FEDERAL COURT OF AUSTRALIA Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282 PATENTS – order for revocation of a patent – order stayed pending an appeal – whether it should be a condition of the stay that the appealing party undertake to pay damages COSTS – applicant successful on some issues but not successful on others – apportionment of costs – discretion to award costs – costs of preparing evidence not used in the proceedings Atlantis Corporation Pty Ltd v Peter Schindler (unreported, 27 May 1997) considered Amalgamated Carburetters Ltd v Bowden Wire Ltd (1931) 48 RPC 105 distinguished Cincinatti Grinders Inc v BSA Tools Ltd (1931) 48 RPC 33 distinguished Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168 distinguished Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 applied Australian Trade Commission v Disktravel [2000] FCA 62 referred to Cretazzo v Lombardi (1975) 13 SASR 4 applied Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Ltd [2001] FCA 1624 applied Raychem Corp's Patents [1998] RPC 31 considered Terrell on the Law of Patents 15th ed. 2000 C.I.P.A. Guide to the Patents Acts 5th ed. 2001 DORIC PRODUCTS PTY LTD v LOCKWOOD SECURITY PRODUCTS PTY LTD N 1089 OF 2000 HELY J 19 MARCH 2002 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1089 OF 2000 BETWEEN: DORIC PRODUCTS PTY LTD APPLICANT AND: LOCKWOOD SECURITY PRODUCTS PTY LTD RESPONDENT JUDGE: HELY J DATE OF ORDER: 19 MARCH 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Subject to Order 2 below, claims 1 – 32 (inclusive) of Australian Patent No 702534 ("the Patent") be revoked. 2. Order 1 be stayed: (a) initially for a period of 28 days from the date on which these orders are pronounced; and (b) if an appeal is lodged within that period, until the determination of that appeal, or further order. 3. Note the following undertakings of the respondent to the Court during the period of the stay: (a) to prosecute the appeal expeditiously; (b) forthwith to serve on the Commissioner of Patents copies of these orders pursuant to s 140 of the Patents Act 1990 with a request that particulars of Orders 1 and 2 be registered in accordance with s 187 of that Act; (c) not to threaten any person with proceedings for infringement of claims 1 – 32 of the Patent; (d) not to seek to amend any claims of the Patent otherwise than in the course of or in connection with these proceedings. 4. The first cross-claim be dismissed. 5. To the extent necessary, grant leave to appeal to the respondent against these orders. 6. Lockwood pay 75 per cent of Doric's costs of these proceedings. 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 N 1089 OF 2000 BETWEEN: DORIC PRODUCTS PTY LTD APPLICANT AND: LOCKWOOD SECURITY PRODUCTS PTY LTD RESPONDENT JUDGE: HELY J DATE: 19 MARCH 2002 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 21 December 2001 I gave my reasons for concluding that claims 1 – 32 (inclusive) of Australian Patent No 702534 ("the Patent") should be revoked. I stood the matter over so that the parties could bring in Short Minutes of Order to give effect to my decision. 2 It is now common ground that it would be appropriate for orders to be made in terms of the attached document in order to give effect to that decision. Accordingly, I make orders in terms of the attached Short Minutes of Order. 3 That leaves two matters outstanding. First, the applicant ("Doric") submits that it should be a condition of any stay that the respondent ("Lockwood") undertake to pay any person (including Doric) such damages or loss, whether legally claimable or not, as a judge may think just and fair as compensation to any person (including Doric) for any disadvantage they may sustain by reason of the stay of the order revoking claims 1 – 32 (inclusive) of the Patent. Lockwood submits that it should not be required to give such an undertaking as the price of a stay, but would be willing to proffer such an undertaking if a stay would otherwise be refused. An undertaking as to damages? 4 It is usual to stay an order for revocation of a patent pending an appeal: Terrell on the Law of Patents 15th ed. 2000 at [14.19]; C.I.P.A. Guide to the Patents Acts 5th ed. 2001 at [72.14]. The reasons for this practice were explained by Emmett J in Atlantis Corporation Pty Ltd v Peter Schindler (unreported, 27 May 1997). The first reason is that if the order were given effect to, and the patent revoked on the register, there is some doubt as to the power of the Full Court to reinstate the patent in the event that the appeal is upheld. The second reason is that the determination of the validity of the patent affects the community generally. But for the stay, members of the public might, in reliance on the state of the register, engage in conduct which may ultimately amount to an infringement if the appeal is upheld. The stay furthers the public interest as a notification that the order for revocation may be overturned. 5 In Atlantis (supra) the applicant offered undertakings: (a) as to damages (but confined to damage to the respondent); (b) not to threaten infringement proceedings; (c) not to seek to amend the patent otherwise than in the course of the proceedings; (d) to obtain the earliest possible date for the hearing of the appeal. 6 Emmett J noted that the terms proffered were consistent with authority in the United Kingdom: Amalgamated Carburetters Ltd v Bowden Wire Ltd (1931) 48 RPC 105 at 122 and Cincinatti Grinders Inc v BSA Tools Ltd (1931) 48 RPC 33 at 59-60. However, in neither of these cases was there any mention of an undertaking as to damages nor was any undertaking as to damages proffered. Emmett J also referred to the decision of Gray J in Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168 at 173. But that was a case in which an injunction against an infringer was stayed pending an appeal, where an undertaking as to damages was proffered and was obviously appropriate. 7 Atlantis (supra) does not decide that it is appropriate to extract an undertaking as to damages as the price of a stay. In that case the applicant simply volunteered an undertaking to that effect, and the other undertakings proffered accorded with the usual English practice. 8 There is no interlocutory injunction in place restraining Doric from dealing with its product. Lockwood has undertaken not to threaten or commence infringement proceedings against any party during the course of the stay. A party should only be required to give an undertaking as to damages where it is necessary for the protection of persons against a perceived risk of injury. Doric did not identify any such risk in the circumstances of the present case. Neither the cases to which I was referred, nor the standard texts, refer to any practice of exacting such an undertaking. In those circumstances, there is no sufficient reason for requiring an undertaking as to damages as the price of a stay. Costs 9 The second outstanding matter concerns costs. Doric was the successful party in the proceedings, as its contention that claims 1 – 32 of the Patent were invalid and should be revoked was upheld. There were a number of issues in the proceedings including infringement, novelty, obviousness, fair basis, sufficiency and uncertainty. Doric succeeded on some of those issues; Lockwood succeeded on others. Lockwood contends that the proper order as to the costs of the proceedings is that each party should bear its own costs. Doric contends that it should receive its costs of the proceedings, and should not be penalised by reason of the fact that it was unsuccessful on some issues. 10 Costs normally follow the event, but the Court has a general discretion to award costs, albeit the discretion must be exercised judicially. Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which it has failed. A successful party who has failed on certain issues may not only be deprived of the costs of those issues, but may be ordered as well to pay the other party's costs: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136. The courts have cautioned against too ready a resort to apportionment according to issue based outcomes. See, eg, Australian Trade Commission v Disktravel [2000] FCA 62. Justice may not be served if the parties are dissuaded by the risks of costs from canvassing all issues which might be material to the decision in the case: Cretazzo v Lombardi (1975) 13 SASR 4 at 16. That may be particularly so in patent cases in which one often encounters overlapping between issues. Thus, for example, there is often an overlap or interconnection between issues of construction, sufficiency, fair basis and obviousness. 11 Lockwood's submission as to the proper order for costs was based upon the fact that: (a) Doric filed a considerable body of evidence upon which it ultimately did not rely; (b) Doric pleaded a large number of prior art documents as relevant to its assertion of invalidity of the Patent only to abandon many of them at the commencement of the hearing (after Lockwood had prepared and filed extensive evidence in response); (c) Doric failed on many of its pleaded grounds of invalidity, most notably the ground of obviousness, which occupied a significant proportion of the hearing time and considerable evidence; (d) Lockwood substantially succeeded on its claim for infringement; (e) the ground upon which Doric succeeded in relation to invalidity did not require evidence. 12 In assessing these grounds, some account needs to be taken of the fact that this case was brought on quickly for a final hearing. At the time of preparation of its evidence-in-chief on validity, Doric did not have any physical locks. Doric largely abandoned the Patent specifications and a number of locks pleaded in its particular of invalidity when it acquired the physical Lockwood storeroom locks shortly prior to the hearing. In Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Ltd [2001] FCA 1624 at par 12, Sackville J said: "A successful party who abandons reliance on certain evidence prepared or compiled on its behalf is, however, not necessarily deprived of any of its costs merely because the evidence is not used in the proceedings." 13 Ultimately the question of whether Doric should receive its costs of preparing evidence which was not used in the proceedings is a matter for the taxing officer, who has to assess whether the costs in question were necessarily or properly incurred in terms of Order 62 rule 19. The circumstance that the evidence was not used in the proceedings raises for consideration whether its preparation in the first place was necessary, but as the passage from the decision of Sackville J illustrates, it is not necessarily determinative of that question. However, this is a matter for the taxing officer, rather than a matter which requires a special costs order. It is not appropriate for me to make such an order, as I am not familiar with material which was not adduced in evidence, nor do I know what the circumstances were which led to the decision not to introduce that material as evidence. 14 Lockwood contends that it won the "infringement event", and that it should have the costs of the infringement proceedings; and that there was no overlap between the infringement case and the fair basis case. Lockwood further contends that it lost the "validity event"; the time taken on infringement and validity was roughly equal; hence, on an "event" approach, the costs should be borne equally. 15 I do not think that this is the right way of approaching the matter. Questions of construction arose during the infringement part of the case, the resolution of which had an impact both on infringement and on validity. The infringement case centred on claims 1 – 6 on the one hand and claim 7 on the other. Infringement of the other claims was largely consequential or not in issue. I found that the storeroom locks, which were Lockwood's own product, anticipated claims 1 – 6, and I found for Doric on infringement of claim 7. 16 So far as validity is concerned, I found that the storeroom locks, the Boyd mortice locks and the Lockwood 530 anticipated some of the claims of the Patent. I found against Doric in relation to the Abloy rim lock and the sliding door locks. 17 A great deal of evidence was tendered in relation to the obviousness issue, on which Doric failed, but there was some overlapping between this issue, and the fair basis objection to validity on which Doric succeeded. Doric failed on the sufficiency issue, but that was not an issue which materially increased the costs of the proceedings. Whilst not an "issue" as such, Doric lost on the question of copying, which was a question addressed by the evidence and which occupied some time at the hearing. 18 The large number of claims, and the interrelationship between them, contributed towards the length and complexity of the hearing. In Raychem Corp's Patents [1998] RPC 31 at 36 – 37 Laddie J criticised the practice of drafting numerous subsidiary claims of ever narrower scope, and reflects upon the difficulty for a party attacking the validity of those claims to direct the evidence to proving the invalidity of all of them. Laddie J noted that: "Although the patentee cannot be prevented from asserting independent validity for numerous subsidiary claims, it must not be forgotten that the court has the power to penalise, at least in costs, a party who abuses the system in a way which inflates the duration and expense of litigation unreasonably." Having found that the structure of the claims was not such as to invalidate them for uncertainty, I do not think that it would be appropriate for me to take into account this consideration on the issue of costs. I reject Doric's submission that I should do so. 19 My overall conclusion is that Doric should suffer some reduction in terms of the costs which might otherwise have been awarded to it to take into account, in particular, its failure on the novelty claim in relation to the Abloy rim lock and the sliding door locks, as well as its failure to succeed on the obviousness issue and on the copying issue. My overall assessment is that Lockwood should pay 75 per cent of Doric's costs of these proceedings. That assessment takes into account the reserved costs of directions hearings. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely. Associate: Dated: 19 March 2002 Counsel for the Applicant: D K Catterns QC, S J Goddard Solicitor for the Applicant: Sprusons Solicitors Counsel for the Respondent: A J L Bannon SC, S Burley Solicitor for the Respondent: Phillips Ormonde & Fitzpatrick Date of Hearing: 5 February 2002 Date of Judgment: 19 March 2002 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1089 OF 2000 BETWEEN: DORIC PRODUCTS PTY LTD APPLICANT AND: LOCKWOOD SECURITY PRODUCTS PTY LTD RESPONDENT SHORT MINUTES OF ORDER 1. Order that subject to Order 2 below, claims 1 – 32 (inclusive) of Australian Patent No 702534 ("the Patent") be revoked. 2. Order that Order 1 be stayed: (a) initially for a period of 28 days from the date on which these orders are pronounced; and (b) if an appeal is lodged within that period, until the determination of that appeal, or further order. 3. Note the following undertakings of the respondent to the Court during the period of the stay: (a) to prosecute the appeal expeditiously; (b) forthwith to serve on the Commissioner of Patents copies of these orders pursuant to s 140 of the Patents Act 1990 with a request that particulars of orders 1 and 2 be registered in accordance with s 187 of that Act; (c) not to threaten any person with proceedings for infringement of claims 1 – 32 of the Patent; (d) not to seek to amend any claims of the Patent otherwise than in the course of or in connection with these proceedings. 4. Order that the first cross-claim be dismissed. 5. To the extent necessary, grant leave to appeal to the respondent against these orders. DATE: ____________________