Inguran, LLC v CRV Ltd
[2023] NZHC 3692
•14 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1074
[2023] NZHC 3692
UNDER the Patents Act 2013 IN THE MATTER OF
infringement of New Zealand
Patent No. 564309, Patent No. 577678 and Patent No. 711384
BETWEEN
INGURAN, LLC
First plaintiff
AND
CYTONOME/ST, LLC
Second plaintiff
AND
STGENETICS NEW ZEALAND LIMITED
Third plaintiff
AND
CRV LIMITED
First defendant
AND
CRV INTERNATIONAL BV
Second defendant
Continued overleaf
Hearing: 27 and 28 November 2023; 22 December 2023 (teleconference) Appearances:
J E Hodder KC, M C Sumpter and T F Cleary for plaintiffs G F Arthur KC, JLW Wass and JRE Wach for defendants
Date of judgment:
14 December 2023
Reissued:
22 December 2023
JUDGMENT OF JAGOSE J
This judgment was delivered by me on 14 December 2023 at 11.30am.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
INGURAN, LLC v CRV LIMITED [2023] NZHC 3692 [14 December 2023]
AND GENUS ABS (NZ) LIMITED
Third defendant
AND ABS GLOBAL, INC
Fourth defendant
AND GENUS PLC
Fifth defendant
[1] Simplistically, mammalian artificial insemination typically is achieved using straws containing millions of sperm cells harvested from male mammals and deposited in their female counterparts.
[2] As over-simplified, the plaintiffs together produce straws of bull semen, largely sorted into the respective sexes, for sale to farmers for sex-selected herd management. So too do the defendants. At substantive issue in this proceeding is if the defendants are doing so in infringement of the plaintiffs’ New Zealand registered patents for the provision of sex-sorted animal sperm, using technology which sorts the sperm in fluid suspension (flow cytometry) according to its X- or Y-chromosome characteristic.
[3] For my interlocutory decision now is the plaintiffs’ application to restrain the defendants from such production and sale under the patents pending trial, and the defendants’ application the proceeding be dismissed in part and otherwise stayed pending determination if the terms of a settlement agreement between them prohibited its issue.
Background
[4] The first plaintiff (Inguran) is a company incorporated in the United States’ Texas, carrying on business as STgenetics. The second plaintiff (Cytonome) is a company incorporated in the United States’ Massachusetts. The third plaintiff (STgenetics NZ) is a company incorporated in New Zealand. Cytonome and STgenetics NZ respectively are Inguran’s majority- and wholly-owned subsidiaries. For present purposes, I refer to these companies collectively as ST.
[5] ST, meaning ‘Sexing Technologies’, has developed technology to sort mammalian semen cells into predominantly X- or Y-chromosome bearing populations. The sorting is done by trained operators using specialised flow cytometry equipment at bespoke laboratories. Such ‘sexed’ semen then is sold in straws for artificial insemination, for corresponding predominantly male or female offspring as may be sought in herd management.
[6] The first defendant (CRV NZ) is a company incorporated in New Zealand. It is the second defendant’s (CRV International) subsidiary. Again, for present purposes, I refer to these companies collectively as CRV. ST and CRV have a variety of arrangements by which CRV used ST’s technology to provide semen sorting services around the world (sorting agreements), including a European joint venture since 2006 and in New Zealand since 2008.
[7] In New Zealand, ST provided services from an initial facility in Hamilton’s Ruakura; subsequently from a temporary facility south of the city at Rukuhia; and presently from a facility within premises owned by Livestock Improvement Corporation (LIC) at Hamilton’s Newstead. LIC is CRV NZ’s primary competitor in the provision of sexed semen to farmers, with some 70 per cent market share. CRV NZ has some 20 per cent and the balance is had by ABS or ST directly and a few others. ST took up its facility in LIC’s premises in preference to standalone premises facilitated by CRV NZ at the same agricultural business hub in Hamilton as from which CRV NZ operates.
[8] ST formerly provided semen sorting services to the fourth defendant (ABS Global), incorporated in the United States’ Wisconsin and owned by the fifth defendant (Genus), incorporated in the United Kingdom. After Genus’ and ABS Global’s development of semen sorting technology to similar ends (Intelligen), the related New Zealand incorporated third defendant (Genus ABS NZ) used it to provide semen sorting services here. Also for present purposes, I refer to these companies collectively as ABS.
[9] In various jurisdictions, including in New Zealand, ABS was successful in replacing ST as CRV’s supplier of semen sorting services. In some cases, CRV since
has returned to ST. In New Zealand, ABS’s involvement initially was sought by CRV in August 2020 to hedge against risk from ST’s comprehended need to move from Rukuhia. In anticipation of that move, conducted progressively over the year to September 2021, LIC is said to have refused to process semen sourced from CRV NZ, “citing biosecurity concerns including around mycoplasma bovis”. Genus ABS NZ and CRV NZ entered into an exclusive Intelligen sorting agreement in June 2021.
[10] ST has registered patents for its semen sorting technology in various jurisdictions around the world, including in New Zealand. By a variety of means, ABS has sought to avoid those patents for Intelligen’s introduction. Related litigation arose in Europe, India and the United States. In a Wisconsin proceeding, ABS was found liable to pay ST royalties for its use of one of ST’s patents in the United States (the US patent). Other litigation continues.
[11] By confidential agreement between ST and ABS dated 27 December 2022, among other things: ABS agreed to pay ST substantial sums of money in satisfaction of the Wisconsin judgment; and ST agreed not further to pursue claims against ABS (or its customers, such as CRV) anywhere in the world asserting Intelligen “or any technology not more than colorably different” infringes ST’s patents. By ‘ST’s patents’ relevantly is meant the US patent and “all corresponding foreign and international patents and patent applications with claims directed to laser kill technology that claim priority from any patent or patent application in the chain of patent applications leading to” the US patent. The agreement is subject to Wisconsin state law and confers exclusive jurisdiction on that state’s courts to deal with any dispute arising out of or in connection with the agreement. ABS claims in Wisconsin the present proceeding breaches that agreement. The parties propose a two- or three- week trial in consolidation with outstanding Wisconsin proceedings in late 2024 or early 2025.
This proceeding
[12] The present proceeding alleges ABS’s technology in New Zealand infringes three of ST’s New Zealand registered patents —
(a)564309 dated 29 March 2004, “Apparatus and methods for providing sex-sorted animal sperm” (NZ’309);
(b)577678 dated 29 March 2004, “Apparatus and methods for providing sex-sorted animal sperm” (NZ’678); and
(c)711384 dated 14 March 2014, “Hydrodynamic Focusing Apparatus and Methods” (NZ’384) —
(collectively, the NZ patents). Patents have a 20-year life;1 accordingly, the former two patents expire in March 2024; the latter in March 2034.
[13]By the present applications:
(a)ST seeks an interim injunction to prevent ABS’s continued deployment of its technology allegedly infringing the NZ patents, to continue for 16 months after the earlier patents’ expiry in reflection of the period of ABS’s alleged infringement to date; and
(b)ABS seeks instead this proceeding be dismissed on grounds of this Court’s lack of jurisdiction either by reason of the 27 December 2022 agreement or to the extent of particular parties’ lack of connection to the proceeding, or (to the extent having jurisdiction) stayed pending the Wisconsin court’s determination if the agreement prohibits the proceeding’s issue by ST.
Counsel agree, if I determine an interim injunction is to issue, I should seek the parties’ proposal for its terms.
Relevant law
—interim injunctions
[14] Interim injunction applications are determined on the basis if the plaintiff has a serious question for trial, and the balance of convenience favours granting the
1 Patents Act 2013, ss 20 and 254; Patents Act 1953 (repealed), s 30(3).
injunction.2 ‘Overall justice’ is the ultimate consideration, being “whichever course seems likely to cause the least irremediable prejudice to one party or the other”.3
[15] By ‘serious question for trial’ is meant one not vexatious or frivolous, on which the plaintiff has at least “a tenable basis upon which it might be able to succeed at trial”.4 As to ‘balance of convenience’, the question is if refusing the injunction would be harder on a plaintiff who was successful at trial, than granting it would be on the successful defendant.5 This assessment usually is undertaken by reference to the adequacy of damages, preservation of the status quo, the uncompensable disadvantages to either party, and the relative strengths of their cases.6 The merits of the cases (insofar as they can be ascertained at the interim injunction stage) can be relevant to the balance of convenience, and to the overall justice of the case.7
[16] But more than inconvenience is required:8 interlocutory injunctions lie to protect plaintiffs against “irreparable damage” for which they cannot adequately be compensated.9 The point of interim injunctions generally is to restore the status quo
— “the last peaceable state between the parties”10 — if required to enable determination and any remedy of the parties’ contested rights at trial: “to enable
2 Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344, [2020] NZCCLR 29 at [23], citing Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142; Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [30]–[31], citing American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL). See also NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12], referring to Roseneath Holdings Ltd v Grieve [2004] 2 NZLR 168 (CA) at [35]–[37].
3 Commerce Commission v Viagogo AG, above n 2, at [30]–[31], citing Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 2, at 142, and National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC 16, [2009] 1 WLR 1405 at [16]–[17].
4 Intellihub Ltd v Genesis Energy Ltd, above n 2, at [24] and [27].
5 Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV-2007-485-1756, 30 July 2008 at [4], citing Cayne v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.
6 At [6]–[14].
7 See, for example, Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 2, at 142, and Roseneath Holdings Ltd v Grieve, above n 2, at [41]–[42], noted in Brooks Homes Ltd v NZ Tax Refunds Ltd [2013] NZSC 60 at [6].
8 Pollen-Plus Ltd v Znel Ltd HC Tauranga CIV-2010-470-0848, 20 October 2010 at [40].
9 Finnigan v New Zealand Rugby Football Union Inc (No 2) [1985] 2 NZLR 181 (HC) at 183; and
American Cyanamid Co v Ethicon Ltd, above n 2, at 406.
10 Wellington International Airport Ltd v Air New Zealand Ltd, above n 5, at [10], citing R & M Wright Ltd v Ellerslie Gateway Motels Ltd HC Auckland CP188/90, 11 July 1990 at 8.
substantial justice to be done between the parties”.11 (Hence, where damages provide adequate compensation, “no interim injunction should normally be granted”.12)
[17] Thus interim injunctions are to prevent specified actions alleged irremediably to change the status quo in reliance on one party’s contention as to those rights. They are not intended in themselves to require compliance with the other party’s contention as to those rights.
—dismissal or stay
[18]Rule 15.1 of the High Court Rules 2016 provides:
(1) The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the court.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court’s inherent jurisdiction.
Analytically, dismissal of a proceeding thus follows strike out or stay, they being available broadly to contain abuses of process:13 “improper use of [the court’s] machinery”;14 use of that process “for a purpose or in a way significantly different
11 Commerce Commission v Viagogo AG, above n 2, at [81].
12 Wellington International Airport Ltd v Air New Zealand Ltd, above n 5, at [6].
13 Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [41].
14 Simon Goulding, DB Casson and William Blake Odgers Odgers on Civil Court Actions (24th ed, Sweet & Maxwell, London, 1996) at [10.15] as cited in Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [87].
from its ordinary and proper use”.15 As such, the jurisdiction carries “a ‘heavy’ onus and … should be exercised only in exceptional circumstances”.16
Should an interim injunction issue?
—does ST have a serious question to be tried on ABS’s alleged infringement?
[19] This is not the place for any substantial discursus on patent law and its role in protecting patentable inventions.
[20] For present purposes it is enough to know — to “[promote] innovation and economic growth while providing an appropriate balance between the interests of inventors and patent owners and the interests of society as a whole”17 — a patent “gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention”.18
[21] The ‘exclusive rights’ confer a “statutory monopoly” on the patent holder:19 to deal with an invented product or use an invented process (and deal with any resulting product),20 subject to “compulsory licences and the use of patented inventions for services of the Crown”.21
[22] A patent application must be accompanied by a specification disclosing the invention and ending with its claim to the scope of invention.22 The specification is published for notification of any opposition prior to any grant of the patent by the
15 Te Wakaminenga o Nga Hapu Ki Waitangi v Waitangi National Trust Board [2023] NZCA 63 at [14], quoting Attorney-General v Barker [2000] 1 FLR 759 (QB) at 764.
16 White v Attorney-General [2021] NZCA 479 at [43], citing Williams v Spautz (1992) 174 CLR 509 (HCA) at 529 and Goldsmith v Sperrings Ltd [1977] 1 WLR 478 (CA) at 498. Similarly, SPAK (1996) Ltd v Leroy [2022] NZCA 564, (2022) 23 NZCPR 769 at [169]–[170], citing Burns v National Bank of New Zealand Ltd [2004] 3 NZLR 289 (CA) at [37], Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267, Smith v Fonterra Co-Operative Group Ltd [2021] NZCA 552, [2022] 2 NZLR 284 at [38], Gartside v Sheffield, Young & Ellis [1983] NZLR 37 at 45 and Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641.
17 Patents Act 2013, s 3(a)(i).
18 Section 18(1).
19 Peterson Portable Sawing Systems Ltd (in liq) v Lucas [2006] NZSC 20, [2006] 3 NZLR 721 at [22]. See also Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd [1979] 2 NZLR 560 (CA) at 572.
20 Patents Act, s 18(2).
21 Section 18(3).
22 Sections 36 and 39.
Commissioner of Patents,23 the validity of which nonetheless is open to challenge.24 The consequential patent is construed purposively from the specification as a whole, “as it would be understood by the appropriate addressee — a person skilled in the relevant art”.25
[23] The NZ patents’ specifications run to many hundreds of pages. But their critical claims are for:
(a)NZ’309: a particular multi-channel system for classifying particles according to one or more characteristics of the particles through a number of flow cytometry units;
(b)NZ’678: a particular flow cytometry system for sorting a mixture of particles including particles with one of two distinct characteristics; and
(c)NZ’384: a particular hydrodynamic focusing assembly for use with a particle processing instrument.
Each patent’s specification is significantly more closely particularised. At issue between ST and ABS on the present proceeding is if any of those necessary particulars are present in ABS’s technology deployed in New Zealand.
[24] The parties’ respective experts (each comprehended ‘skilled in the art’ of relevant aspects of mammalian semen sorting), while agreeing ABS’s technology uses multiple flow cytometry units to sort a mixture of particles by desired characteristics, dispute if — for example — ABS’s technology does so from “an integrated platform comprising at least one” of specified elements, as NZ’309 claims. One of those claimed elements is “a common housing”, which the experts differentially interpret if the housing is required thereby at least partially to enclose the units.
[25] For ABS, Greg Arthur KC argued I could be satisfied from a plain English construction ABS’s bench on which its flow cytometry units sit could not in any sense be construed a ‘housing’, necessarily containing the units as illustrated in ST’s patent.
23 Section 101.
24 Sections 3(b)(ii) and 102.
25 Peterson Portable Sawing Systems Ltd (in liq) v Lucas, above n 19, at [25]–[28].
But such isolated construction would not meet the requirement for purposive construction from the specification as a whole.26 I should need to understand the object of ‘a common housing’ in the overall construction of the specification, which is far from self-evident.
[26] ABS’s expert apprehends the requirement for ‘a common housing’ is to afford structural and protective support for the units; ST’s expert says it is to maintain the units’ fixed position and alignment, isolated from external vibration. I cannot decide that factual dispute on a summary basis, without testing both experts’ evidence, or then if ABS’s bench improperly achieves either. As I indicated at the hearing, ‘housing’ also bears a plain English meaning of ‘accommodation’. A dictionary definition includes “[a] case, cover, or other structure that encloses, protects, or (in some cases) supports a mechanism (esp. a bearing), apparatus, piece of equipment, etc”.27
[27] There are many other disputes between the experts as to ABS’s technology’s alleged infringement of ST’s patents at levels of necessary particularity, painstakingly articulated by reference to their evidence in counsel’s claim charts. A further example is if NZ’678’s particular for sorting by variable flow between characteristics for “purity” is infringed by Intelligen’s sorting for “a desired throughput”. The experts directly dispute if throughput is a proxy for purity. And, with reference to NZ’384, there is dispute if Intelligen’s chips contain fluid focusing components in the particular horizontal and vertical planes claimed by ST. Again, I should need to know the purpose claimed for each ‘purity’ and planes in the overall construction of the specification. None of that is self-evident either.
[28] Without intending to undermine counsel’s considerable diligence in articulating the disputes, none possibly can be determined on a summary basis. All offer ST a tenable basis for its success at trial. I cannot exclude it here.
[29] But ST can have no such basis for success if the parties’ 27 December 2022 agreement conclusively excludes its pursuit of the present proceeding. That is to ask predominantly if the NZ patents, if derived from the US patent, have “claims directed
26 See [22] above.
27 Oxford English Dictionary (online ed, September 2023), sense 6a (emphasis added).
to laser kill technology”.28 The parties’ relevant experts, while noting ‘directed to’ is a term of art in United States’ patent law, differ if the NZ patents have such claims.
[30] ‘Laser kill technology’ is not defined in the parties’ 27 December 2022 agreement. Neither is ‘laser kill’ specified in the NZ patents.
[31] NZ’309 specifies each of the flow cytometry units as “operable to sort a desired population of particles from a mixture of particles by interrogating a stream of fluid containing said particles using a beam of light”, being “a single laser beam” which is split into three or more light beams and directed “into optics systems of the flow cytometry units”. By analysing waveform pulses generated at the time a particle passes through the laser beam (droplet sorting), the specification contends to be able to identify with reasonable probability if any particle is an X-chromosome bovine sperm cell by discriminating between X- and Y-chromosome sperm cells on the basis of their relative difference in DNA content.
[32] Both the NZ’309 and NZ’678 specifications refer to “a photo-damage sorting system where a laser is used to ablate (kill or otherwise damage) selected particle sets to provide a collected population having a desired content”, the NZ’309 specification going on to observe the invention’s improvements are applicable “also to other sorting techniques, such as sorting by photodamage (laser ablation) … [as] discussed in [the US patent]”:
For example, if the particles being analyzed are sperm cells and the intended result is to collect sperm cells having a characteristic A (e.g., a desired chromosome content), then the microprocessor receives signals … which [identify] cells not having characteristic A and selectively activates the laser to ablate such cells or otherwise render them ineffective.
[33] If photo-damage sorting is ‘laser kill technology’ (as it may be, if that phrase in the settlement agreement is to be construed under Wisconsin state law as referring to relevant aspects of the US patent rather than to Intelligen), it nonetheless is arguable the NZ patents do not go so far, if only claiming droplet sorting. The issue may turn on if US patent law means the New Zealand specification’s disclosed alternative applicability is enough to constitute ST’s claim “directed to” laser kill technology.
28 See [11] above.
That requires determination of the scope of the claim in the overall construction of the specification. Particularly given the experts’ dispute, if any of that is to establish the NZ patents have ‘claims directed to laser kill technology’ again is not something I can decide on a summary basis. Such also offers ST a tenable basis for success at trial. I return to the point at [58] below in discussing ABS’s application for stay.
[34] I accordingly conclude ST has a serious question to be tried on ABS’s and CRV’s alleged infringements.
—where does the balance of convenience lie?
[35] In assessing where the balance of convenience lies between the parties, as to which is more detrimentally affected respectively by the grant or refusal of interim relief if successful at trial, patent cases carry a particular weight in favour of grant. That is because the usual disqualifying aspect of adequate damages has less materiality by reason of patents’ conferral of a statutory monopoly — “the opportunity to create its own market which may to a greater or lesser degree survive the expiry of the patent”
— which advantage is lost to infringing competition and such lost opportunity may not be adequately assessed in damages.29 Thus other factors going to weight the balance against grant of interim relief may have correspondingly greater work to do.
[36] ABS and CRV say those contemplations are not compelling in the duopolistic position during the four months remaining for the earlier NZ patents. Any infringing gross profit relatively easily is identifiable for disgorgement to ST, together with any premium as may reflect ST’s higher monopoly pricing. The argument is not entirely attractive, because such gross profits will have been obtained by its premature entry into the market, which prematurity will extend to its preparatory steps to the extent also infringing. CRV evidenced its setting-up in New Zealand “lasted over 16 months” from January 2021 to nearly May 2022. Thus it has a structural head start in competition after the NZ patents expire.
[37] At its highest, ABS and CRV could not so have conducted themselves until the patents expired, when they should also have had to confront any defensive actions as
29 Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd, above n 19, at 572.
may be taken by ST to protect the market previously afforded by its monopoly. It is not simply a case of projecting the competitors’ preparatory time forward from the point of expiry also to capture its gross profits over that subsequent period. The assessment also may need to take into account their likely need for greater speed in establishing its presence in a post-patents market if there are prospective third-party entrants. Those uncertainties, particularly viewed in the context of the then-established infringement of ST’s monopoly and the structural benefits it is intended to afford, are enough to render damages an inadequate remedy for ST.
[38] Conversely, I consider damages are more adequate a remedy for ABS and CRV if sustaining loss through an injunction. Damages would go to compensate them for any lost or deferred investment, including in establishing a foothold in the market, and any consequent net profit. While similar post-patent uncertainties would accrue in such assessment, they are not underpinned by any right further complicating the assessment in context, such as the consequences of the patent holder’s right to be immunised from competition. Their profit aspirations remain open to being achieved in unconstrained competition after the patents’ expiry. The quantum of that success comparatively easily may be applied, if requiring some supplementation for the short break, in retrospective reliance on ST’s mandatory undertaking on order to pay “damages to compensate the other party for any damage sustained through the injunction”.30
[39] ABS argues an injunction would be to remove it from the New Zealand market entirely if it permanently lost CRV’s business here. That is a risk it faces in competition in any event, whether with ST or another entrant. Nonetheless the terms of any injunction should not lightly interfere with inarguable rights of market participation and the benefits thereby to third parties. I recognise ABS’s and CRV’s concerns for third party farmers’ lack of choice in circumstances of an injunction. But that is the intended statutory consequence of ST’s NZ patents, subject to dispute as to their valid scope or operation. Complaint of ST’s monopoly conduct does not carry significant weight given the NZ patents. And ABS cannot be heard otherwise to claim monopoly over CRV as its customer.
30 High Court Rules, r 7.54.
[40] ABS and CRV are on substantially firmer ground in arguing for ST’s disqualifying delay in issuing its proceeding. Delay is a factor against grant of interlocutory relief where it is “unacceptably long”,31 because it may demonstrate a lack of urgency for interlocutory relief or prejudice the party only belatedly to be restrained.32 An associated consideration is the status quo for preservation pending trial.
[41] This proceeding was filed on 26 May 2023 and served on ABS on 12 June 2023, accompanied by correspondence requiring it cease and desist by 30 June 2023. ABS’s 29 June 2023 response put ST directly on notice of “the substantial passage of time since the commercial deployment of [ABS’s] sexed semen technology in New Zealand in February 2022”. ST’s interlocutory application for the injunction then was filed on 21 July 2023.
[42] ABS points out the opening of CRV’s sexed semen processing facility in New Zealand, as “equipped with IntelliGen® Technology, the only commercial laser- ablation semen sexing technology available in key global markets”, was publicised on CRV NZ’s website on 23 February 2022. I assume that publicity was known to ST, meaning at least the subsequent (coincidentally) 16 months beg explanation.
[43] ST claims “practical and commercial reasons” for not earlier proceeding, hoping “to resolve this matter through commercial talks, not litigation”, and only issuing the proceeding as a last resort. It anticipated litigation risked contemporaneous global negotiations with CRV for a replacement sorting agreement, possibly extending to New Zealand, progressing (if peripatetically) throughout the period to early July 2023.
[44] Given patents’ avoidance of usual competitive commercial constraint, I have some resistance to reliance on commercial factors as a ground for delay in their enforcement. The irrelevance of commercial endeavour should cut both ways as each a benefit and burden of patents’ grant.
31 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [42]–[44].
32 Amtec Engineering Group Limited v Marsden Machinery Ltd CA182/95, 24 October 1995 at 11, citing P V Baker and P St J Langan Snell’s Principles of Equity (29th ed, Sweet & Maxwell, London, 1990) at 666.
[45] For ST, Jack Hodder KC placed significant weight on what he submitted were Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd’s “strong parallels” of a six-year delay from 1972 to 1978 in issuing proceedings for patent infringement held “excusable in the particular circumstances”.33 After noting:34
Congoleum has had to be active on an international scale in defending its patent rights, and … it has been largely successful in that no infringer has shown that any of its patents are invalid and substantial damages or agreed royalties have been recovered.
Cooke J identified those ‘particular circumstances’ as “trying to deal with the question of international infringement by agreement or litigation with the source of the whole problem”.35
[46] That is not ST’s position here. ST has been engaged in litigation with ABS about its Intelligen technology since July 2014 in the United States and elsewhere in Europe and India. ST has been successful in upholding the US patent’s validity in the face of ABS’s challenges to it and obtaining infringement verdicts in the United States. ABS has not so challenged the NZ patents, but has challenged ST’s patents in other jurisdictions in attempts to ‘clear the way’ for introduction of its Intelligen technology there. Even if predominantly responsive by ST, none of that is relied on as reason for ST’s delay in issuing proceedings in New Zealand. In deferring issue of proceedings to accommodate negotiations with CRV, ST was not addressing “the source of the whole problem” but only a commercial consequence of it.
[47]Nonetheless, in Congoleum, Richardson J was satisfied:36
… for the reasons given by Casey J, that it would have been unreasonable on any commercial basis for the appellant to have started an action against the respondent in New Zealand before 1974 and that its failure to take direct action from then until the final lifting of the restraint under the consent order in May 1978 was reasonably explicable having regard to the course of litigation overseas.
Casey J’s reasons for the initial commercial unreasonableness were of the infringer’s relatively slight (if profitable) incursions in New Zealand from 1972 before the patent
33 Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd, above n 19, at 562.
34 At 563.
35 At 563.
36 At 569.
holder’s commencement of proceedings in the United States as “the logical place to test the disputed issue”.37 The New Zealand infringer “received the benefit here of the delays” by being able “to trade profitably and continuously without the interference and uncertainty of patent litigation”.38 Thereafter it had to “accept the consequences” of its association with the United States’ infringer.39
[48] The real question, as Richardson J went on to articulate, is if delay created “any apparent prejudice to the respondent’s position”, if having “to account to the patent holder in respect of his profits earned during the period of delay”.40 The respondent’s knowledge of the patent’s existence “diminished the weight to be attached to this factor”.41
[49] For slightly different reasons than urged by Mr Hodder, I similarly do not consider ST’s delay in issuing proceedings materially to weight the balance of convenience in CRV’s (or, derivatively, ABS’s) favour, which has had the benefit of its establishment with ABS’s impugned technology in full knowledge of the consequential risk. I am influenced in that assessment by the earlier NZ patents’ short remaining life. I am not offered convincing evidence CRV’s substantial investment in New Zealand truly is put at risk by a short deferral of its operation, even including a breeding season in which farmers may lack access to CRV’s services. Neither do I consider any ‘churn’ of farmers to ST for that season necessarily to be market- defining for the future. Farmers plainly move between suppliers of sex-sorted bull semen. That competition is one ST must confront on expiry of its patents.
[50] To turn then to the status quo for preservation pending trial, identification of the relevant state of affairs notoriously is difficult because inevitably it is caught up in the disputed conduct at issue. Hence the relevant status quo, “not an immutable concept”, often is defined as “the last settled or peaceful position between the parties”, usually prior to the impugned conduct at issue.42 While substantial delay may justify
37 Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd SC Christchurch A 43/78, 10 April 1979 at 12.
38 At 12.
39 At 12.
40 Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd, above n 19, at 570.
41 At 570.
42 Levi Strauss and Co v Dino Clothing Co Ltd (1986) 1 TCLR 393 (HC) at 399.
deferring that ‘last settled position’ to “the time the proceedings were commenced and the interim injunction was sought”,43 that only can be because the delay objectively was to suggest the position was not earlier disputed; in other words, the ‘settled position’ between the parties only was disrupted by the issue of proceedings (albeit necessarily relying on earlier conduct, now contested).
[51] For the same reasons as I considered ST’s delay not to weigh strongly against an injunction’s grant, ABS’s and CRV’s knowledge of ST’s global contest to the Intelligen technology establishes the last settled position for preservation remains before CRV’s commercial launch using ABS’s technology in New Zealand. Preservation of the status quo is, in any event, only for consideration “[w]here other factors appear to be evenly balanced”,44 and I consider those other factors in combination lean in ST’s favour.
[52] Ultimately, for all those reasons, I consider continued protection of ST’s patents from argued infringement by ABS and CRV weights the balance of convenience in ST’s favour.
—what is the overall justice?
[53] Standing back, I see grant of an interlocutory injunction to the point of the earlier NZ patents’ expiry as giving rise to the least irremediable prejudice to the parties. Such would maintain ST’s limited opportunity for exploitation of its monopoly for the short period of the earlier NZ patents’ life, while leaving ABS’s and CRV’s impugned arrangements available for use in New Zealand immediately thereafter.
[54] I am not prepared to countenance any extension of that period to account for the duration of CRV’s contended infringements in New Zealand. Interlocutory injunctive relief is protective and ancillary to the substantive claim, and not remedial as may flow from it. ST only has itself to blame if enabling CRV’s establishment over the period of its delay, and thereby if losing its patents’ bridgehead in subsequent competition. It cannot, on an interim basis, seek to extend its patents’ effective life. ST
43 Amtec Engineering Group Limited v Marsden Machinery Ltd, above n 32, at 13.
44 American Cyanamid Co v Ethicon Ltd, above n 2, at 408.
necessarily is limited to substantive relief in respect of any springboard losses claimed from ABS and CRV only if ultimately successful on their contended infringement.
Should the proceeding nonetheless be stayed?
[55] Without intending any disrespect for counsel’s careful submissions in these respects, I can deal relatively briefly with the defendants’ application.
—is New Zealand the convenient forum?
[56] Parties’ contractual choice of desired forum for determination of disputes between them generally is to be given effect, “unless there is strong cause or the existence of exceptional circumstances for denying the contractual provision its operative effect”.45 But performance of the 27 December 2022 agreement’s dispute provision would not directly dispose of the present proceeding. Rather it would only determine an element — albeit potentially dispositively — raised on its defence.
[57] Clearly, the Wisconsin court has no jurisdiction to enforce the NZ patents, which is reposed in this Court.46 As plainly, the Wisconsin court has no ability to provide interim relief in respect of this proceeding, which falls within my inherent jurisdiction to grant.47 It cannot be said Wisconsin is a more appropriate forum for determination of ST’s claim: New Zealand has the most real and substantial connection with ST’s claim, principally as providing the law governing the dispute and the only forum for its determination but also as to the presence of the active parties.48 The 27 December 2022 agreement is not effective to prevent my determination of ST’s interlocutory application.
[58] Even if the Wisconsin court determined the 27 December 2022 agreement was effective as a matter of contract between ABS and ST to establish issue of the
45 Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA) at 190, citing Society of Lloyd’s & Oxford Members’ Agency Ltd v Hyslop [1993] 3 NZLR 135 at 142, The Eleftheria [1970] P 94, Evans Marshall & Co Ltd v Bertola SA [1973] 1 All ER 992 and Re Jogia (a bankrupt), ex parte the trustee v D Pennellier & Co Ltd [1988] 2 All ER 328 at 336.
46 Patents Act, s 148.
47 American Cyanamid Co v Ethicon Ltd, above n 2, at 406.
48 Schumacher v Summergrove Estates Ltd [2014] NZCA 412, [2014] 3 NZLR 599 at [28]–[29], citing Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460 (HL) at 465, 476 and 484–486 and Exportrade Corp v Irie Blue NZ Ltd [2013] NZCA 675, (2013) 21 PRNZ 680 at [39].
New Zealand proceeding to be in breach of the agreement between them, it remains an issue of comity if this Court would adopt that determination as providing any defence to ABS on ST’s claim of the NZ patents’ infringement.49 Otherwise, it is a point as arguable in a New Zealand court, and not necessarily excluded by the parties’ agreement any dispute “arising out of or in connection with” the agreement is for Wisconsin courts’ determination. But, if required for this proceeding’s substantive determination, this proceeding could be stayed for the Wisconsin court’s decision on the point.50
[59] Such should turn in part on what progress ABS’s Wisconsin application may have made at, or be expected to make by, the time the point falls for substantive determination in this proceeding. It does not presently demand stay in a blanket way of anything more of this proceeding. Substantial progress may be made in this proceeding, including on interlocutory application, subject to the risk of being undercut by the Wisconsin court’s decision. If that is not a risk (including of an adverse costs award, potentially in indemnity terms) the parties seek mutually to avoid, this proceeding should continue, at least to the point of determination of any less universal application for stay.
—should the Court assume jurisdiction over the foreign defendants?
[60] That raises issues given rise by ST’s claims against the New Zealand ABS and CRV defendants’ foreign related companies.
[61] ST did not require leave to serve originating documents out of New Zealand on ABS and CRV if “the claim is for … a permanent injunction to compel or restraint the performance of any act in New Zealand”, as ST substantively seeks; or “the subject matter of the proceeding is … property situated in New Zealand”, as are the NZ patents; or “the claim arises under an enactment” in relation to which “acts or omissions are done or occurred in New Zealand” or “loss or damage was sustained in New Zealand”, as ST alleges in relation to the Patents Acts.51
49 New Zealand Basing Ltd v Brown [2016] NZCA 525, [2017] 2 NZLR 93 at [67], n 86, citing Society of Lloyd’s v Meinzer (2001) 210 DLR (4th) 519 (Ont:CA) at [60], quoted in Reeves v OneWorld Challenge LLC [2006] 2 NZLR 184 (CA) at [61].
50 Kidd v van Heeren [1998] 1 NZLR 324 (HC).
51 High Court Rules, r 6.27(d), (e) and (j).
[62] Given the foreign defendants’ protests, I nonetheless must dismiss the proceeding unless ST establishes there is “a good arguable case … the claim falls wholly within” one or more of those categories and the Court “should assume jurisdiction” for specified reasons or leave would therefore have been granted.52
[63] For the reasons explained at [61] above, I am satisfied of ST’s good arguable case. The reasons for this Court’s prospective assumption of jurisdiction then are:53
(b) there is a serious issue to be tried on the merits; and
(c) New Zealand is the appropriate forum for the trial; and
(d) any other relevant circumstances support an assumption of jurisdiction.
Given my conclusions ST has a serious case for trial,54 and only this Court has jurisdiction to enforce Patents Acts’ infringement,55 the requisite thresholds are crossed in a generic sense.
[64] And, with particular focus on the individual foreign defendants, I also am satisfied their respective group structures, in the context of the international nature of underlying commercial arrangements between ST, ABS and CRV, together render those foreign defendants necessary or proper parties to claims brought against the New Zealand defendants. I note, for example, ABS Global’s and Genus’ relatively undifferentiated status as parties to the 27 December 2022 agreement and CRV International’s involvement in negotiations claimed intended to affect operations in New Zealand.
[65]The Court should assume jurisdiction accordingly.
—are the number of plaintiffs practicably limited?
[66] Last, I do not understand ABS’s and CRV’s claim for STgenetics NZ’s dismissal from the proceeding as lacking “standing”, as being neither the patentee nor exclusive licensee of any of the NZ patents.
52 Rule 6.29(1).
53 Rule 6.28(5)
54 At [34] above.
55 At [57] above.
[67] STgenetics NZ is pleaded to operate ST’s New Zealand facilities together with Inguran and Cytonome, individually to have suffered loss and damage by reason of the defendants’ alleged infringements, and for its unique election as to an account of profits. The allegation of a right of relief alone would entitle STgenetics NZ’s joinder.56 Its presence before the Court thus is no more than necessary “to justly determine the issues arising” and, perhaps more compellingly in light of the defendants’ position, as a person “who ought to be bound by any judgment given”.57
Result
[68] The plaintiffs’ application is granted, on terms to be determined after consideration of memoranda to be filed.
[69] The defendants’ application is dismissed, with leave reserved for renewed application for stay or by consent.
Next steps
[70] Counsel are to consult and propose (desirably, jointly) terms in accordance with this judgment for such interlocutory order within five working days after the date of this judgment. Such must refer to the necessary undertaking. Counsel should at the same time indicate any passages of this judgment sought for confidentiality redaction.
[71] Pending supplementary issue of this judgment with such terms and any redaction, publication of any aspect of this judgment beyond the parties and their advisors is prohibited.
Reissue
[72] Further to [68][70]–[70] above — after consideration of counsel’s memoranda dated 20–22 December 2023, and subsequently conferring with counsel by teleconference on 22 December 2023 — the terms on which the plaintiffs’ application was granted are as set out in the Schedule to this judgment, on condition of each
56 High Court Rules, r 4.2(1).
57 Rule 4.1.
plaintiff’s signed undertaking otherwise in terms of r 7.54(1) of the High Court Rules 2016 to be filed.
[73] To avoid doubt, counsel advising no redactions are sought of my judgment, the prohibition at [71] above is revoked.
—Jagose J
Counsel/Solicitors:
Jack Hodder KC, Auckland Greg Arthur KC, Wellington Jack Wass, Barrister, Wellington Chapman Tripp, Auckland James & Wells, Auckland
SCHEDULE
1 The defendants, CRV Ltd, CRV International BV, Genus ABS (NZ) Ltd, ABS Global, Inc and Genus plc, their directors, employees and agents (together, the Defendants), are restrained until the expiry of NZ Patents Nos. 564309 and 577678 from importing, making, using, selling, hiring or otherwise disposing of, or offering to import, make, sell, use, hire or otherwise dispose of (together, the Restrained Acts):
1.1the Genus IntelliGen system installed in the Bellevue Laboratory and described in the affidavits of Jesus Martinez dated 31 August 2023, 3 November 2023 and 16 November 2023;
1.2any Genus IntelliGen system for sorting semen that comprises two or more flow cytometry units mounted on a shared optical bench or other type of housing;
1.3any Genus IntelliGen system where three or more flow cytometry units share a single laser; and/or
1.4any Genus IntelliGen system or flow cytometry unit that:
(a) has the Autothroughput feature and/or Autogate feature; and/or
(b) while operating, can vary the sorting strategy or the fluid delivery as a function of either purity of or quantity of particles with a certain characteristic in a population containing particles with two or more characteristics.
2 The Defendants are restrained until the expiry of NZ Patents Nos. 564309 and 577678 from carrying out any of the Restrained Acts in relation to any sexed semen produced using the Genus IntelliGen system installed at the Bellevue facility on Bellevue Road, Matangi, or at any other site in New Zealand.
3 The Defendants are restrained until 11.59pm on 29 March 2024 from carrying out any of the Restrained Acts in relation to the hydrodynamic fluid focusing assemblies described in:
3.1Schedules 1 and 2 to Jesus Martinez’s affidavit dated 31 August 2023; and
3.2 Schedule 1A to Jesus Martinez’s affidavit dated 3 November 2023. (the Restrained Chips)
4 The Defendants are restrained until 11.59pm on 29 March 2024 from carrying out any of the Restrained Acts in in relation to sexed semen produced using the Restrained Chips.
5 In the event that the Defendants wish to carry out any Restrained Act in relation to a hydrodynamic fluid focusing chip that the Defendants say does not contain all of the features of one or more claims of NZ Patent No. 711384 (the Chip):
5.1the Defendants may appropriately but without obligation provide the Chip and/or corresponding computer models (e.g. CAD files) to the plaintiffs’ external counsel and independent expert subject to the confidentiality protocol dated 19 September 2023 and the confidentiality undertakings already provided in this proceeding;
5.2if the plaintiffs’ external counsel and/or plaintiffs’ independent expert consider that the Chip is being used and has or may have features falling within one or more claims of NZ Patent No. 711384, the plaintiffs may seek an order declaring that the chip is subject to the order in paragraph 3;
5.3if the plaintiffs seek an order under 5.2, the following timetable is to apply:
(a) the plaintiffs will file and serve an interlocutory application accompanied by an affidavit from the independent expert recording the independent expert’s view;
(b) within 15 working days the defendants will file and serve notice of opposition, if any, accompanied by independent expert evidence in response;
(c) within 10 working days the plaintiffs will file and serve independent expert evidence in reply; and
(d) the parties agree to the application being heard urgently with:
(i)a half-day hearing to be allocated on the first available date before his Honour Justice Jagose; and
(ii)the plaintiffs filing and serving submissions of not more than 10 pages five working days before the hearing; and
(iii)the defendants filing and serving submissions of not more than 10 pages two working days before the hearing.
5.4from the date the plaintiffs serve any application for orders under paragraph
5.2 until the Court determines the plaintiffs’ application, and on the basis of the continuing undertaking as to damages provided by the first plaintiff, the Defendants are restrained from carrying out any of the Restrained Acts in relation to sexed semen produced using the Genus IntelliGen system with the Chip.
6 Costs reserved.
7 Leave to apply.
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