Wallace & Anor v KD Kanopy Australasia Pty Ltd & Ors [2009] HCATrans 15 (13 February 2009)

Last Updated: 13 February 2009

[2009] HCATrans 015

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B31 of 2008

B e t w e e n -

RICHARD WALDEN WALLACE

First Applicant

BRENDA MARGARET WALLACE

Second Applicant

and

K D KANOPY AUSTRALASIA PTY LTD

First Respondent

TREVOR HUDSON DAND

Second Respondent

K D KANOPY INC

Third Respondent

INSTANT MARQUEE SYSTEMS PTY LTD

Fourth Respondent

INSTA IMAGE PTY LTD

Fifth Respondent

Application for special leave to appeal

FRENCH CJ
HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO BRISBANE

ON FRIDAY, 13 FEBRUARY 2009, AT 9.53 AM

Copyright in the High Court of Australia

__________________

MR A.B.S. FRANKLIN, SC: If it please your Honours, I appear for the applicant. (instructed by Maxwell IP)

MR D.M. LOGAN: May it please the Court, I appear for the respondents. (instructed by Macrossans Lawyers)

FRENCH CJ: Yes, Mr Franklin.

MR FRANKLIN: Your Honours, in a relatively recent Federal Court decision, the decision in the Apotex Case referenced in my outline, Gyles J commenting on the reasoning of this Court in this case and observing that it is not altogether clear, said that:

There is much to be said for the view that a patentee should be held to the advance in the art identified in the specification for the purposes of judging whether there is an inventive step. Put another way, the contents of the specification in suit would be taken into account in identifying the inventive step for the purposes of judging obviousness. However, no authority was cited that directly establishes such a principle . . . The applicants’ contention is a step too far for a single judge.

We submit, your Honours, that this is a laudable objective and that it is not a step too far for this Court and the vehicles to achieve this objective are the proper identification of reference material against which an inventive step is to be judged in the prior art base as defined and the modernisation of the law of claimed construction.

HAYNE J: Now, would taking either of those steps or any of those steps involve reconsideration of any judgments of this Court?

MR FRANKLIN: Yes, your Honour.

HAYNE J: Which ones would fall for reconsideration?

MR FRANKLIN: Lockwood No 2, your Honour.

HAYNE J: Is it a necessary step in the argument you advance to have this Court depart from what was said in Lockwood No 2?

MR FRANKLIN: Yes, it might seem a relatively minor extent, but we say it is a fairly fundamental issue.

HAYNE J: Why should this Court reconsider a unanimous decision so recently given?

MR FRANKLIN: Your Honours, in Lockwood No 2, without argument on the issue as I understand it, the Court in effect said that the prior art base for the purposes of obviousness is defined by section 7(2) of the Act and that it is expanded by 7(3). Now, plainly, with respect, that is not correct. The prior art base is defined in Schedule 1 to the Act, and section 18(1)(b)(ii), which is the ground upon which one attacks the patent on the grounds of obviousness, provides that an invention “so far as claimed in any claim . . . when compared with the prior art base”, that is, the prior art base as defined, must involve an inventive step.

Section 7(2) in turn says that it is presumed “to involve an inventive step” unless it is obvious to the skilled addressee “in the light of the common general knowledge”. Now, your Honours, on any basis common general knowledge is not the prior art base, to quote the late Sir Hugh Laddie. It is the technical background that the notional man brings to consideration of the prior art. When section 7(2) says that the obviousness of the inventive step must be considered in the light of common general knowledge, that reference to common general knowledge cannot be a reference to the prior art base. Indeed, the prior art base is that as defined in the schedule.

The error we say is conflating section 7(2) and section 18(1)(b)(ii). Section 18(1)(b)(ii) requires an inventive step when compared with the prior art base. That means, in a similar vein to the relevant provisions in the UK Act where the inventive step is determined with reference to the state of the art as defined, that to determine the inventive step, the obviousness or otherwise of which is the issue in the case, one has to compare the claimed invention with the prior art base, then in the light of common general knowledge the skilled addressee determines whether or not that inventive step is obvious or inventive and simply on the basis, your Honour, that prior art base is defined in Schedule 1.

That is referred to in section 18(1)(b)(ii). That is the ground, an inventive step with compared with the prior art base, the error is apparent. The prior art base is not common general knowledge. Those two bodies of information are not coextensive.

HAYNE J: What troubles me, Mr Franklin, and I would be glad of your assistance, is this. It is long established – see, for example, John v Commissioner of Taxation [1989] HCA 5; 166 CLR 417, particularly at 438, that although the “Court has power to review and depart from its previous decisions”, it is “a course not lightly undertaken”. John describes not conclusively or exhaustively but describes circumstances in which that is to be done. I understand you say we should review and depart from Lockwood No 2 but having regard to matters of the kind spoken of in John, why should we do it?

MR FRANKLIN: Your Honours, of course, are well aware of the fact that the 1990 Act was preceded by the IPAC report and the IPAC report observed that, unlike Australian law at that time when obviousness was determined with reference to common general knowledge alone, in most other countries all publicly available documents were treated as relevant and for that reason IPAC recommended that disclosures in recorded form or known uses should be taken into account.

The reference to “other countries” was, of course, for example, a reference to the position in the UK where the invention is compared with the state of the art as defined and the inventive step, then having exercised that comparison, is determined in the light of common general knowledge, which is the technical background of the notional man against which the art must be considered.

In the Ajinomoto Case, which is the Full Court decision referenced in my specification, the Full Federal Court observed that the Government was supposedly not prepared to adopt the broad definition of “prior art base” and held, following Lockwood No 2, that in effect the prior art base for obviousness was determined by sections 7(2) and 7(3) and that, of course, accords with the views expressed in Lockwood No 2 in the passages which have been identified in our index to the material that we have put before this Court.

We say, your Honours, that that statement in Ajinomoto, following Lockwood, is plainly incorrect, that the Federal Government was not prepared to adopt the broad definition of “prior art base”. It is indeed that very definition, the broad definition of “prior art base”, that one finds in Schedule 1. That is the definition of “prior art base” that must govern the determination of the question under section 18(1)(b)(ii) of the Act when one compares the invention so far as claimed in any claim with the prior art base to determine the inventive step.

We say the error that occurs as a consequence of that by saying that section 7(2) determines the prior art base and expands it beyond common general knowledge, common general knowledge not being the prior art base, is to skip out a step in the inquiry. How can one determine the obviousness or inventiveness of an inventive step unless one knows what that step is? Before the skilled addressee in the light of common general knowledge can assess that question he must surely know what the step is. The only way one can determine what the step is is to conduct the comparison that section 18(1)(b)(ii) says one must conduct and that is a comparison between the invention so far as claimed in any claim and the prior art base as defined.

If one does that, as is self-evident from the specification in this case, one finds that the very structure which is the subject of the claims is indeed part of the prior art base. The specification describes the prior art in detail. It then goes on to say that there were problems with stability and a need was in existence to improve stability. It describes prior efforts to improve stability and then says that the invention in this case is the particular mechanism to improve that stability.

That is important as context for my submission. Perhaps I can just take you to one passage in the specification which demonstrates that very well, and that is to be found at page 123 of the application book. This is under the heading “DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT” and it says:

The present invention concerns movable or temporary shelters in the form of canopy structures . . . Such structures are those which, by way of example and not limitation, are described in my issued [prior art patents] . . . The present invention specifically concerns novel mounts which may be used to interconnect the framework forming elements, such as the upright corner and intermediate leg support members, scissor assemblies and roof support structures described in those issued patents, a detailed description of those structures is not again here set forth but rather the structures and technology disclosed in those issued patents are herein incorporated by reference.

Your Honours, by skipping out the step of the necessary comparison under section 18(b)(1)(ii), a comparison between the claimed invention and that prior art, one then ignores all of that prior art and comes to a conclusion, as the court below did, that the invention so far as claimed in any claim is the structure itself. That, with respect, in the context of this patent specification, is our finding. Plainly, the structure is part of the prior art and the invention, the inventive step in this patent, is an improvement to that to improve stability. If one then analyses the evidence on those issues – and bear in mind, your Honours, that there was also prior art in Australia. There was the original canopy by Mr McKinnon which was held to anticipate 16 of the 17 claims and was held to be part of the prior art, but on the Court’s decision, by conflating 18(1)(b)(ii) and section 7(2), one disregards that prior art, although it is clearly prior art base material.

FRENCH CJ: Mr Franklin, what impact do the 2001 amendments have on the importance of the point that you raise?

MR FRANKLIN: The 2001 amendments really only have an impact on the second ground that we have raised, and that is ground B, proper construction of section 7(3). One of the points that we take in regard to question B is that in section 7(3), as it was worded before the 2001 amendments, one had to have regard to the relevant art in the patent area. Those words are no longer in the Act.

So, in considering section 7(3) under the Act as it was amended, we say that on question B in the special leave questions, the court below should have had regard to work in the art in Australia. There was work in the art in Australia in the form of the Quikshade canopy, and it should have held that the skilled person could, not would, have ascertained that work. But other than that, we say that the 2001 amendments - - -

FRENCH CJ: You say they posited a test of actual access or assumed access rather than mere availability.

MR FRANKLIN: Yes. But other than that, we say that the 2001 amendments have no impact on the arguments. The first special leave point, your Honour, is the one that I have just raised and that is the fact that it is necessary under 18(1)(b)(ii) to have regard to the prior art base to determine the step which is to be inventive or obvious, and it is impossible to ascertain the inventiveness or obviousness of that step when compared with the prior art base unless you know what that step is. Then, when you know what that step is, the skilled addressee is able to determine its inventiveness or obviousness in the light of, meaning with the benefit afforded by knowledge of common general knowledge which, as I have said, is not the prior art base.

That in a nub is the first special leave point. The second special leave point I have already dealt with briefly and it is set out in the summary. I do not need to deal - - -

FRENCH CJ: You want a modern approach to construction.

MR FRANKLIN: Yes.

HAYNE J: Which decisions of this Court would, therefore, have to be discarded, modified or overruled?

MR FRANKLIN: The point that we here take, your Honour, is that all of the decisions in this Court on claim construction have dealt with the old rules of construction, what Lord Hoffman in a different context in West Bromwich referred to as the “intellectual baggage”, which has been discarded in the modern approach to construction. Those are the EMI rules which come from EMI v Lissen, Lord Russell’s judgment, Lord Russell’s speech where he said that in construing a claim one does not look at the specification unless there is ambiguity or lack of clarity in the claim.

FRENCH CJ: I think Justice Hayne was asking you to direct yourself to what previous decisions of this Court would require re-examination.

MR FRANKLIN: Yes. The decisions in this Court that deal with the relevant issues of claim construction are, firstly, the application of the old EMI rules in Welch Perrin, in Interlego and in Kimberly-Clark. Those are probably the three most important decisions where the Court has approached the matter on the basis of the old EMI rules.

HAYNE J: And is it a necessary step in the argument you would advance in this Court to overrule those cases?

MR FRANKLIN: It is a necessary step in the argument that I advance in this Court to say that the modern approach to construction has discarded or should discard those EMI rules.

FRENCH CJ: The answer to Justice Hayne’s question is?

MR FRANKLIN: The answer is, yes. As far as the second question is concerned, pith and marrow, the important decisions there are, of course,
CIG, which was probably the foundation of pith and marrow in this country, and other important decisions are Galliers & Klaerr and Olin Corporation.

HAYNE J: Do you address any argument to us at all about the engagement of considerations of the kind described in John? Because I should say to you quite bluntly, Mr Franklin, I do not understand your submission thus far to have grappled with John and, absent that, why should we reconsider earlier decisions?

MR FRANKLIN: Well, your Honour, the necessity to reconsider earlier decisions has arisen because in a large number of cases, both in the Federal Court and in the Full Court of the Federal Court, Catnic has been considered, but it has not yet been considered by this Court, and Catnic has the effect of discarding the old rules and replacing it with purpose of construction as defined by Lord Hoffman. Those are my submissions.

FRENCH CJ: Thank you. Mr Logan, we will not need to call on you.

Having regard to this Court’s recent and unanimous decision in Lockwood Security Products Pty Ltd v Doric Products Limited (No 2) [2007] HCA 21; (2007) 81 ALJR 1070 and other decisions to which counsel for the applicant referred indicating that the Court would, if special leave were granted, have to consider overruling those decisions, an appeal to this Court would enjoy insufficient prospects of success to warrant the grant of special leave to appeal. The applicant has not shown how the criteria for reconsideration of the earlier decisions referred to, set out in John v Commissioner of Taxation [1989] HCA 5; (1989) 166 CLR 417, especially at 438 and 439, are engaged.

Special leave to appeal is refused with costs.

The Court will now adjourn to reconstitute for the next matter.

AT 10.13 AM THE MATTER WAS CONCLUDED