FEDERAL COURT OF AUSTRALIA Fina Research SA v Halliburton Energy Services Inc [2002] FCA 1505 PRACTICE & PROCEDURE – evidence under s 160 of Patents Act 1990 (Cth) – nature of patent opposition appeal proceedings – discretionary power of the Court to regulate evidence in patent opposition appeals – where an application has been made to limit cross-examination. Patents Act 1990 (Cth), s 160 Genetics Institute Inc v Kirin-Amgen Inc [1999] FCA 742; (1999) 92 FCR 106 referred to F Hoffman-La Roche AG v New England Biolabs Inc; [2000] FCA 283; (2000) 99 FCR 56 discussed Soncini v Registrar of Trade Marks [2001] FCA 333; (2001) 109 FCR 548 approved Samad v District Court of New South Wales [2002] HCA 24; (2002) 189 ALR 1 cited Kaiser Aluminium and Chemical Corporation v Reynolds Metal Co (1969) 120 CLR 136 discussed FINA RESEARCH SA v HALLIBURTON ENERGY SERVICES INC & COGNIS DEUTSCHLAND GmbH & HENKEL KOMMANDITGESELLSCHAFT AUF AKTIEN & BAROID DRILLING FLUIDS INC & COGNIS DEUTSCHLAND GMBH & CO KG N 552 OF 2000 MOORE J 3 DECEMBER 2002 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 552 OF 2000 BETWEEN: FINA RESEARCH SA APPLICANT AND: HALLIBURTON ENERGY SERVICES INC FIRST RESPONDENT COGNIS DEUTSCHLAND GmbH SECOND RESPONDENT HENKEL KOMMANDITGESELLSCHAFT AUF AKTIEN THIRD RESPONDENT BAROID DRILLING FLUIDS INC FOURTH RESPONDENT COGNIS DEUTSCHLAND GMBH & CO KG FIFTH RESPONDENT JUDGE: MOORE J DATE OF ORDER: 3 DECEMBER 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application made orally by the respondents for an order that there be no cross examination without the leave of the Court be dismissed. 2. Costs are reserved. 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 552 OF 2000 BETWEEN: FINA RESEARCH SA APPLICANT AND: HALLIBURTON ENERGY SERVICES INC FIRST RESPONDENT COGNIS DEUTSCHLAND GmbH SECOND RESPONDENT HENKEL KOMMANDITGESELLSCHAFT AUF AKTIEN THIRD RESPONDENT BAROID DRILLING FLUIDS INC FOURTH RESPONDENT COGNIS DEUTSCHLAND GMBH & CO KG FIFTH RESPONDENT JUDGE: MOORE J DATE: 3 DECEMBER 2002 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This judgment deals with an interlocutory issue which has arisen in a proceeding under the Patents Act 1990 (Cth) ("the Act"). The proceeding is an appeal under s 60 against the dismissal of an opposition to the grant of a patent. The issue concerns how the trial will be conducted. The opponent to the grant of the patent was Fina Research SA ("Fina"), which is the applicant in this appeal. The contentious patent concerns drilling mud. The respondents have applied for an order that there be no cross examination of the witnesses at the hearing of the appeal without the leave of the Court. 2 The proceedings have been on foot for almost two years. Various directions have been given, by and large with the consent of the parties, to prepare the matter for hearing. Affidavits containing their evidence were filed by the applicant in early 2001, by the respondents during a period of more than six months commencing late 2001 and concluding in August 2002 and by the applicant in reply in November 2002. The evidence in reply will, as a result of a guillotine order I have made, conclude on 3 December 2002. The appeal is fixed for hearing in the week commencing 3 February 2003. Various estimates have been given about the duration of the hearing and it may take up to two weeks, perhaps more. 3 The application to limit cross examination by requiring leave is advanced on the basis that an appeal of this type is intended to be of the character described by the Full Court in Genetics Institute Inc v Kirin-Amgen Inc [1999] FCA 742; (1999) 92 FCR 106 at 112: "….the purpose of a pre-grant opposition proceedings is to provide a swift and economical means of settling disputes that would otherwise need to be dealt with by the courts in more expensive and time consuming post-grant litigation; that is, to decrease the occasion for costly revocation proceedings by ensuring that bad patents do not proceed to grant." Specifically, the applicants rely on the judgment of Emmett J in F Hoffman-La Roche AG v New England Biolabs Inc; [2000] FCA 283; (2000) 99 FCR 56 and, in particular, the following passages at 86: "[67] The language employed in the cases to which I have referred suggests that it should appear clear to the Court that no patent granted in respect of the specification would be valid. I consider that, before the Court would uphold an opposition to the grant of a patent, the Court should be clearly satisfied that the patent, if granted, would not be valid. That, however, is not to say that an opponent should not be permitted appropriate opportunity to lead evidence-in-chief as to the facts that are designed to demonstrate, with the requisite degree of clarity, that a patent, if granted, would not be valid. Where the subject matter of the patent is one of complexity, of necessity, the evidence that an opponent would be entitled to adduce would itself be of considerable complexity. [68] I am not persuaded at this stage that evidence of the nature sought to be adduced from Dr Mosbaugh is such as should be excluded, subject of course to the evidence being otherwise in admissible form. On the other hand, it may be that when I have seen all of the evidence sought to be relied upon by New England Biolabs, I could form the view that, whatever evidence is adduced by the Applicant, I would not be satisfied with the requisite degree of clarity that a patent, if granted, would not be valid. Alternatively, it may be that I would be satisfied on the basis of that material, and nothing else, that a patent could well be invalid if granted. In that case, of course, it would be necessary to consider the evidence sought to be adduced on behalf of the Applicant. [69] I would expect that there would be no occasion for extensive cross-examination of witnesses for either party, assuming both parties adduce evidence. That is not to say, of course, that one would ordinarily exclude all cross-examination. For example, it may be that counsel would seek to elicit evidence from a witness that is otherwise not available. However, extensive cross-examination to demonstrate that a witness's views ought not to be accepted or are unreliable, would, in my view, be permitted only in very exceptional circumstances." I will say something more about this judgment shortly. 4 The nature of the present appeal is to be ascertained, in part, by the provisions of the Act which govern appeals from the Commissioner and, in particular, s 160 which provides: "On hearing an appeal against a decision or directions of the Commissioner, the Federal Court may do any one or more of the following: (a) admit further evidence orally, or on affidavit or otherwise; (b) permit the examination and cross-examination of witnesses, including witnesses who gave evidence before the Commissioner; (c) order an issue of fact to be tried as it directs; (d) affirm, reverse or vary the Commissioner's decision or direction; (e) give any judgment, or make any order, that, in all the circumstances, it thinks fit; (f) order a party to pay costs to another party." 5 For reasons which I will briefly explain, it appears to me that the order sought by the respondents is unnecessary. I say that because s 160, in my opinion, confers a discretion on the Court to, inter alia, admit further evidence and permit examination and cross-examination of witnesses. An order requiring leave to cross examine is, in substance, nothing more than what is contemplated by the section. That is, a person wishing to examine a witness or cross examine a witness would have to persuade the Court to exercise the discretionary power to permit that to happen. I respectfully agree with the approach adopted by Sackville J in Soncini v Registrar of Trade Marks [2001] FCA 333; (2001) 109 FCR 548 concerning the construction of s 197 of the Trade Marks Act 1995 (Cth), which is in almost identical terms to s 160. His Honour was considering an application by the applicant/appellant to lead evidence which had not been before the Registrar of Trade Marks. His Honour said: "[12] The first question is whether the substantiative affidavits on which the applicant now relies should be admitted into evidence on the appeal pursuant to s 197(a) of the TM Act given that the applicant adduced no evidence before the Registrar. On one view, s 197(a) of the TM Act could be read as implying that the power conferred on the Court to admit further evidence is enlivened only where there was some evidence before the Registrar. Otherwise (so it might be argued) the evidence could not be described as "further evidence". [13] The Registrar submitted that the words "further evidence" should not be given a narrow construction. Ms Marsic contended that s 197(a) is designed to enable the Court to have before it all evidence relevant to the substantive matters in dispute. Mr Webb adopted this submission, but added that an important factor to take into account is the public interest in ensuring that the merits of a non-use application are addressed: cf Kaiser Aluminium & Chemical Corporation v Reynolds Metal Co (1969) 120 CLR 136, at 143, per Kitto J. The public interest, so he argued, supports a broad view of the power in s 197(a). [14] I am inclined to the view that this construction of s 197(a) is correct. Section 197(a) is intended to be facultative. Moreover, the sub-section confers powers on a Court exercising original, not appellate, jurisdiction. Subject to discretionary considerations, there is no obvious legislative policy suggesting that the Court should be precluded from receiving evidence on the "appeal" merely because none was before the Registrar. On the contrary, unless the Court can receive the evidence, it may well be precluded from giving effect to the public interest. The sub-section should therefore not receive a narrow construction. [15] In any event, as Mr Webb pointed out, this is not a case where there was no evidence before the Registrar. The non-use application was supported by statutory declarations filed on behalf of Warnaco, in compliance with reg 9.1 of the Trade Marks Regulations. The Registrar appears to have decided not to hold a hearing, presumably because the applicant (that is, the opponent in the non-use application) had filed no evidence: see TM Act, s 99; reg 21.16. Nonetheless, the Registrar had Warnaco's statutory declarations before him and their contents amounted to evidence: reg 21.17. Thus, even if the expression "further evidence" in s 197(a) is satisfied only where there was at least some evidence before the Registrar, the affidavits relied on by the applicant in this Court can be described as "further evidence" in that sense. [16] It follows that there is a discretion, pursuant to s 197(a) of the TM Act, to admit the evidence tendered on behalf of the applicant in support of the appeal. In my opinion, the discretion should be exercised in favour of admitting the evidence. The applicant has shown that he intended to file evidence in opposition to the non-use application before the Registrar. The fact that he did not file evidence within the prescribed period resulted from a combination of his solicitors' failure to implement his instructions and certain documents going astray in the post." 6 By parity of reasoning there is a discretion to allow a party to adduce further evidence in a proceeding under the Act (such as the present appeal), and a similar discretionary power to permit the examination and cross-examination of witnesses. For a recent consideration of the principles applicable in determining whether a statute confers a discretionary power and the scope of the discretion see Samad v District Court of New South Wales [2002] HCA 24; (2002) 189 ALR 1 at [31]-[36] and [66]-[68]. 7 Counsel for Fina submitted that the word "and" in the expression "permit the examination and cross-examination of witnesses" in par (b) of s 160 is conjunctive and reflects the position which ordinarily obtains in hearings in a Court. That is, if a witness gives evidence he or she can be cross examined by the opposing party. However, I doubt that this is what is intended. The adducing of evidence, beyond the evidence given before the Commissioner, is addressed in par (a). It can be given by either oral evidence or in an affidavit form or conceivably in some other way which is comprehended by the expression "or otherwise". What par (b) addresses are two things. The first relates to a situation where a witness may have given his or her evidence in chief other than orally at the hearing of the appeal, because, for example, it was in an affidavit form. In that situation the witness can, at the Court's discretion, give further evidence in chief orally by examination. The second is that any person who has given evidence may, at the Court's discretion, be cross examined. That could be, for example, a witness who swore an affidavit read at the hearing or a witness who gave evidence orally at the hearing. How the discretion should be exercised by the Court to admit further evidence, permit examination or permit cross examination is another matter. 8 In F Hoffman-La Roche AG v New England Biolabs Inc, Emmett J did not address, in terms, how par (b) should be construed, and his observations in pars [36]-[38] about s 160 are in qualified terms. Nonetheless, it is clear from earlier observations that his Honour viewed s 160 as conferring a power on the Court to exercise "control" (see [32]) and it is fairly clear that his Honour had in mind the exercise of a discretionary power to admit further evidence and allow examination and cross-examination of witnesses. His Honour noted (at [37] and [38]) that no submissions were made to him about the constitutional validity of s 160, though his Honour appeared to acknowledge that it may not be valid if it deprives a party of a fair opportunity to present its case. These matters may impact upon how the discretionary power should be exercised. Indeed it is fairly clear that Kitto J adopted the approach in Kaiser Aluminium and Chemical Corporation v Reynolds Metal Co (1969) 120 CLR 136 at 143 that a provision could not preclude further evidence being led before the Court because such a provision would be unconstitutional. It is not a large step to say that to allow one party to call evidence and deny the other party the opportunity of testing the evidence would similarly be unconstitutional. Doubtless his Honour had in mind that the High Court, unlike the Commissioner, is exercising the judicial power of the Commonwealth. 9 If, however, the discretion to admit further evidence or permit cross examination should, at least prima facie, be exercised in favour of the person wishing to adduce the evidence or cross examine, an immediate difficulty arises. That is because there is an obvious tension between the hearing likely to result from the exercise of the discretion in this way and a hearing which is swift and economical or inexpensive, as contemplated by the Full Court in Genetics Institute Inc v Kirin-Amgen Inc. 10 Nonetheless it may well be, for example, that the evidence that an unsuccessful opponent, such as Fina, wishes to rely upon (in its totality) in an appeal, beyond that which had been before the Commissioner, should not be admitted unless it demonstrably establishes (subject to perhaps excising evidence that was objected to and not admissible in any event), to the requisite standard, that there should be no grant of a patent. If, on this basis, the evidence was not admitted, there would be no need for the respondent in the appeal to test the evidence by cross examination nor lead responsive evidence. However I would not wish to express a concluded view about whether the discretionary power to allow a party to admit further evidence (I am presently assuming that the expression "further evidence" is a reference to evidence that was not before the Commissioner) should be exercised in this way at least in this matter. It would, however, tend to lessen the tension referred to earlier. It would also potentially afford the applicant in the appeal (the opponent before the Commissioner), in this case Fina, an opportunity to present its case by seeking the exercise in its favour of the discretionary power to admit further evidence by demonstrating that the evidence, if admitted, could establish there should be no grant. 11 All I presently propose to do is dismiss the application made orally by the respondents for an order that there be no cross examination without the leave of the Court. I will, of course, hear the parties on any procedural issues that may arise at the trial turning on the discretion conferred by pars (a) and (b) of s 160. I will also reserve on the costs of this application. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate: Dated: 3 December 2002 Counsel for the Applicant: Mr J J J Garnsey QC with Mr J V Nicholas SC & Mr C Dimitriadis Solicitor for the Applicant Phillips Fox Counsel for the Respondent: Dr A C Bennett SC with Mr S C G Burley Solicitor for the Respondent Sprusons Solicitors Date of Hearing: 22 November 2002 Date of Judgment: 3 December 2002