proceedings. Although US and Australian patent law are similar in some respects, some of the issues pertinent to this opposition are viewed differently in the two jurisdictions. Common general knowledge, for example, has to be assessed as in Australia. This is likely to necessitate different experts than are used in the US proceedings and may lead to a different approach to inventive step. Thus I do not accept that the US proceedings should be expediting matters (but equally I also would not accept that the US proceedings should be delaying the current proceedings either).
I note that it is in the interest of the opponent for any opposition action to proceed without undue delay. However, the opposition is still in its early stages and this application only represents the first application for an extension of time for evidence in answer, I do not believe this represents a serious delay in the overall process and I am not aware of any other special circumstances that would specifically disadvantage the opponent if the present extension were granted.
Clearly the interests of the applicant are in obtaining the extension for them to have the opportunity to serve evidence in answer in the opposition. To date, no evidence in answer has been provided and denying the applicant the opportunity from adducing such evidence would seriously prejudice the applicant's case. On balance, I believe that in this instance the interests of the applicant in having the opportunity to submit evidence in answer outweigh the interests of the opponent. This balance would significantly change if the applicant was not seen to diligently pursue their evidence in any later extension requests.
The public interest
The public interest calls for a balance between the requirements that the Commissioner deals with opposition matters expeditiously and economically and that a serious opposition is dealt with on its merits [see Ferocem Pty Ltd v Commissioner of Patents (supra) and in A Goninan & Co Ltd v Commissioner of Patents (supra)].
In the present case, having some evidence in answer is likely to lead to a more just and correct determination of the opposition. I believe that, on balance, the public interest is best served by granting this extension to allow admission of evidence that is also likely to be highly relevant to the opposition. I also believe that while the applicant's approach to delay evidence pending the outcome of certain amendments appears to have been misguided, they nonetheless appear to be genuinely defending their application. In such a case, the public interest lies in dealing with the opposition on its merits (as per Kaiser Aluminium & Chemical Corporation v The Reynolds Metal Co (1969) 120 CLR 136 at 143).
I am also aware of instances where applicants, having failed to secure extensions of time to serve evidence in answer, have filed a divisional application substantially identical to the opposed application on which the extension was sought, and subsequently withdrawn the opposed application. This means the whole patent application process for the same invention would begin all over again to the serious detriment of an opponent and the public interest. The delay in achieving some certainty about the patentability of the particular invention would usually amount to several years. Filing a divisional application in such circumstances is not in the public interest or the opponent's interests. While this would be a situation where the Commissioner could reasonably entertain an award of costs against the applicant in respect of all actual costs thrown away by the opponent as a result of the applicant's withdrawal of the opposed application regardless of the outcome of the final opposition, the public interest would clearly be adversely affected in a serious way.
DECISION
There does not appear to have been any real progress in the evidence and the applicant failed to establish that they had been diligent in their attempts to prepare such evidence. I am therefore not satisfied that the purported problems referred to by the applicant have impeded the preparation of their evidence as they have claimed. As a consequence, I find that the applicant has failed to provide a satisfactory explanation of the delay in the preparation of evidence in answer in their application under regulation 5.10(2).
However, the applicant's letter of 18 March 2004 in relation to their co-pending regulation 5.10(1) request suggests that the main reason for the delay might be the applicant's belief that amendments currently proposed to the specification would obviate a key novelty citation. As noted above, this approach appears to have been misguided but it does demonstrate the applicant's interest in defending their application. In such a case, the public interest lies in dealing with the opposition on its merits (as per Race Lotto Pty Ltd v AWA Limited [supra]). The interests of the applicant and the public in having the hearing determined on its merits outweigh any disadvantages to the opponent in delaying evidence in answer. I therefore allow an extension of time for the period requested, that is, from 11 February 2004 to 11 May 2004.
Following the principles of Race Lotto [supra], the applicant will not be able to cite the current proposed amendments to justify further extensions under regulation 5.10(2). Further, given the applicant's apparent paucity of detail in the current extension of time application, the applicant would also need to justify any further extensions with specific details of the progress being made in the preparation of their evidence and an indication of when that evidence is likely to be completed.
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.
However, while I have found that the opponent's objection to the extension does not succeed and have allowed the extension, the applicant has not provided a satisfactory explanation for the delays and the opponent's objection was reasonable given the lack of justification provided in the applicant's extension of time request. Consequently, I award costs against the applicant.
Karen Ayers
Delegate of the Commissioner of Patents
20 April 2004
Patent attorneys for the applicant : Phillips Ormonde Fitzpatrick, Melbourne
Patent attorneys for the opponent : Mallesons Stephen Jaques, Sydney
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