Federal Court of Australia

Nalco Company v Cytec Industries Inc (No 2) [2026] FCAFC 113

ORDERS

THE COURT ORDERS THAT:

1.    Subject to order 3, the respondent pay the appellant’s costs of and incidental to the proceedings in the Full Court (including reserved costs in such proceedings) concerning the amendment decision and the amendment application as defined in orders 2 and 7 respectively of the Full Court’s orders made on 26 May 2026.

2.    Subject to order 3, each party bear their own costs of and incidental to the proceedings before the primary judge culminating in the amendment decision and concerning the amendment application.

3.    Notwithstanding the breadth of orders 1 and 2, no existing costs order is to be disturbed and may be enforced according to its terms.

4.    The costs ordered in order 1 are to be on a party/party basis and to be determined on a lump sum basis.

5.    The determination of the quantum of costs on a lump sum basis is to be referred to a Registrar of this Court who may make such directions as are necessary to facilitate and adjudicate on that assessment.

6.    Liberty to apply.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 26 May 2026 we handed down our decision on two appeals concerning decisions of the primary judge relating to Australian patent application no 2012220990 titled “Reducing aluminosilicate scale in the Bayer process” (Nalco Company v Cytec Industries Inc [2026] FCAFC 72).

2    We made the following orders inter–alia:

1.    There be leave to appeal against orders 1 and 2 of the orders made by the primary judge on 1 November 2021 reflecting the reasons given on 19 August 2021 ([2021] FCA 970) (the principal decision) and the reasons given on 1 November 2021 ([2021] FCA 1332).

2.    There be leave to appeal against orders 1 to 5 and 7 of the orders made by the primary judge on 9 December 2024 reflecting the reasons given on 15 November 2024 ([2024] FCA 1318) (the amendment decision).

3.    The appeal from the principal decision be dismissed.

4.    The appellant pay the respondent’s costs of and incidental to the application for leave to appeal and the appeal from the principal decision.

5.    The appeal from the amendment decision be allowed.

6.    Orders 1, 2 and 5 of the orders made on 9 December 2024 reflecting the amendment decision be set aside.

7.    The appellant’s amended interlocutory application dated 23 December 2022 in proceeding NSD130/2019 be granted (the amendment application).

8.    Australian patent application no 2012220990 proceed to grant in the form annexed to the amendment application.

9.    The appellant serve a copy of these orders on the Commissioner of Patents.

10.    Subject to further order, the operation of orders 7 to 9 be stayed for a period of 28 days from the date of this order.

…

3    Those orders left open the question of who should bear the costs of the second appeal and the costs at first instance concerning the application to amend the patent application. We made further orders for the time–tabling of written submissions on this question, which we have now received.

4    For the reasons that follow, Nalco should have its costs of the second appeal. But as to any other costs including the costs at first instance, each party should bear their own costs save that we will not disturb any existing costs order. We have adopted the defined terms used in our earlier reasons unless otherwise indicated, and what follows assumes a familiarity with those reasons (FCJ) that discuss in detail our consideration of the single identified small molecule claim construction issue dealt with by the primary judge in J1 from which the appeal was dismissed, and the claim amendment issues dealt with by the primary judge in J2 from which the appeal was allowed.

5    Before directly addressing the parties’ submissions on costs, we should set out more of the background.

6    In the first instance proceeding and following delivery on 19 August 2021 by the primary judge of J1, on 20 September 2021 Nalco filed an application seeking to amend the patent application under s 105(1A) of the Patents Act 1990 (Cth).

7    On 1 November 2021, Nalco filed particulars of the grounds it relied on in support of the amendment application. On 15 November 2021, Cytec filed its particulars of grounds of opposition. On 24 October 2022, Cytec proposed that its grounds of opposition be amended to include particulars 8(f) and (g) to introduce arguments on discretion including regarding hydrolysis issues.

8    On 23 December 2022 and following the grant of leave by consent, Nalco filed an amended amendment application to address the hydrolysis issues. In these reasons we will refer to the amended amendment application as simply the amendment application.

9    On 10 February 2023, Cytec filed amended grounds of opposition which introduced its proposed particulars 8(f) and (g) and also introduced a new clarity argument, a new extended claim scope argument, a new best method ground and a further new discretionary argument relating to hydrolysed ED small molecules. And on 2 May 2023, Cytec filed further amended grounds of opposition which introduced new clarity arguments which concerned hydrolysis issues. The further amended grounds of opposition contained five clarity arguments, three extended claim scope arguments, one support argument, two best method arguments, three discretionary arguments on futility, and six discretionary arguments.

10    The further amended grounds of opposition were the subject of the amendment hearing before the primary judge which culminated in J2, which reasons were delivered on 15 November 2024.

11    We will use the umbrella description of amendment proceeding to refer to the first instance proceeding commencing with the filing of the unamended amendment application on 20 September 2021 through to the delivery of J2 on 15 November 2024 with final orders made on 9 December 2024.

12    Nalco applied for leave to appeal from J1 and J2 and was granted such leave to appeal by us. Nalco was unsuccessful in its appeal of J1, but it was successful in its appeal of J2 (Beach and Jackman JJ, with Jackson J dissenting as to that latter result).

13    On 26 May 2026, we ordered that Nalco pay Cytec’s costs of and incidental to the application for leave to appeal and the appeal from J1.

14    As to the outstanding costs issue concerning the amendment question, Nalco’s primary position is that Cytec should pay Nalco’s costs of and incidental to the amendment proceeding and of the application for leave to appeal and appeal from J2. It says that costs should follow the event in accordance with what it says to be the orthodox position for a contested application. Nalco’s alternative position is that Cytec should pay Nalco’s costs of and incidental to the amendment proceeding from 15 November 2021, and of the application for leave to appeal and appeal from J2. Nalco says that on 15 November 2021, Cytec entered the fray by filing its grounds of opposition and thereafter caused both parties to incur substantial costs unnecessarily in the amendment proceeding, and in the application for leave and appeal from J2.

15    Contrastingly, Cytec says that Nalco ought to pay Cytec’s costs prior to 23 December 2022. Cytec says that at that point the amendment application included for the first time the form of claims on which Nalco succeeded before us, and Nalco abandoned the form of claims that it had originally sought.

16    Cytec says that Nalco ought to pay Cytec’s costs from 23 December 2022, both before the primary judge and the Full Court on the appeal from J2, having regard to the so–called indulgence principle which we will elaborate on in a moment.

17    Further, Cytec says that its opposition to the amendment application overall cannot be said to have been trivial, unmeritorious or unreasonable in circumstances where we were divided on the central construction issue, which went to Cytec’s allowability grounds (ss 102 and 105(4)). Cytec says that it also had success on the hydrolysis related construction issue before the primary judge and did not press grounds based on that construction before us.

18    Further, Cytec says that its discretionary grounds for opposing the amendment application arose out of, and was responsive to, Nalco’s forensic decision as to how it would meet its full and frank disclosure obligations. Cytec says that there was nothing unreasonable in Cytec making opposing submissions and testing Nalco’s evidence.

19    Finally, Cytec says that to the extent that any discount is considered appropriate in respect of the costs from 23 December 2022, Nalco ought to pay no less than 75% of those costs.

20    Now as is apparent, we have not accepted the position of either party. Nalco should have its costs of the appeal from J2 given its very substantial success. But as to the costs at first instance or what we have also referred to as the amendment proceeding, there should be no order as to costs in favour of either party. In this respect, a watered–down application of the indulgence principle together with the fact that Cytec’s opposition to the amendment application at first instance was neither unmeritorious nor unreasonable supports the position that there should be no order as to costs.

21    Before proceeding further we should say something about the specific costs principles that have application in the present context.

Some relevant principles

22    In addition to the general power given under s 43 of the Federal Court of Australia Act 1976 (Cth), s 105(2) of the Patents Act provides that an order under s 105(1A) “may be made subject to such terms (if any) as to costs, advertisements or otherwise, as the court thinks fit”.

23    Clearly, the discretion to award costs in a s 105(1A) application is broad and unfettered.

24    Nalco says that the usual position, which is that costs should follow the event, should apply in circumstances where the s 105(1A) application is unsuccessfully opposed. It has made the following points in support of that position.

25    First, it says that the Court’s task in the context of s 105(1A), as opposed to the context of s 105(1), is analogous to the Commissioner’s task in dealing with applications to amend patent applications in the context of s 60(3B) and s 104. So, Nalco says that how the Commissioner typically deals with costs in respect of an unsuccessful opposition to an application for an amendment is relevant.

26    In this respect we should note that we accept that the Commissioner’s routine practice is to award costs against opponents whose oppositions to amendment requests are dismissed, including where the opponent had previously succeeded in a s 59 opposition but then unsuccessfully opposed amendments requested by the patent applicant pursuant to ss 60(3B) and 104 in order to overcome any s 59 findings. In such circumstances, delegates have usually awarded costs against unsuccessful opponents; see for example, Caterpillar Inc v Esco Corporation [2016] APO 76; (2016) 125 IPR 74 at [81]; Sheiman Ultrasonic Research Foundation Pty Limited v Novapharm Research (Australia) Pty Ltd [2007] APO 32 at [51] and Moduline Pty Ltd v Electric Cable Duct Systems Pty Ltd [2006] APO 19 at [43]. Nalco also points out that s 60(3B) reflects the legislative policy against penalising applicants for exercising their statutory right to amend.

27    Nalco says that there is no good reason why the same principle should not apply in respect of an unsuccessful opposition to a s 105(1A) application, given that the Court stands in the shoes of the Commissioner under s 105(1A).

28    We do not agree with Nalco’s position which seeks to draw too much from the practice as to awarding costs in proceedings before the Commissioner. As Cytec correctly points out, the costs awarded by the Commissioner are limited by Schedule 8 of the Patents Regulations 1991 (Cth). And s 60(3B) is not a compelling consideration in the exercise of a broad and unfettered judicial discretion as to costs. Moreover, as Cytec points out, there are discretionary considerations that need to be considered under s 105(1A) that do not apply before the Commissioner.

29    Second, Nalco says that the usual costs order in preliminary discovery proceedings against an unsuccessful prospective respondent is analogous. Nalco says that in such a context, whilst a prospective respondent is entitled to remain passive and put the prospective applicant to proof, where the unsuccessful prospective respondent takes an adversarial approach to the application, it exposes itself to an order for costs. Nalco says that analogously, whilst a party to an appeal from an opposition is entitled to remain passive whilst the patent applicant discharges its onus of persuading the Court to allow its amendment under s 105(1A), where that party unsuccessfully opposes the s 105(1A) application and takes an adversarial approach in doing so, it exposes itself to an order for costs.

30    But we agree with Cytec that the practice of this Court in relation to awarding costs in the context of an application for preliminary discovery is not a useful analogy. The approach to costs on a preliminary discovery application is informed by different considerations, in particular the nature of the power to order such discovery and the context in which it is being exercised. A mini–trial of substantive issues is not or should not be undertaken and the purpose for the existence and exercise of the power to order preliminary discovery is quite different. The preliminary discovery jurisdiction is “intended to facilitate the making of sensible decisions concerning the commencement of proceedings, before proceedings have been formulated” (Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 at [26] per Burley J). Contrastingly, under the Court’s jurisdiction to allow the amendment of a patent application substantive issues and quite different discretionary considerations are in play.

31    Third, Nalco had to accept that in respect of a granted patent, a patentee will usually be ordered to pay the costs of an unsuccessful opposition to an amendment sought under s 105(1) because such an amendment is an indulgence, unless the grounds of opposition were trivial, unmeritorious or unreasonable.

32    In Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61, Bennett, Besanko and Beach JJ said (at [312] and [313]):

As to the costs awarded on the amendment application, his Honour failed to take into consideration the principle that amendment of the patent is an indulgence to the patentee and the practice that has long followed that principle. It has long been accepted (for example, Re British Thomson-Houston Company Ltd’s Patent (1936) 53 RPC 225 at 269 per Luxmoore J) that amendment to a patent is an indulgence to the patentee, who should therefore pay the costs. As put by Emmett J in Les Laboratoires Servier v Apotex Pty Ltd (2010) 89 IPR 219 at [59], the power conferred on the Court by s 105, to allow a patentee to validate what would otherwise be an invalid or partially invalid patent, is for the benefit of the patentee, but the exercise of that power is an indulgence. This does not necessarily extend to amendment by deletion (Eli Lilly at [25] per Heerey J). Further, as Luxmoore J said, the Court should not discourage people from assisting the Court and offering “such criticisms as are proper to put forward”. A similar approach towards an opponent of amendment was taken in ICI Chemicals & Polymers Ltd v Lubrizol Corporation Inc (1999) 47 IPR 110 by Emmett J, who observed (at [19]) that if there had been no opponent, it would have been desirable for the Court to invite a contradictor.

This practice means that the award of costs, simply on the basis that certain grounds of opposition to the amendment were unsuccessful, is an approach which is incorrect in principle, where none of the grounds raised were found to be trivial, unmeritorious or unreasonable.

33    But Nalco says that that principle concerning s 105(1) has no application to amendments to patent applications sought under s 105(1A). Nalco says that a s 105(1A) application is not an indulgence sought by a patentee holding a defective or potentially defective granted patent. It says that s 105(1A) provides a facilitative mechanism that was introduced to overcome the difficulty of amending a patent application in the context of a s 60(4) appeal from the Commissioner’s decision. And it says that s 105(1A) applications to amend patent applications are different from s 105(1) amendments of granted patents, with important distinctions and discretionary factors of a different dimension. But in any event, Nalco says that if the indulgence principle applies to a s 105(1A) application, then Cytec’s grounds of opposition were trivial, unmeritorious or unreasonable such that this principle should not apply in the circumstances of this case.

34    We accept that the usual position as concerns granted patents is that the applicant seeking the amendment under s 105(1) will be ordered to pay the costs of an unsuccessful opposition to amendment on the basis that the amendment is an indulgence, so long as the grounds of opposition raised were not trivial, unmeritorious or unreasonable.

35    Now Cytec says that this is the appropriate starting point in the present case, notwithstanding that the application that we are dealing with is a s 105(1A) application. And it says that there is authority for the application of the same approach to the amendment of patent applications under s 105(1A) and refers to Boehringer Ingelheim Animal Health USA Inc v Intervet International B.V. (No 2) [2020] FCA 1433 at [4] to [7] per Moshinsky J, Meat & Livestock Australia Limited v Cargill, Inc (No 2) [2019] FCA 33; (2019) 139 IPR 47 at [470] per Beach J, Novartis AG v Arrow Pharmaceuticals Pty Ltd [2020] FCA 139 at [19] and [20] per Jagot J and Cytec Industries Inc. v Nalco Company [2019] FCA 1800 at [49] and [50] per Burley J.

36    Generally, Cytec says that an amendment under either s 105(1) or s 105(1A) is an indulgence, and that each of them involves similar considerations.

37    But in our view not too much can be drawn from the small number of single instance decisions that have determined costs on a s 105(1A) application. Apart from MLA (No 2), which concerned a contested application, the amendment applications in Cytec, Novartis, Boehringer and ToolGen Inc v Fisher (No 3) (2024) 184 IPR 301 at [31] per Nicholas J were ultimately not contested.

38    Further, whilst some of those decisions referred to s 105(1A) applications to amend patent applications as being an indulgence, they did not apply the indulgence principle with the full rigour that applies to the amendment of granted patents; see for example Boehringer at [7]. Further, whilst in MLA (No 2) Beach J at [470] referred to the successful s 105(1A) amendment applicant as having obtained an indulgence, his Honour made no order as to costs between the patent applicant and the respondent because his Honour “was significantly assisted by [the respondent’s] presentation which enabled [him] to proceed with the confidence that all relevant legal and forensic matters had been addressed”; for completeness we note that there was an appeal from the decision of Beach J concerning broader questions of statutory power, which appeal was dismissed (Meat & Livestock Australia Ltd. v Branhaven LLC (2020) 281 FCR 640).

39    Nalco seeks to re–inforce its point by the findings of the majority as to the distinctions between s 105(1) and s 105(1A) amendments.

40    As it points out, and as recognised by Emmett J in Les Laboratoires Servier v Apotex Pty Ltd (2010) 273 ALR 630 at [59], which was cited by the majority at FCJ [501], the exercise of the power conferred by s 105(1) “in favour of the patentee is an indulgence” because:

[t]he rationale underlying the Court’s discretion to refuse permission to amend is that it is the duty of the Court to protect the public from abuse of the monopoly conferred by the grant of a patent.

41    Contrastingly, as the majority held at FCJ [519]:

Now the rationale underlying the Court’s discretion to refuse amendment under s 105(1) is not a rationale that can simply just be applied to the power of amendment in s 105(1A). No monopoly is conferred by a patent application and so no abuse of monopoly can arise. And s 105(1A) was introduced to overcome the difficulty of amending a patent application in the context of an appeal from the Commissioner’s decision.

42    Nalco says that these findings support the position that the indulgence principle does not inform the exercise of the Court’s discretion in determining costs of an unsuccessful opposition to a s 105(1A) application to amend a patent application.

43    But in our view, and giving due recognition to the distinctions between the s 105(1) context and the s 105(1A) context, the allowing of an amendment under s 105(1A) to a patent application is still giving an indulgence to the patent applicant, albeit that it is less of an indulgence than that given to a patentee permitting an amendment to a granted patent. To recognise that there are differences between the two contexts, as the majority did, does not entail that there is no form of indulgence in the s 105(1A) context in allowing an amendment.

44    In summary, in our view a watered–down version of the indulgence principle still applies to unsuccessful oppositions to s 105(1A) applications. But of course it is not as great an indulgence as allowing an amendment to a granted patent.

Application of principles

45    Nalco succeeded before us in its amendment application with the majority of us holding that the amended claims comply with ss 40(2)(a) and 40(3), and that the amendments were allowable under ss 102 and 105(4). Further, the majority exercised their discretion in Nalco’s favour in allowing the amendments.

46    Nalco says that in respect of the s 102 grounds, whilst they turned on construction, neither the majority nor the minority adopted either Cytec’s construction or the primary judge’s construction. In the circumstances, Nalco says that Cytec ought to pay Nalco’s costs of its unsuccessful opposition in respect of the s 102 allowability grounds.

47    Further, Nalco says that the majority’s rejection of every discretionary argument advanced by Cytec illustrates the triviality, lack of merit or unreasonableness of Cytec’s opposition. Nalco says that Cytec also ought to pay Nalco’s costs of the unsuccessful discretionary grounds. It says that Cytec unnecessarily pursued additional discovery notwithstanding that Nalco had provided voluminous material on voluntary disclosure. It says that Cytec introduced significant complications immediately prior to the hearing of the amendment application by raising late hearsay objections. It says that Cytec’s cross–examination of fact witnesses was ineffective across the board. Nalco points out that the majority found Cytec’s criticisms of Dr Dixon to be overstated. Further, they found that Dr Anthony’s cross–examination was not substantively in conflict with Dr Dixon’s evidence. Further, they found that the transcript of Mr Longstaff’s cross–examination did not support Cytec’s assertions.

48    Now Nalco says that it is one thing for an opposing party to put the patent applicant to proof in respect of discretionary grounds available on the documents produced in answer to its full and frank disclosure obligations, but it is another thing for an opposing party to pursue discretionary grounds that are inconsistent with the produced documents including seeking unfounded credit findings against professional advisers.

49    Contrastingly, Cytec says that the allowability issues, which took up the majority of the proceedings dealing with amendment issues, turned on a construction issue. Cytec says that although it failed on those issues, it was Nalco and its advisers that framed the language of the proposed amended claims that gave rise to the construction issues.

50    Further, as to the discretionary grounds, Cytec says that the primary judge did not deal with the full and frank disclosure issue or the unreasonable delay issue in J2. It points out that the appeal before us was the first occasion on which any decision maker considered and made findings on the voluminous material put forward by Nalco on its amendment application.

51    Moreover, Cytec says that it did not run trivial, unmeritorious or unreasonable grounds. Further, it says that Nalco incorrectly equates grounds meeting that standard with grounds that were merely unsuccessful. In elaboration, Cytec made the following points.

52    Cytec says that the original form of the amendment application filed on 20 September 2021 proposed a different form of claims to those that were pursued in J2, and ultimately allowed on appeal, and raised different issues concerning the meaning of the claims. And as to the grounds that were pressed at the hearing before the primary judge that was the subject of J2, Cytec made the following points. Before that hearing, Cytec identified a number of grounds that it did not press and others that were only conditionally pressed depending on how Nalco put its arguments. Further, Cytec says that each of the grounds was either a consequence of an available construction of the claim set as advanced by Nalco, or arose as a matter of discretion from the documentary evidence adduced by Nalco.

53    Further, Cytec points out that it was its sufficiency and support arguments and the equivalent futility argument that were considered and accepted by the primary judge. The primary judge accepted that Nalco’s loss on the construction issue meant that each of the three bases for refusing the amendment mentioned succeeded.

54    Further, Cytec says that its decision to narrow the issues on appeal by not seeking to contest the hydrolysis construction issue on appeal is a matter in its favour on costs.

55    Further, Cytec says that Nalco had an obligation to make full and frank disclosure of how the amendment came to be sought. Cytec says that it sought and obtained targeted discovery by specific reference to the evidence that Nalco proposed to adduce at the hearing. Further, Cytec says that to the extent that a dispute over discovery categories went before the primary judge, costs orders in relation to that dispute have already been made. Cytec says that that dispute ought not to be in effect double counted as also somehow bearing on the resolution of the costs issues now before us. Moreover, neither party seeks to disturb existing costs orders.

56    Further, Cytec says that whilst the majority did not ultimately accept that the substance and reliability of Dr Dixon’s affidavit evidence was substantially diminished by cross–examination, his affidavit evidence was only served in response to Cytec’s objections and it was appropriate that the evidence be tested by a contradictor. Further, neither Ms Crooks nor Mr DeMaster was required for cross–examination.

57    Generally, Cytec says that Nalco’s ultimate success on appeal in establishing that the amendments were allowable and that the discretion ought to be exercised in its favour does not entail that Cytec’s opposition was trivial, lacking in merit or unreasonable.

58    In our view, it is not necessary to descend into the detail of the history of the amendment proceeding as the parties have done. It is only necessary to make the following points in summary.

59    First, Nalco had complete success in respect of the second appeal concerning challenging the primary judge’s reasons in J2 and on the s 105(1A) discretionary grounds that were decided in its favour by the majority. In our view the costs of this appeal should follow the event. Further, although some indulgence has been given to Nalco in allowing the amendment application under s 105(1A), that can be properly and proportionately addressed by taking that factor into account in our consideration of the costs position at first instance.

60    Further, in our view although none of Cytec’s arguments either on the construction issues, the allowability grounds or the discretionary grounds could be said to have been unmeritorious or unreasonable, nevertheless as the losing party on the second appeal it should pay Nalco’s costs.

61    Second and contrastingly, as to the proceedings at first instance or what we have described as the amendment proceeding, if the correct position had been taken below by the primary judge, Nalco would in any event have obtained some level of indulgence, albeit that it would have been successful. Moreover, as we have said, Cytec’s opposition was neither unmeritorious nor unreasonable and it was entitled to challenge the amendment application, albeit unsuccessfully.

62    In all the circumstances we consider that there ought to be no order as to costs either way. Nalco ought to have been successful at first instance, but such success would have entailed it being given a form of indulgence. On balance, no order one way or the other is justified.

63    For completeness, we note that Nalco pointed out that Cytec also raised issues below that it lost below and were not pursued further. But we cannot say that those arguments were unmeritorious or unreasonable such as to justify any order in Nalco’s favour on such issues.

Conclusion

64    For the foregoing reasons, Cytec should pay Nalco’s costs of and incidental to the appeal concerning J2. Otherwise, each party should bear their own costs in relation to the amendment application and the amendment proceeding culminating in J2, save that we will leave all existing costs orders in place.

Associate:

Dated:    2 September 2026