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Re-examination of patent during litigation

Feature Articles

Cite as: (2006) 80(12) LIJ, p. 60

The Federal Court’s Capral decision has far-reaching procedural and tactical implications for those involved in patent litigation.

By Richard McCormack

The Federal Court’s Capral decision has far-reaching procedural and tactical implications for those involved in patent litigation.
By Richard McCormack

Federal Court decision which allowed patent re-examination to be used during the course of a defence to a patent infringement action, including a cross-claim for revocation of the patent in suit, is a significant procedural issue.

In Capral Aluminium Ltd v G & J Koutsoukos Holdings Pty Ltd,[1] G & J Koutsoukos Holdings Pty Ltd was successful, during the course of repelling a claim of alleged patent infringement, in having the Court order that the legal pro-ceedings be effectively stayed for the purpose of enabling the patent in suit to be re-examined by the Commissioner of Patents.

This issue had not been previously litigated in Australia and it required a proper interpretation and application of s97(3) of the Patents Act 1990 (Cth) (the Act).[2]

The grounds of re-examination of the patent, which concerned security screens for doors and windows, involved lack of novelty and lack of inventive step.

Following the Court’s decision in the re-examination application hearing, the Commissioner was required to report the re-examination result to the Court within the relatively short period of six weeks.

The Commissioner’s report was adverse to the validity of the Capral patent. A further uncommon feature of the case was the making of a See v Scott-Paine[3] costs order arising out of a late amendment to the particulars of invalidity.

Moore J expressed the significance of the procedural issue thus:[4]

“[8] The process of re-examination by direction of the court creates an opportunity for what may be an economic and speedy pre-trial evaluation of issues concerning the validity of a patent arising in proceedings in this court. But there must be a context in which the re-examination takes place. In those circumstances, it is appropriate to give a successful applicant for an order for re-examination, the same opportunity as would exist in relation to an application under s97(2). That is, to provide the Commissioner with documents on which any assertion is based that the invention, so far as claimed and when compared with the prior art base [as constituted by published patent specifications and other relevant literature] as it existed before the priority date of that claim, is not novel and does not involve an inventive step, and, in addition, a statement of the relevance of those documents. If the applicant for the order is not the patentee, the patentee will later have the opportunity to make a statement under s99 disputing any adverse report”. [emphasis added]

The decision has far reaching procedural and tactical implications for those involved in patent litigation, as well as in the pre-action stages where the professional representatives of the potential protagonists engage in dialogue, written or otherwise, as to the claims and denials, respectively.

Accordingly, should the Commissioner’s resulting report be adverse to the patentee, an opportunity would thereby be created in which the entire dispute may be resolved by negotiated compromise[5] or, if necessary, an application for summary judgment by the revoker seeking dismissal of the claim with costs, including, possibly, on an indemnity basis.

The Court relevantly concluded that the power to direct re-examination under s97(3) extends to making orders about the re-examination procedure itself, provided such orders do not limit the statutory powers conferred on the Commissioner to undertake the re-examination.[6]

This reflects the Court exercising powers conferred by the statute, together with additional powers as may be reasonably incidental and necessary to the exercise of the power.[7]

Statutory scheme

The decision also dealt with the various features which form an integral part of the statutory scheme for re-examination under Chapter 9 of the Act, including that:

  • re-examination can occur after grant if an application is made under s97(2) of the Act;
  • the applicant under that sub-section may be either the patentee or any other person;
  • in relation to such an application, although the Act is silent as to what information may or must be furnished by an applicant for re-examination, in circumstances where the report of the Commissioner in relation to the re-examination is against the patentee, the patentee is given an opportunity under s99 to dispute the report. This reflects the Commissioner not being able to exercise the power to revoke a patent under s101, after re-examination under s97(2), unless and until the patentee has had a reasonable opportunity to be heard;
  • pursuant to reg 9.2, an applicant under s97(2) (whether the patentee or any other person) is to furnish the Commissioner with documents supporting the assertion that the invention, so far as claimed, and when compared with the prior art base as it existed before the priority date of that claim, is not novel or does not involve an inventive step;[8]
  • the applicant must also state the relevance of each of these documents to each ground of invalidity, relevantly, relied on;[9]
  • the statutory scheme provided by reg 9.2 is consistent with the applicant for re-examination being entitled to put a submission to the Commissioner in support of the re-examination application, concerning novelty and inventive step. It is important that this opportunity is availed of, as no further opportunity to make submissions to the Commissioner, or comment, is provided under the Regulations or the Act.

Commissioner – AGS

  • In light of issues concerning the practice and procedure of the Patents Office, the Commissioner was actively involved, expressing the view that in the event the Court ordered re-examination of the complete specification, under s97(3) of the Act, then the following should occur:
  • consistent with para 21.4.3 of the APO Manual of Practice and Procedure, the only documents the Commissioner will consider in re-examination will be those that the Court directs the Commissioner to consider;
  • the Commissioner will provide a report on the re-examination of the patent, under s98 of the Act;
  • where the Commissioner reports adversely, under s99 of the Act, the patentee may file a statement disputing the report within two months of the day the Commissioner reports under s98;
  • under s100 of the Act, the Commissioner will give a copy of the report and any statement filed by the patentee to the Court;
  • once a copy of the report and any statement filed by the patentee is given to the Court, the s97(3) re-examination process is complete; and
  • if the Court is minded to order re-examination, the Commissioner undertakes to issue the report within one month.

It is important to ensure that the submissions lodged in support of the re-examination be in detail, as the Commissioner is required to consider issues of validity, by reference to the primary material, rather than, for example, material such as included in the file wrapper of relevant US prior art (patent literature).

Costs – See v Scott-Paine order

In Capral, a See v Scott-Paine[10] order for costs was made, this being conditional in the sense that the outcome was dependent on the applicant, Capral, electing to discontinue the proceedings or not within a set period of time. These costs were expressed thus:[11]

“[8] In the event of the applicant electing to discontinue its claim against the respondent, under order of the court or pursuant to order 5 herein, the applicant is to pay the respondent’s costs of and incidental to these proceedings save and except for those costs as thrown away by the applicant by reason of the respondent’s application for leave to amend its particulars of objection, as referred to in order 1 above, if any, for the period between 2 July and 12 August 2004 inclusive, such costs to be assessed, if not agreed, on a party-and-party basis.

[9] The costs of and incidental to the respondent’s notice of motion be reserved, pending receipt of the Commissioner’s report to the court, pursuant to order 3 herein”.

A useful statement of the costs principle represented by this form of order is found in Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd.[12] There, Sundberg J relevantly stated:

“A See v Scott-Paine order is made when a defendant who is challenging the validity of a patent is permitted to amend its pleadings to include, for example, prior art which was not contained in its original particulars of objections. The order gives the patentee the right to elect, within the specified period, to proceed with or discontinue the action. If the patentee discontinues, it must pay the defendant’s costs up to the ‘switch over’ date (usually the date of delivery of the original particulars of invalidity), and the defendant must pay the patentee’s costs after that date. If the patentee proceeds with the action, the defendant must pay the costs of the application to amend, and in other respects the matter proceeds in the usual way: see Baird v Moule’s Patent Earth Closet Co, reported in Edison Telephone Co v India Rubber Co (1881) 17 Ch D 137, and See v Scott-Paine (1932) 50 RPC 56”.

The purpose of the See v Scott-Paine order is to impose on a party attacking the validity of a patent (revoker) the obligation to take reasonable steps to ensure that the full basis of attack in respect of the validity of the patent is put before the patentee at the earliest time. If this obligation is not complied with, adverse cost consequences may well follow as against the revoker.

The imposition of such obligation is justified by the notorious expense and legal complexity of patent actions.[13]

The principle of the full disclosure obligation is also rele-vant where a revoker seeks to introduce into the cross-claim and particulars of invalidity, by amendment, objections of obviousness or want of novelty. In this event, an important consideration is whether by making reasonably diligent inquiries, the revoker could have discovered the availability of such defences (grounds of invalidity) when the original pleading (defence and cross-claim, with particulars of invalidity) was served.

The revoker will not be found to have failed the diligence test where:

  • a search of prior art would have involved doing things out of the ordinary; or
  • when prior use comes to the revoker’s attention by chance in circumstances where it could not be properly suggested that he should have found it at an earlier date.[14]

Of significance is the fact that the onus of proving that the new material could not have been found with reasonable diligence lies on the revoker.[15] Furthermore, the onus is a heavy one, which is consistent with full disclosure and will, arguably, not be discharged unless the party bearing the onus places the whole story before the court.[16]

However, although failure to exercise reasonable diligence is an important consideration, it is not conclusive.[17]

File wrapper

An application for indemnity costs based on, for example, prior art identified by the Commissioner in an adverse report of the validity of the patent in suit, and present in the file wrapper of relevant US prior art, would be relevant to, although not determinative, of such an order, arguably, being appropriate.

In the Capral case, relevant prior art cited by the US examiner was in evidence through the file wrapper, but Moore J declined to require the Commissioner to consider same.[18]

Discretion – amendment

Finally, the matter of whether a See v Scott-Paine order should be made or not is entirely within the discretion of the Court, and depends on the facts of the particular case.[19] Such discretion is wide ranging and the class of cases is not closed as to the wide range of circumstances which may justify the amendment being allowed.[20]

In exercising its discretion, the Court proceeds on the basis that it is aware that the order is capable of working an injustice to a revoker, by enabling a patentee with what it knows to be a weak patent to discontinue largely at the revoker’s cost.

The Court should bear in mind the possibility that the patent would have been held invalid even on the unamended particulars.[21]

Duty of full disclosure

Although beyond the scope of this article, it should be noted that revocation of patents may occur in a wide range of circumstances including, relevantly, where the patent was obtained by fraud, false suggestion or misrepresentation.[22]

The legal principles relevant to each of these separate categories is worthy of a much closer consideration than has been given in cases thus far, and is a fertile area in relation to the focus which the courts are directing to the obligations of the patentee, and also its professional advisers in approaching the Commissioner with an application for a patent.

The question may be posed rhetorically as to what material would it take to be in the possession, custody or control of the patentee and/or the patentee’s professional advisers (patent attorneys and lawyers) which may involve a duty of disclosure to the Commissioner, so as to avoid a material misleading of the Crown? [23]

The answer will reflect the infinite variety of the particular circumstances surrounding an application for patent, such as, for example, a possible commercial dealing by the inventor in respect of the invention, before the priority date.[24]

Conclusion

Due consideration should be given in patent infringement situations to use such strategies as:

  • re-examination, as used by the revoker in the Capral case, through its cross-claim;
  • the non-infringement declaration procedure available under Part 2;[25] or
  • unjustified threats under Part 3 of the Act, either:
  • alone; or
  • coupled together with other very useful procedural avenues, such as pre-action discovery, especially in respect of documents which record or evidence steps taken in the design and development of the subject invention.[26]

This may be either at the stage where it is no more than an allegation in correspondence or the subject of extant legal proceedings, including the time-honoured reliance by an alleged infringer, as a supplement to denial of liability, on a cross-claim for revocation of the patent in suit, as occurred in the Capral case.

Furthermore, the issue of full disclosure also needs to be carefully considered, whether at the application for patent stage through to the commencement of legal action for patent infringement. This is particularly so due to the nature and full extent of the ground of revocation of a patent by reason of it having been obtained by “fraud, false suggestion or misrepresentation”,[27] awaiting full consideration by superior courts, especially the Federal Court.

It is submitted that the touchstone for the application of these difficult and rather elusive legal principles is when “false suggestion” is of a kind such that its materiality in deceiving the Crown comes into issue.[28]


RICHARD McCORMACK is a member of the Western Australian Bar Association and an interstate member of the Victorian Bar. He is Honorary Fellow of the University of Western Australia Law School, where he has taught patent law (LLM) since 1987. He was counsel for the respondent in Capral.


[1] (2004) FCA 1199; 63 IPR 254.

[2] Patents Act 1990 (Cth), s97(3) relevantly provides: “Where the validity of a patent is disputed in any proceedings before a prescribed court under this Act, the court may direct the Commissioner to re-examine the complete specification and the Commissioner must re-examine the specification accordingly”.

[3] See v Scott-Paine (1932) 50 RPC 56.

[4] Note 1 above, at [8]

[5] This scenario is illustrative only of such an opportunity, and not intended to reflect the final outcome of the Capral case.

[6] Note 1 above, at [3]–[4].

[7] See, for example, DJL v The Central Authority (2001) 201 CLR 226 at [25], but compare with Minister for Immigration and Multicultural Affairs v Wang (2003) 196 ALR 35. See also [4] of the reasons for Moore J’s decision as to this issue.

[8] Reg 9.2(2).

[9] Reg 9.2(2A).

[10] Note 2 above.

[11] Note 1 above, at page 257, and see orders at [8]–[9].

[12] Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1999) 46 IPR 173 at 176 per Sundberg J.

[13] See Williamson v Moldline Ltd (1986) RPC 556 at 563, 565 per Slade J.

[14] Baigue Magiglo v Multiglow Fires (1994) RPC 295 at 298.

[15] See note 13 above, at 564.

[16] See, for example, Re Chevron Research Co’s Patent (1970) RPC 580 per Graham J at 586.

[17] See note 13 above, at 564, per Slade LJ, as cited with approval by Sundberg J in Wimmera (note 12 above) at [7].

[18] Note 1 above, at [9].

[19] See Re GEC Alsthom Ltd’s Patent (1996) FSR 415 at 421.

[20] This principle can be seen in terms of practical operation and application through the statement of Graham J in Re Chevron (note 16 above, at 589).

[21] See note 19 above, at 421.

[22] Patents Act 1990 (Cth), s138(3)(d).

[23] See, for example, false suggestion or representation, as discussed by Parker J in Alsop’s Patent (1917) 24 RPC 733, at 753; Raleigh Cycle Co Ltd v H Miller & Co Ltd (1948) 65 RPC 141 at 162, per Lord MacDermott, and R v Comissioner of Patents (1953) 89 CLR 381 at 404-05, per Fullagar J.

[24] See, for example, Re Wheatley’s Patent Application [1984] 21 IPR 450 at 454 per Oliver LJ; and Azuko Pty Ltd v Old Digger Pty Ltd [2001] 52 IPR 75 at [71] per Gyles J [Fed C of A – Full Court].

[25] No application for a non-infringement declaration has proceeded to trial in Australia, as far as the author’s research has revealed up to the writing of this article.

[26] See Federal Court Rules, O.15A r3 (identity discovery), r6 (information discovery) and r12 (inspection and preservation etc. of property). See, for example, SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 27; Wundowie Foundry Pty Ltd v Milson Foundry Pty Ltd (1993) 27 IPR 202 at 207 per French J; CCA Beverages (Adelaide) Ltd v Hansford & Anor [Federal Court, 15 November 1991, O’Loughlin J], and for recent decision involving multiple parties in separate but related actions, see Austal Ships Pty Ltd v Thurlow [2006] FCA 1219 at [40]-[41] per French J.

[27] Patents Act 1990 (Cth), s138(3)(d).

[28] See cases in note 26 above.

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