Baycity Technologies Limited v Uttinger HC Auckland CIV 2006-404-7709

[2010] NZHC 1227

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2006-404-7709

BETWEEN  BAYCITY TECHNOLOGIES LIMITED Plaintiff

ANDMICHAEL JOSEPH UTTINGER First Defendant

ANDDAIRYSENSE LLC Second Defendant

Hearing:         25 June 2010

Appearances: K W McLeod for plaintiff

C Elliott for defendant

Judgment:      20 July 2010

JUDGMENT OF ALLAN J

In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 3 pm on Tuesday 20 July 2009

Solicitors/counsel : A J Park, Auckland

A J Pietras & Co, Lower Hutt,  [email protected]

C Elliott, Auckland [email protected]

BAYCITY TECHNOLOGIES LIMITED V MICHAEL JOSEPH UTTINGER AND ANOR HC AK CIV 2006-

404-7709  20 July 2010

[1]      In this proceeding the plaintiff seeks an order revoking a patent formerly owned by the first defendant but more recently assigned to the second defendant. The patent concerned relates to what might loosely be called a milk monitoring system.

[2]      Before the Court for determination is an application by the defendants for further particulars of the plaintiff’s claim.  A day or so prior to the hearing of the application, Mr McLeod for the plaintiff provided counsel for the defendants with a copy of a draft seconded amended statement of claim.   The Court is told that the amended pleading narrows the scope of the pleading dispute, but that there remains an issue for determination by the Court.

The statement of claim

[3]      There is an underlying dispute between the parties which it is unnecessary to canvass here, save to say that the plaintiffs plead that the dispute was the subject of a settlement reached in 2005, pursuant to which the first defendant agreed not at any time after the date of the deed of settlement to enforce the patent against certain persons,  including  the  plaintiff’s  assignor.    Subsequently,  the  first  defendant  is alleged to have unlawfully terminated the deed of settlement.   The plaintiff accordingly asserts that it is a person interested in and aggrieved by the existence of the patent.

[4]      The plaintiff relevantly alleges that:

a)       the invention was not new, having regard to what was known or used in New Zealand before the priority date of the claim, and therefore lacked novelty;

b)the invention was obvious and did not involve any inventive step, having regard to what was known or used before the priority date of the claim in New Zealand.

[5]      By way of particulars of the lack of novelty ground, the plaintiff pleads in its draft second amended statement of claim:

What was known

16.1The non-secret development, manufacture and sale in New Zealand of a milk monitoring system known as the Allflex FX550 (“FX550”) manufactured, marketed and sold in New Zealand by Allflex New Zealand Limited (“Allflex”) of 931 Tremaine Avenue, Palmerston North prior to 10 August 1995 (the priority date) but continuing up to 10 August 1995.  The plaintiff intends to rely on both the FX550 and the Technical/Instruction Manual provided with each FX550.

16.2The  FX550  prior  to  the  priority  date,  collected  data,  including volume and temperature data, from milk vats on farms.  In particular the FX550 production had the following features/capabilities:

i)When connected to one or more sensors placed on a milk vat, milk volume and temperature data was capable of being logged over time to, in the case of the temperature profile, provide information for a user to access:

a)        the quality of the milk;

b)        subsequent processing steps for the milk;  and c)   effective scheduling of milk collection.

ii)       the data collected by the FX550 was able to be transmitted (whether automatically or manually) and was transmitted to a remote location;

iii)      included  a  modem  port  and  computer  software  for  the collection of the data log and subsequent transmission of the said data to a remote location;

iv)       had an alarm system activated by pre-determined parameters relating to the stored milk in the vat.

16.3The plaintiff says that the information in the Affirmations of George Lee Cook dated 25 May 2005 and 8 July 2005 filed in the earlier proceedings, and in particular paragraphs 4, 22, 24, 26, 27-33 of Mr Cook’s  first  Affirmation  and  paragraphs  2  and  3  of  Mr Cook’s second Affirmation and the relevant exhibits referred to in those paragraphs, identifies what was known in New Zealand before the priority date about Allflex’s said activities and the FX550 (the plaintiff does not rely on any use of the FX550 referred to in Mr Cook’s Affirmations as ‘prior use’ except to the extent such use is specifically referred to in sub-paragraph 16.5 below).

16.4The plaintiff says that the FX550 unit referred to in paragraph 17(a) in the Affirmation of Anthony John Baird dated 8 February 2010, and filed herein was known.

What was used

16.5     The plaintiff will rely only on the following uses of the FX550

a)The use by Allflex before the priority date of a FX550 unit on a farm owned by Brian Guy at 147 Aorangi Road, RD 5, Feilding, including the use of that unit to transmit data to Mr Guy’s local dairy factory (again before the priority date) (An FX550 unit referred to in paragraph 24 of Mr Cook’s first Affirmation).

b)The use of a FX550 unit prior to the priority date inspected by the first defendant and referred to in paragraph 5 of his affidavit dated 18 March 2010 and filed herein. The plaintiff has no other relevant particulars about this use – those are all within the knowledge of the first defendant.

c)As far as the plaintiff is aware neither of the FX550 units referred to in a) and b) above are still being used or are able to be inspected in use.

[6]      By way of particulars in respect of the allegation of obviousness, the plaintiff pleads:

17.1To the extent, if any, that the alleged invention in any claim is held not to lack novelty, it is obvious and does not involve any inventive step in view of the knowledge referred to in sub-paragraphs 16.1 to

16.4 above and/or the two uses referred to in sub-paragraph 16.5 above when considered in light of the common general knowledge in the relevant industry as at 10 August 1995.

17.2The  plaintiff  says  that  the  ‘common  general  knowledge’  in  the relevant industry as at the priority date was that:

a)Electronic  milk  monitoring  equipment  could  sense  and record parameters of milk in milk vats;

b)Such information could be stored in the equipment and transmitted on a processing facility, usually a dairy factory;

c)That the information stored and then transmitted to the processing factory could be and was used by the processing factory to determine the subsequent processing of that milk.

17.3     The plaintiff says that the information in paragraphs 4, 6, 7, 11, 22,

24, 26, 27, 29, 31, 32 of Mr Cook’s first Affirmation was part of the

‘common   general   knowledge”,   in   particular   that   the   FX550 described  in  Mr  Cook’s  first  Affirmation  had  been  developed,

produced and was being used as described in paragraphs 26 and 27

of Mr Cook’s first Affirmation.

17.4The plaintiff will also rely on the first defendant’s knowledge of electronic milk metering equipment including milk metering equipment the same as or similar to the FX550.

The claim for further particulars

[7]      As may be seen, the pleading is drafted in a somewhat awkward fashion, in that it incorporates by reference various paragraphs in two earlier affidavits of a Mr Cook,  who  had  first  hand  knowledge  of  the  development  of  the  FX550. Mr Elliott does not criticise the pleading technique as such, but argues that, even when Mr Cook’s deposition is taken into account, the defendants have been provided with insufficient particulars of the plaintiff’s claim of “the non-secret development, manufacture and sale in New Zealand of a milk monitoring system …” as pleaded in paragraph 16.1.

[8]      He  relies  on  the  provisions  of  r  22.20  of  the  High  Court  Rules  which relevantly provides:

22.20   Particulars if want of novelty alleged

(1)The particulars of an objection on the basis of want of novelty must state the time and place of the alleged previous knowledge, publication, or use.

(2)The particulars of an objection on the basis that the invention has been used prior to the date of the patent must—

(a)state the name and address of the alleged prior user and the place of prior use; and

(b)state whether the prior use is alleged to have continued to the date of the patent, and, if not, the earliest and latest dates on which the prior use is alleged to have taken place; and

(c)contain   a   description   (accompanied   by   drawings,   if necessary) sufficient to identify the alleged prior use; and

(d)       if the use relates to machinery or apparatus, specify whether it is in existence and where it may be inspected.

[9]      Paragraph 16 of the draft second amended statement of claim pleads want of novelty.  Accordingly, r 22.20(1) applies.  It requires that particulars of an objection (here, by analogy, grounds pleaded in support of a claim for revocation), must state the time and place of the alleged previous knowledge, publication, or use.

[10]     The ground of invalidity of a patent for lack of novelty, whether asserted by way of defence to infringements proceedings, or on an application for revocation, is provided for in s 41(1)(e) of the Patents Act 1953.  It is:

(e)That the invention, so far as claimed in any claim of the complete specification, is not new having regard to what was known or used before the priority date of the claim in New Zealand:

[11]     As was observed in Lucas v Peterson Portable Sawing Systems Ltd1  at [3], the test for lack of novelty is a strict one:   any use or disclosure relied upon as anticipating the claimed invention must incorporate all the features of the claimed invention.  Hence the entitlement of the defendants to detailed particulars of the time and place of the alleged previous knowledge, publication or use.

[12]     The ground of invalidity for obviousness is set out in s 41(1)(f) of the Patents

Act 1953.  It is:

(f)That the invention, so far as claimed in any claim of the complete specification, is obvious and does not involve any inventive step having regard to what was known or used before the priority date of the claim in New Zealand:

[13]     As Mr McLeod points out, the particulars required in support of a claim that an invention has been used prior to the priority date of the patent are somewhat wider than those required in support of a claim of want of novelty.  Rule 22.20(2) explicitly requires rather more information than is specified in r 22.20(1).   In the present case however, little turns on the distinction because, where prior use is relied upon in support of a claim of want of novelty, the extended requirements of r

22.20(2) will apply.

[14]     Mr Elliott argues that the defendants must have the particulars of time and place of every instance said to constitute previous knowledge or publication, and also that there must be full particulars of every use relied upon in order that the defendants may inquire into the circumstances and extent of the alleged prior public knowledge and prior use.

1 [2006] 3 NZLR 721.

[15]     I turn to a consideration of the available evidential material below, but pause to note that r 22.24 provides as follows:

22.24   Evidence restricted to particulars delivered

(1)       No person may be heard or adduce evidence in support of an alleged infringement, objection, or defence so far as it relates to matters that are not specified in, or are at variance with, the particulars that person has delivered.

(2)       Despite  subclause  (1),  the  court  may  grant  leave  on  terms  it considers appropriate.

[16]     In consequence, the plaintiff may not at trial call evidence insofar as it relates to matters that are not specified in, or at variance with, the particulars supplied.  In other words, the plaintiff will be bound by its particulars.   If the particulars are insufficient then the risk falls on the plaintiff, subject to the residual discretion of the Court to grant leave, pursuant to r 22.24(2).

The plaintiff’s position

[17]   In a nutshell, the plaintiff’s argument is that it has complied with the requirements of r 22.20 in the draft amended second statement of claim, and that, in any event, it has provided all the particulars of which it has knowledge.  It further contends that Mr Uttinger, the first defendant, has a greater knowledge of the FX550 equipment than does the plaintiff, which was not involved at the development stage.

[18]     The plaintiff’s position is encapsulated in an affidavit of Mr A J Baird, a director of the plaintiff, sworn on 8 February 2010.  There he says:

8.As I have said, Baycity’s challenge to the patent is largely based on the FX550 unit.  That was a milk metering system, which is better described in Mr Cook’s affirmations in my exhibit AJB-1, conceived and developed by Tui/Allflex in the late 80s/early 90s.

9.        Baycity was not involved in the development of the FX550.

10.As part of these proceedings, and the earlier proceedings, Baycity has been almost totally reliant on obtaining information about the FX550 from former employees of Tui/Allflex and in particular Lee Cook.

11.      Lee Cook now works for Dairy Technology Services (DTS) based in

Hamilton.  DTS and in particular Lee Cook have been very helpful

in providing information used by Baycity New Zealand Limited in the earlier proceedings and Baycity in this proceeding.  Baycity has been totally reliant on the goodwill and cooperation of DTS/Lee Cook in providing information.   Most recently that goodwill has largely dried up because of the considerable demands put on Lee Cook to assist us with the ongoing information gathering process around this proceeding and in particular our request that DTS/Lee Cook help us with the latest, formal request made by the defendants for more information about the FX550 units.

12.I  note  that  Mr  Uttinger  in  particular  has  already  had  a  lot  of information about the development and use of the FX550 unit in New Zealand and has inspected one of those units in operation on a farm in the Manawatu area.

[19]     Mr Elliott argues, however, that the particulars provided by Mr Cook in his affidavits are too vague and so lacking in detail that the defendants do not know the case they are required to meet, and moreover, are unable to conduct their own investigations into the circumstances in which it is claimed that the subject matter of the defendant’s patent was a matter of public knowledge.  It is therefore necessary to consider Mr Cook’s evidence.

[20]     Before doing so I observe that, ultimately, the question of public knowledge is a matter for evidence at trial to be given by persons knowledgable in the art: Amarillo Cell Culture Co Inc v Fernz Corp Ltd.2

Adequacy of particulars

[21]     The detail of the additional particulars sought by the defendants is laid out in a letter from the defendant’s solicitors to the plaintiff’s solicitors dated 22 June 2010. In each case, the defendants seek further particulars of occasions upon which the plaintiff relies as constituting public knowledge earlier than the priority date.  I refer briefly  to  each  in  turn,  bearing  in  mind  the  plaintiff’s  total  dependence  upon Mr Cook,  and  the  consequent  practical  difficulties  in  obtaining  any  further information from him.

2 HC Auckland CL52/93, 3 October 1995 at [15].

[22]     In an affidavit dated 25 May 2005, Mr Cook speaks of the development by Tui/Allflex of a product known as the Allflex FX550.  At paragraph 4(vii) Mr Cook says that:

The unit also recorded and stored the unique supplier number used by each farm which was subsequently used to identify the milk from that farm and used by the processor (usually the dairy factory) to record information in respect of the particular milk i.e. the quality of the milk including (by reference to its temperature profile and samples taken for laboratory testing), identified how much milk was collected, the quality of the milk, and how much the farmer was paid for the milk;  …

[23]     The defendants seek particulars sufficient to identify the farms in question. In my view the expression “ … used by each farm …” is simply a generic expression intended to indicate that the unit would enable such farms as used the equipment to be identified by the processor.   In other words, Mr Cook is not speaking of any particular farm or farms.

[24]     The defendants are not entitled to the particulars sought.

[25]     In paragraph 4(viii) Mr Cook said:

The unit was capable of transmitting, and was used to transmit data collected and processed by the unit to the dairy company’s computer to be used by the dairy company, either with or without subsequent computer processing, to identify the volume of the milk to be collected and/or how it was to be processed.  Milk that was not cooled or stored correctly was either dumped or delivered to a factory where finest quality milk was not required.

[26]     The defendants seek particulars sufficient to identify the dairy company.  In my  view  this  sub-paragraph  is  in  exactly  the  same  category  as  the  previous paragraph (4(vii)).   In other words, no specific dairy factory is being referred to. Mr Cook is simply describing the way the FX550 was intended to operate.

[27]     At paragraph 22 Mr Cook said:

In December 1993 Tui purchased five early model Allflex FX550 units. These were installed on five Tui farms in the Manawatu area and were used to prove the robustness of the system and to compare sight glass readings against volume readings from the Allflex FX550.   Weights and Measures were also testing and evaluating the system for approval at this time.

[28]     The defendants seek particulars sufficient to identify the five Tui farms in the

Manawatu area.

[29]     In paragraph 24 of his affidavit Mr Cook says:

By now Tui had also set up its C.A.S.H. scheduling system operating with Fleetlink Data Compatible Radios on all tankers.  On 3 February 1995 we installed 20 Trade Approved Allflex FX550 units on farms in the Manawatu area. …

[30]     Again, the defendants seek particulars of the relevant farms in the Manawatu area.

[31]     At paragraph 27 of his affidavit Mr Cook says:

By May 1995 25 farms in the Manawatu area had the Allflex FX550 units on them.

[32]     The  defendants  require  particulars  sufficient  to  identify  the  farms.  At paragraph 31 of his affidavit, Mr Cook says:

In  July  1994  a  group  of  approximately  10  transport  managers  from Goulbourn Cooperative Australia visited New Zealand Dairy Industry Transport on a fact finding tour.  I took them to one of the sites referred to in paragraph 18 hereof and explained the benefits of the Allflex FX550 system to them …

[33]     The defendants seek particulars sufficient to identify the site referred to in paragraph 31.

[34]     Finally, the defendants seek further particulars of certain dairy companies referred to in paragraph 2 of Mr Cook’s later affidavit of 8 July 2005 in which he said:

In  February  and  March  of  1995,  Owen  Boyes  of  Allflex  New  Zealand Limited visited a number of dairy companies around the country to demonstrate the Allflex FX550 unit and to explain to the dairy companies the benefits the Allflex FX550 could bring to their operations.   The dairy companies visited including Dairy Group Hamilton, which in February 1995 had  approximately  60%  of  the  total  New  Zealand  dairy  industry,  East Tamaki Dairy Company, Southland Dairy Co-Op and others.

[35]     The  defendants  seek  particulars  sufficient  to  identify  all  of  the  dairy companies or other organisations visited, together with contact details.   The defendants take the point that it is not evident whether certain of the names are those of legal entities or just trading names.

Discussion

[36]     The plaintiff says that it is unable to supply any of the particulars sought because  Mr Cook  is  not  available  to  the  plaintiff,  for  the  reasons  set  out  in Mr Baird’s affidavit.

[37]     Although I can understand that Mr Cook and his current employer may well have become unenthusiastic about further assistance to the plaintiff, it seems inevitable that he will be a pivotal witness for the plaintiff at trial, because it is entirely reliant on his knowledge of events in the mid-1990s with respect to the FX550 in order to make out a case for want of novelty.  That being so, the plaintiff has no alternative but to ensure that Mr Cook is made available to it for the purposes of the litigation, both in respect of the preparation of his brief of evidence and then of course at the trial itself.

[38]     Given those circumstances, I do not understand why it would not be possible for the plaintiff to at least make a further inquiry of Mr Cook in respect of the particulars now sought by the defendants.   On the face of it, the particulars are relatively limited, consisting as they do entirely of a request for the identification of certain farms and dairy companies.   I consider that the plaintiff ought to make a further approach to Mr Cook, in order to determine whether he is able to expand upon his earlier evidence by providing the detail of some at least of the farms and dairy companies of which he gives evidence in his affidavits.  If Mr Cook cannot or will not remember anything more that is relevant, then the plaintiff has done all it can.  The defendants will then not be entitled to the particulars, but the plaintiff will be bound by the restrictions imposed by r 22.24.

[39]     Having said that, I do not regard the request for further particulars in respect of paragraphs 4(vii) and 4(viii) of Mr Cook’s first affidavit as being proper requests.

The farms there referred to are simply generic in the sense that Mr Cook was at that time describing the way in which the FX550 was designed to operate.   In other words, it does not appear to me he was intending to refer to any particular farm or farms.  The further inquiry to be made of Mr Cook will therefore relate to paragraphs

22, 24, 27 and 31 of his earlier affidavit, and paragraph 2 of his later affidavit.

[40]     I accept Mr Elliott’s argument that in this particular case, issues of public knowledge and use are to some degree interwoven because the public knowledge relied upon by the plaintiff, as pleaded in paragraph 16 of the draft second amended statement of claim, arose at least in part from the actual use of the FX550.  Evidence of instances of use will therefore at trial be relevant to the claim of want of novelty.

[41]     I  consider   the   defendants   are   entitled   to   an   opportunity  of   making consequential inquiries, in the event that Mr Cook is able to provide at least some of the further detail sought by the defendants.

[42]     There will accordingly be orders that:

a)       The plaintiff give such further particulars as it can of the relevant farms or dairy organisations as the case may be, referred to in paragraphs 22, 24, 27 and 31 of Mr Cook’s earlier affidavit, and in paragraph 2 of his later affidavit;

b)It will be a sufficient compliance with the order if the plaintiff obtains from Mr Cook such further information as is available to him;

c)       Within  six  weeks  of  the  date  of  this  judgment  the  plaintiff  is  to provide  to  the  defendants  such  further  particulars  as  have  been gleaned from Mr Cook, or alternatively, advise the defendants that Mr Cook is unable to provide any further information.

[43]     At the hearing, the argument proceeded on a more confined basis than was set out in the written materials.  Although I believe that I have dealt with the issues

remaining for determination, I reserve leave for the parties to apply by memorandum for such further or other orders as may be necessary.

Costs

[44]     Counsel were agreed that the defendants are entitled to costs on a category

2B basis in respect of preparation for the hearing of the present application.  There will be an order accordingly.

[45]     I also make an order for costs on a category 2B basis in respect of the hearing of the application itself in favour of the defendants.  That is because in my view it was not sufficient for the plaintiff simply to contend that Mr Cook was unwilling to turn his attention to the issues in the case.  He will obviously be an important witness for the plaintiff at trial, and the plaintiff therefore has no alternative but to maintain communication with him.  I consider the plaintiff ought to have ascertained the state of Mr Cook’s knowledge of the precise matters in respect of which the defendants seek further particulars, prior to the hearing of the application.

[46]     Had Mr Cook been unable to provide any further detail then the defendants’ present application would not in my view have succeeded, because it would have been  futile  to  make  an  order.    Had  Mr Cook  been  able  to  provide  additional information, there would have been no need for the hearing at all.   In those circumstances the defendants are entitled to the costs of the hearing.

C J Allan J