Patent Gesellschaft Ag v Saudi Livestock Transport Co

[1997] HCATrans 158

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M8 of 1997

B e t w e e n -

PATENT GESELLSCHAFT AG

Applicant

and

SAUDI LIVESTOCK TRANSPORT AND TRADING COMPANY

Respondent

Application for special leave to appeal

BRENNAN CJ

DAWSON J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 6 JUNE 1997, AT 12.05 PM

Copyright in the High Court of Australia

MR J. McL. EMMERSON, QC:   If the Court pleases, I appear with my learned friend, MR B.J. HESS, for the applicant.  (instructed by Corrs Chambers Westgarth)

MR D. SHAVIN, QC:   If the Court pleases, I appear with my learned friend, MR A.J. RYAN, for the respondent.  (instructed by Finlaysons)

BRENNAN CJ:   Yes, Mr Emmerson.

MR EMMERSON:   If the Court pleases, the two issues in this case arise under section 40 of the Patents Act which is the section which specifies the requirements for a patent specification.  The section is set out conveniently at page 121 of the application book in the reasons of the Full Court.  There are so far as presently relevant two matters which we say are distinct matters raising separate issues and requiring separate consideration.  Subsection (2) says:

A complete specification must:

(a) describe the invention fully, including the best method known to the applicant of performing the invention.

Now, it is under that that the issue commonly referred to as “sufficiency” arises.  It then goes on to say:

(b) where it relates to an application for a standard patent -

which is this case -

end with a claim or claims defining the invention; and.....

(3)  the Claim or claims must be clear and succinct and fairly based on the matter described in the specification.

DAWSON J:   Now, Justice Olney decided the case on that latter point, did he not?  The claims were not fairly based upon the matter described in the specification, did he not?

MR EMMERSON:   That is correct.

DAWSON J:   I do not know why he went on to consider a whole lot of other matters but he did.

MR EMMERSON:   Yes.  He decided against my client on the issue of fair basis which arises under subsection (3) and on the issue of sufficiency which arises under subsection (2)(a).

DAWSON J:   But one was enough, was it not?

MR EMMERSON:   One would be enough, yes, but in fact he decided on both.  He also decided on a ground of inutility but that was not upheld in the Full Court.

DAWSON J:   He then went on to decide that if he was wrong in all those respects then there was an infringement.

MR EMMERSON:   Yes.  My clients would have succeeded but for these matters, that is correct.

DAWSON J:   But, really, if he was correct in that first matter that the claim was not fairly based on the matter described in the specification, there is no special leave point, is there?

MR EMMERSON:   If he was correct on that, well then, my client must lose but we say it is a special leave point whether he was correct in that.

DAWSON J:   Yes, but we can confine ourselves to that issue really.

MR EMMERSON:   With respect, no, your Honour.  It would seem to us that we would have to succeed on both that and on sufficiency.

BRENNAN CJ:   What is the special leave point, Dr Emmerson?

MR EMMERSON:   The special leave points are the foundation for the requirements of both fair basis and sufficiency.  We say that the court at first instance and the Full Court have gone seriously wrong in both of these and have thereby imposed an additional and unfair burden on the applicant for a patent.

BRENNAN CJ:   What is the error which is the special leave point?

KIRBY J:   Is it the application of established principles to the facts of this case or is it some new principle that you say has to be elucidated?

MR EMMERSON:   It is some new principle which has been stated and which we say has been wrongly stated.  What has happened is this:  the court at first instance and the Full Court, instead of treating the two issues as separate issues, has conflated them and that has a number of consequences.  So far as the requirement of fair basis is concerned, it has turned a consideration which is ordinarily to be answered within the four corners of a patent specification into something requiring extrinsic evidence as to what was actually used in the art at the relevant time.

KIRBY J:   Where do we find the best statement of the principle that you are confined to the four corners?

MR EMMERSON:   We would say that the principle appears from Olin Corporation, for example, which describes the rationale of fair basis.  Could I perhaps go - - -

KIRBY J:   There is nothing in the statute that confines you to the four corners of the specification.  Why should this gloss be permitted?  I mean, it is just an ordinary statutory provision.

MR EMMERSON:   It is an ordinary statutory provision, your Honour, and I would seek to approach it as an ordinary statutory provision.  What it says is:

the claims must be ....fairly based on the matter described in the specification.

So, the comparison which is required by the statute is a comparison between the claims, on the one hand, and the matter described in the specification, on the other.  Now, the court went wrong in that it did not undertake that comparison but brought in a requirement which, in effect, overrode that comparison.

KIRBY J:   It is “the matter described in the specification”, it is not “on the specification”.  May you not look to what the matter is outside the specification?  If Parliament had meant “on the specification”, it would not have put “the matter described”.

MR EMMERSON:   You may look at the matter described in the specification and if you look at the matter described in the specification, that tells you what is the area of examination.

KIRBY J:   You rely on the prepositions “on” and “in”.

MR EMMERSON:   Yes.

KIRBY J:   Is this an established body of jurisprudence?  I mean, is there clear principle that you are confined to the specification?  One would not think this would be a new idea.

MR EMMERSON:   It is not new.  There are established principles or principles which have been widely followed in the context of determining “fair basis”.  One is a set of tests generally referred to as the Mond Nickel tests.  Now they are set out and applied by the judge at first instance in a different context, namely the context of asking whether the claims are fairly based on the Danish specification.  That discussion begins at page 86 of the application papers and the three tests are set out on page 87 of the application papers.  The questions start at line 6:

(1)  Is the alleged invention as claimed broadly (ie in a general sense) described in the basic application?

So, the comparison there is between the claims and, in that case, the basic application.

(2)  Is there anything in the basic application which is inconsistent with the alleged invention as claimed?

Again, there is a comparison between the application and the invention claimed.

(3)  Does the claim include as a characteristic of the invention a feature as to which the basic application is wholly silent?

And that again involves a comparison between the claim and the application.

DAWSON J:   But these are merely aids in applying the statute.  Ultimately, you come back to the statute and you say the claims are fairly based on the specification.

MR EMMERSON:   Precisely, yes, your Honour.

DAWSON J:   In this case, the claims - let us get down to something concrete - spoke of food and water being conveyed directly from storage containers to each of the confinement pens by conveyer means.

MR EMMERSON:   Yes.

DAWSON J:   But the body of the specification spoke of the supply of food and water from the storage tank to a dispensing container and not directly to the pens.  That is what the judge found, did he not?  You may complain about it but that is the basis on which he reached his decision, is it not, that the latter, which is the specification, did not support the claim?

MR EMMERSON:   No.  He does say that but he does not get there in quite that way.  He proceeds by a succession of steps, one of which involves taking a passage in the specification which is referring to a preferred embodiment and then saying, “This does not say something.  Therefore, I will assume - - -”

DAWSON J:   He may have been wrong in the processes he applied but all he was doing was applying the statute, and even if he came to a wrong conclusion, there is no point of principle.  These aids to the interpretation of the statute do not really raise any point of principle.

MR EMMERSON:   There is, in our submission, an importance principle here.  One has to look at the rationale for the requirement of fair basis and what that requirement actually is. 

BRENNAN CJ:   Dr Emmerson, is this the point:  in addition to looking at a comparison of the language, the trial judge looked at the state of the art and found that wheelbarrows were necessary and because he looked at the fact that wheelbarrows were necessary, that led him to the conclusion that there was no fair basis?

MR EMMERSON:   That is not the point that we seek to make.  We are not saying that his Honour followed the correct principle but went wrong on the facts.  We are saying that his Honour did not follow the correct principle.

BRENNAN CJ:   Tell us what principle you say he followed; what principle you say is correct, and contrast the two.

MR EMMERSON:   Right.  The principle that we say is correct is to take the claims, to compare them with the body of the specification in the manner set out, for instance, in Olin Corporation.  We say that what he actually did was not do that.  He used extrinsic evidence to alter the specification; not to construe it but to alter it.

BRENNAN CJ:   Extrinsic evidence being?

MR EMMERSON:   Extrinsic evidence being of what had actually been used on board ships before the priority date.  He brought that in incorrectly.  He used that to qualify the disclosure in the specification.

DAWSON J:   Now, how did he do that?

MR EMMERSON:   He did it because the disclosure of the specification said, “This may be done by any means” and he said, “Because I have brought in these extrinsic considerations, I construe that to mean ‘any means which had been used for this purpose, on board ship, before’”.

DAWSON J:   Why should he not inform himself about that?  He might not know whether there was more than one means of doing it.

MR EMMERSON:   Because what the disclosure teaches you is that you can use any means.

BRENNAN CJ:   Known to the skilled addressees.

MR EMMERSON:   With respect, your Honour, that is putting a gloss on the disclosure.  Indeed, the way in which his Honour approached it was not only known to the skilled addressees but which had been used in the past in analogous circumstances.

BRENNAN CJ:   If it had been confined to skilled addressees, what would you say?

MR EMMERSON:   If it had been confined to skilled addressees, then exactly the same objection still applies.

BRENNAN CJ:   “Any means in the specification” can mean “any means known or unknown”.

MR EMMERSON:   Yes, or used or unused because what his Honour did was not just say - - -

BRENNAN CJ:   Capable of implementation without an inventive step.

MR EMMERSON:   No.  He simply confined himself to matters which had been used, so that instead of carrying out what we say is a simple and straightforward task which has to be carried out when an application is first made by the Patent Office, namely a check for internal consistency, what his Honour did was bring in an inquiry into the prior art and that was then taken up and applied by the Full Court which completely misunderstood, we say, the rationale for the requirement of fair basis, because the Full Court took the rationale as being tied up with a requirement that the patentee give directions, in effect, for practical commercial working.  Now, that nowhere comes out of the Act, it nowhere comes out of the decided cases but that is ‑ ‑ ‑

DAWSON J:   That is not what this involved and not what was decided, is it, Dr Emmerson.  I mean, the body of the specification spoke of the supplies of food and water to a dispensing container and not directly to the pens.  The claim was made that the food and water was to go directly to the pens by conveyer means and so the claim was something which was not supported by the specification.  That was what was decided.

MR EMMERSON:   That, with respect, is not so.  Could your Honour turn to page 4 of the application papers which sets out page 2a of the body of the specification.  Beginning at line 18, this being what is according to the invention, it says:

livestock food conveyor means extending from one or more of said storage tanks to said livestock confinement pens whereby livestock food can be bulk stored in said one or more storage containers and conveyed directly therefrom to each of said confinement pens by said food conveyor means.

So, the body of the specification does tell one that this is what has to happen.

DAWSON J:   Except that it does envisage storage before conveyance to the pens.

MR EMMERSON:   Of course, but storage is one of the elements of this combination and was so held.  Now, if one goes on in the body of the specification, at the bottom of that page and the top of page 3:

Preferably, the food conveyor means and the water conveyor means are comprised of separate pipelines interconnecting the respective storage tanks with said confinement pens and means operable to cause food and water to be conveyed through the respective pipelines to said confinement pens.

So, the preferred way of carrying out this invention again has that direct connection.

DAWSON J:   This may be right or wrong, but it seems that what it does not do is specify a direct conveyance from the storage tanks in the hulk of the ship directly to the pens, and that is what his Honour said.  He may have been wrong but - - -

MR EMMERSON:   This says you must have a direct conveyance.  The specification says it does not matter how you carry out this direct conveyance.  That is what is required.  That appears at page 9 of the application papers, beginning at line 3:

The supply of food and water from the storage tanks to the pens and the removal of manure from the pens can be effected by any convenient conveyor means.

So, that is what you are taught.  If you compare the body of the specification with the claims, at each of these points you were taught in terms something which is entirely consistent with the claims.  It is only by using the odd rationale which brings in the prior art to somehow modify that that his Honour and the Full Court after him went wrong because they did not apply the correct rationale.

BRENNAN CJ:   But it was based solely upon the words which were extracted by the Full Court at page 123 from the specification, was it not?

MR EMMERSON:   It was extracted from - - -

BRENNAN CJ:   We will extend your time by five minutes.

MR EMMERSON:   I am indebted to the Court.

BRENNAN CJ:   What they pick up is that passage which deals with the conveyance to containers.

MR EMMERSON:   Yes.

KIRBY J:   I took you to concede earlier that it would be consistent with your theory that you can elucidate the meaning of the specification.

MR EMMERSON:   You can elucidate - - -

KIRBY J:   Is that not what the Full Court was doing?

MR EMMERSON:   No, it was not.  What it was doing was altering it.  What it then went on to do was focus on what was said by way of example which is not a statement of what the specification teaches.  You see, we say that the rationale of fair basing is that which one derives from the Olin Corporation Case, namely, you compare the claims with the inventive idea.  It is an internal comparison.  Whereas, what has been done here is that because of the confusion between fair basing and sufficiency, the court has brought in a whole lot of extraneous considerations which put, we say, a disastrously heavy additional burden on the patentee.  All that is required by the Act is to get something which is entirely consistent but, in fact, this is not the way the court has dealt with it.

Now, the errors in the statement of the rationale in the Full Court can be illustrated by the sentence which spans pages 126 and 127:

The rationale for fair basing, as explained in cases such as Olin Corporation v Super Cartridge Co Pty Ltd is that the consideration given by the patentee for the monopoly granted in respect of a valid product claim is sufficient disclosure in the specification to enable the skilled addressee to make the product, once the term of the patent has expired.

Now, a specification is something which is filed at the time when the application is made, ex hypothesi, in the inventor’s own experience he might still be and probably is at the prototype stage.  The Act says that he is required to disclose the best method known to him - and there is no finding that Mr Hansen failed to do that in this case - but by putting in a requirement that there should be a disclosure to allow commercial working, which is what a lot of the consideration of the court is concerned with.  In our submission, the court goes wrong and goes wrong in a fundamental and serious way because it assumes then that at the time when he files his application the patentee is going to know what is required for commercial working.

There is no basis in the Act for that assumption, nor is there any basis in the case to which the Full Court refers, the Olin Corporation Case, which, in our submission, says exactly the opposite.  In particular, Sir Garfield Barwick says in that case, in one passage that is referred to, that the rationale is not concerned with - - -

KIRBY J:   But is that not against you?  This Court has stated the principle.  What has happened here is that the Full Court, in your submission, has misstated or misapplied the principle but the principle is not in doubt.  How do we make Olin better by having Olin Mark II.

MR EMMERSON:   We say that this Court has not expressly stated the matters which we set out in our outline, and we say that it is important that it should be, that it has been held now by the Federal Court at first instance and on appeal that Olin does not provide the protection that we think it does provide and we wish to argue that there is that protection.  That is therefore an important reason, we say, for the grant of special leave, not the withholding of special leave.

The patentee simply cannot tell at the time he files his application what is going to be required to make the product, that is to say, something commercial.  All he can tell is how far he has got in his own researches.  The Court will also be aware that this inquiry about fair basis is something that occurs when the patent is first examined in the office, so an inquiry about, in effect, an internal consistency is being changed into an inquiry about a disclosure of how to work the invention to make the product, that is to say, to work the invention commercially.  Now, this makes the case impossible. 

The Court may be aware that patentees have been severely handicapped by a string of decisions from the Full Court which have gone against the patentee.  The patentee has not succeeded in an infringement in validity case for over 10 years in the Full Court in the Federal Court.  This is adding an additional burden which we say cannot be derived from the authorities, cannot be derived from the Act and yet it has been upheld in a way which authoritatively binds any judge at first instance who has to hear a patent case.

BRENNAN CJ:   I think your time has expired, Dr Emmerson.

MR EMMERSON:   If the Court pleases.

BRENNAN CJ:   Yes, Mr Shavin.

MR SHAVIN:   If the Court pleases.  My learned friends have advanced two propositions which, in our respectful submission, are in error.  First of all, my learned friend says that it is well established in authority that in dealing with the question of fair basis one is confined within the four corners of the specification.  In our respectful submission, there is not only no authority to support that proposition but there is a strong line of authority to the contrary. 

At first instance and before the Full Court the applicant contended that the appropriate test for fair basis was that summarised by his Honour Justice Gummow in CCOM v Jiejing Pty Ltd, which is in tab 3 of volume 1 of the respondent’s book of authorities.  If I could take the Court to page 281.  At F his Honour refers to the decision of this Court in Rhone‑Poulenc and at the foot of the page, four lines from the bottom, continues:

Fullagar J also pointed out that the requirement of “fair basing” on matter disclosed in an earlier specification would be senseless if what was required was that the subject matter of the claim must have been actually claimed in the earlier specification; rather, there must be “a real and reasonably clear disclosure”.  This passage was adopted and applied by Gibbs J in Hoffman-La Roche where the claims were for chemical compounds forming part of a very large class disclosed in the basic application.

The test was accepted by our learned friends’ client, both at first instance and the Full Court as a real and reasonably clear disclosure.  In our respectful submission, it is clear that that question raises the issue “real and reasonably clear disclosure to whom”, and “to whom” must be to the addressee.  It is well accepted, as we have noted in our outline, that the court can determine the way in which a specification should be viewed through the eyes of the skilled addressee.  Indeed, his Honour Justice Gummow said exactly that at page 284 of CCOM, where, at the top of the page he said:

Counsel accepted that because “fair basing” raises an issue of law it is open for an appellate court to entertain a fresh argument that there is a lack of fair basing.  That is true, but in deciding these and other issues of construction of patent documents, the court derives assistance from experts who are skilled addressees.

In fact, precisely that approach was adopted by Justice Falconer in Dupont vEnka BV (1988) Fleet Street Reports 69 which appears as case 4.  If I could take the Court particularly to page 81 about nine lines from the bottom of the page.  His Honour said:

but the ambit of the claimed monopoly must not go beyond what, in the case of a product claim, can be made by the skilled addressee in the light of the disclosure in the specification together with such straightforward development of a non-inventive nature as is usually required to put a description into factory practice.  On the evidence it is quite clear that in 1972 the notional skilled addressee, having read the Bair and Morgan specification, would not have known how to make a fibre of initial modulus much higher than the highest exemplified modulus -

if I could interpose, that in one of the examples in the body of the specification in that case there was a limit beyond which the modulus was described.  Here, Justice Falconer went to look at the evidence to see whether the skilled addressee would have been able to understand a claim which did not limit the upper limits of which the modulus could be made.

BRENNAN CJ:   Now, do you find these cases to be inconsistent in any way with Olin’s Case?

MR SHAVIN:   No, if your Honour pleases.

BRENNAN CJ:   We do not need to trouble you further.

MR SHAVIN:   May it please the Court.

BRENNAN CJ:   Dr Emmerson, have you anything to say in reply?

MR EMMERSON:   Yes, your Honour.  The expression “real and reasonably clear disclosure” which appears in the Rheem Case and has been adopted in some later cases, raises nevertheless or does not decide the important issue, real and reasonably clear disclosure of what?  We have no quarrel with real and reasonably clear disclosure of the inventive idea but we quarrel most strongly with the suggestion that it means real and reasonably clear disclosure of how to work the invention commercially.  Now, it is the use of that phrase - - -

BRENNAN CJ:   That is not the proposition that is put against you.

MR EMMERSON:   As we understood it, yes, the proposition that was put against us was that “real and reasonably clear disclosure” was a good way of describing the requirement of fair basis.

BRENNAN CJ:   As understood by a skilled addressee.

MR EMMERSON:   As understood by a skilled addressee.

BRENNAN CJ:   That is not the same test as commercial operation.

MR EMMERSON:   It is a real and reasonably clear disclosure of what?  We say that what has to be disclosed is the inventive idea, not how you work the thing commercially and you do not answer that question by saying it is addressed to the skilled addressee.  Of course it is, and we accept that.  But what the addressee is supposed to understand is what is the invention, not that he is being told how to work the invention commercially.  So, we

say that the passage from CCOM and the reference to “real and reasonably clear disclosure” is simply beside the point.  It does not answer the issues which we seek to raise if this Court grants special leave.  If the Court pleases.

BRENNAN CJ:   The criticism made by the applicant of the judgments of the trial judge and of the Full Court of the Federal Court has not been shown to embrace any new principle different from the ordinary principle defined in Olin Corporation v Super Cartridge Co Pty Ltd (1977) 180 CLR 236. If that case has not been precisely applied in the instant case, we do not apprehend that the error, if canvassed on appeal, would raise any novel issue of principle. Accordingly, special leave will be refused.

MR SHAVIN:   I seek costs, if the Court pleases.

BRENNAN CJ:   What do you say about that, Mr Emmerson?

MR EMMERSON:   I have nothing to say on that.

BRENNAN CJ:   Special leave will be refused with costs.

AT 12.44 PM THE MATTER WAS CONCLUDED