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Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd & Anor [ 2006] HCATrans 129  (10 March 2006)

Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd & Anor [ 2006] HCATrans 129  (10 March 2006)

Last Updated: 23 March 2006

 [2006] HCATrans 129 

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney Nos S597 and S598 of 2005

B e t w e e n -

FRESENIUS MEDICAL CARE AUSTRALIA PTY LTD

Applicant

and

GAMBRO PTY LTD

First Respondent

GAMBRO LUNDIA AB

Second Respondent

Applications for special leave to appeal

GLEESON CJ
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 MARCH 2006, AT 10.15 AM

Copyright in the High Court of Australia

MR A.C. ARCHIBALD, QC: May it please the Court, in each of those matters I appear with my learned friends, MR S.C.G. BURLEY and MS C.L. COCHRANE, for the applicant. (instructed by Allens Arthur Robinson)

MR D.K. CATTERNS, QC: May it please the Court, I appear with my learned friend, MS K.J. HOWARD, for the respondents in each matter. (instructed by Blake Dawson Waldron)

GLEESON CJ: Yes, Mr Archibald.

MR ARCHIBALD: Your Honours, on the question of inventive step, in our contention the reasoning and analysis of the court in paragraph 159 is irreconcilable with the requirements of the Act, that is the 1952 Act, as to inventive step which was the applicable legislation, but the identical principle attends section 18 of the 1990 Act. What the court held in that paragraph was that an inventive step resided in the concept of continuous on-line production and that was a feature which was held not to be a claimed integer of any of the claims of the patent in suit, which is to say that in a combination claim, there being a pool of candidate integers to be selected, that feature was not selected as an integer of the claims and was therefore rejected or, as is often said, was disclaimed.

One can see clearly the finding that it was not a feature of the system of the claims from the finding of the court at line 52 on page 268 in paragraph 167. There the court said that the:

system capable of providing continuous on-line production . . . feature of the system is not an integer of any claim of the patent.

So that one has, in our submission, the entirely anomalous conclusion of the court that the inventiveness of the invention claimed in claim 2 was sustained by a feature that was disclaimed, was not a feature claimed and was in fact disclaimed. Such an approach, in our - - -

HAYNE J: Just before you go from that, what is the significance of the sentence commencing last on 266 and spilling over to 267? What is meant by that?

MR ARCHIBALD: Well, it seems to be the same point. Understanding it against the finding at line 52 on 268, it seems to be referring to the notion that Gambro argued, ie, claimed in argument, that the inventive step resided in on-line production of the B concentrate and that the primary judge accepted that contention and that seems to be so, but, of course, the vice in the primary judge’s approach which permeated his Honour’s findings as to infringement and also as to novelty and obviousness was his Honour’s conclusion that the on-line continuous production feature was in fact an integer of the claims.

The Full Court corrected that error on infringement, but failed to correct it in relation to novelty and obviousness so that what the Full Court says in 159 seems to be reflecting the notion that, notwithstanding the circumstance that the feature is not the subject of a claim, it may nevertheless constitute the inventive step which supports the invention of the patent in suit. Such an approach reads out entirely from the Act the requirement that the invention involve an inventive step so far as is claimed by the invention. One is tied to the claims. What the Full Court has done is go beyond the claims, take a feature that is not the subject of the claims, and find inventiveness in that feature.

Putting it shortly, what the court has done is to support inventiveness of what is claimed exclusively by reference to a feature that was disclaimed and that is not consonant with principle and it is in defiance, in our submission, of the words of the statute which tie inventive step to what is claimed. It will commonly be the case that the body of the specification will travel wider than the claims of the invention as claimed, for various reasons. Here one reason is that the claims were amended down to cope with likely problems were they not amended down. The court has found the on-line production concept in the body of the specification. The court has found that it is not within the claims, yet the court concluded that that feature sustained the inventive step.

The court seems to have proceeded upon the footing that the language of the section, the invention involved, bestowed some licence on the court to travel beyond the claims and to find the inventive step elsewhere. We submit that that is wrong and it necessarily reads out from the statute the vital words, de-emphasised in line 2 of paragraph 159, by the court “so far as claimed in the claims”.

HAYNE J: What is the significance, if any, to be attached to what appears between paragraphs 160 and 166 concerning the use of percolation?

MR ARCHIBALD: Those paragraphs compound the errors that the court otherwise, in our contention, committed. First, the introductory words of paragraph 160 seem to be treating considerations of obviousness in some way that differs from considerations of inventive step. They move from 159 inventive step to 160 obviousness. That is the subject of our second special leave question for we say that the two are antitheses. The court here seems to be treating them as containing some different elements. But in any event, the considerations which the court expounds in those paragraphs ultimately yield the decisive conclusion in paragraph 167 which is founded upon continuous on-line production.

GLEESON CJ: What do you say about paragraph 155?

MR ARCHIBALD: The recitation of the test is accurate.

GLEESON CJ: It is said:

It is not said that his Honour applied the incorrect test or made an error of law.

MR ARCHIBALD: Insofar as the formulation of the test is concerned the narrative of the section, what we bitterly complained about, if I may put it somewhere pejoratively, was his Honour’s conclusion that the inventive step resided in the continuous on-line production feature. That was the theme of the appeal before the Full Court on all three issues, infringement, novelty and inventive step. The problem was that the accounting of the bare principle, both by the primary judge and by the Full Court, is unexceptional, but it is the implementation, the supposed implementation of the principle that it exposes these fundamental errors.

So on the point of involved, as we have submitted, the court seems to be proceeding in paragraph 159 on the footing that one is relieved of the constraints that are imposed in the sphere of infringement when one comes to obviousness. One can move beyond the claim. That, of course, is central to every objection to validity ground on inventive step, both under the old Act and the new Act. It seems to be bereft of any consideration or examination either in this Court or other courts. It is a matter of high importance that the point will spread like wildfire, in our submission, through the - - -

HAYNE J: It is better than floodgates, is it not, Mr Archibald?

MR ARCHIBALD: Maybe, but the progress might be more rapid, even if it is finally stemmed at some points. So it of significant importance and, in our submission, it commands attention of this Court, what it involved in the notion of the inventive step being involved. We say it means something akin to contain or enfold within the claims. The Full Court has proceeded on a different basis. The matter is further compounded because the on-line production feature is essentially a method integer. It deals with the method of preparing. One prepares continuously. The claims in suit were exclusively product claims and what was disclaimed was the method integer. The court observed that expressly in its analysis at paragraph 135 at page 262, line 34:

We have rejected the importation into the claims of a continuous on-line production or method integer.

So when the court gets to obviousness, what it does is support the validity of an exclusively product claim by reference only to a method integer and, in our submission, that cannot be consonant with principle either. Accordingly, in our submission, there are fundamental errors of principle in the court’s approach to obviousness and the matter warrants the grant of special leave. As to novelty, the fundamental error does appear in the decisive paragraph 135 to which we have just drawn the Court’s attention, page 262.

GLEESON CJ: As to novelty, I note what was said in paragraph 125.

MR ARCHIBALD: Again, the statement of the principle is unexceptional. However, a fundamental contradiction appears at paragraph 135. The Meyers Taylor principle is the reverse infringement test so that one asks the question whether the prior publication contains all of the integers of the claims in suit and would therefore infringe. What the court said at paragraph 135 was, in the second sentence that I have read:

We have rejected the importation into the claims of a continuous on-line production or method integer.

Therefore, the claims of the patent in suit did not include that integer, continuous on-line production. It could not be a reason why the prior publication, Stasz, could not anticipate the claims of claim 2 by reason that it lacked as an integer the continuous on-line production feature. That was absent from the claims in suit. Its absence from the prior publication, Stasz, could not disqualify it as an anticipation. Yet, perversely, in our submission, the Full Court then said at line 37 on page 262:

Accordingly, as such an integer would be necessary for Stasz to anticipate, it does not do so.

The court is saying, unless Stasz contained the continuous on-line production integer, it could not anticipate, it does not contain that integer, therefore it does not anticipate. But that is in defiance, in our submission, of the notion which the Meyers Taylor Case commands. It is fundamentally contradictory of the principle. The court in paragraph 136 then seems to explain why it says that Stasz does not contain that integer. They say at line 44:

the second source of concentrate could only operate temporarily. Accordingly, the system as claimed in claim 2 . . . is not disclosed.

So that the feature of operating only temporarily, which was the feature the court ascribed to the Stasz prior publication, is seen by the court as the element which establishes that Stasz did not disclose continuous on-line production. It is really the intrusion into novelty of the very feature which at paragraph 167 the court confirmed was not an integer of claim 2. So again the court has travelled beyond the claims of the patent, beyond the integers of claim 2 and has found that the prior publication did not anticipate because it contained a feature which was not the continuous on-line production feature.

As for infringement, so for novelty - the Meyers Taylor rule bespeaks that of necessity. Therefore it must have been wrong for the Full Court to travel beyond the claims to find as a necessary ingredient of the required disclosure, continuous on-line production. The fact that Stasz operated temporarily only was not a reason for non-disclosure. Again, putting it in terms of method against product, the court found that because Stasz did not contain a method integer, it did not anticipate that which was purely a product claim. Again, in our contention, that is palpably erroneous. For those reasons, if the Court pleases, this is a case in which leave ought be granted.

GLEESON CJ: Yes, Mr Catterns.

MR CATTERNS: Your Honours, as his Honour the Chief Justice pointed out, the Full Court has recorded there was no dispute as to the legal principles underlying both obviousness and novelty and, we respectfully submit, no question of law arises. What our friend’s argument boils down to on both obviousness and novelty is an argument of construction about this so-called on-line integer which our friends in their written submission call a phantom integer. Our respectful submission is that the Full Court fully understood the difference as set out in paragraph 167 at page 268 because their Honours say:

the invention, so far as claimed, was defined by claims to a system for preparing a dialysis or replacement fluid . . . The claims to a system are claims to a combination of integers.

We all agree that is a product claim, a physical thing, not a method claim?

The integers combined in the manner claimed result, as his Honour correctly found, in a system [which is] capable of providing continuous on-line production of concentrate solution contemporaneously with production of dialysis fluid, albeit that this feature of the system is not an integer of any claim of the patent.

So their Honours clearly understand that continuous on-line production is not of itself an integer of the claims, but their Honours also clearly hold, and rightly, and I will take your Honours to the claim, we submit rightly, that all of those integers together result in a system which can do that. So their Honours – this is in the context of obviousness - their Honours were right to – in paragraph 158 their Honours set out the inventive step that we propounded and (a), (b) and (c) are elements of the idea that it would be good to produce the system on-line, but then the invention, which is the invention that is claimed, is a series of integers which combine to make something that is capable of doing that. Now, your Honours, our friends began with paragraph - - -

GLEESON CJ: Is it in the opening words of paragraph 166 that we see the point they addressed, which was whether the idea of “the dissolution of bicarbonate by percolation” was obvious?

MR CATTERNS: Yes, your Honour, that was our friend’s case and the court rejected that on two bases. First factually, because their Honours held that those witnesses did not come up to their evidence that it was common general knowledge to use percolation to produce a solution of constant concentration. In fact, they did not do that. But secondly, the witnesses went straight to using percolation which you would only do if you already have the idea. Their Honours stressed, as his Honour Justice Allsop did, that this is one of those inventions where the conception of the idea is X - 90-odd percent of the inventive step.

The Astra Case, which your Honours remember, has a discussion in paragraph 38 of what Sir Keith Aickin says in VR v Wellcome about “unfelt want” and so on, but there are many inventions where the conception of the idea is crucial, but of course you then have to express your idea in a claim and the question of obviousness and novelty are tested against the claim. Your Honours, the Court has twice recently expanded what is really a cliché in the area of the difference between inventive step, which is a statutory question, and the invention. Your Honours, section 18(1) is the ground and it says that an invention – and the ground is if you are not a patentable invention:

an invention is a patentable invention for the purpose of a standard patent if the invention, so far as claimed in any claim . . .

(ii) involves an inventive step -

Section 7(2) says it:

is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art in the light of the common general knowledge –

and that was discussed in full in Aktiebolaget Hässle v Alphapharm. So, your Honours, they are different concepts and that is the distinction their Honours are drawing in paragraph 159 on 266 when they say:

The inventive step is not necessarily coextensive with the invention as claimed. The requirement is that the invention –

which is the thing that is claimed –

involved an inventive step.

So their Honours fully understood the distinction which, with respect, our friends relied. Your Honours, may I go to the claim to make good our submission that the courts - paragraph 167 is completely correct. The claim is at page 33 at claim 2 and, your Honours, the idea is so that you can plumb these things on-line so that nurses do not have to make up 10 litre batches. A nice simple idea, but one that had not been come up with in literally decades when there was an inconvenient process. So it is clearly a system that is a physical thing and this is a system that is – there is no infringement until the whole thing is all plumbed up with each and every one of the integers, and that is also relevant to novelty.

It is a system for preparing the fluid by mixing a concentrate in powder form with water. We have never suggested that that is a method claim, but it has to be capable of doing that and it is well settled that those sort of limitations mean you have to have a system that is constructed in a way that can achieve that end. Your Honours, the crucial words appear on the next page 34 where the whole of the.....is set up. It is set up in such a way that it is capable of producing the fluid on-line, but on-line is not an integer, nobody said it was. We do not say it was. So we have the first fluid conducting means, so the first end communicates with the tank of water. It withdraws water from that source and the second end delivers a prepared fluid. So that is sort of the main line, and there is a drawing, your Honours, at figure 5 at page 54.

Then there is a second fluid means which communicates with a source of water. It is constructed so that it can introduce water into the vessel to thereby produce a first concentrate solution, and it has third fluid means. So we have got our water down into a vessel that contains the water in powder form. That is the idea or part of the idea. Then you have a third fluid means, communicating with the outlet. So you take the fluid of concentrated saturated solution down the bottom and then you conduct that into a mixing point where it mixes up with the first stream of water and then it goes on and indeed adds a second source of solution and fourth fluid conducting means and so on.

So it describes a physical thing called a system with various integers and, as the court said at 167, those integers together set up a system which is capable of providing on-line production which embodies the inventive idea even though the words “on-line production” are not part of the claim.

So, your Honours, we respectfully submit that that reflects no error and it shows that that construction which we submit is plainly right. Both of our friend’s points turn on the rightness of that construction. Your Honours, we respectfully submit that when our friends say that the court corrected an error by his Honour Justice Allsop, that is in their Honours’ paragraph 39 at page 241 where their Honours say:

Standing alone as the entirety of the considerations to be applied in the construction of the claims, that would be an error of principle -

namely, to look at the essence of the invention which is on-line production. But his Honour did not. Your Honours, that is clear, we submit, both on obviousness and on novelty. So, if your Honours would not mind returning to the court’s discussion of obviousness at paragraph 158, page 266, their Honours rightly – they set out the inventive step propounded. Then their Honours draw the distinction between the inventive step and the invention as claimed, which is the focus of attack and, I respectfully submit, that their Honours reasoning leading up to 167 is correct for the reasons we have put to the Court.

Your Honours, as to the question of percolation which the Court has raised with our friends, as I have submitted before, our friend’s case was based on percolation and the idea of percolation being obvious and, as I have submitted, the court held that that was wrong. His Honour Justice Allsop partly on the evidence held that that was not made good. Your Honours, so far as novelty goes, we would respectfully submit that no question of principle arises. There is no question such as our friend has propounded of purposive construction. Our friends do not propound a construction where you move from the literal words of the claim to something where it is present in substance or as a matter of purposive construction.

Your Honours, we accept that there is a slip in paragraph 135 that our friends took the Court to. That is at page 262. It seems clear to us that there is a slip. Their Honours reject:

the importation into the claims of a continuous on-line production or method integer.

We agree with that:

Accordingly, as such an integer would be necessary for Stasz -

That obviously does not follow the preceding sentence, your Honours. Their Honours probably mean something like such an integer would be necessary for Stasz to anticipate if it were required. But crucially, their Honours then go on, and his Honour Justice Allsop did in more detail, dealing with the Stasz anticipation integer by integer. Your Honours can see that they go on in 136 saying:

there was not sufficient disclosure of these integers.

His Honour Justice Allsop’s reasoning on the integers is in more detail, at paragraph 193, page 125 after noticing at 189 that there was no debate on the legal principles of novelty. That is at page 124. His Honour then looked at the Stasz patent and described it over the following pages, the short point being, your Honours, that at page 127 when we see one drawing of the Stasz document, that mode where different valves are open or closed, possesses the first and third fluid conducting means and associated integers, but not the second, whereas the one of the top of page 128 possesses the second fluid conducting means, but not the first and the third.

Then his Honour dealt in detail with the integers at pages 130 to 132 integer by integer and, in particular with respect to claim 2, not only was there never a system – that is what we mean by temporarily – there is never a moment when you can identify a system which possesses all of the first, second and third fluid conducting means and the relevant mixing points plus other elements. That system just does not exist. So far as claim 2 goes where we add yet another source of concentrate and a fourth fluid conducting means, his Honour held on the evidence that that was not disclosed. That is paragraph 219. That is a full answer standing alone to our learned friend’s novelty case because the expert, Professor Schindhelm, has to supply a whole set of integers himself from a brief description and his Honour held that that could not be done.

We respectfully submit that no question of public importance arises. Our learned friend’s prospects are low and, as has appeared in today’s argument, that the case turns solely on the question of the construction of the claim and neither his Honour Justice Allsop nor the Full Court erred in construing that the integers described a system which was capable of producing on-line production, but properly read, none of their Honours’ reasons, apart from the slip in paragraph 135 holds that on-line production
is part of the claim. So we would respectfully submit that special leave ought to be refused. May it please the Court.

GLEESON CJ: Mr Archibald.

MR ARCHIBALD: If the Court please. The capability point that my friend raises clearly exposes a crisp point of principle for determination. We have made the point that that feature was not claimed. We have made the point that it is a method claim. But it is vital, in light of my learned friend’s submission, to appreciate that the court held that whilst that was one feature of the way in which methods might be employed in connection with the product that was claimed, that method was not the only method that might be applied. The court expressly held at paragraph 71, page 249, line 29:

that continuous on-line preparation of B concentrate is [not] necessarily involved in the system of claim 2.

The court was looking at the infringement question, but held it was not involved for the purposes of infringement. Yet, we submit perversely, when they came to inventive step they say it is involved. At paragraph 73 at page 250, line 10 the court also held:

that the invention as claimed . . . does not require immediacy of use or use “on-line”.

The consequence of the submission our learned friend just made is, and my learned friend was quite candid about it, is to submit that there can be a gap between a disconformity between the inventive step on the one hand and the invention as claimed on the other. That, in our submission, is inconsistent with basic concepts and it is directly contrary to a decision of Justice Laddie, which we can provide to the Court and which we have mentioned to our friend. It is the decision of Justice Laddie in Brugger v Medic-Aid [1996] RPC 635. At page 656, line 22 discussing inventive step, his Lordship said:

It is not legitimate to define the inventive step as something narrower than the scope of the relevant claims.

My learned friend’s contention is to the contrary. There is no authority to which he referred in support of that contention. We submit that point is one which this Court should address in the course of consideration of the issues we have raised.

As to percolation, we say two things. First, the whole of the analysis of the primary judge and the whole of the analysis of the Full Court was
predicated upon the on-line continuous production feature being part of the subject matter to be considered. It was the non-temporary operation point. They were requiring continuity and it was in that framework that percolation was to be considered.

The further fundamental error in this regard is that while percolation was a feature of claim 4 of the patent in suit, top to bottom, percolate through top to bottom, while that was a feature of claim 4, the Full Court entirely overlooked, in our contention, that the percolation requirement of claim 4 was absent from claim 2. There is nothing in claim 2 which requires flow top to bottom which would allow percolation to occur. Claim 2 commences at page 33, continues to page 34. It lacks the top to bottom feature which claim 4 has. One can see the top to bottom feature of claim 4 at page 36, lines 10 to 12. So the whole of that consideration by the Court is, while germane to claim 4, not germane to claim 2 which is the claim now being agitated. If the Court pleases.

GLEESON CJ: We are of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave in this matter and the application is dismissed with costs.

We will adjourn for a short time to reconstitute.

AT 10.54 AM THE MATTERS WERE CONCLUDED