FEDERAL COURT OF AUSTRALIA Humphries v SAS Signage Accessories Supplier Pty Ltd [2009] FCA 671 ROBYN HUMPHRIES and CLEAR FOCUS INTERNATIONAL PTY LTD (ACN 063 866 562) v SAS SIGNAGE ACCESSORIES SUPPLIER PTY LTD (ACN 111 587 501) QUD 67 of 2008 SPENDER J 27 MAY 2009 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QUD 67 of 2008 BETWEEN: ROBYN HUMPHRIES First Applicant CLEAR FOCUS INTERNATIONAL PTY LTD (ACN 063 866 562) Second Applicant AND: SAS SIGNAGE ACCESSORIES SUPPLIER PTY LTD (ACN 111 587 501) Respondent JUDGE: SPENDER J DATE OF ORDER: 27 MAY 2009 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. Within 14 days and pursuant to O 15 r 8, the respondent shall file and serve upon the applicants an affidavit stating: (a) Whether there is or has been in the respondent's possession, custody or power; and (b) If there has been but there is no longer in the respondent's possession, custody or power; when the respondent parted with and what became of, each of the following documents or classes of documents, namely: (c) Correspondence between the respondent and customers of the respondent concerning and relating to the product described as "One Way Vision" who have purchased from the respondent any products sold or offered for sale by the respondent: (i) Described by the respondent as "One Way Vision"; or (ii) Under any of the following product codes RO-44-25, RO-54-50P, RO-60-25, RO-60-50, RO-48-25, RO-48R-25N, DG-30-54; restricted to correspondence between the respondent and its customers of and concerning the product described as "One Way Vision"; (d) Correspondence between the respondent and any of the respondent's customers or prospective customers relating to the supply or projected supply of the said products; (e) Invoices and packing slips of the respondent which relate to sales by the respondent of any of the said products; (f) Purchase orders received by the respondent for any of the said products; (g) Advertisements, information sheets or any other document published by or on behalf of the respondent, including on any website, which includes reference to any of the said products. 2. Costs on the Notice of Motion filed on 21 April 2009 be reserved. 3. The matter be set down for further directions on Friday 17 July at 9.30 am. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QUD 67 of 2008 BETWEEN: ROBYN HUMPHRIES First Applicant CLEAR FOCUS INTERNATIONAL PTY LTD (ACN 063 866 562) Second Applicant AND: SAS SIGNAGE ACCESSORIES SUPPLIER PTY LTD (ACN 111 587 501) Respondent JUDGE: SPENDER J DATE: 27 MAY 2009 PLACE: BRISBANE REASONS FOR JUDGMENT 1 By a Further Amended Statement of Claim filed on 20 February 2009, the applicants allege that the respondent has breached and is continuing to breach two patents. The applicants' case is one of indirect infringement by the respondent and is based on s 117 of the Patents Act 1990 (Cth), which states: 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. 2 That section was recently considered by the High Court of Australia in Northern Territory v Collins (2008) 83 ALJR 1 (Collins). In relation to that case, there are observations by both Hayne and Crennan JJ which are relevant to the present Motion. In Collins, Hayne J said, at [34]-[36]: [34] Section 117(1) is engaged where there is "the supply of [a] product by one person to another.".… [35] Although s 117(1) is engaged only where there is "the supply of [a] product by one person to another", s 117 is directed to an identified sub-set of such transactions. That sub-set is identified first by the introductory words of s 117(1) – "[i]f the use of a product [the product that is supplied] by a person would infringe a patent" – and second by the amplification in s 117(2) of what is meant by "the use of a product by a person". At the risk of undue abbreviation the amplification provided by s 117(2) can be described as inviting attention, in the particular cases identified in each paragraph of the subsection, to "only use" (s 117(2)(a)), "known use" (s 117(2)(b)) and "instructed use" (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin consideration of an issue about the application of s 117(1) will be to examine what is said to be the use of the product that is alleged to engage the provision. It is that use which must be identified as the use which would infringe the patent because the hinge about which s 117 turns is its introductory words: "[i]f the use of a product by a person would infringe a patent." [36] When the question is approached in that way, it will be observed that to ask whether supply of an input for a patented method or process (or resulting product) is capable of attracting s 117(1) may direct attention away from the relevant statutory questions. Those questions are: is there a supply of a product; what is the use of the product (as use is elucidated in s 117(2)); and does that use infringe the patent? 3 Later, in [39], Hayne J said: … questions about the application of s 117 must be approached with a close focus upon the relevant statutory language. That will require identification of the relevant use of the product and the relevant exclusive rights of the patentee. It is not useful, and may be misleading, to proceed by first seeking to establish a singular and all-embracing explanation of the operation of s 117 by excluding certain types of patent or certain types of product from any possible operation of the section. (Emphasis added). 4 Crennan J referred to indirect infringement in her Honour's reasons at [100] and following. At [102], her Honour said: [102] Notwithstanding that reference, the precise boundaries of "indirect" infringement at common law proved elusive. In particular, the sale or supply of an article, including material "produced by nature" (such as timber), which could in any way be used in the making of an article covered by a patent was not an infringement. There were, however, some acts of indirect infringement which could give rise to remedies at the patentee's suit. These included the separate tort of knowingly inducing or persuading another to infringe, acting as a joint tortfeasor in a conspiracy or common design to directly infringe and ordering another, for example an agent, to do an infringing act. In each of these examples the availability of remedies turned on the indirect infringer being a "contributor" or "party" to the direct infringement. (Footnotes omitted) 5 I have referred to those passages because behind the Notice of Motion seeking discovery there is a fundamental question. 6 In this particular case, some of the breaches pleaded by the applicant concern supplies in circumstances described by Hayne J as an "only use" case: s 117(2)(a). This appears from pars 13 to 17 of the Statement of Claim. 7 Other breaches pleaded concern supplies in circumstances described by Hayne J as a "known use" case: s 117(2)(b); pars 18 to 27 of the Statement of Claim apply. It is helpful, in that context, if I exemplify that by referring specifically to par 13 of the Statement of Claim. 8 In the Further Amended Statement of Claim, par 13 reads: Having regard to its nature or design, the Product is capable of only one reasonable use within the meaning of section 117(2)(a) of the Act, namely the affixing or printing of at least one image onto one side of the Product which image is, or images are, not visible from the opposite side to that on which the image was, or images were, affixed or printed and the affixation of the printed Product to a display medium. 9 Paragraph 14 reads: Further and alternatively, having regard to its nature or design, the One Way Vision Laminating Film is capable of only one reasonable use within the meaning of section 117(2)(a) of the Act, namely as a protective layer over one or more sides of the Product. 10 By its Amended Defence and Cross Claim, the respondent denies, amongst other things, that it made supplies of the relevant products. It also denies the allegations made by the applicants about the known use of that product. The Notice of Motion, which was filed on 21 April 2009 by the applicants, seeks orders for discovery by the respondent of categories of documents which are relevant to those issues. 11 Before I turn to that question, there is this fundamental problem to which I earlier referred. I should note first a letter by Victor Tse, dated 27 March 2007, to Scott Coulthart of LegalIT, the solicitors for the applicants, annexed to the affidavit of Mr Tse sworn 1 May 2009. That letter says: We now enclose the sealed copies of the Amended Defence and Cross Claim and Amended Particulars of Invalidity by way of service. 1. As indicated in our Amended Defence, your Further Amended Statement of Claim fails to specify which of the claims of the First and Second Patent, the Respondent is alleged to infringe. The Respondent is entitled to know the case that is put against it which must include a clear indentification of which particular claims are alleged to be infringed. A failure to do so renders the claim liable to be struck out as embarrassing. 2. The particulars of the alleged infringing conduct are inadequate. We refer you to Order 58 Rule 11 of the Federal Court Rules which provides: "Particulars of infringements complained of must give at least one instance of each type of infringement alleged and must specify, in proceedings for infringement of a standard patent, which of the claims of the complete specification of that patent are alleged to be infringed." 12 Clearly, the said Statement of Claim fails to satisfy these requirements. In that regard, it was contended by Miss Downes of senior counsel, who appeared for the applicants on the Motion, that there was a specification of the claims of which infringement was alleged. However, pars 5 and 8 of the Further Amended Statement of Claim are in these terms: 5. The Applicants rely on and incorporate by reference each of the claims of the First Patent. 13 And par 8 reads: 8. The Applicants rely on and incorporate by reference each of the claims of the Second Patent. 14 So notwithstanding that par 4 specifies as named claims the claims defining the invention, the effect of pars 5 and 8 is to produce a pleading which is truly embarrassing in the precise legal meaning of that phrase. 15 The written submissions by counsel for the respondent indicate and took the point, at par 6: Section 117(1) provides, inter alia, that: "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 a patentee or licensee of the patent" (emphasis added). 16 Whether or not s 117 is applicable requires identification of the relevant exclusive rights that the patentee alleges are infringed. There can be no infringement of the "equity of a patent". Infringement must be determined by specific reference to a claim of the patent. 17 In this particular case, the written submissions note that: The respondent has previously drawn the applicant's attention to the lack of particularisation in the applicant's pleadings, including its failure to comply with the requirements of Order 58 r 11(2). 18 So there was a long-standing complaint as to the proper identification of which of the claims of either of the patents in suit the respondent is alleged to have infringed. Miss Downes acknowledged that pars 5 and 8 ought not to have appeared in the pleading and they were withdrawn. In those circumstances, the observation is made by counsel for the respondent on the Motion in par 14: To the extent that the applicant asserts that the respondent has infringed all 48 claims of the first patent (including the omnibus claims) and all 13 claims of the second patent (including the omnibus claims) this should be made clear in the pleadings. 19 In fact, it is now made clear that that is not the allegation on which the applicant relies. 20 I turn now to the Notice of Motion seeking discovery. Order 15 r 2 of the Federal Court Rules provides: RULE 2 DISCOVERY ON NOTICE 2(1) A party required to give discovery must do so within the time specified in the notice of discovery (not being less than 14 days after service of the notice of discovery on the party), or within such time as the Court or a Judge directs. 2(2) Unless the Court or a Judge orders otherwise, a party must give discovery by serving: (a) a list of documents required to be disclosed; and (b) an affidavit verifying the list. 2(3) Without limiting rule 3 or 7, the documents required to be disclosed are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given: (a) documents on which the party relies; and (b) documents that adversely affect the party's own case; and (c) documents that adversely affect another party's case; and (d) documents that support another party's case. 2(4) However, a document is not required to be disclosed if the party giving discovery reasonably believes that the document is already in the possession, custody or control of the party to whom discovery is given. 2(5) For subrule (3), in making a reasonable search, a party may take into account: (a) the nature and complexity of the proceedings; and (b) the number of documents involved; and (c) the ease and cost of retrieving a document; and (d) the significance of any document likely to be found; and (e) any other relevant matter. 2(6) If the party does not search for a category or class of document, the party must include in the list of documents a statement of the category or class of document not searched for and the reason why. 21 What is important is that there is an obligation to disclose documents which adversely affect the party's own case or documents which support another party's case. 22 The respondent filed a list of documents on 18 December 2008 which did not include any of the documents falling into the category set out in par 2 of the Notice of Motion filed 21 April 2009. 23 In that Notice of Motion, the applicants sought the following orders: 1. That the respondent shall give discovery in accordance with O 15 r 2 within 14 days. 2. Further or alternatively, within 14 days and pursuant to O 15 r 8, that the respondent shall file and serve upon the applicants an affidavit stating: a. whether there is or has been in the respondent's possession, custody or power; and b. if there has been but there is no longer in the respondent's possession custody or power, when the respondent parted with and what has become of, each of the following documents or classes of documents, namely: c. correspondence between the respondent and customers of the respondent who have purchased from the respondent any products sold or offered for sale by the respondent: i. described by the respondent as "One Way Vision"; or ii. under any of the following product codes RO-54-25, RO-54, RO-54-50P, RO-60-25, RO-60-50, RO-48-25, RO-48R-25N, DG-30-54; d. correspondence between the respondent and any person referred to relating to any of the said products; e. invoices and packing slips of the respondent which relate to sales by the respondent of any of the said products; f. purchase orders received by the respondent for any of the said products; g. advertisements, information sheets or any other document published by or on behalf of the respondent, including on any website, which includes reference to any of the said products; h. lists of customers of the respondent who have purchased from the respondent any of the said products. 24 There was a degree of correspondence from the solicitors for the applicant to the solicitors for the respondent identifying categories of relevant documents that were asserted not to have been discovered. In particular, I refer to a letter of Mr Coulthart of 29 January, annexed to his affidavit of 21 April 2009, where he said under the heading, "Further and Better Discovery": As discussed, we are of the view that your client's disclosure of documents is deficient in that your client has failed to disclose any documents relevant to the s 117 claim by our client. The extent of your client's knowledge of the business of its customers and the extent of your client's knowledge of the reasons for which its customers purchase the one- way vision material from your client is directly at issue. Accordingly, documents such as copies of communications between your client and its customers which may reveal those factors, lists of customers who purchase such material, purchase orders from those customers and invoices from your client to those customers, will all be relevant and ought have been disclosed. 25 In relation to the request for discovery of the documents identified in par 2 of the Notice of Motion, Miss Downes, in her written submissions at par 14, submitted: Yesterday, the Respondent offered (for the first time) to discover the documents in paragraph 2(g) of the Notice of Motion together with a sample of some of the other categories of documents set out in the Notice of Motion. The offer was expressed to be subject to conditions. 26 In relation to the application for discovery, having dealt with the question of identification of the specific claims on which infringement is alleged, the written submissions by the respondent on the Motion in par 18 and following deal with specific discovery. 27 In par 18 of those submissions, counsel for the respondent said: Subject to the above objections, and subject to appropriate protection for confidentiality, the respondent has offered to provide documents in relation to category 2 e. and 2 f of the applicants' Motion. The respondent has also offered to discover documents in category h. The respondent's offer was conditional because the applicant's Motion was out of time. 28 The reference to category h. appears to be a mistake, and should instead refer to category g., for which disclosure was offered by the respondent. 29 It seems in those circumstances that I should order discovery in respect of the documents in category 2 e., f. and g. of the Motion. In respect of the remaining categories, the respondent submitted that the categories are either extremely broad, and/or insufficiently relevant to any issue in dispute. 30 Category 2 c. seeks discovery of all correspondence between the respondents and its customers. The only limitation is these customers must at some stage have purchased the product described as One Way Vision. However, the category is not limited to correspondence relating to this product, but extends to any product sold by the respondent to its customers. 31 The respondent's submissions continue, at par 21: Accordingly, it is likely that many, if not all, of these documents will be irrelevant to any issue in dispute. To impose an obligation to discover such a broad range of irrelevant documents would be unfair and oppressive to the respondent. 32 This point is well taken, and it seems to me that category 2 c. documents should be restricted to correspondence between the respondent and its customers concerning and relating to the product described as One Way Vision. 33 Category 3 d. seeks correspondence between the respondent and any person referring to, or relating to, any of the said products. 34 Again, the submission by Mr Fitzpatrick, counsel for the respondent, said: This category is not limited to the respondent's customers or to the supply or prospective supply of the products. It therefore extends well beyond any potential issue in dispute pursuant to s. 117 of the Patents Act. 35 This point, in my opinion, is also well taken. It is too broad. It could cover, for instance, correspondence with an accountant of the respondent's business. It has to be limited, in my view, to correspondence between the respondent and any of the respondent's customers, or prospective customers of the products, or relating to the supply or projected supply of the products. 36 In relation to category h., the respondent's customer lists, the point is taken that it is not apparent how the identity and details of the respondent's customers would be relevant to the issue of infringement pursuant to s 117 of the Patents Act, particularly in the context of a split between liability and quantum. It seems to me that the respondent's customer lists, insofar as they are relevant to any matter that might be in issue, are already covered by the earlier categories as limited by these reasons. And so I will not order discovery in respect of category 2 h. That deals with the matters the subject of the Motion. 37 Having regard to the highlighting of the requirement in O 58 r 11, and to what were pars 5 and 8 of the Amended Statement of Claim, and having regard to the fact that discovery of some of the documents sought is, in my opinion, properly to be ordered, I think the appropriate order as to costs is simply to reserve the costs. 38 I make orders in terms of par 2 c. as limited as I've indicated in these reasons. Similarly, in relation to documents in category 2 d., I make an order as limited as I've indicated in these reasons. There should be discovery of category 2 e., f. and g. I make those orders. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate: Dated: 18 June 2009 Counsel for the Applicants: Miss K Downes SC with Mr D Piggott Solicitor for the Applicants: Legal IT Laywers Counsel for the Respondent: Mr B Fitzpatrick Solicitor for the Respondent: Victor Tse & Associates Date of Hearing: 1 May 2009 Date of Judgment: 27 May 2009