FEDERAL COURT OF AUSTRALIA

Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58

THE COURT ORDERS THAT:

1.    The costs orders of the primary judge made on 6 March 2013 be set-aside and, in lieu thereof, orders that the appellant (applicant) pay 20% of the respondent’s costs of the proceedings (including the cross-claim).

2.    The appellant pay 20% of the respondent’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT

1    For reasons given in our judgment delivered on 13 March 2014 (Tramanco Pty Ltd v BPW Transpec Pty Ltd [2014] FCAFC 23) we upheld the primary judge’s finding that none of the relevant claims of the patent in suit was infringed. On the question of validity, we concluded that none of the relevant claims were shown to be invalid except for claims 21, 22 and 23 which we held should be revoked on the ground of insufficiency. We have considered the written submissions received from the parties in relation to costs.

2    The relevant principles are not in dispute and are discussed by the Full Court in Roadshow Films Pty Ltd v iiNet Ltd (No 2) (2011) 91 IPR 482 at [3], Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-272 and Ruddock v Vadarlis (No 2) (2001) 115 FCR 229. In the latter case Black CJ and French J said at [11]:

•    Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.

•    Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.

•    A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.

See Hughes v Western Australian Cricket Association (Inc) (1986) ATPR ~40-748 at 48,136; approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222.

3    The appellant alleged that the respondent infringed claims 1, 12, 13, 14, 19, 20, 21, 22 and 23 of the patent in suit. In the result, the respondent was successful at trial and on appeal in that it escaped any finding of infringement. At trial the respondent also secured an order for the revocation of the patent as a whole. However, on appeal the respondent was only able to uphold the finding of invalidity in relation to claims 21, 22 and 23.

4    In the ordinary course the respondent would be entitled to its costs of the infringement proceeding brought against it. We note, however, that the principal argument relied upon by the respondent in resisting the allegations of infringement was based upon a construction of the relevant claims that was rejected on appeal. Of course the respondent also relied upon other arguments which were accepted by this Court in support of the primary judge’s conclusion that the use of its products did not infringe the claims of the patent, but these did not feature nearly so prominently as the argument which we rejected.

5    Accordingly, the picture underlying the resolution of the infringement claim, is somewhat mixed, with each side having a measure of success in relation to some issues but not others, even though, as the appellant accepts, the infringement action it took against the respondent failed both at trial and on appeal.

6    The position in relation to validity is more complicated. In this Court, the respondent was largely unsuccessful in defending the primary judge’s finding that the patent was invalid. This was largely due to the primary judge’s construction of claim 1 and the concession based finding that the patent was invalid for insufficiency on that construction of the claim.

7    The respondent’s challenge to the validity of that patent was extensive. It encompassed a novelty challenge involving multiple pieces of prior art alleged to have anticipated the relevant claims, an obviousness challenge the subject of detailed reports by Dr Hart, and various other challenges based upon s 40 of the Patents Act 1990 (Cth). There was a considerable amount of evidence relevant to validity given by other expert witnesses called by the respondent apart from Dr Hart that gave rise to an extensive response from the appellant’s experts and lengthy cross-examination.

8    In the result, the respondent was substantially unsuccessful on the issue of validity, with such success as it achieved in relation to the three claims we have mentioned bearing little relationship to the hearing time spent at trial and on appeal. In particular, nearly all of the time taken up in the hearing of the appeal in relation to validity was devoted to issues upon which the respondent failed. Furthermore, the sole ground upon which the respondent established the invalidity of claims 21, 22 and 23 received only slight attention on appeal and, as best we can tell, at trial.

9    The appellant submitted that it should have its costs of the respondent’s invalidity case below and on appeal, and that the respondent should have its costs of the infringement case below and on appeal. This is an approach commonly taken in patent litigation where the applicant fails on infringement and the respondent fails on validity: see, for example, PAC Mining Pty Ltd v Esco Corporation (No 2) [2009] FCAFC 52. Leaving aside the possibility of mixed results (eg. where a respondent’s challenge to validity is only partially successful) that approach will often be appropriate unless the validity issues raised by a respondent are closely connected to the infringement case, for example, where a respondent asserts that on an applicant’s construction, the claims will necessarily lack fair basis or where a respondent raises a so-called “Gillette defence”. One of the difficulties with the approach taken in PAC Mining is that it may make the task of assessing costs particularly difficult and time consuming.

10    The respondent submitted that all the issues arising under its cross-claim were closely related to the infringement case and that the cross-claim should follow the costs of the infringement case:

… with a discount to reflect both the lesser overall importance of and time spent on the validity case as compared with the infringement case and [the respondent’s] relatively lesser degree of success on its cross-claim following the appeal.

11    We should say at once that we do not accept the premise underlying the respondent’s submission. It seems to us that as much time has been devoted in this litigation to the validity issues as has been devoted to infringement issues. Moreover, the argument that featured most prominently in the infringement case, which was decided against the respondent, was also central to the issues of lack of novelty and insufficiency upon which the respondent failed.

12    This is not a case in which the evidence relevant to infringement and validity can be readily disentangled. This provides a good reason, in our view, for not making an order in the form sought by the appellant. It seems to us that it would be more appropriate in this case to deal with costs on a global basis and in a way that reflected the outcome of both the infringement case and the validity case taking into account the appellant’s lack of success on infringement and the respondent’s lack of success on the various issues raised under its cross-claim.

13    While an issue by issue consideration might suggest that each party should be left to bear its own costs, there are two factors which lead us to think that there should be some modest award of costs to the respondent. The first is that the respondent was ultimately successful in the sense that it is free to market its product. The second is that there were no doubt general costs of the proceedings both at first instance and on appeal that could not be tied to any particular issue. On that basis, we think it appropriate to order that the appellant pay 20% of the respondent’s costs of the proceeding below and on appeal.

14    We should add that the respondent relied upon what it referred to as a Calderbank letter of 20 July 2009 in which the respondent offered not to challenge the validity of (inter alia) the patent in suit if the respondent and another entity (Haldex) were each granted a royalty free licence “to market their products on a worldwide basis”. The respondent submitted that the appellant’s rejection of that offer was unreasonable. Like the primary judge, we are not persuaded that it was unreasonable for the appellant to reject the respondent’s offer. There is a particular difficulty with the terms of the offer which related not merely to the settlement of the proceeding before the primary judge, but to what appears to have been a wider patent dispute involving a United States patent granted to the applicant and a pending European patent application which the respondent’s parent company thought it might wish to challenge.

15    We will therefore order that the orders of the primary judge made on 6 March 2013 requiring that the appellant pay the respondent’s costs of the proceedings (including reserved costs) be set-aside and that, in lieu thereof, there be an order that the appellant pay 20% of the respondent’s costs of the proceeding below and on appeal.

16    The last matter we should mention is the appellant’s application for a certificate pursuant to s 19 of the Patents Act 1990 (Cth). This was not a matter raised in the appellant’s notice of appeal nor was it a matter referred to during the course of the hearing of the appeal. Further, it is not a matter relevant to any question in respect of which the parties were given leave to file written submissions. We do not propose to give the appellant leave to raise the matter at this late stage.

17    Orders accordingly.

Associate:

Dated:    16 May 2014