Samsung Bioepis Au Pty Ltd v Pfizer Ireland Pharmaceuticals & Ors

[2018] HCATrans 97

[2018] HCATrans 097

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S3 of 2018

B e t w e e n -

SAMSUNG BIOEPIS AU PTY LTD ACN 611 890 094

Applicant

and

PFIZER IRELAND PHARMACEUTICALS

First Respondent

WYETH LLC

Second Respondent

PFIZER AUSTRALIA PTY LTD ACN 008 422 348

Third Respondent

Application for special leave to appeal

NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 MAY 2018, AT 9.31 AM

Copyright in the High Court of Australia

____________________

MR N.J. YOUNG, QC:   May it please the Court, I appear with my learned friends, MR J.S. COOKE and MR D. LARISH, for the applicant.  (instructed by Ashurst Australia)

MR D. SHAVIN, QC:   May it please the Court, I appear with my learned friends, MS C. DIMITRIADIS, SC and MS C.L. COCHRANE, for the respondents.  (instructed by DLA Piper Australia)

NETTLE J:   Yes, Mr Young.

MR YOUNG:   If the Court pleases. The three proposed grounds of appeal and special leave questions are set out at page 144 of the application book. Each of those grounds raises, in our submission, a question of general importance. The first two grounds and questions are related to each other because they both concern the proper construction and application of rule 7.23 of the Federal Court Rules concerning preliminary discovery. There are equivalent rules in numerous other States and in the Northern Territory.

The third ground of appeal concerns the Evidence Act, sections 76 and 79 in particular, and the correct approach to applying those provisions to opinion evidence in interlocutory proceedings.  That, too, was a question of general importance because we are concerned with uniform national legislation and the court adopted a novel approach to the application of those sections towards opinion evidence.

In our submission, the Federal Court’s approach to rule 7.23 represents a change of course from previous authorities that is likely to have far‑reaching consequences, both in respect of patent cases but more generally in respect of preliminary discovery applications.

Now, can I turn immediately to the terms of the relevant rule at page 83 of the application book?  There are two aspects to the first limb of the rule – that is paragraph (1)(a).  The preconditions for the power to grant preliminary discovery are relevantly twofold.  There must be a reasonable belief and that belief must be directed to the position that the applicant may have the right to obtain relief. 

In our submission, the Full Federal Court misdirected itself as to each of those elements.  The decisive judgment was that of the Chief Justice because Justice Nicholas agreed with the Chief’s analysis at paragraphs 180 and 182 of Justice Nicholas’ judgment.  Justice Perram adopted similar reasoning.

Can I ask the Court to note at pages 82 and 83 the Chief Justice’s explanation of his approach. It appears in paragraph 2 and then at the end of paragraph 4, immediately above the reference to rule 7.23. In paragraph 2 the Chief expresses his dissatisfaction with the existing authorities concerning preliminary discovery, particularly at about line 30. At page 83 at lines 20 to 24 he sets out his intent to articulate the proper approach to preliminary discovery generally and explains that:

this will have an impact on important areas of commerce such as pharmaceutical manufacture and the enforcement of patents –

Now, that presages the fact that his Honour was going to adopt a new and different approach ‑ ‑ ‑

GORDON J:   Is that right, Mr Young, given what is said at line 31 at paragraph 2?

MR YOUNG:   Yes, it is right, your Honour, because what his Honour does is to shift the focus which the existing authorities place on an objective assessment of the facts as to whether they provide a reasonable basis for believing that the applicant may have the right to relief.  The judgment shifts away from that focus and shifts to an assessment of the subjective state of mind of the particular deponents who assert the relevant belief.

His Honour in particular places great emphasis upon the reformulation of the words. That marks a distinction between his approach and that of Justice Perram and Justice Nicholas. Justice Nicholas, for instance, said that the reformulation in rule 7.23 was not intended to disturb the settled principles deriving from George v Rockett in the High Court and Sandhurst in the Full Federal Court, but his Honour did adopt the different approach.  Critically, when it came to actually implementing the approach, Justice Nicholas, despite his different starting point, agreed with the Chief.

Now, the essential principles that exist prior to this judgment are based in the High Court’s decision in George v Rockett.  Justice Nicholas refers to that at his paragraph 175 which is at page 137 of the application book.  It suffices to refer to the first sentence of the second passage in the extract at the foot of 137 referring to the “objective circumstances” and perhaps the rest of that paragraph.

The other leading authority is Sandhurst in the Full Federal Court.  We extract the relevant statement from it in our reply submission at the top of application book 171.  Can I direct the Court to that, please?  It is the end of paragraph 10 and the reference is:

that “a requirement that the belief be reasonably held is an objective requirement, the existence of which does not depend upon the applicant’s state of mind” but rather upon “the existence of facts that are sufficient to induce that belief in a reasonable person”.

Now, all of the cases emphasise that the assessment as to whether there is a reasonable basis is an assessment of an objective fact undertaken by the court itself.  It is not a question of the state of mind of the person making the assertion as to the existence of belief.  So that is the pre‑existing state of authorities and it is against that background that the grounds of appeal are to be assessed.  

Now, can I just go back to the opening of the Chief Justice’s judgment and back to 7.23.  I have expanded on “reasonable belief” and what that means according to the previous authorities.  Can I direct attention to the words “may have the right to obtain relief”? 

It is obvious that the particular right to obtain relief must be identified and considered by the court in determining whether the facts before it provide a reasonable basis for the asserted belief.  That is accepted in all the authorities, including Sandhurst and Rockett, because what is a reasonable basis will vary with the nature of the particular right to relief that is in question. 

It immediately poses the question in a case like this one:  relief for what?  Here it is relief for potential patent infringement which means, in this context, the contention that the applicant’s process of manufacture for its product took and implemented the methods, the patented methods set out in claim 1 of each of the three patents. 

NETTLE J:   But it was all based on the correlation of the glycosylation projections, was it not?

MR YOUNG:   Yes, I will come to that, your Honour.  It will take a little explanation, if I may, but the point I am making here is the reasonableness of the belief intersects with the nature of the right to obtain relief.  It is essential to consider and assess the relevant facts as to whether they provide a nexus with the relevant claims of the patent.

Now, there was no nexus at all demonstrated by the facts that were advanced and that is quite regardless of whatever view is taken about the expert evidence concerning the glycosylation profiles.  That is what I will need to explain, your Honour. 

Can I then say also that in assessing the right to relief and how it bears upon reasonableness, it is a trite principle that you need to understand the claims in the context of the patent specification as a whole.  So if a contention is advanced that is inconsistent with what is set out in the patent specification, its objective reasonableness is immediately called into question.

Now, in respect of that second aspect of rule 7.23, that is the nexus with a right to relief, it is our submission that the Full Court erred by dismissing the need for an objectively established nexus between the asserted belief and the relevant patent claims whose infringement was the postulated basis for the right to relief.

Can I go then to the syllogism that captured the essence of Pfizer’s application?  The Chief Justice sets it out at page 88 of the application book, in paragraph 22.  Now, it is the second part of paragraph 22 at page 88 commencing with the words “Crucial to this belief were three considerations”.  The first was not in issue:

close similarity of the two glycosylation profiles -

The second proposition concerned:

the likelihood of that close similarity -

meant a similarity of process, and the third was:

Dr Ibarra’s view . . . that the Pfizer’s process was in accordance with the patents -

I would ask the Court to note that the second proposition discloses no nexus at all with the patented methods in claim 1 of each of the three patents.  The third proposition, presumably the means by which Pfizer attempted to demonstrate that requisite nexus, was deployed ultimately, or at least as seen by the Full Court, simply as a view unsupported by any facts.  It was not advanced or at least proven as a matter of objective fact. 

Can I ask the Court at that page also to note that phase (b) is a complicated phase.  Paragraph 28 demonstrates that there are numerous factors.  The patented methods were only relevant to a very small subset of those processes within phase (b). relevantly part of (b) and (d) which the Chief Justice says at paragraph 29 across the page.

GORDON J:   Dr Ibarra was not cross‑examined, was she?

MR YOUNG:   No, your Honour, but we can accept entirely her point of view about glycosylation.  It does not make any difference to the points I am endeavouring to explain.  Indeed, the Chief’s second proposition accepts entirely her viewpoint that there was a similarity with phase (b) processes.  Phase (b) processes are not the patented processes, though.  They are a tiny subset within phase (b).

Now, can I go to the errors.  The nub of the error, the first error by the Full Court is that it moved away from a requirement to assess objective facts that satisfy the court there is a reasonable basis for the requisite belief and substituted an inquiry into the state of minds of the particular deponents.  That is evident in these passages.  Could the Court go to pages 102 to 103 in the Chief’s judgment?

In paragraph 69, the Chief has just moved away from the proposition of considering whether there is any need to demonstrate a connection with the patents.  The need for that connection is dismissed in the earlier paragraphs and I will come back to them.  But at 69 the task is centred on the state of mind of the applicant.  If the Court would note from about line 24 onwards:

If the applicant has a belief ‑

The critical aspect of it is what follows:

On the other hand, if in the application it can be shown that the belief of the applicant appears to be based on considerations or views that are unreasonable, untenable, irrational or baseless, it would be difficult to conclude that the applicant has a reasonable belief. 

The same approach appears in 70, five lines from the end of the page, particularly the proposition that:

the debate was not framed by a question whether Dr Ibarra’s views were untenable or unreasonable. 

That is said to be an error and then the question – correct question is posed at the end of the paragraph by reference to subjective views. 

His Honour sums up his approach, paragraph 84 at page 107, last three sentences.  Justice Perram adopted a similar approach at 134 and 135 at page 125 focusing on subjective views of Mr Silvestri in 134, and in 135, the first sentence, dismissing the need for any connection with the patents.  Justice Nicholas, as I said, simply agreed with the Chief’s analysis. 

This focus on state of mind begs the question of what it is that the applicant believes.  There might be a genuine and tenable belief in the possibility of an entitlement, but unless there is a proper assessment of the objective facts that are produced to the court, and unless there is a consideration of the connection with the patented claims, in our submission, the court is not addressing the statutory question. 

Can I then turn to the nexus for the claims?  The Chief dismissed any need for a nexus with the patented claims back at application book 101, paragraph 68.  In paragraph 68, his Honour says:

it is not determinative that the claims are not directed to a glycosylation profile. 

The syllogism step is set out:

similar processes in phase (b) lead to similar glycosylation profiles –

but that does not connect up with any infringement of the patented methods.  Then his Honour says somewhat extraordinarily: 

the fact that he patents are not so directed might make one cautious as to the teaching of the patents -

Surely the true position is the reverse.  If the proposition is inconsistent with the teaching of the patents, one should be cautious about what should be drawn from this alleged similarity. 

The third proposition is that the judge had made a decision that Dr Ibarra’s hypothesis could not be accepted as reasonable.  His Honour thinks that should be the focus of it but that is a misunderstanding.  The main point is even if you accept Dr Ibarra’s hypothesis it demonstrates no connection with the patented methods, simply with phase (b) as a whole. 

The true approach is the primary judge’s approach which is an objective assessment.  Can I direct the Court back to 100?  There the primary judge’s conclusion at paragraph 92 is set out.  In fact it is probably better if I take the Court quickly back to the running paragraphs in the primary judgment at page 34, and this point is missed entirely by the Full Court, commencing at paragraph 91, where Justice Burley is analysing the similarity step in the syllogism.  Paragraph 91:

Nothing in the evidence adduced by Dr Ibarra leads to the conclusion that by reason of the similarity of the glycosylation profiles –

the claims are taken.  Then in 92, last line:

No evidence suggests that by following the methods . . . a glycosylation profile will be produced that has any particular characteristics -

Then the last line of 93 ‑ ‑ ‑

GORDON J:   Is not the problem though what appears in the first few sentences of 93 and that is that there is some sort of mini trial that has gone on leading to the trial judge to choose one view over another? 

MR YOUNG:   No, this has nothing to do with the choice between those two experts. 

GORDON J:   So, what is the ‑ ‑ ‑

MR YOUNG:   Your Honour, is ‑ ‑ ‑

GORDON J:   Just one moment - what is the line then where he talks about “The better view is that” - in 93? 

MR YOUNG:   That is going back to by similarity producing similarities.  But, your Honour, you can accept – let us assume Dr Ibarra is right and the similarity is most likely centred in phase (b).  That was as far as her view went.  The view of the other experts was, no, that similarity in profiles could be generated by phase (a), phase (b) or phase (c).  But assume Dr Ibarra is right, all that narrows it down to is that the source of similarity is phase (b) as a whole.  It does not connect with the small subset of phase (b) processes which are the patented methods.

GORDON J:   It raises the question, does it not? 

MR YOUNG:   No.  Well, it raises a question which is not addressed by the court, which is that in circumstances where they have not assessed reasonable belief by reference to the need for a nexus with the particular patented claims, how can the court objectively be satisfied that there is a reasonable basis for the belief that there may be a right of action.  There is a big hole in the logical analysis. 

GORDON J:   Unless it is incomplete.

MR YOUNG:   Well, it is incomplete because a critical factor has not been addressed.

GORDON J:   Which is the whole purpose of the application. 

MR YOUNG:   Because the court has not addressed the nature of the right to relief and how that bears on the reasonableness of the belief.

GORDON J:   The way to test it is this.  Assume for the moment, and it is not this case, there were four elements to the cause of action.  You had evidence about two and not about the others, but had a reasonable belief based on the facts that you may have had a cause of action.  The rule would operate then. 

MR YOUNG:   Yes, but that is not this case.

GORDON J:   Why not?

MR YOUNG:   I am not – because I am not breaking it down into a situation where the taking of certain elements has been proved by objective facts and there is some doubt about the third integer.  Here, there is no connection at all demonstrated by the objective facts that are advanced to say that the particular patented methods have been taken.

GORDON J:   Well, there is a suggestion that there is a concern it might have been.

MR YOUNG:   Well, the concern that it might have been has to be founded on a reasonable basis.

GORDON J:   Well, that is the question.  So we are back to an expression of view by Dr Ibarra which you contend is wrong.

MR YOUNG:   No, your Honour.  I am prepared to accept for the purposes of the argument that her view is to be preferred.  That only takes you to the proposition that similar profiles means similar phase (b) processes. 

GORDON J:   Correct.

MR YOUNG:   That provides no reasonable basis for saying that the claims may have been taken because the claims are different from phase (b) as a whole. 

NETTLE J:   The claims are part of phase (b).

MR YOUNG:   Well, they are within the phase (b).  Yes.

NETTLE J:   So it is possible, although one has no objective evidence of it being so, that what has produced the similarities identified by Dr Ibarra within phase (b) are the subject of the claims. 

MR YOUNG:   Yes.

NETTLE J:   It is not demonstrated that it is so but the possibility has been created because somewhere within phase (b), accepting Dr Ibarra’s opinion, there has been use.

MR YOUNG:   But that is a possibility.

NETTLE J:   Yes. 

MR YOUNG:   But it is not an objective set of facts upon which the court itself could be satisfied that there is a reasonable basis for concluding that the applicant may have a right to relief for patent infringement. 

NETTLE J:   I suppose it depends upon what you mean by reasonable basis.  If you say, because it is possible that what has been used is the patent within phase (b), there is a reasonable belief that he may have a cause of action for infraction of his patent. 

MR YOUNG:   Well, your Honour, it comes back to a question of whether this test is – requires an objective assessment of facts that are laid before the court.  The last sentence of 93 records Justice Burley’s finding that:

No evidence has been adduced to suggest that the end product is referable to the claims at all. 

NETTLE J:   I appreciate that.  As far as we get with Dr Ibarra, assuming her accuracy, is that it is within phase (b)? 

MR YOUNG:   Yes. 

NETTLE J:   And, therefore, possibly maybe within the patent. 

MR YOUNG:   Yes, but can I then - I see the time, your Honour, but can I have an extra few minutes ‑ ‑ ‑ 

NETTLE J:   Yes, keep going.  

MR YOUNG:   ‑ ‑ ‑ because I have not got to the last step of the syllogism. 

NETTLE J:   That is all right, keep going. 

MR YOUNG:   Can I say this, that in relation to this proposition both Justice Perram and the Chief Justice thought it was of no consequence that the patent specification itself indicated that the source of the similar glycosylation profiles was to be found in phase (a).  That is dismissed.  The fact that the patents are not directed might make one cautious is what - to glycosylation as said by the Chief.  But Justice Perram said at 135 ‑ page 125:

But it was not possible to dismiss Dr Ibarra’s evidence on glycosylation as speculation just because it appeared contrary to the teachings of the three patents. 

The teaching of the three patents was that glycosylation profiles are generated in phase (a).  But this is part of the need to consider the nexus with the patents and so that was disregarded and that was part of the objective assessment that we say the rule requires.

Can I turn then to the last step in the syllogism - Pfizer’s process and the section 76 point?  The first thing is that that step in the syllogism was absolutely essential.  Would the Court look at page 36 please of the application book, paragraph 101.  This is how Pfizer sought to fill that hole that I addressed your Honour Justice Nettle about, through the last leg of the syllogism as Justice Burley makes clear.  The fact that Pfizer’s own process used the claims was said to be the bridge. 

Now, at trial – at the first hearing, at the primary hearing that was advanced as a fact, not as a mere matter of opinion.  That is clear from Pfizer’s own submissions at page 38 as recorded by Justice Burley.  Paragraph 107:

Pfizer submits first, that the evidence . . . was not opinion evidence at all but a statement of fact as to the presence of physical features of the process –

based on her intimate experience.  The second proposition was that section 76 did not apply at all.  Then you have senior counsel’s submissions recorded by the Chief at 103 which made it very clear that the third proposition that syllogism was being advanced as a matter of fact because it was the necessary factual bridge to the right to relief for infringement - it appears very clearly in paragraph 72.  So, Ibarra’s evidence was directed to prove the fact that the Pfizer process used the claims, but her opinion evidence was an assertion without any basis.  In fact, set out in her affidavits ‑ ‑ ‑

NETTLE J:   I think I understand the 176 point. 

MR YOUNG:   Yes, all right.  So the Full Court determined the Evidence Act applied, they determined that her evidence was opinion evidence but they considered that neither 76 nor 79 was capable of applying.  The

Chief’s reasons about that are 105, paragraph 79, particularly the second half of it.  The nub of the reasoning is that:

Pfizer is entitled to rely on Dr Ibarra’s affidavit –

notwithstanding non‑compliance with sections 76 and 79, simply as a basis for Silvestri’s belief, even though it would be inadmissible to prove the fact as to what Pfizer’s own process did. 

NETTLE J:   Well, it all depends on whether it is the George v Rockett test or this new subjective belief test, does it not?

MR YOUNG:   Well, your Honour is right because the approach to 723 and the objective nature of the test flows through here.

NETTLE J:   Yes.

MR YOUNG:   This further indicates that the court is shifting from objective assessment to an assessment that somebody has sworn to it.  In this case somebody ‑ Dr Silvestri has sworn to it based on somebody else’s opinion that is not an admissible opinion because it does not set out any facts, but because that final opinion relies on a previous affidavit, you can circumvent the requirements of the Evidence Act, you can establish a reasonable belief without any factual evidence simply by having the device of two affidavits.

NETTLE J:   I think we have the point, Mr Young. 

MR YOUNG:   If your Honour pleases.

NETTLE J:   Mr Shavin.

MR SHAVIN:   If the Court pleases.

NETTLE J:   Can I ask upfront, do you accept that the Chief Justice formulated a new test which departed from the old?

MR SHAVIN:   No, if the Court pleases.

NETTLE J:   Could you go there first if it is convenient? 

MR SHAVIN:   Yes, certainly.  The Chief Justice at paragraph 69, which the Court will find at application book 102, in our respectful submission adopted a construction of the rule that is entirely consistent both with George at 112 and 116 and with Sandhurst at paragraphs 19 to 21.  In George v Rockett at 112, the High Court said:

When a statute prescribes that there must “reasonable grounds” for a state of mind ‑ including suspicion and belief ‑ it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.

At 116, the Court said:

The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists:  the assent of belief is given on more slender evidence than proof.  Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture.

Now, the approach that was adopted by the court was to ask whether the active mind of Pfizer, Mr Silvestri, had a reasonable basis to believe not that he might have a cause of action for patent infringement, but a right to obtain relief.  There is nothing in the rule that would require the basis of that opinion to be in admissible form.  Rather, he has to inform himself - and one must ask whether the way in which he has informed himself objectively provides him with a reasonable basis for belief.  So that the court ‑ ‑ ‑

GORDON J:   What is the court’s role then, once it has received that?

MR SHAVIN:   The court then must identify whether, in fact, the basis of that belief is reasonable and that is what in fact, in our respectful submission, both the Chief Justice, Justice Perram, and accepted by Justice Nicholas, did.  So that when one looks at paragraph 69 of the Chief Justice – and it is plain, in our respectful submission, he clearly approached the language of the rule:

The relevant question posed by the rule is whether the applicant reasonably believes that it may have the right to obtain relief.  It is not whether one scientific view is more or less persuasive than another . . . views may differ . . . If the applicant has a belief that is founded on considerations or views reasonably open (even if contested as incorrect by others) that may well found a conclusion that the applicant has a relevant reasonable belief.  On the other hand, if in the application it can be shown that the belief of the applicant appears to be based on considerations or views that are unreasonable, untenable, irrational or baseless, it would be difficult to conclude that the applicant has a reasonable belief.

Now, in our respectful submission, that articulation is on all fours with what the High Court has said at page 116 of George v Rockett because otherwise the whole purpose of the rule is completely undermined.  Of course, in the circumstances of this case, one is looking at whether or not a possible defendant has infringed a process patent and the terms of the process, of course, will be exclusively within the knowledge of the respondent.  It cannot be anywhere else.

So the only way in which one can identify whether there is a reasonable basis to believe that there may be a right to relief is to try and look at what you can and thus the syllogism was important.  It was important to identify that in fact the glycosylation profile was very similar - some said the same, there was a very minute difference - but also that was on Cho and on Schiestl that when in fact Pfizer changed its own process to use bovine free ‑ ‑ ‑

NETTLE J:   Serum.

MR SHAVIN:   ‑ ‑ ‑ ingredients, the glycosylation profile was different even though the two products were bio similar.  Now, Dr Ibarra was not the office cleaner.  Dr Ibarra was the scientist, advisor, intimately involved in the production processes.  She knew that in fact the process was – the outcome of the process was very dependent upon very small changes in the process.  She believed and knew of her own knowledge from many years work with the Pfizer production process - the Full Court properly accepted she was well qualified - that in fact the Pfizer process fell within the claims of the patent. 

Thus, when in fact Dr Silvestri relies upon a person of real scientific expertise, of direct scientific knowledge of the Pfizer process, of direct knowledge of her own of the variations that caused the impact of them in the process, then the question is, was it reasonable for him to rely upon such an opinion to form a view that Pfizer may have a right to relief. 

Thus, the approach of the court, consistent with Rockett which says you cannot know everything, you do not have to have it on a balance of probability, you do not have an infringement trial when the very nature of the rule is to enable you ex ante to determine whether you may have a right to relief, you look at the basis of the opinion, was Mr Silvestri acting objectively, reasonably in accepting the opinion and forming the view.  That is consistent with Rockett.  As we will see it is exactly on fours with what is said by the Full Court in Sandhurst in paragraphs 19 to 21 and it is correctly articulated in paragraphs 69 and 70.

Inherent in our friend’s discussion of the claims and the possible inconsistency of Dr Ibarra’s view with the teaching of the patent of course, none of that was put to Dr Ibarra.  What is being said is that Dr Ibarra’s view ought to be rejected as lacking credibility because it appears from an analysis not put to her that there might be way of challenging some of her opinions.

NETTLE J:   I think it has moved on.  Mr Young accepts for the sake of argument that Dr Ibarra’s opinion is correct but contends that it takes one no further than that.  The reason for the correlation in glycosylation is because it is within phase (b) and the patent is only a very small part of phase (b) and therefore it is not enough to have a reasonable belief that it might be in phase (b).

MR SHAVIN:   Yes, but I think if we can say this, your Honour.  The criteria in the claims go directly to process parameters at the core of phase (b).  Dr Ibarra’s opinion, if our friend is going to accept that has to accept the whole of it, is that variations in those process parameters will directly affect the glycosylation profile and our friend, if he is going to accept Dr Ibarra, has to accept also her opinion that the Pfizer process falls within the terms of the claim.  So that when you take and accept, as our friends must, in our respectful submission, the whole of Dr Ibarra’s opinion then one finds that her opinion was that the respondents may be using the patent claims.  Now, what our friend wants to do is to pick and choose.  He would like to accept bits of her opinion but without cross‑examining her reject other portions of it.  In our respectful submission he cannot do that. 

GORDON J:   I understood Mr Young – or at least one aspect of his argument was, “Listen, we accept Dr Ibarra, we accept her evidence but the underpinnings for that opinion are not set out and therefore we should not, in effect, get to first base on this application”.  On a section 76 point it is the basis that we have an assertion that it is within it without any foundation for those opinions.

MR SHAVIN: So what our friends would seek to do is in fact to destroy the whole of the core of the rule because what one does not have in an application for pre‑action discovery under rule 7.23 is a mini infringement trial. What one must be able to do is to form, objectively, a reasonable belief. What the court does is to say well, that means you cannot prove it. If you proved it, you would not in fact be entitled to discovery under the rule.

GORDON J:   Well, that is a difficulty with this rule.  One has a sort of grey area in the middle where you have enough but probably not enough and the court has to make an assessment whether you have crossed the line.  So there are really two issues in the way I understand your argument.  One is, if we adopted Mr Young’s submission we would end up having, in a sense, a trial and secondly, that if it was in effect pushed to that level of standard, you would never have any application of the rule.  You would just have a trial. 

MR SHAVIN:   The problem with that is that the rule is designed in the public interest, in the administration of justice, to ensure that the court is troubled with matters where there is a reasonable basis for the matter and where the knowledge is exclusively in the hands of the potential respondent.  If in fact you can find a reasonable basis, you might have a right for relief, not for the cause of action.  Then you can go forward, get the discovery and determine whether or not the court should be troubled with the proceeding. 

GORDON J:   There is a balance though, is there not?

MR SHAVIN:   There is a balance.  

GORDON J:   This is seen as being a very extreme power.  It is only exercised in circumstances where the preconditions, as Mr Young describes them, have been met.  I mean, there is a balance.  It is not dissimilar to a search warrant at one level, subject to court order. 

MR SHAVIN:   It is somewhat shorter because the court will always, of course, narrowly identify and has a discretion as to whether it makes the order and how intrusive the order is.  When one looks at the claims, two or three facts if identified in a confidential manner would be sufficient to resolve one way or the other whether the matter falls within the claims or not.

But what the Full Court has done which, in our respectful submission, is entirely consistent with both George v Rockett and Sandhurst is to look at the word “reasonable” and say well, is it objectively reasonable or is it unreasonable?  Our friend says well they have looked too much at belief, but it is a belief.  It has to be a reasonable belief.  A reasonable belief does not have to be a belief that is backed up by admissible evidence which can be tested in a three week trial. 

This is a pre‑action application designed to facilitate the processes of the court.  The approach articulated of the court’s own rule by the Chief Justice in paragraph 69, in our respectful submission, and discussed further in 70, is absolutely on fours with the authority.  Similarly, when one looks at paragraphs 120 and 121 of Justice Perram at page 117 and 118 of the application book, one finds at paragraph 120 a perfectly orthodox articulation of the text, and a discussion at 121 that, in our respectful submission, is a proper balance.  It is a balanced view in orthodox language.

GORDON J:   Do you say that 121 says anything new? 

MR SHAVIN:   No.  In Sandhurst - and our friends have relied upon Sandhurst - there are propositions that can readily be absorbed.  The Full Court in Sandhurst, which was Justices Dowsett, Davies and Wigney in 2014, at paragraph [19] relevantly said:

To put it another way, a requirement that the belief be reasonably held is an objective requirement, the existence of which does not depend upon the applicant’s state of mind but upon the existence of matters upon which the court may be satisfied there are reasonable grounds for the applicant’s state of mind:  George v Rockett . . . It is for the court to be satisfied that the belief is one that is reasonably held.  The criterion in r 7.23(1)(a) is a requirement that the belief must be reasonable.  In considering whether a belief is reasonably held, the court is not confined to the matters about which the applicant has deposed, but can consider the facts and matters put before the court by the applicant and whether, having regard to those matters, the Court is satisfied –

At [20]: 

Sandhurst argued that there was no admissible evidence providing an evidentiary foundation for the primary judge’s finding that Mr Clarke had a reasonable basis for his belief because it was incumbent upon Mr Clarke to depose to the objective foundation on which he believed he may have a right to relief against Sandhurst.  We disagree.  No such requirement is found in the statutory language of r 7.23(1)(c).      Rather, the requirement is to show that the belief held by the applicant is one that is reasonably based.  That requires an applicant to satisfy the court that there are reasonable grounds for the belief:  that is, the existence of facts that are sufficient to induce that belief in a reasonable person -. 

At [21] in the second half of the paragraph:

In the first place, r 7.23(1)(a) does not require an affidavit from an applicant deposing as to his or her belief.  The onus is on an applicant for preliminary discovery to satisfy the criterion in r 7.23(1)(a) but that onus can be established inferentially.  That is to say, the nature of the allegations against the prospective respondent and the circumstances out of which they arise may provide a sufficient basis upon which the court may be satisfied that the applicant for preliminary discovery reasonably believes that there is a right to relief . . . it would not have been fatal to the application had the paragraphs been ruled inadmissible.  What is required is that there must be some evidence on which to satisfy the court -

Now in our respectful submission, what you see is the analysis by the Full Court below is absolutely on fours with the analysis by the Full Court in Sandhurst.  It is consistent with George v Rockett, particularly the passage to which we referred at page 116.  When one accepts Dr Ibarra’s opinion in its entirety then one finds that what one has is a highly qualified and experienced person, knowledgeable of the Pfizer production process. 

The Chief Justice, paragraph 33; Justice Perram at 131 and Justice Nicholas at 183 relied upon Cho, a paper by the respondent’s own scientists that showed that the glycosylation profiles of the Pfizer product and the respondent’s product were very similar - and Schiestl, which showed that the glycosylation profiles of the Pfizer product changed after a change of manufacturing process though they remained bio similar, together with her knowledge of the sensitivity of the profile to changes in the process to infer that a substantially similar process was being used to manufacture the respondent’s product as the Pfizer product, and that accordingly the respondent may be using the claimed process.

Now, if one accepts that opinion from a properly qualified scientist with knowledge of the matters, then why is that not a reasonable basis for Mr Silvestri to have believed that Pfizer may have a right to relief.  The approach is traditional and orthodox.  It is consistent with the Full Court.  It is consistent with George v Rockett. 

NETTLE J:   What about the admissibility of Dr Ibarra’s opinion?

MR SHAVIN:   In our respectful submission, that cannot be a matter for special leave.  What the Full Court said on analysis of the transcript - it was put in a number of ways of which one was set out, but it cannot be that this Court is going to pass the varying statements by lead senior counsel before Justice Burley to determine the way in which it was relied upon. 

The Full Court – in Justice Perram, having set out at – this is application book 132 in paragraphs 159 and 160, having referred to the extract of the transcript, his Honour said:

There is force in Samsung’s submission but it needs to be considered in the context of the later debate which then took place about admissibility.  This was a T60-61 and involved, inter alia, the contention that the rules of evidence did not apply with the usual strictness to preliminary discovery applications.  That discussion cannot be reconciled with the idea that actual facts were being debated. 

Thus, what is being said is not that Dr Ibarra’s opinion was being tendered for proof of the underlying facts but was being tendered as proof that there was a basis for Mr Silvestri’s belief, that is it showed that Mr Silvestri had in front of him material that provided a reasonable basis of belief, not for the truth of the contents and thus, we do not get within the territory of sections 76 and 79, was not seeking to prove to the court the underlying facts.  That might happen if we get to a trial on infringement. 

NETTLE J:   Or if Dr Ibarra had been cross‑examined.

MR SHAVIN:   Yes, which she was not.  Thus, in our respectful submission, there is no question of error below.  We have referred in our outline, as the Court has seen, that…..approach that has been taken by this Court in Oates and other cases is that this is a construction by a Full Court of the Federal Court of its own rule, a rule which it has the power to make and amend.

Although there are rules for pre‑action discovery in every court, there is no evidence before the court that those rules are the same.  Indeed, it is plain they are not.  What one has here is a perfectly orthodox approach to the construction of the rule, given the policy objectives of the rule in the concept of the administration of justice efficiently within that court, where the court having looked at George v Rockett, having looked at Sandhurst says what we need to do is we need to see whether in fact Mr Silvestri’s opinion was objectively reasonable.

NETTLE J:   I see you are out of time, Mr Shavin. 

MR SHAVIN:   May it please the Court.

NETTLE J:   Mr Young.

MR YOUNG:   Your Honour, I will go directly to the – what my learned friend said about the rule 7.23 test. First, the approach is a departure as George v Rockett demonstrates.  Can I ask the Court to go to a different passage in George v Rockett, at 122?  This is where the Court implemented the general principle that there must exist facts which are sufficient to induce the state of mind in a reasonable person.  At 122 in the first paragraph, the Court emphasises that there must be facts put before the magistrate and in that case there were:

no facts which might have satisfied the magistrate that there were reasonable grounds for believing that the documents for which the search warrant was sought would afford evidence as to the commission of the offences –

and there is reference to the particular offences.  A little bit earlier, the Court illustrated the importance of the nexus with the specified offences.  At the foot of 118 they postulated a fraud involving accounting entries and a subpoena directed to that offence, 118 at about point 8 on the page: 

necessary that the suspected entry be identified with sufficient precision.

There is a question of what the base – what the asserted belief relates to and what it can justify, so you have to look at the right to relief. 

Now, my learned friend read the passages from Sandhurst and George.  What they emphasise is that the court itself must be placed in a position to assess the relevant facts to determine whether they provide a reasonable basis for the belief.  Hence the passage that was read in Sandhurst that there is:

an objective requirement, the existence of which does not depend upon the applicant’s state of mind but upon the existence of matters upon which the court may be satisfied that there are reasonable grounds - 

So that is the existing state of authorities. My learned friend in his submissions reduced the rule 7.23 test to this proposition: was Silvestri acting reasonably? I took that down verbatim. He asserts he was because of the identity and the qualifications and the experience of the person who swore an affidavit that disclosed no factual basis for the opinion it asserted. Now, that is a transformation of the text.

We are not contending that facts have to be adduced and proved to the level of a balance of probabilities, only that there must be a basis and objective fact put before the court.  My learned friend also said that if we accept or assume Ibarra to be correct in respect of phase (b), we have to accept her opinion about the Pfizer process. 

That does not follow.  She explained her factual basis, her reasons for the first proposition about phase (b).  She gave no basis in fact for her other opinion and as to that can I refer the Court to what Justice Burley said at pages 51 to 52 of the application book in paragraph 175.  The form of Dr Ibarra’s evidence about the Pfizer process, and I look at line 3 at page 52, deprived the court:

of the opportunity to consider it.  The Court would be expected to exercise the coercive powers of discovery without having any way to

consider how the requisite belief may apply to one or all of the patents raised. 

Now, that was dismissed by the Chief Justice as another example of over refinement.  With respect, it is not.  It goes to the fundamental protection that there must be a factual basis adduced for the making of the order upon with the Court itself can satisfy itself that there is a reasonable basis.

NETTLE J:   I see you are out of time.

MR YOUNG:   Yes, your Honour.

NETTLE J:   The Court will adjourn briefly to consider the matter.

AT 10:27 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.30 AM:

NETTLE J:   In this matter the Court is not sufficiently persuaded that the Full Court of the Federal Court of Australia departed from previous authority regarding the interpretation of rule 7.23 of the Federal Court Rules 2011 (Cth), or that the decision of the Full Court is otherwise sufficiently attended by doubt, to warrant the grant of special leave to appeal. In the result the application for special leave is refused with costs.

Thank you, gentlemen.

AT 10.31 AM THE MATTER WAS CONCLUDED