FEDERAL COURT OF AUSTRALIA Baygol Pty Ltd v Foamex Polystyrene Pty Ltd [2004] FCA 887 PRACTICE AND PROCEDURE – Discovery – application for further and better discovery – discovery in relation to defined categories of documents – principal proceeding patent claim under s 117 of the Patents Act 1990 (Cth) – categories for further discovery not too broad – application granted – parties to agree on appropriate regime regarding commercial sensitivity. BAYGOL PTY LTD v FOAMEX POLYSTYRENE PTY LTD N 1530 OF 2003 TAMBERLIN J SYDNEY 12 JULY 2004 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1530 OF 2003 BETWEEN: BAYGOL PTY LTD ACN 008 055 212 APPLICANT AND: FOAMEX POLYSTYRENE PTY LTD ACN 088 759 264 RESPONDENT JUDGE: TAMBERLIN J DATE OF ORDER: 12 JULY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent make discovery of the documents requested in the letter of the solicitor for the applicants to the solicitor of the respondents of 23 March 2004. 2. Liberty to apply on one day's notice in relation to the question of confidentiality and the formulation of an appropriate confidentiality regime if the parties cannot otherwise agree. 3. Costs of this application be costs in the principal proceeding. 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 1530 OF 2003 BETWEEN: BAYGOL PTY LTD ACN 008 055 212 APPLICANT AND: FOAMEX POLYSTYRENE PTY LTD ACN 088 759 264 RESPONDENT JUDGE: TAMBERLIN J DATE: 12 JULY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application made by the applicant, Baygol Pty Limited ("Baygol"), for further and better discovery by the respondent Foamex Polystyrene Pty Limited ("Foamex"). 2 The principal application is for relief which is relevantly based upon alleged patent infringement pursuant to s 117 of the Patents Act 1990 (Cth). That section provides: "117 Infringement by supply of products (1) If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent. (2) A reference in subsection (1) to the use of a product by a person is a reference to: (a) if the product is capable of only one reasonable use, having regard to its nature or design – that use; or (b) if the product is not a staple commercial product – any use of the product, if the supplier had reason to believe that the person would put it to that use; or (c) in any case – the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier." 3 In this application the provisions of ss 2(a), (b) and(c) are of relevance. 4 The allegation is that Foamex manufacturers products known as "pods" that are used in an infringing method of making a building foundation in accordance with the method claimed in the patent. 5 On 31 October 2003, a direction was made that discovery would be given by both parties of all documents on which they propose to rely in support of their case and all documents of which they were aware that to a material extent, adversely affected their own case or supported the other party's case. Discovery was ordered to be made by 2 February 2004. 6 On 2 February 2004, Foamex served a list of documents, and there was a dispute between the parties in relation to the extent of discovery sought. Finally, on 23 March 2004, Baygol's solicitors wrote to the solicitors for Foamex seeking discovery under the motion of the following documents: "(a) Manufacturing specifications, drawings, designs and any other documents relating to the manufacture by the Respondent of pods; (b) Quotations, estimates, advertisements and all documents relating to the offer for sale of pods; (c) All documents which relate to the manufacture, sale or delivery of pods for use in waffle pod foundations, all instructions and general communications given by the Respondent to its customers; (d) The identity of all customers and end users who purchase products from the Respondent; (e) Documents relating to instructions given by the respondent for the use of the products, and documents relating to inducements made by the Respondent and contained in advertisements published by or with the authority of the Respondent." 7 Foamex seeks to resist discovery of these documents on two grounds. The first is a general ground based on the issues said to arise under the pleading and particulars. This is to the effect that there are defects and inconsistencies in Baygol's pleading which make it embarrassing. Foamex therefore alleges that the pleadings are improperly particularised, internally inconsistent and inadequate and that, on the basis of these pleadings, Foamex should not have to produce any of the further documents claimed. Foamex concedes that a narrower range of discovery relating to instructions or inducements it has made or authorised since October 1987 concerning the use of the pods in forming building foundations would be relevant and appropriate, and it accepts that it has an ongoing obligation to make discovery relevant to this issue. It identifies only one additional document as coming within this category. Foamex also raises an issue regarding the commercial sensitivity and confidentiality of the documentation, but this is a distinct issue from the appropriate extent of discovery and can be catered for by a proper confidentiality regime. 8 On 8 April 2004, Baygol provided submissions in reply in which it disputes the allegations concerning the pleading and particulars alleged by Foamex. Foamex has also made detailed submissions dealing with each of the allegations in the pleading. 9 At the time of this application there has been no step taken to strike out or challenge the pleading and the essential question before me is the extent of discovery on the basis of the pleading as it stands. I do not consider it necessary or appropriate to rule on the question of the sufficiency of the pleading in the absence of any proper challenge to it. Nor am I suggesting that I consider there is any defect in the pleading as contended by Foamex. I therefore turn to the specific documents in question and I approach the issue on the basis of the provisions of s 117 which have been pleaded. design documents 10 Foamex submits that the design of the pods is a matter of objective fact which is inherent and observable in the pods to which Baygol has access, and that Baygol has already particularised the allegedly infringing elements of the design. It is said that the subjective goals of the designer are not relevant to the inquiry as to what use the pods may be put. It is also said that the patent makes no specification as to the design of the box-like hollow members, beyond that they come within this description. Further, it is said that this is a matter of objective fact. 11 I do not consider that these objections have any substance. Section 117(2) is clearly concerned with the nature and design of products. It is not a sufficient reason for failing to discover any of the documents sought that the design of the product can be observed by examination of the product, or that the product can be examined by experts for Baygol. In my view, the design documents are clearly discoverable having regard to s 117. As Baygol points out, the documents are relevant because Baygol is entitled to know whether, having regard to the nature and design of the products, they have only one reasonable use. The examination of documents bearing on this question is clearly a relevant and material consideration. Manufacturing records and documents 12 Foamex says that it is the supply and not manufacture which is at issue in a dispute under s 117. Therefore, manufacturing methods and specifications cannot be relevant on the issue of liability. An investigation of the nature and design of the products and their reasonable use and the belief which the applicant holds can, in my view, be properly examined in the light of manufacturing methods and specifications. The request concerns documents relating to manufacture and not to additional documents such as wage records, plant leasing and purchasing documents. The request, in my view, is not too wide when read in its proper context. marketing documents – quotations, estimates, advertisements and all documents relating to the offer for sale. 13 This request is said to be oppressive in that it is too broad, seeks irrelevant documents, and does not specify a time period. It is said that such documents can only relate to instructions or inducements to use the product, and it is suggested by Foamex that discovery should be narrowly confined to documents which contain instructions or inducements. 14 I accept the submission of Baygol in this matter that orders, quotations and documents relevant to the supply of documents may disclose the intended use of the product, and they are relevant. They also bear on any proposed use of the product to which the supplier may have had reason to believe the person being supplied would undertake. documents relating to the manufacture, sale or delivery of pods for use in waffle pod foundations 15 In my view, description of documents in these terms is sufficiently relevant to warrant discovery. ALL Instructions and general communications given by FOAMEX to its customers 16 This request is not too broad, and is clearly related to the provisions of s 117 as pleaded. It is clear that, when read in context, this request is concerned with instructions and communications within the requirements of s 117(2)(c) and I so read it. General communications must be read in the context of the specific provision relied on and Foamex concedes that it will discover such instructions and inducements as it has issued or authorised being to the best of its knowledge but that there is only one document which has not yet been discovered. Identity of all customers and end users who have purchased products from foamex 17 In my view, the documents falling within this category can be relevant to the question of whether the supply of the pods infringes s 117. The type of customer and end user are both relevant to the likely use of the product, or could be relevant to whether the supplier had reason to believe that the persons supplied would put it to a particular use, and this in turn may lead to a line of inquiry concerning instructions, inducements or advertisements I do not think the request is unduly broad and I indicated earlier that any commercial sensitivity can be protected by the imposition of an appropriate confidentiality regime. 18 Foamex concedes that documents relating to instructions given by Foamex for the use of the product, relating to inducements, and contained in advertisements is relevant, as it must do, because these are the terms of s 117. 19 Foamex has contended generally that since the issues of liability and quantum have been segregated many of the documents requested are not relevant, because they predominantly go to the question of damages. However, the question of the dominant or sole purpose of the documents is not the question at issue. The issue is whether the documents sought can throw light on the issues raised. The fact that they may also bear, or predominantly bear, on the question of quantum is not a reason for refusing discovery, provided that they can be regarded as otherwise discoverable in respect of one or more of the relevant issues. conclusion 20 For the above reasons, I consider that Foamex should make discovery of the types of documents as claimed in the matter of 23 March 2004 from Baygol's solicitors to Foamex's solicitors in paragraphs (a) – (e). This determination is made on the basis that the parties will discuss the question of commercial confidentiality, and will seek to agree on an appropriate regime. If such a regime cannot be agreed upon then I will determine the question. For this reason, I reserve liberty to apply in relation to this matter. I think the appropriate order in relation to costs is that they should be costs in the principal proceeding. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. Associate: Dated: 12 July 2004 Counsel for the Applicant: Anthony Franklin SC Solicitor for the Applicant: Griffin Vincent Counsel for the Respondent: S Minahan Solicitor for the Respondent: Rigby Cooke Date of Last Written Submissions: 8 April 2004 Date of Judgment: 12 July 2004