Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2)
[2013] FCA 170
FEDERAL COURT OF AUSTRALIA
Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2013] FCA 170
Citation: Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2013] FCA 170 Parties: TRAMANCO PTY LTD (ACN 010 101 872) v BPW TRANSPEC PTY LTD (ACN 006 645 272) File number: QUD 114 of 2009 Judges: DOWSETT J Date of judgment: 6 March 2013 Catchwords: COSTS – whether successful party should have costs of an issue not ultimately decided – indemnity costs – whether Calderbank letter rejected – whether rejection unreasonable Legislation: Patents Act 1990 (Cth) s 40 Cases cited: Calderbank v Calderbank [1975] 3 All ER 333 cited
Facton Ltd v Seo (2011) 91 IPR 135 appliedDate of hearing: Determined on the papers Dates of submissions: 5 July 2012, 1 August 2012, 10 August 2012 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 21 Counsel for the Applicant and Cross Respondent: Mr A Franklin SC Solicitor for the Applicant and Cross Respondent: Bennett & Philp Lawyers Counsel for the Respondent and Cross Applicant: Mr P Collinson SC with Ms S Gatford Solicitor for the Respondent and Cross Applicant: Madgwicks Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 114 of 2009
BETWEEN: TRAMANCO PTY LTD (ACN 010 101 872)
Applicant/Cross RespondentAND: BPW TRANSPEC PTY LTD (ACN 006 645 272)
Respondent/Cross Applicant
JUDGE:
DOWSETT J
DATE OF ORDER:
6 MARCH 2013
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.the applicant pay the respondent’s costs of the proceedings, including reserved costs; and
2.there be no order as to costs incurred on the question of costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 114 of 2009
BETWEEN: TRAMANCO PTY LTD (ACN 010 101 872)
Applicant/Cross RespondentAND: BPW TRANSPEC PTY LTD (ACN 006 645 272)
Respondent/Cross Applicant
JUDGE:
DOWSETT J
DATE:
6 MARCH 2013
PLACE:
BRISBANE
REASONS FOR JUDGMENT
The applicant (“Tramanco”) holds Australian Patent No 2004264997 (the “Patent”). In these proceedings it sought to establish that the respondent (“BPW”) had infringed the Patent. By cross claim BPW sought revocation of the Patent upon the grounds of lack of novelty, lack of inventiveness, failure to disclose the best method of performing the invention and that the patent was not clear, succinct and fairly based on the specification. After a lengthy trial I held that the claims in the Patent lacked novelty and that the specification did not comply with ss 40(2)(a) and 40(3) of the Patents Act 1990 (Cth) (the “Patents Act”). I found that the invention was anticipated by a patent described in the reasons as the “Tal patent” and two publications described therein as “Sweatman 1983” and “Sweatman 1994”. Although I was satisfied that the invention lacked novelty I did not reach any conclusion as to inventiveness.
Tramanco’s case was based upon a construction of the claims which, in my view, was unduly restrictive. It attempted to justify such an approach by reference to the specification. I considered that the extent of Tramanco’s reliance on the specification went beyond that permitted by the authorities. In my reasons I addressed the issue of inventiveness in some detail. In the end I did not consider it necessary or practicable that I reach a conclusion on that issue. This view reflected the fact that Tramanco’s case was based on a narrow construction of the claims, which construction I had rejected, whilst BPW’s case was based upon a construction which was much closer to that which I adopted. On that construction, the claims were anticipated. There seemed to be little point in determining whether, on that construction, the claims lacked inventiveness.
There was some disagreement between the parties as to the appropriate orders flowing from my reasons but, in the end orders were formulated with respect to all matters save for costs. Tramanco concedes that on the basis of my judgment, BPW should have its costs of the proceedings, including reserved costs, save as to the question of inventiveness, such costs to be calculated on a party-and-party basis. BPW submits that it should have all of its costs incurred prior to 20 July 2009, on a party-and-party basis and costs incurred on or after that date, on an indemnity basis.
COSTS INCURRED IN CONNECTION WITH THE ISSUE OF INVENTIVENESS
Having formed the view that no good purpose would be served in this case by reaching a conclusion as to inventiveness, it is not appropriate that I decide the matter for the purpose of awarding costs. Although BPW did not succeed on that issue, it did not fail. As I have observed, I examined the question in some detail. Were it necessary to reach a conclusion I would almost certainly have concluded that the claims lacked inventiveness.
Novelty, inventiveness and compliance with the requirements of s 40 of the Patents Act may be treated as discrete issues, but they are not necessarily unrelated. Evidence going to one such issue may relate to the others. In each respect, much depends on the construction of the claims. Where the claims are expressed broadly, and the patentee seeks to read them down by reference to the specification, neither party may be able confidently to predict the outcome on the construction question. Such uncertainty will frequently lead them to raise issues which may arise in the event that the Court adopts one of a range of possible constructions, but not others. In such circumstances, a court should not readily conclude that where an otherwise successful party fails on one issue, it should be deprived of the costs associated with that issue.
In the present case, on my construction of the claims, it was unnecessary to decide the question of inventiveness, but it cannot be said that BPW acted unreasonably in raising it. Indeed, it would probably have been successful. In those circumstances, BPW should have its costs of that issue.
INDEMNITY COSTS
BPW relies on a letter dated 20 July 2009. It was sent after the application and statement of claim had been filed and served, and before filing and service of the defence and cross claim. The letter was as follows:
Since our meeting on Thursday 9 July 2009 we have been seeking instructions and further information from our parent company in Germany.
We are advised by our patent attorneys that claims 1, 12 and 19 of the Australian patent are invalid over prior art including the two US patents we mentioned during our discussions, namely US Patents 5,973,273 (Tal) and US 4,839,835 (Hagenbuch). Our patent attorneys also advise that there are significant doubts about the validity of your patents worldwide and, in particular, your granted US Patent 7,512,520 and your pending European application. Our parent company in Germany is considering challenging the pending European application and is looking at possible options to nullify the US patent.
In regard to our meeting of 9th July 2009 we have also been following up the details of the description handed over in regard to the Road Condition Monitoring (RCM) feature. In the meeting we handed over a description which was incomplete. The RCM description we provided during the meeting is consistent with the description that BPW gave when the product was exhibited at the IAA 2008. The BPW “Trip-log” function is described in the attachment, note that this feature has not been advertised in the market. As you might be aware, the BPW ECO Tronic EBS has been released in Australia, prior to any other markets. It has been difficult to obtain the information which would be necessary to fully demonstrate the Road Condition Monitoring – in particular due to the fact that the product has not been advertised.
We continue to maintain that also the trip log function does not infringe your RCM claims which we interpret as the combination of onboard weighing systems and GPS. As we mentioned in our meeting, the information obtained either from our histogram and/or from the Trip-log data does not allow us to determine where on the road an event has occurred. Thus, we again repeat our contention that claims 20 to 23 of the patent are not infringed.
Nevertheless, BPW is prepared to leave the patent portfolio as it stands so as long as it and its co-developer, Haldex are granted a royalty free licence to market their product on a worldwide basis. The pending Federal Court action can then be dismissed by consent with both parties bearing their own costs.
We hope this matter can be brought to a swift resolution.
The applicant responded by email dated 22 July 2009 as follows:
I have read the documents and the screen captures which you sent me in your email last Monday afternoon together with the explanations on same. They highlight the fact that there are obviously more screens embedded within the drop down menus, as shown in the screen capture themselves. I will need to review these other drop down screens if I am to assess your software as requested.
Therefore would you ask someone to produce all such screens and to send them to me forthwith if, as you say in your email, you want this to be resolved quickly.
However, for me to consider your offer of any licence or any agreement with BPW and/or Haldex I firstly require agreement from BPW Transpec and Haldex that, if a settlement can be agreed, it will include a core term that all of Tramanco’s costs are paid in full. Secondly, I need to see the cross-claim by this Friday (which is when it is due).
There are other matters of concern which need to be resolved. These relate to your offer not to challenge our various patents worldwide so that matter (at the least) will also need some discussion in due course.
Fairly clearly BPW was offering to settle on the basis that:
·the applicant discontinue the proceedings;
·there be no attack on the validity of any of Tramanco’s patents;
·Tramanco grant a royalty-free licence to BPW (perhaps meaning BPW’s German parent company) and Haldex in order to permit the marketing of “their products” on a worldwide basis; and
·there be no order as to costs.
BPW submits that it was also implicit in the offer that it would not claim any compensation from Tramanco pursuant to the latter’s undertaking as to damages. For present purposes I accept that submission.
Tramanco effectively responded by asserting that any settlement would have to provide that its costs be paid in full, presumably by BPW. That response was inconsistent with the offer. On general principles, it would constitute a rejection of that offer, so that later acceptance was not possible. However BPW submits that the offer remained open for acceptance, even after the subsequent filing and service of the defence and cross-claim. In other words, the offer remained open indefinitely or perhaps, for a reasonable time.
BPW seems to accept that the offer contained in the letter of 20 July 2009 was not in accordance with the Rules of Court as they then stood. The letter is rather a “Calderbank letter”, a reference to the decision of the Court of Appeal in Calderbank v Calderbank [1975] 3 All ER 333. Broadly speaking, in making an order as to costs, a court may take into account an offer which has been unreasonably refused by one of the parties to the litigation. Such refusal may lead to a less favourable exercise of the discretion as to costs than would otherwise occur. The court may, for example, deprive the successful party of some or all of its costs and/or order it to pay some or all of the unsuccessful party’s costs. Alternatively, the court may order that the costs to be paid by a party be assessed on an indemnity basis rather than a party-and-party basis.
In Facton Ltd v Seo (2011) 91 IPR 135 at [55] Gordon J said, concerning the relevance of such a letter:
What then are the relevant principles?
(1)The Court’s power to award costs is contained in s 43 of the Federal Court of Australia 1976 Act. The Court has a wide discretion in the award of costs. It is, of course, a discretion which must be exercised judicially and in accordance with well-established principles … ;
(2)The usual course is to order costs on a party and party basis … ;
(3)Indemnity costs can properly be awarded where the circumstances of the case warrant the Court departing from the usual course of ordering costs on a party and party basis. Those circumstances have been variously described as “some special or unusual feature” and include “an imprudent refusal of an offer to compromise” …;
(4)Order 23 of the Rules headed “Offer of Compromise and Payment into Court” provides a structure which encourages parties to make and consider fair and reasonable offers to settle proceedings … . It is not however a code … . The parties are also able to rely upon the common law principles in relation to Calderbank letters … . A Calderbank letter can be considered by the Court in deciding whether to make an order displacing the usual costs order even if Order 23 of the Rules has not been followed … ;
(5)Refusal of an offer which satisfies the requirements of a Calderbank letter does not itself warrant an order for indemnity costs … . The onus is on the offer or offeror to show that the conduct of the offeree was unreasonable … . The reasonableness of the conduct is viewed in light of the circumstances which existed at the time the offer was rejected;
(6)If, however, the central requirements of a Calderbank letter (that it is clear, precise and certain …) are not met, it does not mean that the offer cannot be considered by the Court in the exercise of its general costs discretion. Courts will be prepared to pay some regard to an offer of compromise which purports to be in accordance with the Rules but which for some reason is technically deficient if the terms of the offer are such as to leave the offeree no reasonable doubt as to the nature and extent of what is being offered … . The offer must be certain … . It must be capable of acceptance which, if accepted, would have brought the dispute between the parties to an end … ; and
(7)In determining whether an offer should have been rejected, a court looks at the “reasonableness of the conduct of the offeree (when) viewed in the light of the circumstances which existed when the offer was rejected … . It has also been described as whether the rejection of the offer was “imprudent” or “unreasonable” … or “imprudent, reckless or unreasonable” … .
Clearly, BPW’s “offer” was far more favourable to Tramanco than was the outcome of the proceedings. The question is whether Tramanco’s refusal of the offer was unreasonable or imprudent. Mr Sack (on behalf of Tramanco) and Mr Unger (on behalf of BPW) have sworn affidavits. The affidavits do little more than demonstrate the antipathy between the parties which was demonstrated during the trial. At para 17 of its submissions Tramanco sets out 15 reasons which are said to lead to the conclusion that its conduct was not unreasonable. However it seems to me that there are four substantial matters for consideration, namely:
·the absence of any specified time within which the offer was to be accepted;
·the extent to which Tramanco was, on and after 22 July 2009 able to make a decision as to whether the BPW product infringed the Patent;
·the extent to which BPW had informed Tramanco of the basis of its claim that the Patent was invalid; and
·the effect of the proposal that Tramanco grant a royalty-free licence to BPW and Haldex “to market their product on a worldwide basis”.
As to the absence of any time limit for acceptance of the offer, I consider that the absence of any such limit is irrelevant to Tramanco’s failure to accept it. Tramanco made it clear that it would not accept any offer which did not provide for payment of its costs. If one accepts that the offer remained open thereafter, it either remained open until acceptance or withdrawal or for a reasonable time. Tramanco submits that it is essential that a Calderbank letter have a specified limit upon the time within which the offer can be accepted. However it cites no authority for this proposition. There seems to be no reason why one party to litigation should not make an offer which is to remain open indefinitely. If BPW’s offer remained open after 22 July 2009, then it was for Tramanco to reconsider it from time to time as it discovered more about its own, and BPW’s cases.
As to the question of infringement, I consider that, in the circumstances of this case, it was reasonable for Tramanco to seek more information as to the BPW product, assuming that the proceedings as commenced were not an abuse of process in the sense that Tramanco must have known that it had no prospects of success. Although I have some doubts on that score, I am not able to draw that inference. BPW refers to other aspects of Tramanco’s conduct, before and after 20 July 2009 which suggest a somewhat unusual approach to the litigation. In particular, it did not take advantage of offers by BPW to allow appropriate inspection of the allegedly infringing product. Although such conduct is unusual, it may be unreasonable to have expected Tramanco to abandon its infringement claim at such an early stage in the proceedings.
As to the validity of the patent question, it is important that in the letter of 20 July 2009 BPW identified the Tal patent as prior art upon which it relied in its case on the validity. Further, the two Sweatman papers were identified in the defence and cross-claim which was filed and served shortly after 20 July 2009, on either 24 or 26 July 2009. To my mind, at that point Tramanco ought to have taken advice, at least in a preliminary way, as to whether or not the Tal Patent and subsequently, the Sweatman papers, anticipated any of the claims. This would not necessarily have been a lengthy exercise. Whilst it is true that lawyers are accustomed to construing patents with the assistance of patent attorneys, and often with the assistance of other experts, the question of construction is, in the end, a matter for the court, and therefore a matter about which the legal advisers must form a view. One assumes that some enquiry as to the prior art was made before lodgement of the patent application. There is no evidence to suggest that in considering BPW’s offer, Tramanco took legal advice as to the effect of the Tal patent upon the validity of the Patent. To my mind, any fair reading of Tal or of either of the Sweatman papers, unencumbered by the misconceived approach taken by Tramanco to the question of construction at the trial, would have led to a realization that there was a serious possibility of anticipation. I suspect that the failure to adopt a realistic construction of the claims led to the failure to accept the offer and that, subject to one other matter, such failure was unreasonable.
The qualification arises out of the requirement in the offer that Tramanco grant royalty-free licences to BPW and to Haldex. As Tramanco points out there is an implicit ambiguity in the penultimate paragraph of the letter where the question of a licence is raised. The reference to BPW in the first line may be a reference to the respondent in these proceedings, or it may be to the German parent company. In so far as it concerns proceedings in connection with the Patent, it is presumably a reference to the respondent. However, in so far as concerns patents in other countries, it is suggested, in the second paragraph of the letter, that it is the parent company which is considering applications to set aside those patents. Tramanco points out that the parent company is the manufacturer and world-wide distributor of the product. As it was not a party to these proceedings, and as BPW’s solicitors were not expressly purporting to act for it, there was no basis for assuming that the offer, if accepted, would bind the parent company. Similar considerations arise in connection with Haldex, although Haldex was not to give anything in return for the licence. Further, the terms of any licence were not identified. It is possible that a bare licence, with no other terms, might have been in contemplation, but such an approach would be a little simplistic. I should add that the evidence does not clearly support the proposition that the parent company and Haldex jointly developed a “product”. It rather suggests that Haldex built an electronic braking system to meet the parent company’s specifications. The system incorporated Haldex’s products with some variations.
In my view, considered as the proposed term of a compromise of this litigation, this aspect of the offer required further investigation and consideration before the offer could be accepted. In those circumstances one could not expect Tramanco, acting reasonably, to have accepted it. The letter of 20 July 2009 was more a basis for further negotiation than a firm offer. Had either of the parties sought to clarify the questions associated with the licence, that party’s position, for present purposes, may have been stronger. I conclude that it was not unreasonable for Tramanco to refuse to accept the offer. BPW’s costs should be taxed on a party-and-party basis.
As each party has had a degree of success on the question of costs, I shall make no order as to the costs incurred in connection with that question.
I order that the applicant in the principal proceedings pay the respondent’s costs of the proceedings, including reserved costs.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate:
Dated: 6 March 2013
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