FEDERAL COURT OF AUSTRALIA Atlantis Corporation Pty Ltd v Schindler (No 3) [2000] FCA 1758 PATENTS – jurisdiction of appellate court to direct amendment of patent under subs 105(1) of Patents Act 1990 (Cth) – appellate court had previously made orders disposing of appeal, but reserving liberty to apply – whether proceeding satisfied description of a pending proceeding for infringement or for revocation of the patent or in which the validity of the patent "is" in question for purposes of definition of "relevant proceedings" in Schedule 1 to Patents Act 1990 (Cth) PATENTS – priority date of claim – whether claim fairly based on matter disclosed in provisional specification – claim more limited than anything disclosed in provisional specification – mandatory integer in claim inconsistent with one of the embodiments in provisional specification – held claim not fairly based on matter disclosed in provisional specification Patents Act 1990 (Cth) ss 105(1), 112, Schedule 1 ("relevant proceedings") Coopers Animal Health Australia Ltd v Western Stock Distributors Pty Ltd (1987) 15 FCR 382 (FC) referred to ATLANTIS CORPORATION PTY LIMITED & ANOR v PETER SCHINDLER & ORS NG 284 of 1997 WILCOX, LINDGREN JJ 6 DECEMBER 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 284 OF 1997 ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF NEW SOUTH WALES BETWEEN: ATLANTIS CORPORATION PTY LIMITED (ACN 003 233 681) FIRST APPELLANT HUMBERTO URRIOLA SECOND APPELLANT AND: PETER SCHINDLER FIRST RESPONDENT INNOVATECH (AUSTRALIA) PTY LIMITED (ACN 002 287 023) SECOND RESPONDENT DESINAN SERVICES PTY LIMITED (ACN 057 580 793) THIRD RESPONDENT LUCY MARY SCHINDLER FOURTH RESPONDENT BRUNO DESINAN FIFTH RESPONDENT PETER SCHINDLER CROSS APPELLANT ATLANTIS CORPORATION PTY LIMITED (ACN 003 233 681) FIRST CROSS RESPONDENT HUMBERTO URRIOLA SECOND CROSS RESPONDENT JUDGE: WILCOX, LINDGREN JJ DATE OF ORDER: 6 DECEMBER 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appellants' motion brought by notice of motion filed on 4 November 1998 be dismissed. 2. The appellants pay the respondents' costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 284 OF 1997 ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF NEW SOUTH WALES BETWEEN: ATLANTIS CORPORATION PTY LIMITED (ACN 003 233 681) FIRST APPELLANT HUMBERTO URRIOLA SECOND APPELLANT AND: PETER SCHINDLER FIRST RESPONDENT INNOVATECH (AUSTRALIA) PTY LIMITED (ACN 002 287 023) SECOND RESPONDENT DESINAN SERVICES PTY LIMITED (ACN 057 580 793) THIRD RESPONDENT LUCY MARY SCHINDLER FOURTH RESPONDENT BRUNO DESINAN FIFTH RESPONDENT PETER SCHINDLER CROSS APPELLANT ATLANTIS CORPORATION PTY LIMITED (ACN 003 233 681) FIRST CROSS RESPONDENT HUMBERTO URRIOLA SECOND CROSS RESPONDENT JUDGE: WILCOX, LINDGREN JJ DATE: 6 DECEMBER 2000 PLACE: SYDNEY REASONS FOR JUDGMENT (No 3) THE COURT: 1 On 24 October 1997, a Full Court constituted by Lockhart J and ourselves made orders on the appeal and cross appeal in this proceeding, at the same time publishing reasons for the orders made: see Atlantis Corporation Pty Ltd v Schindler (1997) 39 IPR 29. 2 Lockhart J resigned his commission as a Judge of the Court on 4 June 1999. At that time there was pending a motion brought by notice of motion filed by the appellants on 4 November 1998. Subsection 14(3) of the Federal Court of Australia Act 1976 (Cth) (the "FCA Act") provides, inter alia, that where, after a Full Court has commenced a hearing or further hearing of a proceeding, and before the proceeding has been determined, one of the Judges constituting the Full Court resigns his or her office, the hearing and determination, or the determination, of the proceeding may be completed by a Full Court constituted by the remaining Judges, where two in number with the parties' consent. The expression "proceeding" is defined in s 4 of the FCA Act as follows: "Proceeding means a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal". The parties have consented to our hearing and determining the motion. 3 The notice of motion seeks an order that Australian letters patent 593085 be amended. The purpose of the motion is to overcome the grounds of invalidity of the patent identified by the Full Court. The present reasons for judgment should be read with the earlier ones. We will use the abbreviated forms of reference we used in our earlier joint judgment. 4 The patent was sealed on 17 May 1990 under the Patents Act 1952 (Cth) ("the 1952 Act") pursuant to an application that was accompanied by a provisional specification lodged on 9 April 1986. The complete specification was lodged on 27 March 1987. 5 In 1994 an action for infringement of the patent and a cross-claim asserting its invalidity were brought in the Supreme Court of New South Wales. That proceeding was disposed of in two stages by McLelland CJ in Eq: see Atlantis Corporation Pty Ltd v Schindler (1995) 33 IPR 91 and Atlantis Corporation Pty Ltd v Schindler (1997) AIPC 91-340. By its orders of 24 October 1997 the Full Court of this Court dismissed an appeal and allowed a cross-appeal from his Honour. For present purposes we need do no more than to note orders 6 to 9 made on that date, which were as follows: "6. Australian Patent No. 593085 be revoked. 7. The matter be remitted to the Supreme Court of New South Wales for the purpose of: (a) assessing whether any and, if so, what damages should be awarded to the respondents; (b) dealing with any notices of motion that are outstanding or require reconsideration in the light of the decision of this Court, in which respect, in particular, order 9 below applies. 8. The appellants pay the costs of the respondents of the proceedings at first instance and of the appeal and cross-appeal. 9. Liberty to apply be reserved." 6 On 31 October 1997 Atlantis-Urriola filed a notice of motion seeking an order staying order 6 (the order revoking the patent). On 7 November 1997 Wilcox J made the following order: "On the Appellants by their counsel giving an undertaking to abide by an order of the Court in respect of damages sustained by any of the Respondents as a result of this order I order that Order 6 made by the Full Court on 24 October 1997 be suspended pending further order of a Judge." 7 On 18 December 1997, Wilcox J noted undertakings and made orders as follows: "THE COURT NOTES THAT: 1. The Appellants undertake to pay to the Respondents such damages or loss whether legally claimable or not as a Judge may think just and fair as compensation to the Respondents for any disadvantage they may sustain by reason of these orders. 2. The Appellants undertake to the Court that during the period of the stay in Order 3: (a) they will not threaten or commence proceedings for infringement of Australian Patent No. 593085; (b) they will take steps to have the patent amended as set out in the affidavit of Humberto Urriola sworn 5 December 1997 with expedition. THE COURT ORDERS THAT: 3. The execution of Order 6 made by Lockhart, Wilcox and Lindgren JJ in the Federal Court of Australia in matter no NG 284 of 1997 on 24 October 1997 be stayed pending the determination of an application to amend the Patent or further order. 4. LIBERTY is reserved to apply to a judge of this Court for a revocation or amendment of the above order on 3 days notice. 5. The Appellants pay the Respondents costs of the notice of motion filed on 31 October 1997." 8 The undertaking noted in order 2(b) related to an application to the Commissioner of Patents for leave to amend, not the application subsequently made to the Court. In accordance with that undertaking, Atlantis-Urriola sought from the Commissioner leave to amend the patent pursuant to s 104 of the Patents Act 1990 (Cth) ("the Act" and "the 1990 Act"). That application has not yet been resolved. On 1 May 1998, the Patents Office wrote to the patent attorneys for Atlantis-Urriola advising that the Commissioner took the view that he was not able to grant leave to amend under s 104 because the patent remained the subject of a "relevant proceeding" and the procedure of amendment pursuant to court order under s 105 was available. 9 On 4 November 1998 Atlantis-Urriola filed the present notice of motion seeking an order that the patent be amended. Section 105 of the Act confers on the Court a power to direct amendment of a patent which Atlantis-Urriola seek to invoke. Subsection 105(1) is as follows: "In any relevant proceedings in relation to a patent, the court may, on the application of the patentee, by order direct the amendment of the patent, the patent request or the complete specification in the manner specified in the order." 10 The expression "relevant proceedings" is defined in Schedule 1 to the Act as follows: "relevant proceedings in relation to a patent, means court proceedings: (a) for infringement of the patent; or (b) for revocation of the patent; or (c) in which the validity of the patent, or of a claim, is in dispute". 11 Mr Schindler submits that the present proceeding is not within the expression "relevant proceedings", with the result that Atlantis-Urriola's motion is incompetent. Mr Schindler submits as follows: "(a) by virtue of the remitter order made by the Full Court on 24 October 1997, there are no "relevant proceedings" subsisting in the Federal Court which provide the foundation for an application under s.105; and (b) there are no "relevant proceedings" in the Supreme Court because there are no proceedings subsisting for infringement of the patent, for revocation of the patent, or in which the validity of the patent or a claim of the patent remain in dispute." 12 Atlantis-Urriola, on the other hand, submit that the reservation on 24 October 1997 of liberty to apply followed by the stay and liberty to apply of 18 December 1997 kept the present proceeding alive. 13 Amendment of the patent, whether pursuant to leave granted by the Commissioner or by order of the Court, would call for a setting aside of the revocation order (order 6) of 24 October 1997. 14 The orders of 24 October 1997 were made in conjunction with publication of the Full Court's reasons for judgment of that date. It appears, but we cannot be certain, that the purpose of the reservation of the liberty to apply was nothing more than the common one of facilitation of the implementation of the orders, including, in particular, in the present case, order 7(b). 15 Although we are not certain at this point of time, we think the "application to amend the Patent" referred to in order 3 of 18 December 1997 was probably a reference to a proposed request to the Commissioner under s 104 of the Act, rather than an application to the Court under s 105 of the Act. It was not long after 18 December 1997, in fact on 20 January 1998, that Atlantis-Urriola approached the Commissioner for leave to amend. 16 In our opinion, the Court lacks power to make the order sought by Atlantis-Urriola. It seems to us that, in order to be "relevant proceedings", for the purposes of subs 105(1) of the Act, a proceeding must satisfy one of the three limbs of the definition of that expression contained in Schedule 1 of the Act as at the time when the application for amendment is made. In the present case, that was 4 November 1998. Whatever the proper characterisation of the appellate proceeding may once have been, it was not, as at that date, one in which Atlantis-Urriola were alleging, or seeking relief in respect of, infringement of the patent, or in which Mr Schindler was seeking revocation of the patent, or in which the validity of the patent was in dispute. The only relevant patent had been determined to be invalid and had been ordered to be finally revoked, and the action for infringement of it had been dismissed. These were all final orders. They were made on 24 October 1997. Accordingly, as at 4 November 1998 there was not on foot in this Court a proceeding for infringement of that patent or for revocation of that patent or in which the validity of that patent or of any of its claims was in dispute. The reservation of liberty to apply does not detract from these propositions. 17 As we see the position, it is irrelevant that an order was made on 7 November 1997 suspending the operation of the revocation order. The fact that a suspension order was made does not derogate from the proposition that the proceeding for revocation had been finally determined two weeks earlier, on 24 October 1997. 18 The views we have expressed are supported by s 112 of the Act which provides: "A complete specification relating to a patent must not be amended, except under section 105, while relevant proceedings in relation to the patent are pending." (In the 1952 Act both the substantive provision and the nature of the proceeding that was required to be pending appeared in s 85, and both were, in substance, the same as in the 1990 Act.) Section 112 exposes a legislative policy: so long as a proceeding is "pending" for infringement or for revocation or in which the validity of the patent or of a claim is in dispute, leave to amend is to be a matter for the relevant prescribed court, whereas in other cases it is to be a matter for the Commissioner. The policy assumes that a prescribed court may be required to deal with issues of infringement, revocation or validity, as the case may be, in any event, and that it will therefore be more convenient and efficient for that court, rather than the Commissioner, to deal with an application for leave to amend. But in the present proceeding, after 24 October 1997 there was no basis upon which this Court would be called upon to deal with any question of infringement, revocation or validity, in conjunction with which it would be convenient and efficient for it to deal with the question of amendment. 19 For the above reasons, we think that s 105 of the Act does not empower this Court to direct amendment of the patent. Accordingly, Atlantis-Urriola's motion should be dismissed. 20 This conclusion makes it unnecessary for us to deal with the question whether it would have been appropriate to direct the making of the proposed amendments, but as the matter was extensively debated we make the following observations. 21 Section 102 of the 1990 Actprovides that an amendment of a complete specification is not allowable in the circumstances set out in the section. The debate on the hearing of the application for amendment did not, however, turn on this provision. The reason is that Atlantis-Urriola accepted that the amendment would be futile unless they could retain the priority date of 9 April 1986, being the date of lodgement of the provisional specification: subs 45(2) of the 1952 Act and reg 23.18 of the Patents Regulations under the 1990 Act. The reason is that between that date and 27 March 1987, the date of lodgement of the complete specification, Atlantis-Urriola published the invention with the result that it lacked novelty by the latter date. The question agitated, therefore, was whether the proposed amended claim 1 would be "fairly based on matter disclosed in the provisional specification". 22 Most of the debate on the hearing turned on two aspects of the proposed amended claim 1 which is as follows: "1. A rigid drainage cell adapted to be used in a sub-surface drainage systems [sic], said drainage cell comprising: First and second substantially parallel perforate planar members maintained in a fixed spaced relationship from each other by means of a plurality of spacer members; The spacer members being columnar in configuration and disposed substantially normally to the two planar members whereby all areas between the perforations are directly supported by the spacer members at a load bearing capacity suitable for sub-surface drainage; The perforations in the planar members comprising at least 40% of their surface area, and the perforations of each planar member being out of register with the perforations of the other planar member. The perforate nature of both surfaces and the disposition of the spacer members being such that gases or liquids may freely pass through the drainage cell around the spacer members in any direction." The submissions on the hearing related chiefly to the integers touching load-bearing capacity and perforations (holes) as a percentage of surface area, particularly the latter. 23 In the existing claim 1, load bearing capacity is dealt with as follows: "and all areas between perforations being adapted for load bearing at a loading of at least 20 kilograms per square metre." The proposed amended version would omit those words and "replace" them with: "the spacer members being columnar in configuration and disposed substantially normally to the two planar members whereby all areas between the perforations are directly supported by the spacer members at a load bearing capacity suitable for sub-surface drainage." The existing claim 1 does not indicate how the areas between perforations are to be "adapted" for load bearing, whereas the proposed amended version would do so by introducing the integer of columnar spacer members. But the Figures contained in both the provisional specification and the complete specification suggest some kind of columnar spacer members. While the existing version specifies a loading of "at least 20 kilograms per square metre", the proposed amended version would refer more generally to "a load bearing capacity suitable for sub-surface drainage". 24 There is no basis in the text of the provisional specification for a requirement that the non-perforate areas of the planar surfaces be able to bear a weight of at least 20 kilograms per square metre, although there is a basis for saying those areas must have "a load bearing capacity suitable for sub-surface drainage". Clearly, the structure would collapse if it could not bear the load imposed by the earth above it (of whatever depth it might be) and by any activity taking place on the surface of the ground. 25 Both the present claim 1 and the proposed amended claim 1 include the integer: "the perforations in the planar members comprising at least 40% of their surface area", while the proposed amended version continues: "and the perforations of each planar member being out of register with the perforations of the other planar member". 26 There is no reference to "at least 40%" in the provisional specification. Atlantis-Urriola rely on the Figures that form part of the provisional specification but we think the reliance is misplaced. The Figures relate to two embodiments. In one, the perforations (holes) account for only about 12 per cent of the total area of the planar surface areas, whereas in the other embodiment they account for about 50 per cent. These percentages do not provide a basis for saying that the provisional specification insists that the perforations account for not less than 40 per cent of the area of the planar surfaces. We return to this question below. 27 Atlantis-Urriola rely on expert affidavit evidence of Paul Robert Taylor and Christopher Joseph Rochfort. Mr Taylor is a patent attorney who has had considerable experience in practice as a patent attorney since the 1970s. His background is that of a chemical engineer. His affidavit is directed to establishing that an engineer of ordinary skill and knowledge, reading the provisional specification, would realise that the drainage cell would have to admit water and that the perforations would therefore have to account for a certain minimum percentage of the planar surface area. His evidence was also intended to prove that such an engineer would appreciate that the planar surface would have to support a minimum weight of soil, which might far exceed 20 kilograms per square metre according to the particular use being made of the drainage cell (use in a flower box can be contrasted with use below a surface over which vehicles, equipment and heavy machinery, such as tractors, pass). 28 Mr Rochfort is a horticulturalist who has practised as such for more than 20 years. He states that the proportion "at least 40% perforation of the planar surface area" seems to him to state the minimum required for the product to work effectively. 29 We are not persuaded to think that the actual "approximately 12 per cent" and "approximately 50 per cent" of the respective embodiments in the provisional specification or the nature of sub-surface drainage use suggest a mandatory "not less than 40%" integer. It is impossible to read into the provisional specification any requirement that the perforations must exceed even 12 per cent of the planar surface areas, since the holes in one of the two embodiments in fact occupy only 12 per cent of those areas. 30 We know from the provisional specification that water must be able to drain through the perforations in the upper planar surface and out through the perforations in the lower planar surface. But so far as the provisional specification reveals, it may be necessary that the perforations account for approximately 12 per cent to approximately 50 per cent of the surface area. While it may be possible to say that pin holes would not allow sufficient water to drain through and that holes that accounted for 99 per cent of the surface area ("chicken wire") would simply be too weak a structure from a load bearing viewpoint and would allow a filter membrane to sag too far into the interplanar area, it is simply not possible to find any suggestion that the perforations must occupy at least 40 per cent of the planar surface areas. 31 We do not think there is a general principle that a claim is "fairly based on matter disclosed in [a] provisional specification" if it is narrower than some other hypothetical claim that would be so fairly based; cf Coopers Animal Health Australia Ltd v Western Stock Distributors Pty Ltd (1987) 15 FCR 382 (FC). It is not inconsistent with this proposition that complete specifications commonly commence with a "consistory" claim expressed in wide terms followed by narrower dependent claims: cf Welch Perrin & Co Pty Ltd v Worrel (1961) 106 CLR 588 at 612, 617, 618; ICI Chemicals & Polymers Ltd v The Lubrizol Corporation Inc [2000] FCA 1349 (FC) at [99]. 32 We are required to apply the priority date test according to its terms. Doing so, we think that a drainage cell required to have at least 40 per cent of its planar surfaces occupied by perforations is not fairly disclosed by the provisional specification in this case. 33 This conclusion means that if we had had jurisdiction to entertain the motion, we would not have directed amendment of the patent as sought. We need not address other submissions that were made, including a submission by Mr Schindler that the proposed general formulation of the load-bearing capacity, even if fairly based on matter disclosed in the provisional specification, is deficient. 34 The motion will be dismissed with costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox and Lindgren. Associate: Dated: 6 December 2000 Counsel for the Appellants: Mr D K Catterns QC Solicitors for the Appellants: Banki Haddock Fiora Counsel for the Respondents: Mr J M Ireland QC Solicitor for the Respondents: Victor A Bizannes Date of Hearing: 25 October 2000 Date of Judgment: 6 December 2000