SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited - [2016] APO 22

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2016] APO 22

Patent Application: 2004203785

Title:Treatment of aqueous suspensions

Patent Applicant:  Ciba Specialty Chemicals Water Treatments Limited
Opponent:  SNF (Australia) Pty Ltd
Delegate:  Dr S.D. Barker
Decision Date:  28 April 2016
Hearing Date:  Written submissions completed on 8 March 2016

Catchwords: PATENTS – opposition to grant of a patent – award of costs – opposition succeeds – cost awarded against the applicant – award reduced by 50% in recognition of the particular circumstances of the case

Representation: Counsel for the applicant: Mr D Shavin QC with
Mr P Creighton-Selvay
Solicitor for the applicant: Gilbert + Tobin
Counsel for the opponent: Mr B Caine QC with Mr B Fitzpatrick
Solicitor for the opponent: K & L Gates

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2004203785

Title:Treatment of aqueous suspensions

Patent Applicant: Ciba Specialty Chemicals Water Treatments Limited
Date of Decision: 28 April 2016
DECISION
I award costs according to Schedule 8 against Ciba Specialty Chemicals Water Treatments Limited, those costs reduced by 50%.
REASONS FOR DECISION

This decision relates to patent application number 2004203785 (the present application). The applicant is Ciba Specialty Chemicals Water Treatments Limited (Ciba). The opponent is SNF (Australia) Pty Ltd (SNF). On 16 February 2016 I issued a decision in relation to the opposition (the earlier decision),[1] finding that the opposition succeeded to the following extent: claims 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 14, 16, 17, 19, 21, 22, 23, 24, 25, 26, 27, 29 and 30 lack inventive step in the light of WO 01/92167 (known as the Gallagher patent). I allowed both parties two weeks from the date of the earlier decision to file submissions in relation to costs, and a further week to respond to those submissions. Both parties have filed submissions.
[1] SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2016] APO 8.
Summary of the parties’ submissions
SNF's submissions were that:
·as SNF was substantially successful in the opposition, the starting point for awarding costs should be that SNF is entitled to its entire costs in the opposition; and
·Ciba had improperly and unreasonably raised estoppel arguments that were ‘virtually entirely unsuccessful’ and therefore SNF is entitled to costs with respect to Ciba’s failed estoppel arguments.
Ciba's submissions were that:
- Ciba had substantially succeeded in the opposition because SNF was unsuccessful on the grounds of novelty, utility, fair basis and secret use, as well as all assertions of lack of inventive step except against the Gallagher patent;
- SNF's conduct in pursuing grounds in the opposition that had previously been rejected by the Federal Court was an abuse of process which caused Ciba to waste a substantial amount of time and money;
- SNF's conduct in repeatedly failing to act in accordance with its obligations under the Patents Regulations had caused Ciba to waste a substantial amount of time and money; and
- Ciba should be awarded costs in its favour above those in Schedule 8 of the Patents Regulations given the above-mentioned circumstances.
The law
The power of the Commissioner to award costs is based on section 210 of the Patents Act 1990 and regulation 22.8 of the Patents Regulations 1991. The power is discretionary, so I must take into account all relevant considerations.
The Federal Court has summarised the principles that apply to the award of costs on several occasions. In Hughes v Western Australian Cricket Association (Inc)[2] Toohey J said:
"1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v. Godfrey (1920) 2 KB 47.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1 QB 564.
[2] [1986] FCA 382 at [9].
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, 'issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v. Lombardi (1975) 13 SASR 4 at 12."
The same views were expressed by Black CJ and French J in Ruddock v Vadarlis.[3]
[3] [2001] FCA 1865; 188 ALR 143 at [11].
The adoption of an "issues" approach is only appropriate where it is fair to do so,[4] and the reduction in the award of costs is not an exercise in financial precision. Rather, what is required is a search for a "fair estimate"[5] of the quantum of any adjustment, based on the particular facts as a whole, recognising that "the assessment will often be rough and ready".[6] Relevant considerations include the "relative failures and successes of the parties, the time spent on particular issues, the interrelationship between different issues, and the level of involvement of the various parties in leading evidence and making submissions at the hearing".[7]
[4] H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 at [9].
[5] H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 at [12] and [14].
[6] Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5].
[7] H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 at [15].
Another consideration is whether the successful party has engaged in any conduct that would disentitle them to an award of costs.[8] The conduct of a party need not be misconduct, but conduct that may be seen to have brought about or substantially contributed to the costs being considered.[9] In appropriate cases, the award of costs can reflect the extent to which significant sums have been thrown away by reason of one party, albeit successful overall, raising and pursuing unsuccessful points.[10] Where the successful party relied on issues or allegations improperly or unreasonably raised, the successful party may be deprived of an award of costs, or even be ordered to pay the costs of the unsuccessful party.[11]
[8] Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72.
[9] Keddie v Foxall (1955) ALR 835; Weir Pumps v CML Pumps (1983) 2 IPR 129 at page 154.
[10] C Van Der Lely NV v Ruston's Engineering Co Ltd [1993] RPC 45 at 63.
[11] Patent Gesellschaft AG v Saudi Livestock Transport & Trading Co (1996) 33 IPR 461 applying Rediffusion Simulation Ltd v Link-Miles Ltd [1993] FSR 369.
Was the opponent successful?
The opposition succeeded on the ground of lack of inventive step and was unsuccessful on other grounds.
In relation to the ground of inventive step, I found that the nine prior art publications and acts relied on by the opponent were part of the prior art base. However, I found that only one of these documents was a valid citation. Twenty-four out of thirty claims of the present application were found to be anticipated by the Gallagher patent. I also found that the opponent had not established any of the claims lacked inventive step in light of the common general knowledge alone.
The opponent submitted that it was wholly successful on the central issue in the opposition. The applicant submitted that a mere 6 pages out of 121 pages of the opponent’s submissions filed for the hearing concerned the Gallagher patent. Therefore, the applicant submits that the opponent was unsuccessful in the matters canvassed by the remaining 115 pages. Further, the applicant was effectively successful in matters canvassed in 166 out of 170 pages of its written submissions because only 4 out of the 170 pages concerned the Gallagher patent.
SNF’s submissions on the issue of the polymer switch were significant to the opposition succeeding on the ground of inventive step. However, this issue was only one of many allegations raised by SNF during the opposition. The analysis of Ciba in regard to the proportion of the parties’ written submissions concerning the Gallagher patent as subsection 7(3) information may be a guide to the relevance of this information. However, I consider it is not appropriate to determine the success of the opposition by simply performing a mathematical analysis on the proportion of relevant information upon which the opposition succeeded.
Prima facie, the opponent was successful, but that success was not complete. Only some of the claims were found to lack inventive step, and several grounds were not successful.
Did the opposition succeed on substantial grounds?
The opposition succeeded on the ground of lack of inventive step. I consider that it is self-evident that this is a substantial ground. I am satisfied that SNF has succeeded on the substantial ground of inventive step.
The unsuccessful grounds
SNF was not successful in the grounds of novelty, utility, secret use and fair basis. While being substantial grounds of opposition, lack of success of the opposition on these grounds does not automatically reduce the award of costs.
Ciba submitted that SNF’s submissions and evidence were extensive, complex, and ultimately a large proportion of the matters canvassed in the submissions and evidence was effectively unsuccessful. SNF submitted that the evidence it filed in regard to the issue of inventive step was also relevant to most of the other grounds of the opposition SNF relied upon. I consider that there is overlap in the relevance of the evidence for the various different grounds relied upon by SNF. As discussed above, using a mathematical analysis of the proportion of relevant information upon which the opposition did not succeed is not an appropriate method on which to base a reduction of the award of costs.
SNF acknowledged that the ground of novelty was a major ground it appropriately and reasonably pursued but was ultimately unsuccessful. I accept that there is overlap of the evidence in regard to novelty and inventive step. However, the emphasis and relevance of the information, even though contained within the same body of evidence, is different between the two grounds.
SNF acknowledged that the grounds of inutility and fair basis stood alone from inventive step. However, SNF submitted that since relatively little evidence or submissions or hearing time were directed to those grounds in the context of the opposition, only a minimal reduction on the award of cost is appropriate. I agree.
I am satisfied that SNF has failed on certain substantial grounds and the circumstances make it reasonable to adopt an issues approach in this case to adjust the award of costs accordingly.
Conduct of the parties - SNF's conduct
Ciba submitted that SNF pursued a long list of contentions and grounds of invalidity previously rejected by the Federal Court[12] and therefore caused a waste of a substantial amount of time and money. Ciba further submitted that an opposition confined to the issue of inventive step with evidence and submissions relevant to this ground could have been determined swiftly. Prior to the hearing of the opposition, I expressed concern if SNF elected to maintain grounds of opposition that had already been considered in the Federal Court decision on the innovation patents. I noted in correspondence to both parties that conduct causing unnecessary expense would be relevant to my decision on award of cost.
[12] SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2011] FCA 452; 92 IPR 46.
SNF and Ciba both submitted very significant amounts of submissions and evidence. The hearing of the opposition occupied 3 days. Ciba submitted that a very significant amount of time and money was spent debating contentions prosecuted by SNF which were bound to fail. Therefore, Ciba submitted that the cost order of the opposition should reflect the extent to which significant sums of its costs have been thrown away by reason that SNF raised and pursued unsuccessful points, particularly points that were improperly and unreasonably raised.
The grounds of invalidity that were asserted and that failed in the Federal Court were novelty and fair basis.[13] SNF continued to pursue these grounds of novelty and fair basis in the opposition and were subsequently unsuccessful on these two grounds.[14] Although this was not a case where estoppel applied, the decision of the Federal Court was clearly of considerable importance, and provided guidance as to the likely outcome in the opposition (in the absence of different evidence). I consider that the conduct of SNF in pursuing grounds that were previously unsuccessful in the Federal Court without a significant new body of evidence was conduct that substantially contributed towards the cost, complexity and protracted proceedings of the opposition.
[13] SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2011] FCA 452; 92 IPR 46.
[14] SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2016] APO 8.
Ciba also submited that SNF's conduct in repeatedly failing to act in accordance under the Patents Regulations caused the waste of a substantial amount of time and money. SNF’s conduct that Ciba alleges to cause waste of a substantial amount of time and money include:
·   obtaining multiple extensions of time to file evidence in support;
·   filing an amended Statement of Grounds and Particulars (SOGAP);
·   filing evidence that bore little resemblance to the amended SOGAP which consequently led to Ciba applying for a direction from the Commissioner that SNF file an amended SOGAP, and which subsequently caused Ciba to obtain and file further evidence;
·   submitting arguments in support of fair basis and inutility that were not foreshadowed in the SOGAP; and
·   belatedly abandoning at the hearing issues in relation to certain acts of secret use and issues in relation to obviousness based on certain prior acts which had the effect of cost thrown away by Ciba preparing evidence and submissions in respect of matters abandoned by SNF at the last minute.
I consider that only some of the above-mentioned conduct was unreasonable, and although it necessarily contributed to the cost and complexity of the opposition, it was not significant considering the overall complexity of the matter.
It is appropriate to make an adjustment to the award of costs that takes into consideration the conduct of SNF that contributed significantly to the cost and effort of Ciba in the opposition.
Conduct of the parties - Ciba's conduct
SNF submitted that Ciba improperly and unreasonably raised estoppel arguments that SNF spent significant time responding to, and that caused SNF significant expense. SNF submits that Ciba was "virtually entirely unsuccessful" in relation to its estoppel contentions and therefore Ciba should pay SNF's cost of defending those submissions.
Whilst I found that estoppel did not technically apply to the opposition, I considered that the principles in regard to the consideration of evidence and findings of fact that underpins estoppel were relevant to the opposition. I considered that I could inform myself of the previous decision of the Federal Court and findings of fact that were made.[15]
[15] SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2016] APO 8 at [50]-[52].
Therefore, it was appropriate to raise the issue of estoppel, and no adjustment to costs should be made based on this point.
Conclusion
This was clearly a matter of importance to both parties, and was argued with great force by both sides. It was always going to be a complex case. In the absence of special circumstances, I would award costs according to Schedule 8 against Ciba. However, the complexity of the case was increased by the way that the matter was prosecuted, and I am satisfied that the circumstances justify altering the award of costs.
Whilst SNF has succeeded on the substantial ground of inventive step, it succeeded only in relation to the Gallagher patent. SNF failed on other substantial grounds. The conduct of SNF contributed to the cost, complexity and protracted proceedings of the opposition. In my opinion it is appropriate that costs be awarded against Ciba, but those costs should be reduced by 50%.
Dr S.D. Barker
Delegate of the Commissioner of Patents