SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatment Limited and Anor

[2013] HCATrans 54

[2013] HCATrans 054

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne       No M75 of 2012

B e t w e e n -

SNF (AUSTRALIA) PTY LTD (ACN 050 056 267)

Applicant

and

CIBA SPECIALTY CHEMICALS WATER TREATMENT LIMITED

First Respondent

CIBA (AUSTRALIA) PTY LTD (ACN 005 061 469)

Second Respondent

Application for special leave to appeal

FRENCH CJ
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 15 MARCH 2013, AT 2.17 PM

Copyright in the High Court of Australia

MR C.D. GOLVAN, SC:   If your Honours please, I appear with MR G.J. FITZGERALD for the applicant.  (instructed by K&L Gates)

MR D. SHAVIN, QC:   If the Court pleases, I appear with MR N.R. MURRAY for the respondent.  (instructed by Griffith Hack Lawyers)

FRENCH CJ:   Thank you, Mr Shavin.  Yes, Mr Golvan.

MR GOLVAN:   Your Honours, this matter concerns two questions of principle, first in relation to the correct test to apply for an innovation patent, that is to say the test of innovative step, and the second question concerns the approach adopted by the majority and the trial judge in the question of construction.  Can I deal first with the question of innovation?  Your Honours, the High Court is yet to consider the test for innovative step, it is ‑ ‑ ‑

FRENCH CJ:   You complain of her Honour’s use of the words “important effect”, is that right?

MR GOLVAN:   That is right.  To illustrate it, your Honours, can I go to paragraph 194, accepting that the test is of a functional or factual kind, just to look at the state of the facts upon which the test was then applied.

FRENCH CJ:   So, what page in the application book?

MR GOLVAN:   It is page 61 of the application book.

FRENCH CJ:   Thank you.

MR GOLVAN:   The point here, your Honours, is that there were two patents at issue being looked at 194, one concerned the use of flocculant in a particulate form, that is called Slatter 3, and the present patent, which is flocculant in an aqueous solution.  The idea is that flocculant in an aqueous solution had generally been well known in the common general knowledge before the priority date.

FRENCH CJ:   There is a difference between settlement and sedimentation on the one side and rigidification, so‑called.

MR GOLVAN:   That is right, your Honours.

FRENCH CJ:   Another wonderful contribution by intellectual property law to the English language.

MR GOLVAN:   Yes, that is right, your Honours.  The point here is that when one looks at the facts as found, or the evidence is referred to it at paragraph 194, about halfway down, this shows the problem with the effect test.

Furthermore, Professor Slatter suggested that the fact that the polymer in aqueous solution [which is the patent] would take effect more quickly was not necessarily an advantage since this might increase the risk of rigidification within the pipe before deposition.

Which, of course, is a disadvantage.

Drawing on this, SNF submitted that Patent 944 gave no indication that the speedier activation of the flocculating polymer confers any identifiable benefit over the process of adding particulate polymer previously taught in Slatter 3.

Now, what her Honour then did is refer to the evidence of Doctor Farrow, who talked about there being a different effect.  Then across the page your Honours will see references to “material effect”, including a discussion about “a different rate of reaction” prompting the conclusion “important effect”.  Now, the problem with this is that it contemplates a negative effect, and we say that stands fundamentally at odds with the notion of a substantial contribution.  In other words, her Honour has not – and we respectfully submit the majority below has not assessed and weighed up the evidence of both negative and neutral effect.

On the footing of this evidence, we would submit that this evidence is actually supportive of a discharge of the onus in respect of the test of no substantial contribution.  In other words, if the evidence stands as being that the effect is either negative or neutral, it cannot constitute, in our submission, a substantial contribution.  Otherwise we are making something of a nonsense, we would respectfully submit, of a concept of innovation, and innovation cannot be a situation where the patent works worse than the prior art, or even just as well as the prior art.  It has to be in the nature of an innovation.  Your Honours, that proposition is supported by reference to the explanatory memorandum which is discussed at page 253 in the Dura‑Post Case, where it is observed in relation to the revised explanatory memorandum that:

Therefore the test for innovative step will require an inventive contribution lower than that required to meet the inventive step threshold set for standard patents.

Now, your Honours, in Dura‑Post it was found that the contribution does not need to be in advance, and that I think to interpolate means that to call it an advance, a substantial contribution would be to encroach on the territory of inventive step as distinct from innovative step.  But, your Honours, in our view, as we submitted and noted by the learned trial judge at paragraph 194, which it took the Court to, it does have to be an identifiable benefit. 

In the absence of benefit, one then finds legitimately, we respectfully submit, commentary from his Honour Justice Dowsett in dissent to say that on the application of the effect test there is an enlargement of the statutory language which has a risk of error, which his Honour referred to at paragraph 227 at application book 218, and involves his Honour asking what his Honour called the “wrong question”.

We submit that there is a fundamental importance in having the right question clarified so that this evidence that I took the Court to, which is essentially the entirety of the evidence on the question of the effect, can be considered in the context of a test which responds to the notion of identifiable benefit, something less than an advance, but something more than a negative effect which just intuitively sounds wrong, or even a neutral effect, and by “neutral effect” I mean, for instance, reference to even the conclusion at 197 that the effect is important.  The adoption of a conclusion of the effect being important is not anything more than, we would respectfully submit, a neutral observation having regard to the test of substantial contribution in what I put in so many words to be a positive test.

FRENCH CJ:   Now, the negative effect that you are talking about, just so I understand, is the delay in activation of the flocculant?

MR GOLVAN:   Yes, that is right.

FRENCH CJ:   That is at 194?

MR GOLVAN:   Paragraph 194 is a good example of the negative effect.

FRENCH CJ:   Yes.  But, why cannot that be an innovation as something which causes a process to operate in a more beneficial way than it might otherwise have done?

MR GOLVAN:   No, no, no.  Sorry, if I have misunderstood your Honour’s question, but what the point of 194 is, that by using the flocculant in aqueous solution that might increase the risk of rigidification.  Now, that is not what this patent is designed for, it is not designed to increase ‑ ‑ ‑

FRENCH CJ:   I am sorry, yes, I see.

MR GOLVAN:   I am sorry, I did not answer your Honour’s question well.  It is not designed to increase the risk of rigidification, it is designed to actually diminish the risk.  The whole purpose of this patent is to promote the flow of material and its deposition at the correct point for purposes of managing ‑ ‑ ‑

FRENCH CJ:   And rigidification after deposition.

MR GOLVAN:   Rigidification after deposition is entirely the point of it.

FRENCH CJ:   Yes, that is right.

MR GOLVAN:   Whereas to actually cause there to be a risk of rigidification within the pipe is exactly to detract, and that is why I called it “negative”

FRENCH CJ:   But, is it not an integral part of the process that you do not get rigidification in the pipe, otherwise everything jams up?  It starts, as it were, rigidifying after it has left the pipe, and then you get the stacking and so forth?

MR GOLVAN:   Yes, but if there is an increased risk of rigidification within the pipe then you are actually causing an effect which could detract from the innovation.

FRENCH CJ:   That is because of the presence of the flocculant ‑ ‑ ‑

MR GOLVAN:   Of the flocculant.  All the flocculant does in essence is, we say, to cause the particles to have ‑ ‑ ‑

FRENCH CJ:   Well, there is a network in polymerisation ‑ ‑ ‑

MR GOLVAN:   There is a debate about networking.  But, in essence the description we adopt is settling or sedimentation or add yield stress, in other words, the particles come together.  Doctor Farrow has introduced the idea of interlocking or chemical bonding and we say that transcends his role, which I will come to in a minute.  But, your Honours, the point of this submission is to say the description of what I have called “the negative effect” or even a neutral effect, which is simply to say, there is an effect, would be to endorse an outcome where – after all patents invariable include in them some description of how they might work, and unless there is a requirement for there to be at least, shall we say, a beneficial effect, one runs the risk that innovation is given where there is nothing like an innovation occurring simply because something works.

It is got to be more than something works in order to entitle the patent to the status of innovative.  That is how we put the issue of the problem of focusing on effect, which of course is not the statutory language and runs a risk that we are in a departure and a state of the law where a senior judge of the court below observe that there is a tension in the way in which the test is to be understood and applied for the kind of reasons I have indicated.  We have also indicated another issue about it which will come for further consideration if we are successful on the grant of leave, which is:  as a matter of construction, the fact that both patents of Slatter 3 and the patent declare the same benefit of improved rigidification, means that the claim process makes not contribution to the working of the invention.

But, it is really our intention, your Honours, today to put before the Court the problem of the enlargement of the test which has caused Justice Dowsett to express the views that he has, and also we would submit, constitutes a further move away, if you like, from the test as it is to be understood by the wording of the statute and as envisaged in Dura‑Post itself.  In Dura‑Post there is no discussion as we see it of the issue of effect being sufficient, save for a  reference to the inquiry being as to a factual or functional nature, and whilst we accept fully that the inquiries as to a factual or functional nature, by way of our illustrations looking at the evidence in those paragraphs, we say that a negative or neutral effect cannot be part of the inquiry and that we will have discharged our onus if the evidence remains as it is as described in paragraphs 194 through to 197.

FRENCH CJ:   Now, this was dealt with by Justice Bennett, I think, at paragraphs 362 and 363.

MR GOLVAN:   Yes, Justice Bennett at page 256 of the book.  Her Honour, as it were, adopts the important effect testing – expresses it in relation to Slatter 3, at 361, and I have not taken your Honours specifically to Slatter 4 ‑ ‑ ‑

FRENCH CJ:   Is her Honour actually positing it as a test or as a conclusion of a factual character about the process?

MR GOLVAN:   Yes, but for the reasons I have indicated, effect should be only the beginning of an inquiry, whether it is important or not important, it should be an effect of a particular character.

FRENCH CJ:   You spoke of it as though it were being used as a substitute for the statutory test.

MR GOLVAN:   We have endeavoured to put that, but in another way of putting it, it has achieved certainly an elevation in the discussion which seems to mean that if you satisfy the test of important effect you have pretty much satisfied the no substantial contribution requirement.  But, your Honours, if we are wrong in that then the argument we are putting is that the finding of a neutral or negative effect, be it important or otherwise, is not enough to do the work to warrant the conclusion of innovation, otherwise the concept of innovation falls away in itself. 

Now, your Honours, can I deal with the second point, which is the question of construction?  There, as your Honour the Chief Justice observed, the tension in that part of the debate was between the concept of networking, chemical bonding and sedimentation and settling, and in the ultimate ‑ ‑ ‑

FRENCH CJ:   The term we are concerned about is not “rigidification” really, it is “improved rigidification”.

MR GOLVAN:   “Improved rigidification”, that is true, your Honour.  But for the following reasons we say that the concept of networking or chemical bonding was not available.  The first reason is that it is not used in the specification or claims which rather uses the language of “settling” and “sedimentation” as well as “stand” and “rigidified”, but nowhere does one find the language “networking” or “bonding”.  The second point is that the concept was introduced through contested ‑ ‑ ‑

FRENCH CJ:   But it was found, was it not, to exclude existing process of sedimentation and settlement?

MR GOLVAN:   Well, your Honour, that is an emanation of acceptance.

FRENCH CJ:   The improved rigidification was not described by existing processes of settlement and sedimentation, is that ‑ ‑ ‑ 

MR GOLVAN:   Well, your Honour, the analysis seemed to proceed on the basis that this is what Doctor Farrow described, and Doctor Farrow, we say, was largely focused on a description of a post‑priority date process called the SNF process, which was accepted as satisfying the test of networking or chemical bonding.  But, your Honour, the critical point is her Honour, as it were below, the trial judge – and I will come to show your Honours in respect of the majority judgment – largely derive their conclusions from the views of Doctor Farrow.

FRENCH CJ:   This appears at paragraph 65 of the judgment, I think, does it not, at page 28?

MR GOLVAN:   Paragraph 65.

FRENCH CJ:   “I accept Dr Farrow’s evidence (outlined above) that”?

MR GOLVAN:   Yes, that is so, your Honours.  Our criticism is broken down into a few parts.  The second part I was going to come to which is that there is no finding that this evidence accorded with the understanding of a skilled addressee, and this is an important fact, it is not just about the receipt of expert evidence.  But the relevant test is the skilled addressee being a person of ordinary skill in the relevant art possessed of the common general knowledge, but rather was a statement, we would say, that one cannot put any higher than the personal scientific opinion of Doctor Farrow, which is, as it is described by Justice Dowsett at paragraph 78.

The third point is that the terms “networking” or “chemical bonding” are at odds with the much broader definition of “rigidification”, which was found by the trial judge as not being a term of art and does not convey the notion of chemical bonding or networking.  The fourth point is that there was evidence from skilled addressees, none of them adopted this approach to the question of rigidification or improved rigidification, save by reference to discussion about the postdating SNF process, which is a matter in error. 

The fifth point is that the use of this language adds a gloss to the patent which significantly transcends the language selected by the patentee in a document which founds a statutory monopoly and which falls foul of the requirements described in the Welch Perrin test at page 610, which I will just briefly read to the Court, which is this:

Courts have often insisted that it is not legitimate to narrow or expand the boundaries of monopoly as fixed by the words of a claim by adding to those words glosses drawn from other parts of the specification.  Similarly, if a claim be clear it is not to be made obscure simply because obscurities can be found in particular sentences in other parts of the document.

The word “rigidification” has abundant clarity and found not to be a term of art.  Now, your Honours, this argument was put at trial on appeal and is the subject of various views expressed by his Honour Justice Dowsett to the effect that these arguments were never met by CIBA ,and if I could just briefly go to those expressions of conclusion found in Justice Dowsett’s decision.  Could I start with going to court book 158, which is paragraph 44, where his Honour elucidates his impression of the state of the matter in bullet points at paragraph 43, the second last, the view expressed by Farrow is:

almost totally divorced from the content of the claims and the body of the specification –

Across the page at 159:

none of Dr Farrow’s evidence, to which the primary Judge refers in connection with the construction question, expressly addresses the knowledge and understanding of the skilled addressee –

Two more bullet points on:

despite the clear assertion by SNF that there was no evidence as to the skilled addressee’s understanding of the word “rigidification”, Ciba has not pointed to any such evidence, other than generalized references to the evidence of Dr Farrow, Mr Schroeter and Mr Bembrick.

Schroeter and Bembrick is directed to the postdating SFN process.

GAGELER J:   Do you accept that her Honour’s statement of principles of construction at pages 13 through to 15 of the application book is a correct statement?

MR GOLVAN:   Yes, I do, your Honour.

GAGELER J:   So your complaint is about the application?

MR GOLVAN:   It is about the application, and indeed to illustrate another way in which her Honour has qualified Doctor Farrow in a different respect, at application book 075, at paragraph 241, her Honour was at pains to point out that Doctor Farrow’s evidence on sufficiency, that is at application book 75, that when he was giving evidence on sufficiency he was doing so through the lens, if you like, of the understanding of the skilled addressee.  So she was able to make a finding positively about the scope of that evidence. 

This is a case in which an expert who does have some practical experience has been brought into play on the question of construction without his practical experience being the subject of a direct finding as to validate the evidence on construction.  Now, as your Honours will be aware, there are various findings in the trial judgment about who a skilled addressee is, described variously as a practical person working in the mining industry with practical knowledge and experience in the treatment and disposal of mining wastes.  There was said to be no need for the person to be ‑ ‑ ‑

FRENCH CJ:   I think you are out of time, Mr Golvan, you had better wind up.

MR GOLVAN:   Yes.  Can I just make one final comment then, your Honours?  There is a finding of Justice Bennett at paragraph 259 at application book 230 and her Honour states:

Her Honour accepted that Ciba’s expert witness, Dr Farrow, was able to address Patent 944 as the skilled addressee.

We say that is not founded.  If your Honours please.

FRENCH CJ:   Yes, thank you.  We will not need to trouble you, Mr Shavin.

This application concerns the validity of innovation patents for improved treatment of mineral slurries as part of the disposal of tailings and other waste material resulting from the processing and beneficiation of minerals.  Separation of waste from water is typically effected by processes of flocculation and settlement or sedimentation.  The patents in question refer to a process of improved rigidification of the material while retaining its fluidity during transfer. 

The first special leave point argued arises in relation to the innovative step question.  The primary judge’s finding, reflected in the majority in the Court of Appeal, that a person skilled in the art would consider the form in which the flocculant was added to have “an important effect” on the process was, in our opinion, a statement of an evaluative kind which, taken in context, did not disclose an approach by her Honour which was inconsistent with the statutory test. 

The other special leave point is said to arise out of the trial judge’s approach to the construction of the term “improved rigidification” involving the use of a water soluble polymer as flocculant and excluding existing processes of settlement and sedimentation.  That construction informed the trial judge’s conclusions adverse to the applicant on issues of novelty and want of innovative step.  The applicant complained that the primary judge relied upon the evidence of an expert rather than that of a skilled addressee in construing the patent.  However, the trial judge formulated the correct principles. 

The complaint is really one of application.  No error of principle warranting the grant of special leave is disclosed in her Honour’s approach to construction or in that of the Full Court.  Special leave will be refused with costs.

We will adjourn now to reconstitute.

AT 2.41 PM THE MATTER WAS CONCLUDED