FEDERAL COURT OF AUSTRALIA Voxson Pty Limited v Telstra Corporation Limited (No 4) [2016] FCA 915 File number: NSD 2436 of 2013 Judge: PERRAM J Date of judgment: 11 August 2016 Catchwords: PATENTS – application to amend amended statements of claim and amended originating application – whether leave to amend Cases cited: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 3) [2013] FCA 85 Date of hearing: 30 June 2016 Registry: New South Wales Division: General Division National Practice Area: Intellectual Property Sub-area: Patents and associated Statutes Category: Catchwords Number of paragraphs: 29 Counsel for the Applicant: Mr D Shavin QC and Ms C Cunliffe Solicitor for the Applicant: DibbsBarker Counsel for the First Respondent: Mr N Murray Solicitor for the First Respondent: Spruson & Ferguson Lawyers Counsel for the Third and Sixth Respondents: Mr A Lang Solicitor for the Third and Sixth Respondents: Baker & McKenzie Solicitor for the Fifth Respondent: Mr P Kerr of Allens ORDERS NSD 2436 of 2013 BETWEEN: VOXSON PTY LIMITED Applicant AND: TELSTRA CORPORATION LIMITED First Respondent OPTUS MOBILE PTY LIMITED Third Respondent VODAFONE HUTCHISON AUSTRALIA PTY LIMITED Fifth Respondent OPTUS NETWORKS PTY LIMITED Sixth Respondent JUDGE: PERRAM J DATE OF ORDER: 11 AUGUST 2016 THE COURT ORDERS THAT: 1. The parties bring in short minutes of order within 14 days to give effect to these reasons. 2. The matter be listed for further directions on 30 August 2016 at 9.30am. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT Perram J: 1. Introduction 1 By an interlocutory application dated 4 April 2016 the applicant ('Voxson') seeks leave to file Third Further Amended Statements of Claim and a Further Amended Originating Application. The remaining respondents are Telstra Corporation Limited ('Telstra'), Optus Mobile Pty Limited and Optus Networks Pty Limited ('Optus'), and Vodafone Hutchison Australia Pty Limited ('Vodafone'). Each opposes the grant of leave. 2 Voxson is registered as the patentee of Australian Standard Patent No 676242, which is entitled 'Positioning systems utilizing mobile telephone system for correction signals'. The patent has a priority date of December 1992 and has now expired. Voxson alleges that Telstra, Optus and Vodafone have infringed the patent through the operation of their mobile telephone networks. It seeks from each damages or an account of profits. 2. Background 3 The subject matter of the suit involves the operation of the global positioning system via mobile devices operating on the respondents' mobile telephone networks. As might be expected, the technical aspects of this are involved. Separate statements of claim have been prepared for each of the respondents reflecting, I assume, their differing positions. Each of these pleadings is substantial in its own right, with hundreds of paragraphs of technical allegations. 4 For the purposes of the present application, these separate pleadings are not however relevantly different. During the hearing of the application, attention was predominantly focussed on the Optus pleading. It was accepted that the outcome of the debate on that pleading would determine the fate of the other two. 5 Claim 1 of the patent is as follows: A system for tracking the location of vehicles and the like, said system comprising local positioning information supply means which corrects positioning information received from satellites so as to produce a local positioning information signal; and wherein said local positioning information signal is transmitted to said vehicles and the like on a special signalling layer of a communications path provided by a mobile telephone system. 6 Proof of infringement of claim 1 will require at least that it be shown that the respondents are transmitting a 'local positioning information signal' on a 'special signalling layer of a communications path provided by a mobile telephone system'. 7 Optus operates 2G, 3G and 4G mobile networks. So far as the present debate is concerned, each of these networks stands in the same position. Each operates using two channels. The information which is being communicated across the network between end users or devices passes along what was referred to as the traffic channel. That information is accompanied by, or associated with, other information referred to as control data. Typically this control data relates to the data travelling along the traffic channel. One example is the numbers which identify the devices between which the traffic is passing. The control data passes over what is referred to as the control channel. 8 The present debate arises from the relationship between the traffic and control channels and the 'special signalling layer' referred to in claim 1. 3. The Debate between the Parties 9 As it must, Voxson alleges that Optus transmitted a 'local positioning information signal' on a 'special signalling layer' provided by its networks. It has agreed at least since an exchange of correspondence culminating in a letter from its solicitors to Optus' solicitors dated 22 April 2016 that the 'local positioning information signal' upon which it relies is only transmitted on the traffic channel of Optus' network. It does, however, say that, as in the case of any traffic signal, it is supported by a control signal passing along the control channel. Voxson has accepted, since at least the letter of 22 April 2016, that despite that fact, no part of the 'local positioning information signal' upon which it relies passes along the relevant control channel. Voxson says that it has never said otherwise. 10 Despite that denial, something of a procedural odyssey has attended Voxson's arrival at this juncture. This has been driven, in part, by the way in which the patent variously uses the expression 'special signalling layer' and, to an extent, by some of Voxson's own tactical manoeuvrings. It is useful to note at this point that the concept of the 'special signalling layer' is touched upon in several parts of the patent. Amongst the consistory clauses this passage appears at page 3 line 19-26: Preferably said local positioning information signal is transmitted as part of a control layer signal or messaging signal on said mobile telephone system for reception by a mobile telephone receiver which further includes differential global positioning means whereby a physical location in three dimensions of said receiver is obtained. Any such control layer or messaging signal will be hereinafter referred to as the "special signalling layer". (Emphasis added.) 11 Later in the patent, in a section dealing with various preferred embodiments of the invention, this short passage appears (page 8 lines 17-19): The special signalling layer can reside entirely within the control layer or can be interleaved across the control layer and the signal layer. 12 Also relevant is this passage at page 7 line 26 to page 8 line 6: The special signalling layer 24 includes the control layer which transmits information to do with the administration of the telephone call being conducted on mobile phone 18 including such things as the identity of the mobile telephone together with necessary information which allows transfer of communication in respect of the mobile phone 18 from cell 15 to cell 16. The special signalling layer 24 can be unmetered and continuous. 13 Optus submits that the passage at [11] above, together with certain other passages, means that the 'special signalling layer' must consist of at least the control channel. This is consistent with the passage at [12]. It follows, so Optus submits, that Voxson's recent agreement that the 'local positioning information signal' upon which it relies is not transmitted across Optus' control channel is factually fatal to its case. 14 Voxson, on the other hand, submits that the expression 'special signalling layer' is a term defined in the longer passage set out above at [10] from the consistory clauses and that that definition is satisfied by a 'local positioning information signal' transmitted along a 'control layer' or 'messaging signal'. It interprets these as corresponding to the control and traffic channels respectively and puts particular emphasis on the word 'or'. It argues that limitations appearing in a preferred embodiment (such as the one to which Optus points) cannot be used to crimp the meaning otherwise to be afforded to claim 1. 15 In response, Optus submits that, although the passage it relies upon does appear in the section dealing with preferred embodiments, a close reading of it reveals that it does not, in fact, form part of any such preferred embodiment. Rather, read in its full context, it is submitted to be part of a description of the then existing technology. Presumably this matters because, if correct, it would imply that any such limitation was not truly a description of a preferred embodiment and hence could not be subject to that principle. 16 Although it was said by Optus that its argument was not a construction argument, the interaction between the parties' submissions does give rise to such an issue. It is a necessary part of Optus' submission that it has to contend that its construction argument is so strong (and correspondingly that of Voxson so weak) that the proposed pleading should not be permitted to advance. Whilst I accept that I should not grant leave to Voxson to allow the pursuit of a plainly untenable case, I am not satisfied that Voxson's position on the meaning of 'special signalling layer' is of that character. In saying that, I am cognizant of the nature of Optus' response to Voxson's argument about the limited use to which the preferred embodiments may be put in the construction of claim 1, but this is not sufficient to render Voxson's position so untenable as to deny it the right to a trial. Further, there is textual support for Voxson's argument in the consistory clauses (e.g. 'control layer or messaging signal'). Finally, when one adds to the mix that the process of construction of the patent will involve, in part, an ascertainment of the understanding of the person skilled in the art, I do not feel I can come close to being satisfied that the argument which Voxson wishes to advance has no reasonable prospects of success: cf. Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 3) [2013] FCA 85 at [61] per Edmonds J. To the contrary, the issue of construction appears well within the range of contentions which would ordinarily warrant trial. 17 Subject to what now follows, I accept therefore that Voxson should be permitted to advance such a construction in parallel with a suggestion that the alleged 'local positioning information signal' passes along the traffic channel only. Some issues nevertheless arise from the wording of the proposed pleading. Proposed paragraphs 407-410 are as follows: 407. For the Infringement Period, one or more of the messages referred to in paragraphs 361, 362, 363(a), 365-377 above were transmitted and/or received by the Optus 2G SET on: (a) one or more traffic channels of the Optus 2G GERAN being the Packet Data Traffic Channels (PDTCH) as described in a version of 3GPP TS 45.002 at Section 3.2.4, or the equivalent section in another version of TS 45.002 as described in Annexure A; and (b) one or more control channels of the Optus 2G GERAN being the Packet Associated Control Channel (PACCH) as described in a version of 3GPP TS 45.002 at Section 3.3.4.2, or the equivalent section in another version of TS 45.002 as described in Annexure A. 408. [DELETED] 409. The traffic and control channels referred to in paragraph 407 above corresponded to the 'special signalling layer' referred to in each of claims 1-57, 10, 14-169 and 22 25 of the Vox 1 GPS Patent. 410. The messages referred to in paragraph 407 above were transmitted on a 'special signalling layer' referred to in each of claims 1-57, 10, 14-169 and 22 25 of the Vox 1 GPS Patent. 18 These paragraphs are difficult to understand without significant digression. However, such a digression is not necessary for present purposes. The difficulty which exists lies in the word 'and' at the end of subparagraph 407(a). In light of the now uncontroversial fact that the 'local positioning information signal' is not transmitted along the control channel there is no need for subparagraph 407(b). Mr Shavin QC, who with Ms Cunliffe of counsel appeared for Voxson, eventually accepted that this was so if I were minded to reject two of his other submissions. The first of these was that I should read 'and' as 'or'. I do not think that I should do that. The second was that it should be read as, or perhaps discretely amended to read, 'supported by'. Such a reading or alteration would, I think, most likely be factually accurate in its import but also irrelevant. In the form of the pleading which is eventually filed subparagraph (b) should be removed. Cognate changes to the parts of the pleading dealing with the 3G and 4G networks should also be made. 19 In that circumstance, it is not necessary to dwell upon Voxson's submission that paragraphs 407 and 409-410 had already been sanctioned by Bennett J in Voxson Pty Limited v Telstra Corporation Limited [2015] FCA 1490 at [71]-[72], or that the idea that the control channel might have only a supporting role was a matter of which her Honour was fully aware. This is because I am able to reach the conclusion I have without relying upon any such proposition. My willingness to do so likewise relieves me of the burden of considering Optus' corresponding responsive argument that the issue decided by Bennett J was not quite the same as the one presently under consideration, especially now that it is accepted on all sides that the 'local positioning information signal' does not travel along the control channel. 4. Outcome 20 In principle, therefore, leave should be granted. However, the argument I have accepted (about an arguable construction of claim 1) is not one which found voice until the delivery of written submissions on the present application. 21 The lateness in the argument's articulation occurs against a backdrop depicting a scene in which Voxson's case is seen to have undergone substantial change over time; indeed, there may well be something to be said for the view that its case has become a little like Grandfather's axe. Its basic case nevertheless appears to be that the 'local positioning information signal' which it says is transmitted over Optus' various mobile networks is a signal consisting of information provided by a server to a mobile device which informs that device of the location in orbit of satellites involved in the operation of the global positioning system. This information allows the mobile device more rapidly to find those satellites and thereby to decrease the time taken for it to determine its own location. Without this technology, it can take quite a time for the mobile device to find the satellites. I assume that it is the rapidity of this process which allows mobile devices to engage in real time self-location such as is used in applications which track the device. Voxson also says that the 'local positioning information signal' improves the accuracy of the positioning process. 22 This case appears to have gone through three phases of development. 23 In the first perhaps primordial phase, Voxson alleged that Optus itself maintained such a server and that the 'local positioning information signal' was transmitted by Optus from this server to its subscribers' mobile devices over the control channel operated by it on its own networks. 24 The second phase became necessary when it became apparent that the first phase was doomed. This occurred when it emerged that Optus maintained no such server. By then it had become tolerably clear that mobile devices on Optus' networks obtain the satellite location information by accessing a third party server which has nothing to do with Optus (provided, for example, by Apple). This third party server sends the information to the mobile device using the internet and, more particularly, by means of an ordinary data transmission across Optus' traffic channel. Of course, such a data transmission on the traffic channel is necessarily accompanied by corresponding data on the control channel. In this second phase of the life of the pleading, Voxson alleged that the 'local positioning information signal' was transmitted on both the traffic and control channels. 25 There followed tortuous correspondence between the parties which it is fortunately not necessary to relate. Now, and since certainly no later than its letter of 22 April 2016, Voxson accepts that the transmission of the 'local positioning information signal' occurs across only the traffic channel. Compared to its position at the outset, Voxson has entirely reversed its case from contending that the patent required transmission on the control channel to arguing that it does not and that transmission on the data channel will suffice. 26 Voxson's most recent construction appears therefore somewhat late in the piece. I mention this because prior to Voxson's written submissions on this application there seemed to be quite serious problems for it. In particular, it appeared to be committed to an allegation in subparagraph 407(b) that the 'local positioning information signal' was transmitted in part through the control layer, when it had eventually found itself driven through solicitors' correspondence to concede that this could not be correct. Apart from some tastefully arranged fig leaves such as the submission that in paragraph 407 the word 'and' should be read as if it said 'or' or, even more creatively, as if it actually said 'supported by', it now appears that the case based on the control channel has been, in effect, wholly abandoned. 27 Despite that, I do not think that the circumstances require a departure from the ordinary rule that Voxson should pay the costs thrown away by reason of the amendment on a party-party basis. Although there was much Sturm und Drang from the respondents about Voxson's most recent attempt at the pleading (said, perhaps a little harshly, to be its ninth), the present debate was certainly prefigured before Bennett J in Voxson Pty Limited v Telstra Corporation Limited [2015] FCA 1490, and the whole problem articulated by her Honour at [71]-[72]. No doubt there has been since then something of a game of cat and mouse about the relationship between the 'special signalling layer' and the control and traffic channels but, at the risk of a very mixed metaphor, the cat is now out of the bag: the 'local positioning information signal' travels only on the traffic channel. What has become of the mouse remains unclear. 28 Whilst Bennett J thought that Voxson should pay, on an indemnity basis, the costs thrown away by reason of its abandonment of a baseless case premised on servers Optus and Vodafone simply never had (see Voxson Pty Limited v Telstra Corporation Limited (No 3) [2015] FCA 1492 at [70] and [73]), I do not think the present situation is analogous. The elements of the current debate were all largely in place by the time of her Honour's judgment, although it took several further months for Voxson fully to embrace what the facts seemed to be suggesting. Whilst obviously not ideal, I do not regard that tardiness in embracing what was really a paradigm shift in its case up to that point involved unacceptable or unreasonable behaviour in the litigation such as to warrant an indemnity costs order. 29 The parties are to bring in short minutes of order within 14 days to give effect to these reasons. Voxson should also pay the costs of the amendment application itself. The matter will be listed on 30 August 2016 to resolve any outstanding issues, to fix the matter for a six week trial and to make timetabling orders leading to that trial. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 11 August 2016