Zenon Environmental Inc v Memcor Australia Pty Ltd

OFFICIAL NOTICE
DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS
Application : No. 715364 in the name of Zenon Environmental Inc

Title: Vertical skein of hollow fibre membranes and method of maintaining clean fibre surfaces

Action: Opposition under section 59 by Memcor Australia Pty Ltd and an objection to an extension of time to serve evidence in answer

Decision: Issued .
Abstract

Extension of time under regulation 5.10(2) was found to be appropriate in all the circumstances.
The public interest is finely balanced between determining an opposition on its merits and expeditious handling of the opposition within the Patent Office. There has been undue delay in proposing the amendments and there is a serious question about whether the amendments are really necessary. However, the amendments are lengthy and complex and their fate needs to be finally determined before the substantive opposition can be continued. Further, the nature of the amendments is such that they are non-trivial and likely to have a significant effect on the evidence to be filed. The public interest therefore lies in granting the current extension so that the opposition can be determined on its merits with minimal problems in the appeal environment.
However, while an extension of time under regulation 5.10(2) is appropriate in all the circumstances, evidence in answer should not be completely stayed pending the amendments. There is no reason to delay evidence in answer to the evidence in support already provided by the opponent in respect of the original 18 claims which have only minor amendments and given the substantial delays involved, the opponent has the right to at least partly understand the case the applicant is intending to run.
PATENTS ACT 1990
DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS
Re:Patent Application No. 715364 by Zenon Environmental Inc, Opposition thereto by Memcor Australia Pty Ltd and an objection to an extension of time to serve evidence in answer

BACKGROUND

Patent Application 715364 was filed under the provisions of the PCT on 8 August 1996 by Zenon Environmental Inc (Zenon) claiming priority from two US basic applications (08/514,119 and 08/690045) filed on 11 August 1995 and 31 July 1996 respectively. The Australian application was advertised accepted on 3 February 2000 and on 2 May 2000, a notice of opposition was filed by Memcor Australia Pty Ltd (Memcor). Memcor served their statement of grounds and particulars on 2 August 2000 and finalised their evidence in support on 13 August 2001.
Evidence in answer was initially due on 14 November 2001. This evidence was stayed pending a first request to amend the specification under section 104 (see the chronology below). When that first set of amendments was withdrawn, and another set of amendments filed, the applicant filed a further request under regulation 5.10(1) to extend the time to serve evidence in answer in the main opposition because of the new amendments. This request was still pending when the time for serving evidence in answer neared completion and so the applicant filed another request under regulation 5.10(2) to extend the time to serve evidence based on the reasons that new amendments had been filed.
The opponent objected to the regulation 5.10(2) request and the matter was set for hearing on 4 June 2004 in Canberra. The applicant was represented by Barry Hess of counsel, instructed by John McCormack, patent attorney of Griffith Hack, Melbourne. The opponent was represented by Peter Heathcote, patent attorney of Baldwin Shelston Waters, Sydney.
RELEVANT CHRONOLOGY
The relevant chronology is as follows:
§Patent Application 715364 was advertised accepted on 3 February 2000;
§Notice of opposition under section 59 filed on 2 May 2000 followed by service of the Statement of Grounds and Particulars on 2 August 2000;
§Evidence in support in section 59 opposition completed on 13 August 2001;
§Evidence in answer in section 59 opposition initially due on 13 November 2001. Three extension of time requests under regulation 5.10(2) were granted without objection until 13 May 2002;
§First application to amend the complete specification filed on 8 May 2002;
§The opponent filed a notice of opposition on the section 104 amendments 1 November 2002 followed by service of the statement of grounds and particulars on 3 February 2003;
§On 21 November 2002, with the agreement of both parties, section 59 proceedings deferred until the outcome of the section 104 amendments was known;
§Evidence in support in the section 104 opposition was completed on 2 July 2003;
§Evidence in answer of the section 104 opposition initially due on 3 October 2003;
§Applicant requested and was granted a first extension of time up until 3 January 2004. They then filed a second request for an extension up until 3 April 2004. The opponent objected to this second request and that matter was set for hearing on 11 March 2004;
§On 10 March 2004, the applicant withdrew their first section 104 amendments and the hearing of 11 March 2004 was vacated;
§On 5 March 2004, the applicant filed a second request under section 104 to amend the complete specification. The period for comments from the opponent under regulation 10.2(7) expired on 11 May 2004 without comments being filed. The proposed amendments have yet to be considered by an examining delegate of the Commissioner.
§The Commissioner advised the parties on 11 March 2004 that the section 59 opposition clock had restarted because the first section 104 amendments had been withdrawn and that as a result, evidence in answer in the section 59 opposition was due on 11 April 2004.
§On 7 April 2004, the applicant filed requests under both regulation 5.10(1) and (2) to extend the time for filing evidence in answer in the section 59 opposition because of the second section 104 amendment request.
§The Commissioner granted the regulation 5.10(2) request to 11 May 2004 without objection from the opponent. However, the Commissioner advised the applicant on 22 April 2004 that it was not clear that a regulation 5.10(1) direction was appropriate in all the circumstances because of the already considerable delays that had occurred in the section 59 opposition. The Commissioner therefore advised the applicant that if they intended to pursue the direction, they would need to provide further submissions;
§The applicant did not file further submissions in relation to regulation 5.10(1) but on 11 May 2004 made another request for an extension under regulation 5.10(2) to extend the time to serve evidence in answer in the section 59 opposition to 11 August 2004.
§The opponent objected to this second extension of time request under regulation 5.10(2) and the matter was set for hearing on 4 June 2004.
STATUTORY FRAMEWORK
The Commissioner is empowered under regulation 5.10 to issue directions relating to the conduct of opposition proceedings, and to extend the time within which a party may take a step prescribed by Chapter 5, including the service of evidence in answer. Regulation 5.10 relevantly reads as follows:
(1) The Commissioner may, on his or her own motion or on the application of a party:
(a)give a direction that is not inconsistent with the Act or these regulations for the conduct of proceedings to which this Chapter applies; or
(b)determine that a period prescribed in this Chapter (except in regulation 5. 3 or 5.3AA, paragraph 5.4 (a) or subparagraph 5.8 (1) (a) (i)) is to be extended by such further period as the Commissioner reasonably allows.
(2)The Commissioner may extend the time within which the party may take a step prescribed in this Chapter (not being a step that is taken under regulation 5.3 or 5.3AA, paragraph 5.4 (a) or subparagraph 5.8 (1) (a) (i )):
(a)on the application of a party in the approved form; and
(b)on such reasonable terms (if any) as the Commissioner specifies; and
(c)after the party has served the application on the other party.
Both these powers are subject to the requirements of sub-regulation 5.10(5):
(5)The Commissioner must not give a direction under sub-regulation (1) or grant an application under sub-regulation (2) or (4) unless the Commissioner:
(a)if he or she proposes to grant an application by a party is reasonably satisfied that the other party has been notified of the application; and
(b)if he or she proposes to act on his or her own motion ensures that the parties are notified of the proposed action; and
(c)in either case:
i.gives the parties a reasonable opportunity to make representations concerning the application or proposed action; and
ii.is reasonably satisfied that a direction, an extension of time or the serving of further evidence is appropriate in all the circumstances.
Regulations 5.10(1)(b) and (2) both explicitly empower the Commissioner to extend the time for a party to serve evidence in opposition proceedings. Regulation 5.10(1)(a) also allows the Commissioner to issue a direction with regard to the conduct of proceedings. Before granting an extension under either regulations 5.10(1)(b) or (2), or making a direction under regulation 5.10(1)(a), the Commissioner has to be satisfied under regulation 5.10(5) that the extension, or direction, is "appropriate in all the circumstances".
PRELIMINARY MATTERS
Prior to the current regulation 5.10(2) request, the applicant had made a request under regulation 5.10(1), to defer evidence in answer in the section 59 opposition pending the outcome of amendments filed on 5 March 2004. The regulation 5.10(1) request was held in abeyance until the applicant responded to the Commissioner's invitation to provide further submissions (our letter dated 22 April 2004). As a consequence, the opponent was unaware of the pending regulation 5.10(1) request at the hearing.
The opponent's attorney advised that he had no instructions to deal with a regulation 5.10(1) request at the current hearing. Given that the opponent had no prior opportunity to object to such a request and that they have a statutory right of 10 days notice of a hearing [regulation 22.23(1)], I advised that the current hearing could only proceed to determine the regulation 5.10(2) request.
However, in order to expedite the regulation 5.10(1) request after the hearing, I suggested that if I found that the section 104 amendments justified an extension under regulation 5.10(2), I would propose a direction under regulation 5.10(1) to defer evidence in answer pending the outcome of the amendments as part of my decision. At the same time, if I considered that the amendments were likely to require further evidence, I could propose a second direction to deal with further evidence. Both parties would of course be given the opportunity to object to (and/or provide comments on) any proposed directions.
The parties agreed to this course of action.
DISCUSSION
This law relating to regulation 5.10 has been thoroughly considered by Burchett J in Ferocem Pty Ltd v Commissioner of Patents (1994) 28 IPR 243 and more recently by Sackville J in A Goninan & Co Ltd v Commissioner of Patents (1997) 38 IPR 213. These decisions make it clear that regulation 5.10 confers a broad discretion that cannot be reduced to imperative compliance with particular requirements. It requires proper, genuine and realistic consideration of all the relevant aspects that pertain to the application.
In the current case, the only reason given by the applicant for requiring an extension under regulation 5.10(2) was because of pending amendments filed on 5 March 2004. In my decision of Affymax Technologies N.V. v Diversa Corporation 2001 APO 52, I noted that there were a number of factors to consider whether an extension of time under regulation 5.10 was appropriate where there were pending amendments, including:
§the nature of the amendments;
§whether there would be any undue delays in proposing (or processing the amendments); and
§the interests of the parties and the public.
I will consider each of these factors in turn.
Nature of the amendments
In previous decisions of the Commissioner, evidence has been deferred where the proposed amendments were non-trivial and likely to have a significant effect on the evidence required in the main (section 59) opposition (see, for example, Stena Rederi Aktiebolag vDanyard A/S (1996) 34 IPR 111, Exxon Chemical Patents Inc v Lubrizol Corporation (1998) 41 IPR 126, Airsense Technology Ptd v Vision Systems Ltd (1999) 48 IPR 483 and Affymax Technologies N.V. v Diversa Corporation [supra]).
In the current case, evidence in support was based on 18 accepted claims. As those claims remain substantially unchanged by the proposed changes, evidence in answer (as currently required) should be unaffected by the amendments. However, the amendment request also proposes to add 80 additional claims. These additional claims appear to be a completely reworked and different set of claims from the accepted claims. There are major differences in drafting style from the old (accepted) claims and little interdependence between the two sets of claims. If the amendments are allowed, the opponent will clearly need to revise their evidence in support and they are likely to require extra evidence to address the additional claims. Both the applicant and opponent acknowledged this at the hearing.

Of course, until the opponent provides their additional evidence in support, the case to be answered by the applicant is unclear. In that sense, the amendments will have a significant impact on the evidence needed to be adduced by both the opponent and the applicant.

Is there an undue delay in proposing or processing the amendments?

I note that amendments during opposition inevitably delay the opposition process. Given this, my view is that the only amendments an applicant should seriously contemplate during opposition are ones which are likely to help resolve at least some of the issues in dispute in the opposition. In addition, amendments should be made at the earliest possible opportunity to avoid evidence being prepared in respect of the wrong set of claims which may later prove to be irrelevant.

In the current case, I am unable to see any clear purpose to the addition of the 80 extra claims. They do not appear to address any of the evidence in support. They also broaden rather than narrow the issues in dispute and add an extra and unnecessary level of complexity to the case. The applicant must have recognised the impact that the amendments were likely to have on the opposition. I am therefore at a loss to understand why they believe the amendments are necessary during opposition and then why they have waited until evidence in support was finalised before proposing them.

The applicant's delays are particularly inexcusable because they had filed a previous request to amend that they subsequently withdrew shortly before the current request. The current amendment request does not appear to address any of the concerns that the opponent raised in their opposition to the first section 104 request. Instead, it seeks to add 20 claims in addition to the 60 claims proposed in the first request. The reasons for failing to include these additional claims in their first request were never explained by the applicant. Their behaviour is inconsistent with an applicant diligently preparing a serious defence of their patent application. Their actions have clearly resulted in unnecessary costs to the opponent which I envisage that the Commissioner is likely to consider this as a factor in awarding costs in the substantive opposition should the opponent raise the issue at that time.

The interests of the parties and the public

The applicant's interest is obviously in deferring the evidence to allow some certainty to the final form of the amendments before presenting their evidence. However, my view is that their interest is secondary to both the opponent and public interest. While I accept that the applicant has the statutory right to amend the specification under section 104 as they see fit, they also have an obligation to diligently prosecute their case in opposition proceedings before the Commissioner. They have not addressed any of the evidence in support and do not appear to be making a serious attempt to defend the application. Given that the amendment process has already have caused significant delays in the opposition, the applicant does not deserve the Commissioner's indulgence in granting an extension.
The opponent's interest lies in having the substantive matter finally dealt as efficiently and expeditiously as possible. As discussed at the hearing, it is not immediately clear how this might be achieved. If the section 59 matter proceeds despite the section 104 request, both parties will need to prepare evidence on all the proposed claims even though some of these claims may not ultimately be allowed. This approach can be successful if the amendments are straightforward or minor because the amount of extra evidence required to encompass both sets of claim (i.e. accepted and proposed) is not unduly onerous. In such circumstances, if the section 104 request is opposed, it is not uncommon for the Commissioner to hear the section 104 and 59 oppositions together.
In contrast, the amendments in the current case are very complex. They seek to add an additional 80 claims which are drafted very differently from the original claims and there is likely to be significant effort required to prepare evidence to the 80 additional claims. If these amendments are ultimately not allowed, this extra evidence will be unnecessary - a situation which should be avoided according to the "the general principle of avoiding a multiplicity of proceedings and the wastage of time and expense that may arise from the presentation and consideration of what may well prove to be irrelevant evidence or material" (as per University of Georgia Research Foundation Inc v BioChem Pharma [2001] FCA 688).

In addition, having major amendments pending after a substantive hearing which do not address either the evidence or the decision is likely to cause significant problems in the appeal environment. Given this, my view is that the amendments will need to be finally determined before a hearing on the substantive matter is conducted and that it is not possible to fully process the section 104 and 59 matters concurrently.

This leaves two alternative options both of which were canvassed at the hearing:

(a)Partial deferral of evidence in answer pending the section 104 amendments where evidence in answer in the section 59 opposition is continued based on the current evidence in support (and accepted set of claims) and later (if the amendments are allowed), these are dealt with by a round of further evidence.

(b)Complete deferral of evidence in answer pending the section 104 amendments where evidence in answer is deferred until the section 104 amendments have been finalised, at which point the opponent would be provided an opportunity to complete evidence in support in relation to the any new claims (if allowed) and the applicant would continue with evidence in answer based on all the evidence in support;

I note that the section 104 amendments will delay the section 59 opposition regardless of whether or not evidence in the main opposition was partly or completely deferred [i.e. option (a) or (b)]. At the hearing, I favoured option (b) because I was concerned that option (a) might lead to evidence becoming "piece meal" which adds to the costs of preparing evidence and makes arguments disjointed at the substantive hearing. However, on further reflection, option (a) is the better option. The original evidence in support has not considered the new claims and additional evidence in support will be required. In that sense, evidence will always be "piece meal" regardless of the option chosen. I also note that in option (b), the opponent will bear the initial burden of preparing evidence and this seems unfair given that the opponent has not caused the current problems.

While arguably the process in option (a) will be likely to be slightly more unwieldy than option (b), this has to be balanced against other factors such as the undue delays that have already occurred and the opponent's interest in having some knowledge of the applicant's case at the earliest possible opportunity. Evidence in support was completed on 13 August 2001 and the applicant has yet to mount a serious challenge to the opponent's case. After this inordinate length of time, the opponent has the right to at least partly understand the case the applicant is intending to run.

There is no reason to delay evidence in answer to the evidence in support already provided by the opponent in respect of the original 18 claims which have only minor amendments As a result, my view is that option (a) is the more appropriate option in all the circumstances of this case. In this option, the applicant would continue with evidence in answer in the section 59 opposition based on the current evidence in support (and accepted set of claims) and later (if the amendments are allowed), deal with these in a round of further evidence. Evidence in reply would then be deferred until the amendments and further evidence have been concluded.

The public interest calls for a balance between the requirements that the Commissioner deals with opposition matters expeditiously and economically and that a serious opposition is dealt with on its merits [see Ferocem Pty Ltd v Commissioner of Patents (supra) and in A Goninan & Co Ltd v Commissioner of Patents (supra)]. In the present case, it is important for the public to have an understanding of the applicant's case as early as possible. Because of this, continuing in part with evidence in answer (ie: option (a) above) is in the public interest.

I also note that having some evidence in answer is likely to lead to a more just and correct determination of the opposition. In such a case, the public interest lies in dealing with the opposition on its merits (as per Kaiser Aluminium & Chemical Corporation v The Reynolds Metal Co [supra]). While the applicant's approach to completely delay evidence pending the outcome of certain amendments was misguided, this was a genuine misunderstanding and according to the principles of Race Lotto v AWALimited [1998] APO 78), this justifies an extension (although further extensions could not be sought based on the same rationale). As a result, on balance, the public interest is best served by granting the applicant a reasonable opportunity to allow admission of evidence that is likely to be highly relevant to the opposition.

DECISION

There has been undue delay in proposing the amendments and there is a serious question about whether the amendments are really necessary. However, the amendments are lengthy and complex and their fate needs to be finally determined before the substantive opposition can be continued. Further, the nature of the amendments is such that they are non-trivial and likely to have a significant effect on the evidence to be filed. The public interest therefore lies in granting the current extension so that the opposition can be determined on its merits with minimal problems in the appeal environment.
However, while I find that an extension of time under regulation 5.10(2) is appropriate in all the circumstances and I grant an extension up until 11 August 2004 to serve evidence in answer, I do not believe that evidence in answer should be completely stayed pending the amendments. Given the substantial delays involved, the opponent has the right to at least partly understand the case the applicant is intending to run. There is no reason to delay evidence in answer to the evidence in support already provided by the opponent in respect of the original 18 claims which have only minor amendments. As a result, my view is that evidence in answer should only be partially deferred pending the section 104 amendments. To that end, I propose the following directions under regulation 5.10(1):
i.   Evidence in answer is to proceed in relation to the 18 accepted claims based on the current evidence in support and have 2 months from the date of this decision to complete this evidence.
ii.   If the amendments are allowed, the opponent has 2 months from the date the Commissioner advises the parties of the allowance of the amendments to serve and file further evidence in support of their opposition in relation to the amended claims;
iii.   Once the further evidence in support has been served, the applicant will have 2 months from date of service to serve and file further evidence in answer in relation to the amended claims. Such evidence is to be limited to responding to the opponent's further evidence and it shall not be available to the applicant to argue in respect of the accepted claims;
iv.   Evidence in reply is deferred until the Commissioner advises the parties that ALL evidence in answer has been completed at which time the normal time limits provided in regulation 5.8(4) would apply.
I note while any time frame proposed above can be extended by regulation 5.10(2), the Commissioner expects the parties to adhere the above time table and otherwise prosecute their cases in a timely and expeditious manner. If either party requests an extension, they should be prepared to justify their request with a detailed explanation of their progress to date and an indication of when evidence is likely to be finalised.
Both parties are invited to provide written comments in relation to the above directions or request to be heard. In absence of a response within 14 days of the date of this decision, I will assume that the parties agree to the process as outlined above and will proceed to issue the proposed directions.
COSTS
In matters before the Commissioner, costs generally follow the event. While the extension was allowed, the applicant's conduct did not justify an extension. Their amendments have caused significant delays and have unnecessarily complicated proceedings. My view is that the opponent was clearly justified in objecting to the extension of time. As a consequence, I award costs against the applicant.
Karen Ayers
Delegate of the Commissioner of Patents
Patent attorneys for the applicant : Griffith Hack, Melbourne
Patent attorneys for the opponent : Baldwin Shelston Waters, Sydney

[2004] APO 16

8 July 2004