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Black & Decker Inc v GMCA Pty Ltd (No 3) [2008] FCA 932 (19 June 2008)

Last Updated: 20 June 2008

FEDERAL COURT OF AUSTRALIA

Black & Decker Inc v GMCA Pty Ltd (No 3) [2008] FCA 932

COSTS – applicant successful overall but not on all issues – whether appropriate to apportion costs on issue by issue basis – whether indemnity costs should be awarded on basis of conduct leading to loss of trial date and failure to admit facts






Federal Court of Australia Act 1976 (Cth) s 31A

Black & Decker Inc v GMCA Pty Ltd (No 2) [2008] FCA 504 referred to
Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225 cited
Cretazzo v Lombardi (1975) 13 SASR 4 cited
Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 referred to
Ragata Develpopments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court of Australia, Davies J, 5 March 1993) cited
Ungar v Sugg (1899) 9 RPC 113 cited
Welcome Real-Time SA v Catuity Inc (No 2) [2001] FCA 785 cited
















BLACK & DECKER INC and BLACK & DECKER (AUSTRALIA) PTY LTD v GMCA PTY LTD
VID 1262 OF 2005

HEEREY J
19 JUNE 2008
MELBOURNE

THE COURT DECLARES THAT:

1. The Respondent has infringed claims 1 and 3 to 8 (inclusive) of Australian Standard Patent No. 757412 ("the Standard Patent") by exploiting in Australia the multi-purpose power saw sold under the name "Tyrannosaw" with Model No. TRM50 ("the Tyrannosaw Mark I").

2. The Respondent has infringed claims 1 to 6 (inclusive) of the Standard Patent by exploiting in Australia the multi-purpose power saw sold under the name "Tyrannosaw" with Model No. TRM51 ("the Tyrannosaw Mark II").

3. The Respondent has infringed claims 1 to 5 (inclusive) of Australian Innovation Patent No. 2002100583 ("the Innovation Patent") by exploiting in Australia the Tyrannosaw Mark I.

4. The Respondent has infringed claims 1 to 5 (inclusive) of the Innovation Patent by exploiting in Australia the Tyrannosaw Mark II.

THE COURT CERTIFIES THAT:

5. For the purposes of s 19 of the Patents Act 1990 (Cth), the validity of claims 1 to 8 of the Standard Patent was questioned unsuccessfully in these proceedings.

6. For the purposes of s 19 of the Patents Act 1990 (Cth), the validity of claims 1 to 5 of the Standard Patent was questioned unsuccessfully in these proceedings.

THE COURT ORDERS THAT:

7. The Respondent whether by itself, its directors, officers, servants or agents or otherwise howsoever during the term of the Standard Patent is restrained from infringing claims 1 to 8 inclusive of the Standard Patent and in particular, from:

(a) importing, making, selling, supplying, or otherwise disposing of or offering to make, sell, supply or otherwise dispose of or using or keeping for the purpose of doing any of those things, the multi-purpose power saw sold under the name "Tyrannosaw" with Model No. TRM50 ("the Tyrannosaw Mark I");

(b) importing, making, selling, supplying, or otherwise disposing of or offering to make, sell, supply or otherwise dispose of or using or keeping for the purpose of doing any of those things, the multi-purpose power saw sold under the name "Tyrannosaw" with Model No. TRM51 ("the Tyrannosaw Mark II");

(c) authorising any person to do any act which would be a breach of the injunction referred to 7(a) and (b) above.

8. The Respondent is to deliver up on oath to the Applicants or their nominated agent or destroy under the supervision of the Applicants or their nominated agent all power tools, power saws, apparatus or other products or things in the possession, custody or control of the Respondent, the importation, sale, supply or use of which would be a breach of any of the foregoing injunctions, by 27 June 2008.

9. The Cross-Claim be dismissed.

10. The Respondent pay the Applicants’ costs of the Claim and the Cross-Claim, including reserved costs, such costs to be taxed as between party and party, save that there be taxed on an indemnity basis the costs wasted or duplicated by reason of:

(a) the Respondent’s fourth (19 December 2006) and fifth (18 April 2007) particulars of invalidity, and

(b) the adjournment of the trial date of 10 April 2007.

THE COURT DIRECTS THAT:

11. On or before 23 June 2008 the Respondent file and serve an affidavit setting out:

(a) the number of units of the Tyrannosaw Mark I sold by the Respondent, or for which purchase orders have been placed with the Respondent;

(b) the number of units of the Tyrannosaw Mark II sold by the Respondent, or for which purchase orders have been placed with the Respondent;

(c) names and addresses of the customers to whom the sales or prospective sales referred to in sub-paragraphs (a) and (b) above were made;

(d) the sums received or receivable in respect of the sales or prospective sales referred to in sub-paragraphs (a) and (b) above; and

(e) an approximate estimate of the costs and profits derived or to be derived from the sales or prospective sales referred to in sub-paragraphs (a) and (b) above, and particulars as to how that estimate was made.

12. Reserve to the Applicants liberty to apply for limited discovery to assist in the making of the Applicants’ election as to whether they wish to recover damages or an account of profits.

13. The Applicants file and serve a written notice of their election as to a claim for damages or an account of profits in respect of all infringements of the Standard Patent and the Innovation Patent by the Respondent, by 4 July 2008.

14. The matter be listed for further directions on 14 July 2008 at 9.00am.

15. Liberty to apply.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1 Judgment on liability was handed down on 18 April 2008: Black & Decker Inc v GMCA Pty Ltd (No 2) [2008] FCA 504. Subsequently I heard argument as to some aspects of the relief sought.

Declarations, certificates and injunctions

2 The applicants (collectively B & D) seek, inter alia, the following orders:

(a) importing, making, selling, supplying, or otherwise disposing of or offering to make, sell, supply or otherwise dispose of or using or keeping for the purpose of doing any of those things,, the multi-purpose power saw sold under the name "Tyrannosaw" with Model No. TRM 50 ("the Tyrannosaw Mark I");

(b) importing, making, selling, supplying, or otherwise disposing of or offering to make, sell, supply or otherwise dispose of or using or keeping for the purpose of doing any of those things, the multi-purpose power saw sold under the name "Tyrannosaw" with Model No. TRM 51 ("the Tyrannosaw Mark II");

(c) authorising any person to do any act which would be a breach of the injunction referred to 7(a) and (b) above.

3 Senior counsel for GMCA argued that the findings of the Court in relation to the Standard Patent concerned only claim 6, which dealt specifically with a power tool used as a panel saw and a jigsaw (see the full text of the claims of the Standard Patent at [16] of the substantive judgment).

4 The declarations and certificates sought are appropriate. B & D’s application from the outset sought declarations that GMCA’s two products, referred to in the judgment as T1 and T2, infringed, in the case of T1, claims 1 and 3 to 8 of the Standard Patent and, in the case of T2, claims 1 to 6. The cross-claim sought declarations of invalidity of those claims. Thus the validity of all claims was in issue. Likewise the respondent sought revocation on alleged grounds of invalidity, which referred to all claims. Debate particularly centred on the term "vector" which appears in claim 1 and is carried forward into all the subsequent claims. The declarations and certificates sought are appropriate.

5 It is proper to have an injunction not only referring to particular products found to have infringed, but also in respect of any other infringing products which the infringer might produce or sell: see Welcome Real-Time SA v Catuity Inc (No 2) [2001] FCA 785.

Costs in relation to design infringement issues

6 I held that B & D’s design was valid but not infringed. Thus each side had some success in relating to design issues. GMCA says that it should recover its costs on those issues or at least on the infringement issue. B & D says there should be no reduction of a general order as to costs in relation to design issues or at worst there should be no order as to costs.

7 As a general rule a court should be reluctant to undertake an enquiry as to who was successful on particular issues for the purpose of determining whether there should be an apportionment of costs against the successful party: see Dr Martens v Figgins Holdings (No 2) [2000] FCA 602 at [54] where Goldberg J said:

See also Cretazzo v Lombardi (1975) 13 SASR 4 at 16.

8 In the present case B & D did not fail on all issues relating to the design. The design infringement issue did not take up a major part of the design case, still less of the total hearing. From a commercial aspect it was understandable that B & D should pursue design infringement as well as the Standard and Innovation Patent infringements as they were all bound up with the one product. Also, the design infringement issue, turning as it did essentially on visual inspection, did not become the subject of very detailed expert evidence, although there was some. There was no witness whose evidence was confined to design infringement, the one issue on which GMCA succeeded.

9 All in all I think it is reasonable not to make any reduction of the general award in favour of B & D.

Indemnity costs

10 B & D submits that it should receive at an indemnity level an award of costs thrown away in relation to:

• repeated changes in GMCA’s case;

• loss of the trial date in April 2007; and

• failure to respond reasonably to notices to admit.

11 These issues need to be seen in the context of the tortuous history of this case. That progress, or lack thereof, brings to mind the statement of Lord Esher MR in Ungar v Sugg (1899) 9 RPC 113 at 117 recently cited by Jacob LJ in Nichia Corporation v Argos Ltd [2007] EWCA Civ 741 at [1]:

12 Jacob LJ, England’s pre-eminent patent judge, continued:

13 Those observations apply equally to patent litigation in this country. Some additional points can be made. In most commercial litigation the relevant events, the creation of documents, the conversations, the payment or non-payment of money etc, have already occurred by the time the litigation commences. With patent litigation, however, much of the critical evidence is from experts and only comes into existence after the proceedings have been launched and those experts have been located and retained and have prepared their evidence. All this takes time, and since both sides face the same kind of problems there is a natural tendency for mutual accommodation: "We understand you need an extra three months to get Professor X’s evidence, just give us an extra three months after that to get Dr Y’s".

14 Patent law by its nature throws up multiple issues; construction, novelty, obviousness, fair basing, infringement etc. Lawyers have a natural inclination to raise every conceivable issue at the start on the not entirely unreasonable basis that it is usually easier to drop a claim or defence than to add one. The merits of a party’s case on any particular issue are unlikely to be at risk of summary judgment or strikeout. In 2005 the Federal Court of Australia Act 1976 (Cth) was amended by the insertion of s 31A which makes the standard for summary judgment the "reasonable prospect of successfully" defending or prosecuting the proceeding. The provision, by subs (3), explicitly rejects the old standard, by which it had to be shown that a claim or defence was "hopeless" or "bound to fail": see General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125. It remains to be seen what real change s 31A will bring about in Australian legal culture, but patent litigation is unlikely to be at the forefront.

15 Another factor is a rather indulgent attitude often taken towards amendment and adjournment applications, in reliance on Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146. However, there is a limit, as was demonstrated in the present case when Finkelstein J refused GMCA a further adjournment of the trial date. I refused leave to appeal from this decision and an application by GMCA for special leave to appeal to the High Court was dismissed: GMCA Pty Ltd v Black & Decker Inc  [2007] HCATrans 662. 

16 Undue prolongation and expense of patent litigation can be particularly damaging in Australia where the relatively small size of markets, in comparison with those in the United States and Europe, make it all the more difficult for firms to recover costs.

17 To minimise cost and delay it is critical that practitioners take a realistic and common sense approach, confine the contest to factual and legal issues that are truly arguable and agree as much as possible on what should not be in dispute. For its part, the Federal Court, under the leadership of Bennett J in Sydney and Middleton J in Melbourne, has recently introduced, on a trial basis, procedures whereby patent cases, upon commencement, are brought before the judge in charge of the Patents Panel for a thorough analysis of the issues. The case is then passed on to the Panel docket judge for further management and trial. An outline of the procedures appears as a schedule to this judgement.

18 The procedures just mentioned were not in operation for use in the present case. Still, the co-operation and common sense approaches usually adopted should have been taken. Regrettably, on the part of GMCA, they were not.

Changes in GMCA’s case

19 B & D commenced this proceeding on 13 October 2005. On 7 February 2006 GMCA filed and served its first particulars of invalidity containing 21 alleged anticipations, 18 of which were patents.

20 On 22 May 2006 GMCA filed its second particulars of invalidity. These raised one further anticipation (a patent) in relation to the patents in suit and four in relation to the design and also 22 particulars in respect of which it was said the Standard Patent lacked clarity.

21 On 14 August 2006 GMCA filed its third particulars of invalidity. These made some minor corrections to the alleged anticipations.

22 On 18 August 2006 Finkelstein J set the matter down for trial with an estimate of five days commencing 10 April 2007 and gave directions as to the filing of evidence.

23 On 16 November 2006 GMCA’s solicitors wrote to B & D’s solicitors requesting an extra month in which to file its evidence in chief on invalidity. It appeared from that letter that

(a) GMCA had only appointed its experts on 23 October and 3 November 2006 (that is, over a year since the proceeding commenced);

(b) one of those experts was currently overseas making it difficult to finalise his affidavit;

(c) prior art searches were still being conducted in review;

(d) GMCA was having difficulty locating prior art and was still attempting to locate additional witnesses; and

(d) GMCA’s patent attorney was taken ill on 11 November.

24 On 27 November 2006 Finkelstein J extended the time for filing of evidence (evidence in chief by both parties 15 December 2006, GMCA answering evidence 16 February 2007, B & D answering evidence 2 March 2007) and directed that no evidence could be filed thereafter.

25 On 15 December 2006 GMCA filed its evidence.

26 On 19 December 2006 GMCA filed its fourth particulars of invalidity. These added 11 further anticipations in relation to the patents in suit and eight in relation to the design.

27 On 20 March 2007 GMCA was granted leave by Finkelstein J to amend its particulars of invalidity and file further evidence in relation to new prior art. As a consequence, on 11 April 2007 his Honour made orders vacating the trial date and fixing a new trial date of 19 November 2007. His Honour gave directions as to the further filing of evidence.

28 On 18 April 2007 GMCA filed its fifth particulars of invalidity. These deleted 25 pieces of prior art that had previously been cited against the patents and introduced 11 new pieces. The particulars also deleted six pieces of prior art that had previously been cited against the design and introduced one new piece of prior art.

29 Since the adjournment of the trial a further four affidavits were filed on behalf of GMCA in May 2007. A further five affidavits were filed on behalf of B & D in July 2007 and a further five affidavits on behalf of GMCA between August and October 2007.

30 On 5 October GMCA sought a further postponement of the trial date. As already mentioned, this application was rejected by Finkelstein J, who gave reasons on 26 October. His Honour said at [6] that GMCA’s non compliance was "not excusable". His Honour continued:

31 His Honour noted that a consequence was the trial had to be vacated. It was refixed to commence on 19 November and a new timetable was set in place. His Honour noted:

32 His Honour then went on to note how the affidavits referred to, and produced, new prior art. His Honour refused leave to rely on any additional material.

33 In the event, by the time of its closing submissions at trial GMCA relied on only seven pieces of prior art, two of which had not been pleaded. This is to be contrasted with the pleading at various stages of no less than 45 pieces of prior art.

34 B & D was put to significant wasted expense dealing with alleged anticipations which ultimately were not relied on by GMCA. Many of these took the form of patents, which required careful analysis by B & D’s experts and lawyers.

35 Some latitude needs to be allowed for the changing of a party’s case as investigations reveal possible new arguments. But a line has to be drawn somewhere. Otherwise cases would never get to trial. When, as often happens today, and did so in the present case, there is no interlocutory injunction in place, an ultimately successful patentee may suffer loss which is difficult or impossible to quantify. In the present case B & D claims that costs wasted or duplicated by reason of GMCA’s fourth (19 December 2006) and fifth (18 April 2007) particulars of invalidity should be ordered on an indemnity basis. I agree. One of the established categories for which indemnity costs may be ordered is where a party has conducted its case so as to

Ragata Develpopments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court of Australia, Davies J, 5 March 1993) at 5, cited with approval in Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225 at 233.

Loss of trial date in April 2007

36 The substantial reason for this was GMCA’s application on 20 March 2007 to add ten new pieces of prior art and vacate the trial date.

37 Much of B & D’s work and evidence up to that time was wasted and B & D was forced to prepare for a trial seven months later. As Finkelstein J noted in the passage already quoted, the case was "a particularly bad one as regards delay". I reject GMCA’s argument that B & D was somehow equally to blame because it was a day late in serving exhibits to some of its affidavits.

38 B & D should receive costs on an indemnity basis for costs wasted or duplicated by reason of this adjournment of the trial date.

Notice to admit facts

39 On 12 October 2006, that is almost a year after the commencement of proceedings and about six months before the scheduled trial date, B & D’s solicitors served a notice to admit facts on GMCA. By this stage the parties had completed discovery but had not filed any evidence.

40 The notice to admit covered issues including:

• Incorporation of the B & D companies;

• Sale of GMCA’s allegedly infringing products (including trap purchases);

• Whether those products possessed any of the integers of the patents in suit.

41 Most of such facts, which arise in a case concerning relatively simple mechanical products sold at retail level, should have presented little real difficulty for admissions.

42 The only matter GMCA was prepared to admit was that the B & D companies were incorporated, and then only subject to the production of certificates of incorporation. Despite requests by B & D’s solicitors that GMCA reconsider its position, no further admissions were forthcoming.

43 On 15 December 2006 B & D filed further affidavits dealing with various matters the subject of the notice to admit. On the same day GMCA filed an affidavit by its principal expert, Dr Stark, in which he concluded that many of the integers of the claims of the patents were present in GMCA’s products and all of the integers of claims 1 to 5 of the Innovation Patent were present in the T1 product.

44 On 31 July 2007 B & D filed a second notice to admit repeating the facts set out in the first notice. Further correspondence ensued, but no admissions were made by GMCA. B & D’s solicitors wrote on 27 September noting that the matters not admitted included:

45 Much of this had already been affirmed as correct by Dr Stark in his affidavit the preceding December. Nevertheless, no admissions were forthcoming.

46 I must say that the attitude of GMCA and its solicitors to the admission of facts is, of all the conduct in this case which is open to criticism, the most disturbing. It reveals an obstructionist view which should have been long abandoned in commercial litigation in this country, a deliberate unwillingness to get to the real issues in dispute. However, paradoxically, it does not seem really practicable to make an indemnity costs order in respect of this particular aspect. As senior counsel for B & D frankly accepted, insofar as admissions were sought in relation to integers which contained contentious features, it was proper to resist them. In light of the way the trial was conducted and the evidence that was called, it is hard to see how the taxing officer could be expected to identify any extra costs which were incurred by reason of unreasonable failures to admit. B & D were not able to suggest a practical answer to this problem. For that reason only, there will be no special order for costs in that respect.

Orders

47 There will be orders and declarations accordingly.

Associate:

Dated: 19 June 2008

SCHEDULE
INFORMATION CIRCULAR TO PRACTITIONERS
IN RELATION TO
PATENT PROCEDURES
IN THE FEDERAL COURT OF AUSTRALIA
________________________________________________________________________

After consultation with practitioners, the Court proposes to implement on a trial basis certain procedures in relation to patent proceedings.

The aim of the procedures is to accelerate the identification of issues and generally to improve the facilitation of the trial process.

Upon filing in the District Registry, there will continue to be the random allocation of patent cases to individual judges assigned to the Patent panel.

In New South Wales and Victoria, new proceedings will be listed before a nominated Patents List Judge. Subsequent directions may be before the docket judge or Patents List Judge depending upon the nature of the procedural dispute.

These procedures are deliberately not over prescriptive, with an emphasis on flexibility of application to each proceeding.

However, by setting out what is expected of practitioners and litigants, the Court anticipates that, to the extent practicable, it will be informed of the matters required for giving the appropriate directions at the earliest possible stage in the proceedings.

The following are the general procedures which practitioners can expect will be adopted:

• On the first return, the parties should be in a position to explain the issues in the proceedings, including whether infringement is disputed.

• After the filing of particulars of invalidity the party seeking revocation must explain how each ground of invalidity can be supported. The particulars of invalidity should include details of the passages of any prior publication relied upon for novelty purposes.

• Before any directions are made for the filing of evidence, the court will enquire whether any expert evidence will be required, whether a single expert is appropriate for all or any part of the evidence, whether any of the evidence can be given orally or by reference to standard texts, or in a combination of summary outline and oral evidence, whether a primer is appropriate, and as to the appropriate method of evidence (such as evidence of experts and prior meetings of experts to explain or narrow the issues in dispute).

• Before discovery is ordered, the parties must confer to discuss the issues to be addressed by discovery and the nature of the documents sought, and whether evidence should precede discovery.

• Unless there has been satisfactory narrowing of issues and resolution of procedural issues, the parties will be referred to a procedural mediation.

• If appropriate, a case management conference will be arranged to resolve issues concerning discovery and any interlocutory steps.

• Any special matters should be raised at the earliest possible occasion including, for instance, any intended application for amendment to the patent.

It is anticipated that at a time nominated by the Patents List Judge or the docket Judge, the parties shall reduce to writing as relevant:

• Amended pleadings containing only the matters in dispute

• Issues in dispute with respect to each ground of claimed invalidity

• Statement of non-controversial matters, such as publication dates and priority dates

• Α[nu][psi] [omicron][upsilon][tau][sigma][tau]α[nu]δ[iota][nu][gamma] [pi][rho][epsilon]−[tau][rho][iota]α[lambda] μα[tau][tau][epsilon][rho][sigma]

• Action items for each party

• The issue/s likely to be addressed by each [named] witness/expert

• The mechanism of the giving of evidence by each witness

• Any other case management issues, including likely interlocutory disputes

• Any outstanding pre-trial matters

• Matters likely to attract cost orders

• The next appearance date

• The likely hearing time