FEDERAL COURT OF AUSTRALIA Damorgold Pty Ltd v JAI Products Pty Ltd (No 2) [2014] FCA 377 Citation: Damorgold Pty Ltd v JAI Products Pty Ltd (No 2) [2014] FCA 377 Parties: DAMORGOLD PTY LTD (ACN 051 905 705) and VERTILUX CORPORATION PTY LTD (ACN 074 643 182) v JAI PRODUCTS PTY LTD (ACN 126 185 377); JAI PRODUCTS PTY LTD (ACN 126 185 377); DAMORGOLD PTY LTD (ACN 051 905 705) and VERTILUX CORPORATION PTY LTD (ACN 074 643 182) File number: VID 1051 of 2010 Judge: MIDDLETON J Date of judgment: 14 April 2014 Legislation: Federal Court of Australia Act 1976 Patents Act 1990 (Cth), s 22, 105, 140, 187 Cases cited: BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557 Courtney v Medtel Pty Limited (No 3) [2004] FCA 347 Damorgold Pty Ltd v JAI Products Pty Ltd [2014] FCA 150 Eli Lilly and Company v Pfizer Research and Development Company NV/SA [2003] FCA 988 ICI Chemicals v Lubrizol [1999] FCA 1417 Lockwood Security Products v Doric Products (No 2) (2007) 235 CLR 173 Ruddock v Vadarlis (No 2) (2001) 155 FCR 229 Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 3) [2011] FCAFC 165 Date of hearing: 4 April 2014 Place: Melbourne Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 44 Counsel for the Applicants: Mr G McGowan SC with Dr W Rothnie Solicitor for the Applicants: Philips Ormonde Fitzpatrick Lawyers Counsel for the Respondent: Mr GJ Fitzgerald Solicitor for the Respondent: Griffith Hack Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1051 of 2010 BETWEEN: DAMORGOLD PTY LTD (ACN 051 905 705) First Applicant VERTILUX CORPORATION PTY LTD (ACN 074 643 182) Second Applicant JAI PRODUCTS PTY LTD (ACN 126 185 377) Cross-Claimant AND: JAI PRODUCTS PTY LTD (ACN 126 185 377) Respondent DAMORGOLD PTY LTD (ACN 051 905 705) First Cross-Respondent VERTILUX CORPORATION PTY LTD (ACN 074 643 182) Second Cross-Respondent JUDGE: MIDDLETON J DATE OF ORDER: 4 APRIL 2014 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. During the term of the Australian Patent No. 760547 ('the Patent'), the respondent, by itself, its directors, officers, servants, agents or howsoever otherwise, be restrained from infringing either or both of claims 23 and 27 of the Patent including without limitation by, without the licence, authority or consent of the applicants, within the patent area: (a) importing, making, using, selling, supplying or otherwise disposing of, or promoting or advertising or offering to make use, sell, supply or otherwise dispose of, or keeping for the purposes of doing any of these things roller blind spring assist mechanisms with model numbers SA38R, SA38L, SA45R, SA45L, SA5518R, SA5518L, SA5520R and SA5520L ('JAI spring assists') for use in a mechanism for controlling extension and retraction of blinds as claimed in either of claims 23 and 27 of the Patent; (b) doing any act referred to in subparagraph (a) above together with the giving of, or the publication of, instructions for the use of JAI spring assists for use in a mechanism for controlling extension and retraction of blinds as claimed in either of claims 23 and 27 of the Patent; (c) authorising any other person to do any act referred to in subparagraphs (a) or (b) above; (d) procuring or inducing or joining in a common design with any other person to do any act referred to in sub-paragraphs (a) or (b) above. 2. Within 28 days, the respondent: (a) deliver up on oath to the applicants, or for destruction under the supervision of the applicants, all articles and documents in the possession, custody or control of the respondent: (i) the sale, supply or use; or (ii) the offering for sale or supply, of which by the respondent would be a breach of the injunction set out in paragraph 1 above, including without limitation: (iii) all JAI spring assists; (iv) any dies for the manufacture of either or both of: A. the component identified as "K" in Annexures BH-5 and BH-6 in the affidavit of William Samuel (Bill) Hunter sworn on 4 June 2012 in this proceeding (the driven member); B. the component identified as "N" in Annexure 'A' to the Reasons for Judgment dated 28 February 2014 (the connecting member); (v) any manufacturer's or technical drawings and specifications for the design and construction of either or both of: A. the driven member; or B. the connecting member; and (b) file and serve an affidavit by its proper officer verifying that it has complied with each of its obligations under this paragraph 4. 3. The Patent insofar as claimed in claims 1 to 17, 19 to 22, 24 to 26, 29 and 30 be revoked. 4. For the purpose of enabling the applicant to make an election between its claim for damages and its claim for an account of profits, the respondent file and serve by 16 May 2014 an affidavit by its proper officer deposing to: (a) the total number of: (i) JAI spring assists; and (ii) components, including without limitation side controls, blind cylinders, brackets, control chains and bottom rails, sold or supplied for use with, the JAI spring assists in a roller blind system ("associated components"), imported, manufactured, sold or otherwise supplied by it; (b) the price at which each JAI spring assist and any associated components was sold or otherwise supplied; (c) the cost to the respondent of the importation, manufacture, sale or supply of each JAI spring assist and any associated components; (d) the approximate amount of profit it contends it made by the importation, manufacture, sale or supply of each JAI spring assist and any associated components; (e) the method of allocating overheads, if any, which the respondent regards as reasonably acceptable; (f) the steps or reasoning by which the approximate amount of profit has been calculated; and (g) the amounts or quantities referred to in paragraphs (a) to (d) separately for the JAI spring assists and each type of associated component, and identifying the records kept in respect of such importation, manufacture, sale or supply. 5. The respondent pay the first-named applicant's costs of the proceeding to date, to be taxed (in default of agreement) and paid forthwith. 6. The operation of the orders made in paragraph 3 above be stayed: (a) initially, for a period of 21 days after the date of these Orders; and (b) if an application for leave to appeal against these orders be filed by any party within the period referred to in sub-paragraph (a), until 21 days after the final determination of that application or, if leave is granted and an appeal is instituted in accordance with that leave, 21 days after the final determination of that appeal. 7. The directions hearing be adjourned to 6 June 2014 at 10.15am. THE COURT CERTIFIES THAT: 8. Pursuant to s 19 of the Patents Act 1990 (Cth), the validity of claims 23 and 27 of the Patent was questioned unsuccessfully in this proceeding. 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 1051 of 2010 BETWEEN: DAMORGOLD PTY LTD (ACN 051 905 705) First Applicant VERTILUX CORPORATION PTY LTD (ACN 074 643 182) Second Applicant JAI PRODUCTS PTY LTD (ACN 126 185 377) Cross-Claimant AND: JAI PRODUCTS PTY LTD (ACN 126 185 377) Respondent DAMORGOLD PTY LTD (ACN 051 905 705) First Cross-Respondent VERTILUX CORPORATION PTY LTD (ACN 074 643 182) Second Cross-Respondent JUDGE: MIDDLETON J DATE: 14 APRIL 2014 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 28 February 2014, I delivered reasons on liability in this proceeding, apart from a question concerning the standing of the second applicant. 2 In Damorgold Pty Ltd v JAI Products Pty Ltd [2014] FCA 150 at [263], I concluded JAI had infringed claims 23 and 27 of the Patent. I also found that: (a) claims 1-17, 19-22, 24-26, 29 and 30 were anticipated by the conduct of making publically available in Australia the RolaShades product; (b) none of the claims the subject of the Patent was anticipated by the Toso Patent; and (c) contrary to JAI's contentions, the Patent disclosed a manner of manufacture. 3 The parties remained in dispute over the orders to be made following upon my conclusions. On 4 April 2014, I made orders after hearing submissions from the parties. These are the reasons for the making of those orders. 4 JAI desired to adjourn the further hearing of this proceeding (including as to injunctive relief, the status of the second applicant and costs) until the hearing of an amendment application to the Patent (not yet made by Damorgold). JAI effectively sought directions forcing Damorgold to proceed with an amendment application. I think this was misconceived. I was told by Damorgold that no amendment application will be made. In these circumstances, the Court has no power of its own motion to amend or direct amendment before appropriate application is made by the patentee: see s 105 of the Patents Act 1990 (Cth) ('the Act'). 5 In my view, the orders sought by Damorgold, including those relating to injunctive relief, delivery up, and seeking information relating to making an election as to monetary relief, could all be made upon the basis of and in conformity with my conclusions and reasons. 6 As to the claims in the Patent found to be invalid, I made the order as suggested by Damorgold that the Patent insofar as claimed in claims 1 to 17, 19 to 22, 24 to 26, 29 and 30 be revoked. I saw no utility in making a declaration (either by itself or in addition to this revocation order) to this effect, and accordingly refused to make any declaratory order. 7 JAI went so far as to submit that no other orders relating to infringement could be made until an amendment application was heard and determined in favour of Damorgold. This argument proceeded on the basis that claims 23 and 27 of the Patent were dependent claims, the claims upon which they depended were held to be invalid, and thus claims 23 and 27 could not be enforced without amendment. Essentially, the contention of JAI was that without amendment, the dependent claims as written did not make sense and were unclear. 8 Claim 23 (referred to in the Judgment at [58]) is a dependent claim as follows: Mechanism according to any preceding claim, wherein said driven member is of unitary construction. 9 Claim 27 (referred to in the Judgment at [62]) is another dependent claim in the following terms: Mechanism according to Claim 26 wherein said connecting member is of unitary construction. 10 The reference to "according to Claim 26" in Claim 27 above leads in turn to that claim also being dependent on any preceding claim. 11 I do not accept the submission that claims 23 and 27 cannot stand and be read on their own, or make sense if the invalid claims upon which they depend, are revoked. No authority relied upon by JAI goes that far, including the decisions of Eli Lilly and Company v Pfizer Research and Development Company NV/SA [2003] FCA 988, at [3] per Heerey J, ICI Chemicals v Lubrizol [1999] FCA 1417, at [16] per Emmett J and Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 3) [2011] FCAFC 165 at [2] to [4]. 12 The public Register would enable, upon inspection of the whole specification and Court order revoking only some of the claims, the reader to refer back to the preceding claims upon which claims 23 and 27 were dependent. There is nothing in the Act that would indicate that the Commissioner of Patents would delete in their entirety the claims revoked by Court order, so that their text could not be read in conjunction with the registered order of the Court and the remaining valid claims. 13 No party sought to take me to any relevant Regulation in this regard, particularly JAI, which was effectively the moving party to resist the relief now being sought on the basis that claims 23 and 27 did not make sense and were unclear. 14 It may be for the purposes of "clarity of the Register" an amendment application may usefully be made (see Lockwood Security Products v Doric Products (No 2) (2007) 235 CLR 173, at [172]), but this is different from concluding that Damorgold is precluded from obtaining the relief now sought upon finding an infringement of claims 23 and 27 prior to any amendment being made to those claims. Any amendment would presumably simply be to remove the incorporation by reference to the preceding claims, and set out in full the claims themselves. 15 There has been no suggestion that claims 23 and 27, by the incorporating by reference the preceding claims, lacked sufficient clarity so as to make them invalid. No such separate argument was advanced in this proceeding. Claims 23 and 27 were and will still be able to be read and understood in conjunction with the claims which have been held to be invalid. No interested party reading the public Register, with notification of the Court orders, will have any doubt as to the claim of the monopoly in claims 23 and 27, which they will still be able to read in conjunction with the wording of the other claims. 16 It is to be recalled that the invalidity of a patent in relation to a claim does not affect its validity in relation to any other claim – see s 22 of the Act. This would not completely answer the contention raised by JAI, if it was correct in its contention that claims 23 and 27 are independently invalid for lack of clarity by reason of the incorporation by reference of the preceding claims. 17 As I have said, this has never been contended as a separate argument in this proceeding, and I do not consider that claims 23 and 27 are rendered invalid simply by their dependence on other invalid claims, where claims 23 and 27 incorporate by reference the preceding claims. All that needs to be done to understand claims 23 and 27 is to read the claims with the inclusion of the wording found in the preceding claims. 18 Again, as I have said, it may be convenient, or in the interests of 'clarity of the Register', to delete the invalid claims, and amend claims 23 and 27 to set out in full the words incorporated by reference. However, it is not necessary to do so before Damorgold is entitled to appropriate relief, the infringement having already been found by the Court. 19 It may well be that if an amendment application was made, Damorgold would confront some difficulties in seeking an amendment. However, this is of no moment where Damorgold does not seek such an amendment. JAI accepted that the alleged conduct of Damorgold that JAI will rely upon in resisting an amendment application, is not relevant to the task I had in the making of orders in conformity with my conclusions and reasons. Such conduct and its consequences is a matter JAI wants to have debated upon an amendment application being made by Damorgold. Upon present indication, such a debate will not be occurring unless Damorgold changes its mind and makes an application under s 105. 20 On the above basis, I made the orders relating to injunctive relief, delivery up, and election as to monetary remedy as proposed by Damorgold, after discussion with the parties as to some minor amendments. I also ordered a certificate pursuant to s 19 of the Act. 21 I ordered a stay of the revocation order as suggested by Damorgold. 22 I now turn to costs, to which there was also some debate. 23 The Court has a broad and unfettered discretion under s 43 of the Federal Court of Australia Act 1976 to award costs. Within that general discretion, it has long been accepted that costs will ordinarily follow the event, so that a successful litigant will receive its costs in the absence of some circumstance justifying the making of some other order: see eg Ruddock v Vadarlis (No 2) (2001) 155 FCR 229 at 234; at [9] – [12] (Black CJ and French J). 24 In the present proceeding, Damorgold sued JAI for infringement of the Patent and have been vindicated. JAI has been found to have infringed the Patent, and orders have been made reflecting this position. 25 JAI cross-claimed seeking revocation of the Patent; significantly not just some of the claims, but all of them. JAI failed in this ultimate endeavour, having decided to fight the proceedings on an all or nothing basis. While it has succeeded in respect of a number of claims, if failed in respect of claims 18, 23, 27 and 28 resulting in the Court finding that JAI infringed claims 23 and 27. 26 It is also important to recall that JAI's cross-claim proceeded on three bases – an attack on novelty, the allegation that the Patent was not a manner of manufacture and the allegation that the named inventor (Mr Fortunato) was not the inventor. 27 The attack on grounds of manner of manufacture and that Mr Fortunato was not the inventor failed. 28 The attack on novelty was pressed on three bases: the RolaShades product, the RolaShades Drawing and the Toso patent. 29 The attack based on the Toso patent entailed substantial expert evidence and significant resources in preparation and in Court, and it failed. 30 Similarly, the attack based on the RolaShades Drawing failed. 31 The attack based on the RolaShades product succeeded partially. However, JAI failed in supporting its attack on the validity of claims 23 and 27, which the Court found to be infringed. 32 In my view, the approach to take in considering costs is to proceed on the basis that Damorgold had very substantial success on liability issues in the proceeding and the claim that JAI infringed the Patent has been vindicated. 33 As noted above, JAI's primary position was that resolution of the question of both quantum and costs ought to be deferred until after any amendment of the Patent. JAI further submitted that the question of costs should await determination of issues relating to the exclusivity of the licence which the first applicant asserts it granted to the second applicant. This was a matter which was to be dealt with in the quantum phase. Of course, in the event that the second applicant is not an exclusive licensee, it would have had no standing to sue and would not be entitled to recover any of its costs of the proceeding. 34 However, I think that as both applicants were represented by the same legal representatives, I do not think this would cause any difficulty if the first applicant wished to proceed to taxation forthwith, as it does. 35 In a proceeding of this type, and where liability and quantum were ordered to be heard separately, and liability has now been established, with some time undoubtedly elapsing before a final determination, I thought it was appropriate to order costs be paid forthwith: see eg Courtney v Medtel Pty Limited (No 3) [2004] FCA 347, at [20] to [22] per Sackville J. 36 It then became a matter of determining the incidence of costs. 37 JAI submitted that the appropriate orders were for JAI to pay 20 per cent of the first applicant's costs of the application and that the first applicant should pay JAI 80 per cent of its costs of the cross-claim. 38 The main argument of JAI was that Damorgold were successful in establishing infringement in respect of only two of the 28 claims asserted to have been infringed. It was contended that JAI was largely successful on its cross-claim in invalidating 26 of the 30 claims of the Patent, and aside from claims 27 and 30 (noting that claim 30 has been found to be invalid), JAI did not contest the infringement case on any basis other than invalidity. 39 However, by reference to what I have set out above, the fact remains that JAI was unsuccessful on various separate substantial issues. 40 Further, the main commercial contest between the parties related to whether any infringement had occurred. In this regard, Damorgold have been successful, obtaining injunctive relief and delivery up in support of the objective in coming to Court. 41 I do not consider any party acted unreasonably, nor unreasonably prolonged the proceeding. Nevertheless, the successful party was Damorgold, and Damorgold should not be deprived of an order for costs if otherwise entitled to it in the normal circumstances. 42 I accept that the effective resistance to the infringement claim was essentially JAI asserting invalidity. It is also true that it received a favourable outcome in relation to all claims but 18, 23, 27 and 28 but it failed in its ultimate endeavour in this litigation to avoid being found to have infringed. 43 I should also indicate that I do not consider that Damorgold unreasonably contested the issue of the RolaShades Product, where it was unsuccessful. As my reasons indicated, the arguments raised by Damorgold were not without basis, but after hearing all the evidence I came to a different conclusion than the one contended for by Damorgold. I do not consider that Damorgold should be penalised for supporting their case in a reasonable way: see the discussion in the decision in BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557 at [21] to [27]. 44 In these circumstances, where the primary relief sought by Damorgold against JAI had been granted, and no other circumstances justified a different order, the appropriate cost order to make was that JAI pay the first applicant's costs to date. The position of the second applicant will be considered later (if necessary). I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate: Dated: 14 April 2014