FEDERAL COURT OF AUSTRALIA Novartis AG v Agvantage Pty Ltd [2012] FCA 160 Citation: Novartis AG v Agvantage Pty Ltd [2012] FCA 160 Parties: NOVARTIS AG and NOVARTIS ANIMAL HEALTH AUSTRALASIA PTY LIMITED (ACN 076 745 198) v AGVANTAGE PTY LTD (ACN 097 970 280) File number(s): NSD 135 of 2012 Judge: JAGOT J Date of judgment: 28 February 2012 Catchwords: COSTS – application for preliminary discovery – where parties made consent orders save as to costs – determination of costs Cases cited: Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Date of hearing: 28 February 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 7 Counsel for the Applicants: Mr JS Cooke Solicitor for the Applicants: Clayton Utz Counsel for the Respondent: Ms C Champion Solicitor for the Respondent: Bowen Legal IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 135 of 2012 BETWEEN: NOVARTIS AG First Applicant NOVARTIS ANIMAL HEALTH AUSTRALASIA PTY LIMITED (ACN 076 745 198) Second Applicant AND: AGVANTAGE PTY LTD (ACN 097 970 280) Respondent JUDGE: JAGOT J DATE OF ORDER: 28 FEBRUARY 2012 WHERE MADE: SYDNEY BY CONSENT, THE COURT ORDERS THAT: 1. In the event that the prospective respondent decides to market in Australia a product having the active constituent dicyclanil (Dicyclanil Product), the prospective respondent shall make a sample of the final dosage formulation of the Dicyclanil Product in liquid form (Formulation) (being not less than 250ml) available to Professor Brendan Kennedy or, if he is not available at the relevant time, an expert as agreed between the parties, but at the sole expense of the prospective applicants (Nominated Expert) for the sole purpose of testing the sample of the Formulation, in order to identify the polymorph crystal form of dicyclanil used as the active constituent of the Dicyclanil Product and for the Nominated Expert to provide a written report in respect of his or her findings simultaneously to each party. A copy of the prospective applicants' letter of instructions to the Nominated Expert shall be provided to the solicitor and counsel of the prospective respondent, on a confidential basis at the same time as it is provided to the Nominated Expert. This order is subject to: (a) The agreement of the prospective applicants and the Nominated Expert to a confidentiality regime in the form set out in Annexure A to these orders that protects the confidentiality of the Formulation and, in particular, limits access to the Formulation and the test results to the Nominated Expert, solicitors, counsel and patent attorney retained by the prospective applicants in Australia and to Dr Christine Bohmann, Dr Bernd Liphardt and Mr Walter Oechslein of Novartis Animal Health Inc and Ms Anjali Kallianpur of Novartis Animal Health Australasia Pty Limited and the Court; and (b) the Nominated Expert undertaking to perform the necessary test and to provide his report within 1 month of receiving the sample of the Formulation from the prospective respondent. 2. The prospective applicants, within 1 month of receipt of the Nominated Expert's report: (a) inform the prospective respondent of their intention to commence proceedings for infringement of Australian Patent No 743515 (Novartis Patent) against the prospective respondent should the prospective respondent seek to commercially exploit a product in Australia made by use of the Formulation; or (b) inform the prospective respondent that in their opinion a product made by use of the Formulation will not infringe the Novartis Patent and that accordingly no proceedings will be commenced against the prospective respondent in respect of the commercial exploitation of a product made in accordance with the Formulation. THE COURT: 3. Notes and accepts the undertaking of the prospective respondent to the Court not to advertise, offer for sale and sell a product made by use of the Formulation in Australia prior to the expiration of the one month period referred to in Order 1(b) above. 4. Subject to orders 1, 2 and 3 above, notes that notwithstanding these orders including the undertaking given by the prospective respondent in order 3 above, the prospective applicants reserve their rights to commence proceedings against the prospective respondent, including by seeking preliminary discovery, interlocutory relief including injunctive relief and/or final relief, in the event that the prospective applicants believe that: (a) The prospective respondent intends to launch a product which infringes the Novartis Patent; and/or (b) The Dicyclanil Product infringes the Novartis Patent. THE COURT ORDERS THAT: 5. Each party is to bear its own costs in respect of the originating application filed on 27 January 2012. 6. The originating application filed on 27 January 2012 be otherwise dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Form 3 Rule 2.13(4) Annexure "A" Confidential Undertaking in relation to Agvantage's Information Federal Court of Australia No. NSD 135 of 2012 District Registry: New South Wales Division: General Novartis AG and another Prospective Applicants Agvantage Pty Ltd (ACN 097 970 280) Prospective Respondent 1. I, ____________________________ of ___________________________________________, (insert name) (insert address) give this undertaking in relation to the documents and sample contained in Schedule 1 to these confidentiality undertakings which incorporate information alleged by Agvantage Pty Ltd (Agvantage) to be confidential information (Confidential Information). 7. I hereby agree and undertake to Agvantage : (a) not to use the Confidential Information other than for the purpose of determining whether Australian patent 743515 entitled "Dicyclanil polymorphs and hydrates and their preparation" dated 25 August 1998 (the Patent) owned by Novartis AG may be infringed by the proposed Agvantage Dicyclanil Product in Australia and/or any proceeding brought by Novartis AG and any of its subsidiaries against Agvantage for infringement of the Patent, (collectively, the Purposes); and (b) not to disclose, discuss or otherwise distribute the Confidential Information with or to (as applicable) any person other than: (i) the Federal Court of Australia; (ii) legal advisors external to Novartis AG and Novartis Animal Health Australasia Pty Ltd (NAH) (which shall mean Australian solicitors and/or Australian Counsel instructed by Novartis AG and NAH, and their support staff); (iii) any independent expert retained by Clayton Utz on behalf of Novartis AG and NAH in relation to the Purposes, who has provided a confidentiality undertaking identical or similar hereto; (iv) Dr Christine Bohmann, Head of Intellectual Property, Animal Health, Novartis Animal Health Inc, who has provided a confidentiality undertaking identical or similar hereto; (v) Dr Bernd Liphardt, Senior Patent Attorney, Novartis Animal Health Inc, who has provided a confidentiality undertaking identical or similar hereto; (vi) Mr Walter Oechslein, Fellow Formulation Manager, Novartis Animal Health Inc, who has provided a confidentiality undertaking identical or similar hereto; and (vii) Ms Anjali Kallianpur, Senior Regulatory Affairs Manager, NAH, who has provided a confidentiality undertaking identical or similar hereto; (c) any other individuals approved by Agvantage that have provided confidentiality undertakings identical or similar hereto in relation to the Purposes; (d) as agreed by Agvantage, and without limitation to the provisions of this undertaking, I understand and agree not to disclose, discuss or otherwise distribute the Confidential Information with or to any other person at Novartis AG or NAH who has not provided confidentiality undertakings identical or similar hereto in relation to the Purposes; (e) on request to return all the Confidential Information provided to me to Agvantage or its solicitors and to destroy all copies which I may have of any documents, notes or other records (including computer records) containing the Confidential Information and to confirm such destruction upon oath if requested by Agvantage; and (f) in the event that I become aware of any use or disclosure of the Confidential Information which occurs as a result of any breach of the foregoing undertakings (a)-(e) (or any of them) to notify Agvantage immediately with full details of that use or disclosure. 8. The above undertakings do not apply to any information that I can demonstrate to the reasonable satisfaction of Agvantage: (a) was in my possession and at my free disposal prior to the date of this undertaking; (b) is hereafter received from a third party without any obligations of confidence; (c) is or has become generally available to the public through no act or default on my part. 9. The obligations pursuant to this undertaking may be removed or modified only with the prior written consent of Agvantage or by order of the Court. 10. By giving this undertaking, I do not concede that the Confidential Information is confidential in equity, but nevertheless, agree to be bound by the obligations set out in this undertaking. 11. This undertaking shall be governed by Australian law and any disputes arising from this undertaking shall be referred exclusively to the Courts of Australia. Signed: _____________________________ Dated: ______________________________ SCHEDULE 1 1. The sample of the Formulation of the Agvantage Dicyclanil Product referred to in paragraph 1 of the Orders. 12. Results of the tests conducted by the independent expert in relation to the Formulation. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 135 of 2012 BETWEEN: NOVARTIS AG First Applicant NOVARTIS ANIMAL HEALTH AUSTRALASIA PTY LIMITED (ACN 076 745 198) Second Applicant AND: AGVANTAGE PTY LTD (ACN 097 970 280) Respondent JUDGE: JAGOT J DATE: 28 FEBRUARY 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The only issue remaining in relation to this application for preliminary discovery is the determination of costs, in circumstances where the parties have managed to resolve between themselves proposed consent orders for their future conduct. 2 The applicant's position is that there should be no order as to costs so that each party pays its own costs, relying on the decision in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin). The respondent contends that the applicant's conduct in bringing the proceedings for preliminary discovery at this time was unreasonable and, accordingly, there should be an order for costs in the respondent's favour. 3 It seems to me that Lai Qin sets out the relevant principles because in this case there has been no hearing on the merits of the preliminary discovery application. Accordingly, as McHugh J observed in Lai Qin (at page 624), I am necessarily deprived of the factor that usually determines whether or how a costs order will be made. McHugh J identified two situations in which the discretion to order costs might appropriately be exercised in favour of one party and against the other, in circumstances where there has been no hearing on the merits (at page 624): – (i) where the Court is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action, and (ii) in cases where the Court feels that, although the parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. 4 His Honour said at page 625: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. 5 In the present case, the respondent relies upon the alleged unreasonable conduct of the applicant. The respondent has filed an outline of submissions in support of this contention. The effect of these is to say that, given the applicant's state of knowledge before it commenced the proceeding, it had no grounds for a reasonable belief of threatened patent infringement and, in effect, acted on the basis of gossip regarding the imminent release of the product in question without verifying the truth of issues with the respondent relating to the timing of the release of any product. 6 However, the actual course of communications between the parties leading up to commencement of the proceedings does not support an inference or conclusion that the applicant acted unreasonably in seeking preliminary discovery. In addition, I cannot say whether one or the other party is certain to have succeeded had the preliminary discovery application been contested because, fortunately, the parties have avoided the additional expense associated with a contest by reason of their proposed consent orders. 7 In the circumstances, the order I will make is that each party is to bear its own costs of the originating application for preliminary discovery. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 29 February 2012