FEDERAL COURT OF AUSTRALIA SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Ltd (No 4) [2013] FCA 845 Citation: SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Ltd (No 4) [2013] FCA 845 Parties: SNF (AUSTRALIA) PTY LTD v CIBA SPECIALTY CHEMICALS WATER TREATMENTS LTD File number: VID 447 of 2008 Judge: DAVIES J Date of judgment: 20 August 2013 Catchwords: PATENTS – Infringement – Discovery sought to enable informed election between damages and an account of profits – Whether entitled to seek discovery of documents for additional damages claim – Principle in Nokia Corporation v Liu (2009) 179 FCR 422 applied. Legislation: Patents Act 1990 (Cth), s 122(1A) Cases cited: SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Ltd (2011) 92 IPR 46 Nokia Corporation v Liu (2009) 179 FCR 422 Bitech Engineering v Garth Living Pty Ltd (2011) 91 IPR 160 LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 70 FCR 436 Tivo Inc v Vivo International Corp Pty Ltd (No 3) [2013] FCA 797 Date of hearing: 9 August 2013 Date of last submissions: 9 August 2013 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 13 Counsel for the Applicant: E. Heerey Solicitor for the Applicant: Griffith Hack & Co Solicitor for the Respondent: K&L Gates Counsel for the Respondent: B Caine SC with B Fitzgerald IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 447 of 2008 BETWEEN: SNF (AUSTRALIA) PTY LTD Applicant AND: CIBA SPECIALTY CHEMICALS WATER TREATMENTS LTD Respondent JUDGE: DAVIES J DATE OF ORDER: 20 AUGUST 2013 WHERE MADE: MELBOURNE DEFINITIONS In this Order, the following terms have the following meanings: Patents means the Innovation Patents 2006100944, 2007100834 and 2008100396. SNF Process means the process defined by Kenny J in her reasons of 6 May 2011 (Reasons) at [299] (see also Reasons at [6], [10], [59]-[60], [237]-[240], [324] and [326]), as set out in: a) the letters dated 11 April and 20 May 2008 from SNF's solicitors Middletons to Davies Collison Cave (CB vol 1, section B, tab 5 p 738 and 744); b) SNF's original statement of claim dated 19 June 2008 at [8]; c) The paper entitled "The Impact of Flocculant Addition on a Tailings Storage Facility" presented by SNF's employee Mr Daniel Bembrick to a metallurgical conference in Perth August 2008 (the Bembrick Paper) (CB vol 2, section C tab 2 p 852W). THE COURT ORDERS THAT: 1. Subject to a confidentiality regime being agreed between the parties, SNF (by an officer with sufficient knowledge of the affairs of the company) file and serve by 24 September 2013 an affidavit setting out the matters in (a) to (g) below: a) The volume (in kilograms) of flocculant sold or otherwise disposed of by SNF to customers in Australia for use in the SNF Process (SNF Flocculant); b) The amount (measured in a quantifiable unit, for example, the number of hours) of technical, instructional and other services provided to customers in Australia relating to the SNF Process (SNF Services); c) The price at which each kilogram of the SNF Flocculent referred to in paragraph (a) above was sold or otherwise disposed of; d) The price at which each unit of the SNF Services referred to at paragraph (b) above was sold or otherwise provided; e) The approximate amount of gross and net profit SNF made from: i) the sale or disposal of each kilogram of SNF Flocculent referred to at paragraph (a) above; ii) the sale or provision of each unit of the SNF Services referred to at paragraph (b) above; f) the steps or reasoning by which the approximate amount referred to in paragraph (e) above has been calculated; g) the names and addresses of the customers to whom SNF sold the SNF Flocculant or supplied the SNF Services; broken down into the periods 7 January 2004 to 5 May 2011 and 6 May 2011 to 7 January 2012, and annexing to the affidavit all documents relevant to the matters referred to in paragraphs (a) to (g). 2. Any application by the Cross-claimant (Ciba) seeking leave to issue subpoenas to third parties, including but not limited to the owners or operators of the Bulga Coal Mine, the Cowal Gold Mine, the Ashton Coal Mine and Mr Daniel Bembrick be filed by 8 October 2013. 3. The matter is listed for further directions on the first available date after 22 October 2013, including directions in relation to the matter being referred to mediation. 4. Liberty to apply on 2 days' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 447 of 2008 BETWEEN: SNF (AUSTRALIA) PTY LTD Applicant AND: CIBA SPECIALTY CHEMICALS WATER TREATMENTS LTD Respondent JUDGE: DAVIES J DATE: 20 AUGUST 2013 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The parties are in dispute over the extent to which the applicant/cross-respondent ("SNF") is obliged to give information and discovery in aid of a hearing to assess the damages occasioned by SNF's infringement of patents owned by the first respondent/cross-claimant ("Ciba") or, at the election of Ciba, an account of profits in respect of the infringements. 2 The infringement claims were made by Ciba by way of cross-claim to SNF's application for declarations of invalidity in respect of Ciba's patents. The Court dismissed SNF's application but upheld the patent infringement claims: SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Ltd (2011) 92 IPR 46; [2011] FCA 452. The patents that are the subject of the infringement claims are processes described by Kenny J at [25] as "directed to the treatment of mine tailings with flocculants". Ciba alleged that SNF directly infringed the patents by using a process referred to as the "SNF process" at three mine sites in New South Wales: the Bulga Coal Mine from 2006, the Ashton Coal Mine from about October 2008 and at the Cowal Gold Mine from about November 2006. At trial SNF admitted that if the patents were valid, then the use of the SNF process infringed the patents as alleged and that the SNF process had been used at the three mines: [10], [299], [301]. The reasons of Kenny J at [299] also recorded that: SNF has admitted that the SNF process contains all the essential integers of the claims of the infringed patents. 3 The orders of Kenny J made on 9 June 2011 included that: 2. Upon admission, [SNF] has infringed: (a) Innovation Patents 2006100944 and 2008100396 by exploiting the Patented Process at the Bulga Coal Mine, and by authorising, or joining in a common design with other persons to do such acts at the Bulga Coal Mine, without the license or authority of [Ciba]; and (b) Innovation Patent 2007100834 by exploiting the Patented Process at the Cowal Gold Mine, and by authorising, or joining in a common design with other persons to do such acts at the Cowal Gold Mine, without the license or authority of [Ciba]. 3. Upon admission that the Patented Process has been used at the Ashton Coal Mine, [SNF] has infringed Innovation Patents 2006100944 and 2008100396 by authorising, or joining in a common design with other persons in relation to the conduct at the Ashton Coal Mine, without the license or authority of [Ciba]. "Patented Process" is a defined term in the orders and contains the integers of the claims of the infringed patents. 4 Kenny J also granted injunctions restraining SNF from exploiting the Patented Process and from authorising, directing or joining in a common design with other persons to exploit the Patented Process in Australia until 7 January 2012. 7 January 2012 is the day on which the term of the infringed patents expired. 5 The orders sought by Ciba in aid of the inquiry into damages include the following proposed order: SNF (by an officer with sufficient personal knowledge of the affairs of the company) file and serve by [6 weeks from the date of this Order] an affidavit setting out the matters in (a) to (h) below, broken down into the periods 7 January 2004 to 5 May 2011 and 6 May 2011 to 7 January 2012, and annexing to the affidavit all documents relevant to the matters referred to in paragraphs (a) to (h): (a) the volume (in kilograms) of flocculant sold or otherwise disposed of by SNF to customers in Australia (Flocculant); (b) the volume (in kilograms) of flocculant and other products sold or otherwise disposed of by SNF to customers in Australia for use in the SNF Process (SNF Flocculant); (c) the amount (measured in a quantifiable unit, for example, the number of hours) of technical, instructional and other services provided to customers in Australia relating to the SNF Process (SNF Services); (d) the price at which each kilogram of the Flocculant and SNF Flocculant referred to in paragraphs (a) and (b) above was sold or otherwise disposed of; (e) the price at which each unit of the SNF Services referred to at paragraph (c) above was sold or otherwise provided; (f) the approximate amount of gross and net profit SNF made from: i. the sale or disposal of each kilogram of the Flocculant and SNF Flocculant referred to at paragraphs (a) and (b) above; ii. the sale or provision of each unit of the SNF Services referred to at paragraph (c) above; (g) the steps or reasoning by which the approximate amount referred to in paragraph (f) above has been calculated; and (h) the names and addresses of the customers or potential customers to whom SNF offered or sold the SNF Flocculant or the SNF Services, including: i. the approximately seven mine sites referred to in paragraph 3 of the affidavit of Mr Russell Henry Shroeter dated 18 February 2010 (CB vol 3, section F, tab 4, p 2149) and Reasons at [301]; ii. the attendees of the metallurgical conference in Perth in August 2008 referred to in Reasons at [239]; iii. any other recipients of the Bembrick Paper or the ACARP Presentations. 6 Ciba relies on the Full Court decision in Nokia Corporation v Liu (2009) 179 FCR 422; 82 IPR 452; [2009] FCAFC 138 ("Nokia") for the width of the proposed orders. Nokia is authority that the inquiry as to damages (or an account of profits) is not limited to the loss occasioned by the infringement that has been proven, but extends to the right to claim relief in respect of all "instances" of the infringement and that in aid of the inquiry, a patentee is entitled to orders designed to identify further "instances" of the infringement in respect of which pecuniary relief may be sought. 7 SNF has objected to the width of the proposed orders, contending Ciba is only entitled to pursue damages or an account of profits in respect of the use of the SNF process at the three mines which Kenny J found to have infringed the patents and that the orders should be confined to the matters in (a) to (h) in relation to the three mines only and only in relation to flocculants for use in the SNF process. Reliance was placed on Bitech Engineering v Garth Living Pty Ltd (2011) 91 IPR 160; [2011] FCA 357 ("Bitech"), which also concerned the scope of the discovery that the infringing party was obliged to give for the purpose of the damages assessment. 8 In Bitech, the respondents were found to have infringed the applicant's patent, which had application in electric and gas fired domestic room heaters. Foster J found that certain models of electric flame effect heaters sold by the respondents infringed the patent and ordered an assessment inquiry. In issue was whether it was open to the applicant, in the assessment inquiry, to prove and recover damages for infringements of other models of heaters that had not been considered at the trial. His Honour held no, reasoning that the applicant had pleaded a very precise case, which confined the infringement claim to specific models. No right to supplement that identification was reserved by the applicant and no findings of fact had been made to the effect that any of the additional models had infringed the patent. Foster J held that the additional heaters were not just further instances of infringement but were additional claims of infringement that had not been the subject of findings by the Court. His Honour did not allow the patentee to make the additional claims for infringement through the assessment inquiry and accordingly, refused the patentee's application for discovery orders in respect of the additional heaters. 9 By parity of reasoning, SNF argued that if Ciba is seeking to have further liability issues determined – that is, whether SNF has engaged in any further conduct in respect of which it might be found to be liable arising from the carrying out of the SNF process at mines other than Bulga, Cowal and Ashton – that these issues should first be determined. If Ciba is not seeking to have further liability issues determined, then the only relevant information to which Ciba is entitled is that relating to SNF's use of the SNF process at the three mines in respect of which liability findings have been made – Bulga, Cowal and Ashton. It was submitted that it would be entirely inappropriate for Ciba to seek discovery of documents relating to other mines that have never been the subject of any allegation of infringement and not the subject of determination. It was put that Ciba did not allege, nor did it adduce any evidence, that the supply by SNF of flocculants to other mines constituted direct or indirect infringement nor did it reserve any right in the particulars to add to the "instances" of infringement and that to seek discovery of documents in relation to other mines would be to reopen issues of liability impermissibly that should properly have been brought in the trial on liability. 10 I do not consider that Ciba's proposed orders in this case go beyond the Nokia principle in so far as those orders relate to the pleaded case that SNF used, and authorised others to use, a process for improving the rigidification of coal mining tailings process and supplied flocculant products to coal mining operators in Australia for use in that process. Although the pleadings did not expressly reserve the right to add to the instances of infringement pleaded – that is, the use of the SNF process and the supply of flocculants for use in the SNF process at the mines sites identified – the subject matter of the infringement claim was the SNF process, not the particular process at the individual mines. SNF admitted that the SNF process contained all the essential integers of the claims of the infringed patents (being the "the Patented Process" as defined in the orders) and to be an infringing use. At [301] and [314], Kenny J found that SNF had directly infringed Ciba's patents by using, and authorising the use of, the SNF process at the Bulga and Cowal mines, based on the admission of SNF that SNF used the SNF process at "approximately" seven sites, including the Bulga and Cowal mines. At [322] and [327], Kenny J also found that SNF had indirectly infringed Ciba's patents by supplying flocculant to mine operators, including at Ashton, as well as Bulga and Cowal, for use in the SNF process. Ciba is entitled to pursue SNF in respect of additional "instances" of SNF's infringement relating to the SNF process beyond the use of the SNF process, and the supply of flocculants for use in the SNF process, at the three mines in respect of which findings were made. However I am not disposed to make the orders in so far as they extend the ambit of the information and discovery sought beyond the SNF process. As presently advised on the material before me, it is not apparent how information about the supply of flocculants or other products by SNF that were not used in the SNF process relates to the second stage hearing. 11 SNF also objected to proposed order 1(h) on the basis that the information sought is irrelevant to making the election. It is also not apparent how the information sought in respect of "potential customers" is relevant to making the election. However, I think that Ciba is entitled to the names and addresses of customers to whom SNF sold flocculant for use in the SNF process, as that information directly concerns the infringing conduct. 12 SNF next objected to the categories of documents sought in Annexure A on the basis that the discovery sought is not justified at this stage before making the election because, for the most part, the documents are relevant (if at all) to Ciba's claim for additional damages under s 122(1A) of the Patents Act 1990 (Cth). I do not accept this objection. In my view, Ciba is entitled to seek discovery of documents that may bear upon its additional damages claim. Ciba is not yet obliged to make an election and this class of documents is relevant in aid Ciba of making an election on an informed basis: LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 70 FCR 436; Tivo Inc v Vivo International Corp Pty Ltd (No 3) [2013] FCA 797. 13 That said, I accept the submission the proposed categories of documents sought in Annexure A, as presently framed, are objectionable either because they are expressed in such wide terms ("evidencing", "evidencing or relating to", "relating to") that they are oppressively wide (categories 2, 3, 4, 5 and 6) and/or because the relevance to the assessment inquiry is not apparent (categories 1, 3, 4, 5, 6 and 7). I will not order discovery in the form presently before the Court but will give Ciba the opportunity to make a further discovery request in proper form. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies. Associate: Dated: 20 August 2013