Upaid Systems Ltd v Telstra Corporation Limited

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FEDERAL COURT OF AUSTRALIA

Upaid Systems Ltd v Telstra Corporation Limited [2016] FCAFC 158

Appeal from: Upaid Systems Ltd v Telstra Corporation Limited (No 3) [2016] FCA 227
File number: NSD 521 of 2016
Judges: PERRAM, JAGOT AND BEACH JJ
Date of judgment: 22 November 2016
Catchwords: PATENTS – application for leave to appeal – infringement of patent claims – summary dismissal – construction of patent claims – whether applicant has reasonable prospects of success – standard patent for a convergent communications platform and method for mobile and electronic commerce in a heterogeneous network environment – construction of integers of claim – “charging” an account – “settling” an account – appropriateness of summary dismissal – leave to appeal granted – appeal allowed
Legislation:

Federal Court of Australia Act 1976 (Cth) s 31A

Federal Court Rules 2011 (Cth) r 26.01

Cases cited:

Nampak Plastics Europe Ltd v Alpla UK Ltd [2015] FSR 11; [2014] EWCA Civ 1293

Spencer v Commonwealth of Australia (2010) 241 CLR 118

Upaid Systems Ltd v Telstra Corporation Limited (No 3) (2016) 118 IPR 16; [2016] FCA 227

Virgin Atlantic Airways Ltd v Delta Air Lines Inc [2011] RPC 18; [2011] EWCA Civ 162

Dates of hearing: 14, 15 November 2016
Registry: New South Wales
Division: General Division
National Practice Area: Intellectual Property
Sub-area: Patents and associated Statutes
Category: Catchwords
Number of paragraphs: 82
Counsel for the Applicant: Mr A J L Bannon SC with Mr C Burgess
Solicitor for the Applicant: Allens
Counsel for the Respondent: Mr R C Macaw QC with Mr A R Lang
Solicitor for the Respondent: Clayton Utz

ORDERS

NSD 521 of 2016
BETWEEN:

UPAID SYSTEMS LTD

Applicant
AND:

TELSTRA CORPORATION LIMITED (ACN 051 775 556)

Respondent

JUDGES:

PERRAM, JAGOT AND BEACH JJ

DATE OF ORDER:

22 NOVEMBER 2016

THE COURT ORDERS THAT:

1.The applicant have leave to appeal in respect of order 2 of the orders of Yates J made on 11 March 2016, but otherwise its application for leave to appeal be dismissed.

2.The appeal be allowed and order 2 of the 11 March 2016 orders be set aside.

3.That part of the respondent’s interlocutory application filed on 29 October 2014 seeking summary dismissal be dismissed.

4.The parties’ costs of the application for leave to appeal and the appeal be treated as their costs in the cause in the principal proceeding.

5.The applicant have leave to file and serve further and better particulars of its infringement case in relation to the 853 patent, the scope of such leave to be determined by the primary judge.

6.There be referred to the primary judge for his further consideration:

(a)the scope of any order permitting the applicant to file and serve further and better particulars of its infringement case in relation to the 853 patent; and

(b)any outstanding question of costs in relation to the respondent’s interlocutory application filed on 29 October 2014.

7.Liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

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Details
Case
[2016] FCAFC 158
Decision Date

CaseChat Overview and Summary

In Upaid Systems Ltd v Telstra Corporation Limited, the dispute centred on the validity and infringement of patents related to a convergent communications platform and method for mobile and electronic commerce in a heterogeneous network environment. The Federal Court of Australia was tasked with determining whether the primary judge's order for summary dismissal of Upaid's infringement claims concerning the 853 patent was appropriate. Upaid argued that the judge erred in dismissing their case without allowing them to provide further particulars, a course of action he had foreshadowed for the 646 patent. The primary legal issues revolved around the interpretation of the patent claims, particularly the terms "charging" and "settling" an account, and whether Upaid had a reasonable prospect of success in prosecuting their claims.

The court held that the primary judge's summary dismissal was not appropriate in this context. The complexity of the technology involved in the 853 patent made it difficult for the court to confidently construe the relevant claims on a summary application. The court emphasised that while summary judgment could apply to patent disputes, it depended on the nature of the dispute. Given that the technology was complex and the court was unable to form a confident view about the claim or its construction, summary dismissal was inappropriate. The court also noted that the exercise of this power should be used with caution, especially in cases involving complex questions of law.

Accordingly, the appeal was allowed, and the order for summary dismissal was set aside. The court granted Upaid leave to file and serve further and better particulars of its infringement case in relation to the 853 patent, subject to the primary judge's determination of the scope of such leave. Additionally, the court dismissed the respondent's interlocutory application seeking summary dismissal and referred the matter back to the primary judge for further consideration of outstanding questions, including the scope of any order permitting Upaid to file and serve further particulars and any outstanding costs related to the interlocutory application.

Orders

Orders of the court

1. The applicant have leave to appeal in respect of order 2 of the orders of Yates J made on 11 March 2016, but otherwise its application for leave to appeal be dismissed.

2. The appeal be allowed and order 2 of the 11 March 2016 orders be set aside.

3. That part of the respondent’s interlocutory application filed on 29 October 2014 seeking summary dismissal be dismissed.

4. The parties’ costs of the application for leave to appeal and the appeal be treated as their costs in the cause in the principal proceeding.

5. The applicant have leave to file and serve further and better particulars of its infringement case in relation to the 853 patent, the scope of such leave to be determined by the primary judge.

6. There be referred to the primary judge for his further consideration:

(a) the scope of any order permitting the applicant to file and serve further and better particulars of its infringement case in relation to the 853 patent; and

(b) any outstanding question of costs in relation to the respondent’s interlocutory application filed on 29 October 2014.

7. Liberty to apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Upaid’s present application before us seeks leave to appeal from these orders, save that the challenge to order 1 is confined to paragraph 1 (and all related paragraphs) of the consolidated particulars of infringement filed by Upaid on 5 November 2014. The leave to appeal application and the appeal, if leave is granted, have been heard together. For the reasons that follow, we would grant leave to appeal and allow the appeal in respect of order 2 only; we would otherwise dismiss the application for leave to appeal in respect of order 1.BACKGROUND The primary judge has set out in his reasons (Upaid Systems Ltd v Telstra Corporation Limited (No 3) (2016) 118 IPR 16; [2016] FCA 227) a chronological history of the procedural steps in this matter that it is unnecessary to repeat (see at [2] to [24]). It suffices to say that the orders the subject of the present leave application were made by the primary judge on Telstra’s application filed on 29 October 2014 (as subsequently amended) seeking to strike out Upaid’s further amended statement of claim and consolidated particulars of infringement and seeking summary dismissal of the infringement claims concerning both the 853 patent and the 646 patent. His Honour ordered that paragraphs 1 and 19 (and related subparagraphs) of the consolidated particulars of infringement be struck out, but foreshadowed that he would give leave to Upaid to file further particulars of infringement concerning the 646 patent. In relation to the summary dismissal application, his Honour only summarily dismissed Upaid’s claim for infringement of claim 1 of the 853 patent. The present challenge before us concerns the 853 patent only. The 646 patent can be put to one side. Upaid contends that his Honour was in error in ordering summary dismissal of the infringement case concerning claim 1 of the 853 patent. It was further contended that his Honour was in error in not giving leave to Upaid to file and serve further and better particulars of its infringement case concerning the 853 patent as he had foreshadowed for the 646 patent. Before discussing these questions, it is appropriate to set out some aspects of the specification of the 853 patent. The field of the invention is described in [0002] in the following terms:The present invention relates to a convergent communications system for providing services to individual and corporate customers worldwide. More specifically, the invention relates to a convergent communications system that provides mobile commerce, electronic commerce and communication services through existing communication switches without specific hardware located at those switches. This system supports the use of pre-paid and post-paid accounts across heterogeneous networks to provide a large range of advanced communication services regardless of a customer’s location. His Honour discussed the 853 patent at [28] to [34] of his reasons. At [31] and [32], his Honour discussed the problems said to be addressed by the invention in the following terms:The complete specification discusses post-paid and pre-paid telephone access accounts. It describes a post-paid account as one established on the basis of a customer’s creditworthiness. It says that, because of arrangements between operators of different telephone networks, post-paid account users are able to make long distance telephone calls or access their home network when roaming in a visiting network. The operator of the home network stands as payment guarantor for the calls made by its customers in the visiting network. Visiting networks provide a facility for making and receiving calls to the home network subscribers and collect, process and forward the usage data to the caller’s home network for payment. The home network then pays the visiting network. However, the periodical billing of post-paid customers and the collection of money from those customers, involves delays. It is in this way that the home network stands as payment guarantor to the visiting network for calls made by its customers. The complete specification says that, due to this problem, the home network is able to offer roaming only to its post-paid customers whose creditworthiness is established. With the increase in the pre-paid subscriber base, network operators worldwide want to offer roaming services to their pre-paid customers as well. But, due to the inherent nature of non-real-time processing of call usage for roaming customers, operators are not in a position to offer true pre-paid roaming to their customers.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

The primary judge made an order for summary dismissal invoking s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011. It is not necessary to separately discuss r 26.01. Subsections 31A(2) and 31A(3) provide as follows:Summary judgment(1) […](2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success.[…] His Honour discussed the parties’ submissions concerning the question of “reasonable prospect of success” and his own conclusions at [496] to [516]. The relevant principles were not in doubt. A number of propositions may be stated. First, a proceeding or claim need not be “hopeless” or “bound to fail” for it to have no reasonable prospect of success (s 31A(3)). Second, s 31A(2) may justify summary dismissal where, inter alia, there is unanswerable or unanswered evidence of a fact fatal to the pleaded case or any permissible modification (Spencer v Commonwealth of Australia (2010) 241 CLR 118 at [22] per French CJ and Gummow J). Third, the exercise of power under s 31A(2) should be used with caution, particularly where complex questions of fact or law are involved. The present case concerns questions of construction of claim 1 of the 853 patent which are legal questions although to some extent informed by factual considerations. Fourth, as was said in Spencer at [59] per Hayne, Crennan, Kiefel and Bell JJ:In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like “clearly”, “manifestly” or “obviously”) as “frivolous”, “untenable”, “groundless” or “faulty”. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word “reasonable”, in the phrase “no reasonable prospect”, be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a “frivolous”, “untenable”, “groundless” or “faulty” claim. Fifth, the fact that one is dealing with a patent infringement claim does not make it immune from a summary dismissal order. But where the technology is complex or the Court is not able to confidently construe the relevant claim, then summary determination may not be appropriate. In Virgin Atlantic Airways Ltd v Delta Air Lines Inc [2011] RPC 18; [2011] EWCA Civ 162 at [13] and [14], Jacob LJ observed:… Whilst the general rules as to summary judgment apply equally to patent cases as to other types of case, there can be difficulties, particularly in cases where the technology is complex. If it is, the court may not be able, on a summary application, to form a confident view about the claim or its construction, particularly about the understanding of the skilled man. On the other hand in a case such as the present, where the technology is relatively simple to understand, there is really no good reason why summary procedure cannot be invoked. No one should assume that summary judgment is not for patent disputes. It all depends on the nature of the dispute.That can cut both ways, of course. If the court is able to grasp the case well enough to resolve the point, then it can and should do so – whether in favour of the patentee or the alleged infringer.

Ratio Decidendi

Legal Principle Established

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