O'Callaghan v Genovese
[2005] WASC 161
O'CALLAGHAN & ANOR -v- GENOVESE & ANOR [2005] WASC 161
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 161 | |
| Case No: | CIV:2115/2003 | 29 APRIL 2005 | |
| Coram: | MASTER NEWNES | 22/07/05 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Portion of costs payable by plaintiffs, otherwise no order as to costs | ||
| B | |||
| PDF Version |
| Parties: | EUGENE PATRICK O'CALLAGHAN JOAN GERALDINE O'CALLAGHAN GAETANO GENOVESE MARIA GENOVESE |
Catchwords: | Practice and procedure Application by plaintiffs to discontinue Whether defendants entitled to costs of the action Relevant principles Turns on own facts |
Legislation: | Patents Act 1952 (Cth), s 105 Patents Act 1990 (Cth), s 138 Rules of the Supreme Court, O 1 r 4A, O1 r 4B Statute of Monopolies, s 6 |
Case References: | Edwards Madigan Toorzillo Griggs Pty Ltd v Gloria Stack & Ors [2003] NSWCA 302 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1998) 81 ALR 397 Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 Re The Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Rizal v Minister for Immigration and Multicultural Affairs [1999] FCA 334 White v Overland [2001] FCA 1333 Woodbridge Foam Corporation v Afco Automotive Foam Components Pty Ltd [2002] FCA 883 American International Group Inc v London American International Corp Ltd [1982] FSR 441 Australian Securities Commission v AustHome Investments Ltd (1993) 44 FCR 94 Blay v Pollard & Morris [1930] 1 KB 628 Bond Media Limited v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82 Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 Chen v Karandonis [2002] NSWCA 412 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876 Craig v The Queen (1933) 49 CLR 429 Dare v Pulham (1982) 148 CLR 658 Decor Corporation Pty Ltd v Dart Industries inc (1998) 13 IPR 385 Furr v CD Truline (Building Products) Ltd [1985] FSR 553 Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469 Harriman v The Queen (1989) 167 CLR 590 MacRae Knitting Mills Ltd v Lowes Ltd (1936) 55 CLR 725 O'Neill v Mann [2000] FCA 1680 Populin v HB Nominees Pty Ltd (1982) 41 ALR 471 Pulham v Dare [1982] VR 648 Re Malley SM; Ex parte Gardner [2001] WASCA 83 Ready v Brown (1968) 118 CLR 165 Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 49 IPR 225 Smith v Carbone Bros Pty Ltd, unreported; FCt SCt of WA; Library No 960369; 17 July 1996 Water Board v Moustakas (1988) 180 CLR 491 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
JOAN GERALDINE O'CALLAGHAN
Second Plaintiff
AND
GAETANO GENOVESE
First Defendant
MARIA GENOVESE
Second Defendant
Catchwords:
Practice and procedure - Application by plaintiffs to discontinue - Whether defendants entitled to costs of the action - Relevant principles - Turns on own facts
Legislation:
Patents Act 1952 (Cth), s 105
Patents Act 1990 (Cth), s 138
(Page 2)
Rules of the Supreme Court, O 1 r 4A, O1 r 4B
Statute of Monopolies, s 6
Result:
Portion of costs payable by plaintiffs, otherwise no order as to costs
Category: B
Representation:
Counsel:
First Plaintiff : Mr D H Solomon
Second Plaintiff : Mr D H Solomon
First Defendant : Mr D W Thompson
Second Defendant : Mr D W Thompson
Solicitors:
First Plaintiff : Solomon Brothers
Second Plaintiff : Solomon Brothers
First Defendant : Phillips Fox
Second Defendant : Phillips Fox
Case(s) referred to in judgment(s):
Edwards Madigan Toorzillo Griggs Pty Ltd v Gloria Stack & Ors [2003] NSWCA 302
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1998) 81 ALR 397
Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284
Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116
Re The Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
Rizal v Minister for Immigration and Multicultural Affairs [1999] FCA 334
White v Overland [2001] FCA 1333
Woodbridge Foam Corporation v Afco Automotive Foam Components Pty Ltd [2002] FCA 883
(Page 3)
Case(s) also cited:
American International Group Inc v London American International Corp Ltd [1982] FSR 441
Australian Securities Commission v AustHome Investments Ltd (1993) 44 FCR 94
Blay v Pollard & Morris [1930] 1 KB 628
Bond Media Limited v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82
Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183
Chen v Karandonis [2002] NSWCA 412
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876
Craig v The Queen (1933) 49 CLR 429
Dare v Pulham (1982) 148 CLR 658
Decor Corporation Pty Ltd v Dart Industries inc (1998) 13 IPR 385
Furr v CD Truline (Building Products) Ltd [1985] FSR 553
Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469
Harriman v The Queen (1989) 167 CLR 590
MacRae Knitting Mills Ltd v Lowes Ltd (1936) 55 CLR 725
O'Neill v Mann [2000] FCA 1680
Populin v HB Nominees Pty Ltd (1982) 41 ALR 471
Pulham v Dare [1982] VR 648
Re Malley SM; Ex parte Gardner [2001] WASCA 83
Ready v Brown (1968) 118 CLR 165
Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 49 IPR 225
Smith v Carbone Bros Pty Ltd, unreported; FCt SCt of WA; Library No 960369; 17 July 1996
Water Board v Moustakas (1988) 180 CLR 491
(Page 4)
1 MASTER NEWNES: This is an application by the plaintiffs for leave to discontinue the action. The only issue on the application is by whom the costs of the action should be borne. The plaintiffs seek an order that they pay the defendants' costs for the period 21 May 2004 to 1 February 2005 to be taxed, the defendants pay the plaintiffs' costs of this application to be taxed, and otherwise there be no order as to costs.
2 The defendants seek an order that the plaintiffs pay the defendants' costs of the action in their entirety on the basis that the defendants acted unreasonably and improperly in commencing and continuing this action in circumstances where the action could never have succeeded. The defendants seek costs on an indemnity basis, maintaining that the plaintiffs must have known from earlier communications that by reason of prior art the claim as pleaded could not succeed.
3 The proceedings were commenced by the plaintiffs on 16 September 2003, claiming an order pursuant to s 138 of the Patents Act 1990 (Cth) revoking the defendants' patent number 724027 and an order rectifying the register, an injunction restraining the defendants from infringing the plaintiffs' patents, delivery up by the defendants of anything in their possession which would infringe the plaintiffs' patents, and damages for infringement, for breaches of the Fair Trading Act and for passing off. The claims for breach of the Fair Trading Act and for passing off were subsequently abandoned.
4 The amended statement of claim is dated 29 March 2004. It was filed and served following a successful application by the defendants to strike out the original statement of claim, primarily on the ground that the original statement of claim did not plead the essential integers of either the plaintiffs' or the defendants' patent.
5 In the amended statement of claim, the plaintiffs plead that since 21 June 1982 they have carried on business in partnership, manufacturing and supplying to the public devices for controlling access to access ways and restricted areas. Since 9 January 1985 the plaintiffs have manufactured and sold a pivotal bollard under two patents granted to the plaintiffs. Since 27 September 1993 they have manufactured and sold a removal bollard under a patent and, since 19 April 1991, they have manufactured and sold a retractable bollard under a patent. They have granted licences in respect of each of the patents. The plaintiffs say that, since January 1982, they have established significant and valuable good will in the business and the patents.
(Page 5)
6 The plaintiffs plead that their fourth patent, in respect of the retractable bollard, was filed on about 10 July 1989 and has a priority date of 19 April 1991. The complete specification was published and became open for public inspection on 12 November 1992. The complete specification contains the claims defining the invention. The patent was sealed on 27 May 1994. The plaintiffs plead in par 25A of the amended statement of claim that the essential integers of the patent are:
"(a) an outer tubular casing;
(b) a barrier member being movable within the casing;
(c) a means for locking the barrier member into a fixed position."
7 The plaintiffs plead that the patent is valid, subsisting and of full force and effect.
8 The first defendant is the owner of a patent for a form of bollard. The priority date of the patent is 13 November 1997 and the specification was published and became open for public inspection on 6 March 1999. The patent was sealed on 17 July 2003.
9 The plaintiffs plead that the essential integers of the defendants' patent are:
"(a) a base section;
(b) a body being movable within the base section; and
(c) a latch means for fixing the body into position."
10 The plaintiffs plead that the defendants' invention lacks novelty. It is alleged by the plaintiffs that the essential integers of the defendants' patent are the same as the essential integers disclosed in the prior art base. Alternatively, to the extent they are not the same, the other essential integers are merely mechanical or workshop equivalents of the essential integers of the prior art base. Accordingly, it is alleged, the invention the subject of the defendants' patent claims is not novel and is not a patentable invention.
11 The plaintiffs also plead obviousness, alleging that at the defendants' priority date, the invention, the subject of the defendants' patent claim, would be obvious to a person skilled in the relevant art, having regard to the common general knowledge of such a person.
(Page 6)
12 The plaintiffs further plead that the invention does not involve an inventive step and/or is not a manner of new manufacture within s 6 of the Statute of Monopolies. It is therefore not an invention within the meaning of the Patents Act. The plaintiffs also plead that the defendants' patent claims do not define an invention within the meaning of the Act.
13 The plaintiffs allege that the defendants' patent is, and has always been, invalid.
14 The plaintiffs plead that the first defendant has assigned his right and title to the patent to the first defendant and the second defendant jointly, alternatively, has licensed the first defendant and the second defendant jointly, or permitted the second defendant either jointly or in common with the first defendant, to exploit the patent.
15 It is alleged that, since 13 November 1997, the defendants have exploited a retractable or submersible bollard under the name "BOSS submersible bollard", manufactured in accordance with the defendants' patent, and have thereby infringed the plaintiffs' patent.
16 The defendants, by their amended defence dated 7 May 2004, deny, or do not admit, the material allegations regarding the plaintiffs' patents. The defendants deny that the plaintiffs' patent is valid and deny the essential integers of the plaintiffs' patent as pleaded in par 25A of the statement of claim. The defendants say that the art base relevant to the plaintiffs' patent at the alleged priority date included a German patent specification which was made publicly available for inspection within Australia on 5 January 1987 and an Australian patent specification (the "Calhaen specification") which was publicly available in Australia on 6 December 1979. The defendants plead that the inventions claimed in those specifications each possess all of the essential integers pleaded in par 25A of the statement of claim.
17 The defendants therefore plead that, at the priority date, the integers pleaded in par 25A of the statement of claim were not novel.
18 The defendants deny that the invention claimed in the defendants' patent consists of the matters pleaded in the statement of claim and say that the invention claimed by the defendants is the invention disclosed in the claims of the complete specification of the defendants' patent. The defendants also deny that the essential integers of the defendants' patent are as pleaded by the plaintiff and say that they are as set out in the schedule to the defendants' defence.
(Page 7)
19 The defendants deny that the essential integers of the defendants' patent are the same, or materially the same, as the prior art base. In particular, the defendants say that the prior art base did not include a catch means and an elongate member interconnecting a locking means and latching means, used in the context of retractable bollards of the kind, or in the configuration, in the claims of the defendants' patent.
20 The defendants admit they have manufactured a bollard pursuant to their patent, known as the "BOSS Submersible Bollard", from a date shortly after 13 November 1997, but no later than December 1997. But the defendants deny that in doing so they have infringed the plaintiffs' patent.
21 The circumstances leading up to the plaintiffs' application for leave to discontinue are set out in the affidavit of the first plaintiff, sworn on 23 March 2005. The plaintiffs are husband and wife. Mr O'Callaghan says that the defendants applied to patent an invention of a retractable bollard (the "Genovese Submersible Bollard") long after the patent for the retractable bollard, known as the "Oakal Retractable Sentry", had been granted to the plaintiffs. He says the plaintiffs originally opposed the grant of the patent for the Genovese Submersible Bollard ("GSB"), but withdrew their opposition and instead decided to wait to see if the defendants proceeded to sell the GSB, or alternatively to investigate a commercial resolution with the defendants concerning the novelty of the GSB.
22 It turned out that no commercial resolution was reached and the defendants commenced selling the GSB. These proceedings were then commenced by the plaintiffs.
23 Mr O'Callaghan says in his affidavit that he was unaware of either the German specification or the Calhaen specification until they were sent to the plaintiffs' solicitors on 7 May 2004. He believed that the plaintiffs' invention was unique but that the defendants' was not.
24 Mr O'Callaghan says that he was admitted to hospital in November 2004 after suffering a mild stroke. He was subsequently diagnosed with stomach cancer and is undergoing treatment for that. Mr O'Callaghan says he believes that the plaintiffs have a strong case but in view of his health and the expense involved in what ultimately may be a process by which the parties simply provide a benefit for others, the plaintiffs no longer wish to continue the action. The last, somewhat enigmatic, statement was explained by counsel for the plaintiffs to mean that, in light
(Page 8)
- of the German and Calhaen specifications, the ultimate outcome of the proceedings may simply be to establish that neither the plaintiffs nor the defendants have the protection of a valid patent.
25 Mr O'Callaghan has annexed to his affidavit correspondence between the solicitors for the parties, commencing in October 2003. It appears from that correspondence that on 20 October 2003, the defendants' solicitors wrote to the plaintiffs' then solicitors conveying an offer by the defendants to settle the matter on the basis that the plaintiffs discontinue the action and each party bear their own costs. The defendants' solicitors said the plaintiffs were unlikely to be able to establish any case along the lines of that pleaded in the statement of claim. It seems that nothing came of the settlement proposal.
26 On 7 May 2004, the defendants' solicitors wrote again to the plaintiffs' solicitors enclosing a copy of the defendants' amended defence of that date. In that letter, the defendants' solicitors complained that the statement of claim did not plead what the plaintiffs said were the essential integers of the defendants' invention. The letter also enclosed two prior art publications not mentioned in the statement of claim. One was the Calhaen specification. The other was the German specification, which the defendants' solicitors noted should come as no surprise to the plaintiffs as, the solicitors say, it was specifically mentioned to Mr O'Callaghan and the plaintiffs' patent attorney in the Patent Office opposition proceedings. The defendants' solicitors went on to say that if the essential integers of the plaintiffs' invention were as pleaded, then the enclosed prior art demonstrated that the plaintiffs' invention lacked novelty and would entitle the defendants to counterclaim for revocation of the plaintiffs' patent on that basis.
27 A letter was sent to the plaintiffs' new solicitors on 25 August 2004 seeking a response to the letter of 7 May 2004. The plaintiffs' solicitors responded by letter of 6 October 2004, in which they proposed an amendment to the pleading in relation to the essential integers of the defendants' invention. In relation to the plaintiffs' patent, they said that the German specification was not translated from the original German and reliance solely on the diagrams in it was meaningless. They also said that the essential integers of the plaintiffs' invention must be considered in the light of the evidence and the terms of the plaintiffs' patent. Once that was done, the invention was clearly novel. The plaintiffs' solicitors said that the comments of the defendants' solicitors regarding the prior art base seemed to suggest that neither the plaintiffs nor the defendants had an invention capable of sustaining a valid patent and observed that there
(Page 9)
- would be little point in either side expending time and money establishing that. They enquired as to the defendants' position on settlement.
28 On 10 November 2004, the defendants' solicitors proposed that the action be settled on the basis that the plaintiffs pay to the defendants the sum of $55,000, discontinue the action and enter into a deed covenanting not to re-agitate any of the issues in the action. That offer was rejected, as was a counter-offer made by the plaintiffs. Further negotiations between the solicitors came to nothing.
29 The plaintiffs' position is that (without conceding its liability to do so) it is prepared to pay the defendants' costs from the time the Calhaen specification was disclosed by the defendants by their letter of 7 May 2004. They say that an additional 14 days after that would be a reasonable time for an assessment of the specification to be made and the potential difficulties with the plaintiffs' case, in the light of it, recognised. They therefore propose that the plaintiffs pay the defendants' costs from 21 May 2004.
30 The defendants do not accept that. The defendants seek an order that the plaintiffs pay the defendants' costs of the action in their entirety on the basis that the defendants acted unreasonably and improperly in commencing and continuing this action in circumstances where the action could never have succeeded, and the defendants seek costs on an indemnity basis, maintaining that the plaintiffs must have known by reason of prior art and correspondence with the Patent Office that the claim as pleaded could not succeed. It was submitted on behalf of the defendants that where a plaintiff seeks to discontinue an action which obviously cannot succeed, or where the defendant has a clear and valid defence, the Court should order the plaintiff to pay the defendant's costs of the whole action because the defendant has in effect succeeded in defeating the plaintiffs' claim.
31 The defendants say their patent attorney drew the plaintiffs' attention to the existence of prior art in the opposition proceedings. In addition, the Patents Office had referred to prior art in rejecting two earlier applications by the plaintiffs for a patent for a retractable bollard. They say the essential integers pleaded in the statement of claim in respect of the current patent are precisely the same as the first specification which was rejected by the Patent Office on the basis of the existence of prior art. The further integer, the locking mechanism, which was included in the description of the invention for which the patent for the retractable bollard
(Page 10)
- was ultimately granted to the plaintiffs, is not pleaded in par 25A of the statement of claim.
32 In an affidavit sworn on 18 April 2005, the defendants' patent attorney, Mr Neal Holliday, says that at some time prior to June 2003, in connection with the opposition proceedings, he had a telephone conversation with Mr O'Callaghan. Mr Holliday says that in the course of that conversation he told Mr O'Callaghan that he (Mr Holliday) had documents that were published in Australia prior to the date of the plaintiffs' patent showing a submersible bollard. Mr Holliday says he told Mr O'Callaghan that he did not consider the plaintiffs were entitled to protection over any submersible bollard, but only over their particular version of the submersible bollard. Mr Holliday says the documents to which he referred was the German specification, but he does not say that he identified the documents to Mr O'Callaghan.
33 The first plaintiff does not accept that that conversation took place.
34 In an affidavit sworn on 18 April 2005, the first defendant says that after these proceedings were commenced by the plaintiffs he was considering instructing the defendants' solicitors to file a counterclaim for revocation of the plaintiffs' patent on the basis that the essential features had all appeared in the prior art. He said he was aware of the German specification, but thought there might be other material that the defendants could rely on. He recalled that during the opposition proceedings he had seen a relevant patent specification. He therefore made searches and found the Calhaen specification. That was provided to the plaintiffs' solicitors on 7 May 2004.
35 The defendants submit that it is plain the plaintiffs' case had no prospect of success. The plaintiffs' patent specification contains four claims. Claims 2 and 3 are dependent upon, and incorporate, claim 1. Claim 4 is an omnibus claim to be construed by reference to the diagram provided with the specification. The relevant claim is claim 1, which claims "a device for controlling access to access ways" and sets out four integers. Each of the integers is essential. The relevant prior art discloses inventions comprising, or incorporating, integers, 1 to 3, such that those integers taken together, and in the absence of integer 4, do not disclose a novel or inventive device. They cannot form an invention for the purposes of the Act.
36 A comparison of the claims of the original version of the plaintiffs' specification (which was rejected by the Patent Office), and the claim of
(Page 11)
- the specification as published, shows that, in effect, the original specification was amended prior to grant by, relevantly, the addition of the fourth integer. It is clear that had occurred because the Patent Office had concluded that the original claim could not stand on its own as an invention for the purposes of the Act. The first report of the Patent Office examiner states that the original claim is not novel or inventive in light of the prior art, to which he refers. That was repeated in a subsequent examiner's report. In his response to that second report, Mr O'Callaghan says that the amendments made to the original version of the plaintiffs' specification "clearly distinguish [the plaintiffs'] invention from the prior art cited". That is, the defendants contend, Mr O'Callaghan conceded that the original claim, which did not include the fourth integer, did not disclose an invention that was novel or inventive.
37 The defendants say that, nevertheless, the invention the plaintiffs have pleaded in this action, comprising the three integers set out in par 25A of the statement of claim, is the same as the original claim. In doing so, the plaintiffs, have pleaded, in effect, only the first three integers of the plaintiffs' patent and have alleged that the plaintiffs have taken their invention by taking those integers. The pleading does not plead in par 25A the fourth integer, the locking means being accessed through a passage passing through the retractable member. I should interpolate that that feature is, however, arguably referred to in par 20(b) of the statement of claim, which describes the plaintiffs' patent.
38 The defendants therefore say that on the basis of the integers pleaded in the statement of claim, the plaintiffs' claim is plainly unsustainable because it is clear from the prior art that the invention was not novel. For that reason the plaintiffs had previously been refused a patent for such an invention. On the other hand, when regard is had to the four integers which do comprise the plaintiffs' invention which is the subject of the patent, it is clear that the defendants' product does not infringe because it does not have the fourth integer. In order to infringe a patent, all the integers must be present in the infringing article.
39 The defendants also say that the earlier patent applications were not, as they should have been, discovered by the plaintiffs. The plaintiffs gave discovery in September 2004 and did not discover the documents. The defendants became aware of them fortuitously and obtained copies from the Patent Office.
40 I should say that the failure of the plaintiffs to give discovery of the prior applications for a patent does not seem to me to be a point of great
(Page 12)
- substance. The plaintiffs say that on the pleadings the prior applications were not relevant. In any event, the only significance of the prior applications was to establish, if it be the case, that through the correspondence with the Patents Office, the plaintiffs were aware that the three integers pleaded in par 25A of the statement of claim did not constitute an invention for the purposes of the Patent Act. But the fact that the statement of claim did not constitute a patentable invention would not have come as any revelation to the defendants. The defendants' solicitors say that they were always aware that the prior art demonstrated that the three integers did not disclose such an invention.
41 The defendants say they should be awarded indemnity costs because the first plaintiff was at all material times aware that there was prior art which prevented the plaintiffs' case, as pleaded, from succeeding. Counsel for the defendants referred to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1998) 81 ALR 397, where Woodward J said (at 401):
"I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some a wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion."
42 The defendants say the plaintiffs were aware that the Patent Office had refused to grant a patent for an invention the integers of which were identical to those pleaded in the statement of claim. The plaintiffs therefore commenced this action for infringement in wilful disregard of known facts or in circumstances where the plaintiffs, properly advised, should have known that they had no chance of success.
43 The plaintiffs deny that their case has no prospect of success. They say that the new element in the case is the disclosure of the Calhaen and German specifications, which raise the potential for the patents of both the plaintiffs and the defendants to be revoked. They say that the defendants first made express reference to the Calhaen specification and the German specification on 7 May 2004. The defendants do not say why they did not disclose those specifications earlier. The plaintiffs accept that the Calhaen
(Page 13)
- specification may affect the breadth of the claim that can be made by them against the defendants.
44 The plaintiffs that say the only previous reference to prior art is the allegation by Mr Holliday that, on a date which is not specified with any particularity, he spoke to Mr O'Callaghan by telephone and said he had documents showing a "submersible" (not "retractable") bollard that was published in Australia prior to the date in Mr O'Callaghan's patent and that Mr Holliday considered Mr O'Callaghan was not entitled to protection over any submersible bollard. According to an affidavit sworn by the plaintiffs' solicitor, Mr O'Callaghan cannot recall such a telephone conversation and says he does not refer to his bollards as being "submersible", but rather as "retractable".
45 The plaintiffs say that even if Mr Holliday's evidence is accepted, his assertions on behalf of his clients, in circumstances where he did not produce the documents to which he referred, were quite reasonably given no weight. Indeed, the plaintiffs were entitled to assume that if such documents existed, they would have been provided to them. I did not understand it to be in issue that the plaintiffs did not identify or provide a copy of the prior art referred to by Mr Holliday (that is, the German specification), or the Calhaen specification, prior to 7 May 2004.
46 The plaintiffs say they were unaware of the Calhaen specification until produced by the defendants and have never seen or read a translated version of the German specification. So far as they were aware, the plaintiffs' invention was unique and they instituted the proceedings in good faith on the basis that the defendants' patent breached the essential integers of the plaintiffs' patent.
47 The plaintiffs say that on the pleadings, there is no attack on the plaintiffs' patent. It was submitted that if a defendant in an infringement proceeding wishes to allege that an invention is not a patentable invention, or the specification does not comply with the legislation, they must counterclaim under ss 121(1) and 138(3) of the Act. Under s 105 of the Patents Act 1952 (Cth), which has since been repealed, a defendant could raise the invalidity of the patent as a defence to infringement whether or not they also sought the revocation. There is, however, now no corresponding provision to s 105 in the Act: see Halsbury's Laws of Australia at 240 – 2615. There is no counterclaim by the defendants in the action for revocation of the plaintiffs' patent and, accordingly, the action must proceed on the basis that the plaintiffs have a valid patent.
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48 Moreover, the plaintiffs do not accept that the defendants have not infringed their patent. That is an issue of fact. Accordingly, whether or not the defendants had infringed the plaintiffs' patent as pleaded, or, to the extent the statement of claim may not properly plead the essential integers of the plaintiffs' invention, as actually constituted, was clearly a triable issue.
49 In Re The Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, McHugh J said at 624:
"In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule, the successful party is entitled to his or her costs: Latoudis v Casey (1990) 170 CLR 534. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order: Latoudis at 566 – 568. When there has been no merits, however, a court is necessarily deprived of the factor that usually determines whether or not it will make a costs order."
50 His Honour went on to say at 625:
"If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continue to be reasonable until the litigation was settled or its further prosecution became futile, a proper exercise of the cost discretion will usually mean that the court will make no order as to the costs of the proceedings."
51 It is clear, however, that although his Honour thought that that would usually be the case, he was not laying down an invariable rule. In the course of his judgment, McHugh J referred (at 624) to the discretionary nature of the power to order costs, and as to the general rule that the successful party is entitled to costs, and went on to say that in an appropriate case the Court will make an order for costs where the moving party no longer wishes to proceed with the action, even where there has been no hearing on the merits.
52 In Rizal v Minister for Immigration and Multicultural Affairs [1999] FCA 334, Sackville J pointed out (at [16]) that the comments of McHugh J evince a somewhat more flexible approach than was taken by the Federal Court in Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287, when the Court suggested that,
(Page 15)
- "[t]here will be very few cases, where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of the party". Sackville J suggested that the determining factor in whether or not costs will be awarded to a party will be the reasonableness of the conduct of the parties.
53 In Edwards Madigan Toorzillo Griggs Pty Ltd v Gloria Stack & Ors [2003] NSWCA 302, Davies AJA (with whom Mason P and Meagher JA agreed) said at [5]:
"When proceedings are brought to an end without a determination after a trial, the Judge may find it difficult, even impossible, to make an award of costs. If the Judge does make an award, it will generally be because the Judge is satisfied that one party has had a substantial victory and the other a substantial loss, or that there has been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in costs."
54 The question of the reasonableness of the conduct of the parties must be examined in the context of the litigation as a whole, including whether each of the parties have taken reasonable steps to ensure that the real issues in the action are clearly identified and properly understood by all of the parties. In White v Overland [2001] FCA 1333, Allsop J said at [14]:
"However, by way of general principle I would simply like to make perfectly plain my view that in the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are. Any practice of quietly leaving footprints in correspondence or directions hearings to be uncovered at some later time in an attempt to reveal that a matter was always in issue should be discouraged firmly. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, commonsense and an appreciation of costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative
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- ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said.
…
Representatives do not owe duties to the other side's client. They owe duties to their own client. But no-one's interests are advanced by litigation proceeding on assumptions which are seen or suspected to be false.
…
In the long run the only consequence of keeping issues hidden or not clearly identifying them is to disrupt the business of the court leading to the waste of valuable public resources and to lead to the incurring of unnecessary costs by the parties, costs which ultimate have to be borne by someone."
55 In Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116, that passage was cited with approval by Heydon JA (with whom Mason P and Young CJ in Eq agreed).
56 The views expressed by Allsop J in White v Overland essentially echo the philosophy which underlies O 1 r 4A and r 4B of the Rules of the Supreme Court and I would respectfully adopt them.
57 In my view, on an application of this nature it is appropriate to look generally at the reasonableness of the conduct of the respective parties in order to determine where the costs of the litigation should fall. Where, for instance, a party contends that the other parties' case is without merit and therefore must inevitably have failed at trial, it may be a relevant consideration whether the party so contending made reasonable endeavours to draw that to the attention of the other party and to bring the litigation to an early end, or whether it has simply stood by and allowed costs to mount and scarce, expensive public resources to be unnecessarily consumed in hopeless litigation.
58 The question of whether or not a party's conduct has been reasonable is, of course, to be determined on the facts of each case and no hard and fast rules can be laid down.
59 As I have said, the defendants submitted that the plaintiffs' case as pleaded would inevitably have failed because the prior art and the earlier correspondence between the plaintiffs and the Patent Office made it quite
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- clear that the three integers pleaded in par 25A of the statement of claim did not amount to a patentable invention. The defendants' counsel said that the defendants' solicitors had attempted to raise the deficiencies in the plaintiffs' claim with the plaintiffs' successive solicitors, but that it was not clear either of those solicitors understood what was being put.
60 It appears that not all of the communications between the solicitors regarding the adequacy of the statement of claim have been put before me, but what is in evidence does not seem to me to communicate to the plaintiffs in a meaningful way the defendants' contention that the plaintiffs' case was fatally flawed and must necessarily fail. For instance, even in their letter to the plaintiffs' solicitors of 7 May 2004, while the defendants' solicitors drew attention to what they said were deficiencies in the pleading of the defendants' patent which caused the statement of claim to be embarrassing, they then said that otherwise the amended statement of claim "now largely meets the formal requirements set down by Order 20 … ". That does not seem to me the sort of communication that would alert the plaintiffs' solicitors to the fact that (as the defendants contend) the statement of claim discloses no arguable cause of action and that the action must inevitably fail. It was also the first occasion on which the defendants had clearly identified the prior art which they contended made the plaintiffs' pleaded claim unsustainable.
61 The defendants accepted that it would have been open to the plaintiffs to amend the statement of claim to plead, or to plead more clearly, all of the essential integers of the plaintiffs' invention. The defendants' counsel accepted that if the defendants had brought an application to strike out the statement of claim that would probably have led to such an amendment, and he added that the defendants may well have brought such an application when the statement of claim was in its final form, but the case never reached that stage. In that context, I should say that it appears clear from the correspondence that the form of the pleadings was still unresolved at the time discussion of settlement commenced in earnest and was not thereafter pursued to finality.
62 The defendants' counsel also acknowledged that if the plaintiffs had amended the statement of claim to plead all of the essential integers of the plaintiffs' invention that would have overcome the defendants' argument that the pleaded invention lacked novelty. But it was submitted that once the fourth integer was taken into account it was apparent that the defendant's device did not infringe it. The defendants' counsel conceded in argument that that was an issue that could only be determined at trial, although he subsequently submitted that, had the fourth integer been
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- pleaded by the plaintiffs, it would have been immediately obvious that the plaintiffs' case could not succeed because the defendants' device did not incorporate the fourth integer. In my view, the initial concession was properly made.
63 It was, however, submitted on behalf of the defendants that what is relevant for the purposes of the present application is the case as actually pleaded by the plaintiffs. Counsel referred to the observations of Finkelstein J in Woodbridge Foam Corporation v Afco Automotive Foam Components Pty Ltd [2002] FCA 883 at [3] - [5] as to the importance of pleadings in defining the issues to be tried. Counsel argued that the plaintiffs' pleaded case could never have succeeded because of the prior art. The prior art was an insuperable obstacle. The prior art, it was submitted, would have been an obstacle to the plaintiffs' case even if it had been amended to plead the fourth integer, although it would not necessarily have been an insuperable obstacle.
64 In the circumstances, I do not consider that the position of the parties can be determined simply by reference to their pleaded cases. In saying that I do not dissent from the observations of Finkestein J in Woodbridge Foam Corporation about the importance of pleadings in identifying the matters in issue, but his Honour's comments were made in the context of an application to strike out a pleading. I am concerned with rather different circumstances.
65 It is clear that the action is still at a comparatively early stage and, as I have said, that the pleadings were still in something of a state of flux when the decision was taken by the plaintiffs to bring the proceedings to an end. The defendants' solicitors had always been aware that par 25A of the statement of claim did not properly plead the integers of the plaintiffs' patent. As the defendants' counsel said in argument, the defendants' position had always been that what was pleaded was not what the patent entitled the plaintiffs to because the fourth integer was missing from the pleading. In my view, given that, and the stage the matter had reached, it was almost inevitable that sooner or later the true case would have emerged as the real issue between the parties, whether as the result of a strike out application by the defendants or otherwise.
66 Whatever might be the position on the pleadings as they currently stand, once that case emerged it would clearly have given rise, in my view, to a triable issue as to whether the defendants had infringed the plaintiffs' patent, as properly constituted. The outcome of that issue is not
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- something that can be determined with the requisite degree of certainty at this stage.
67 The plaintiffs' do not accept that they have other than a strong case. They say that the decision to bring the proceedings to an end has come about because of a combination of Mr O'Callaghan's supervening ill-health and the expense of the litigation which, in light of the prior art first disclosed to the plaintiffs in May 2004, might ultimately do no more than demonstrate that neither side has a sustainable patent.
68 Having regard to all of the circumstances, I consider that, with one proviso, the appropriate order is that the plaintiffs pay the defendants' costs of the action from 21 May 2004 to the date of this application, but, save for costs orders already made, there otherwise be no order as to the costs of the action. The proviso is that it seems that no previous order has been made in respect of any costs thrown away by the defendants by reason of the plaintiffs' abandonment of the claims for breach of the Fair Trading Act and for passing off. On the face of it, the plaintiffs should pay any such costs, but I will hear the parties on that.
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