FEDERAL COURT OF AUSTRALIA

Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd [1999] FCA 421

INTELLECTUAL PROPERTY – Patents – Costs – Infringement proceedings – Cross claim for revocation – Amendment of particulars of grounds of invalidity – See v Scott Paine order.

Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1998) AIPC 91 applied

Baird v Moule’s Patent Earth Closet Company reported in Edison Telephone Co v India Rubber Co (1881) 17 Ch D 137 cited

See v Scott‑Paine (1932) 50 RPC 56 cited

Williamson v Moldline Ltd (1986) RPC 556 applied

La Baigue Magiglo v Multiglow Fires [1994] RPC 295 cited

Josiah Wedgwood & Sons Ltd v Stained Glass Systems Ltd (unreported, Chancery Division, 16 October 1996) cited

GEC Alsthom Limited’s Patent [1996] FSR 415 applied

WIMMERA INDUSTRIAL MINERALS PTY LIMITED v RGC MINERAL SANDS LIMITED and RGC MINERAL SANDS LIMITED v WIMMERA INDUSTRIAL MINERALS PTY LIMITED and THE COMMISSIONER OF PATENTS

VG 215 OF 1994

SUNDBERG J

13 APRIL 1999

MELBOURNE

THE COURT ORDERS THAT:

1.                  The respondent have leave to amend paragraphs 2A(1) and 10A(1) of the Further Amended Grounds of Invalidity in accordance with exhibit PEZ 2 to the affidavit of Paul Edward Zawa sworn 2 October 1998.

2.                  [Costs.]

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

THE AMENDMENT APPLICATION

1                     A general description of the nature of this proceeding can be found in my reasons in Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1998) AIPC 91‑406 (“Wimmera”).  The respondent (“RGC”) has now applied for leave to amend pars 2A(1) and 10A(1) of its Further Amended Particulars of Grounds of Invalidity.  Paragraph 2A as it now stands is in part as follows:

“2.       The alleged invention so far as claimed in each and every claim of the complete specification is not novel when compared with the prior art base as it existed before the priority date of each such claim.

PARTICULARS

Hereunder the Respondent/Cross‑Claimant will rely on common general knowledge in Australia before and at the said priority date and also upon the whole of each of the following instances of prior publication and prior user and/or prior art information.

A.                 Matters occurring before 2 March 1990 (the date on which the provisional patent specification PJ 8919 was lodged)

…

(1)               The use by the Respondent/Cross‑Claimant and its predecessors Associated Minerals Consolidated Limited and Western Titanium Limited, at their Capel B Plant from about 1980 onwards, such Plant being near Capel in Western Australia, and at their Narngulu C plant, near Geraldton in Western Australia from 1987 onwards, in the large scale commercial production and sale of synthetic rutile, of a process for upgrading the titania content of a titaniferous material, namely ilmenite, (“the prior process”) which process comprised the steps of:

(i)                 reducing the ilmenite using a solid carbonaceous reductant (namely coal or coal and recycled coal char) in a reduction kiln at temperatures in the reduction kiln ranging from about 920^oC to about 1195^oC, and both with, and without, the addition of sulphur, a sulphur containing compound or sodium chloride to the reduction kiln, to form metallic iron, a rutile phase or phases (including reduced rutile) and one or more of the separate impurity bearing titaniferous phases referred to in the specification and claim of the Petty Patent to produce a thermally reduced product ….

…”

Paragraph 10A(1) is in the same form.

2                     The amendment sought will do three things.  First, it will add another Plant at which the prior process was carried out.  Second, it will alter the period in which the process was carried out at the Capel B Plant.  If these two aspects of the amendment are made, the process will be alleged to have been carried out at RGC’s:

“Capel A Plant from:

about May 1973 to about August 1975;

about January 1980 to about September 1982; and

about 1983 onwards;

Capel B Plant from:

about June 1974 to about December 1982; and

about January 1984 onwards;

such Capel Plants being near Capel in Western Australia.

Narngulu Plant from 1987 onwards, such Plant being near Geraldton in Western Australia.”

3                     The third aspect of the amendment will affect the description of the first step in the prior process by adding after the opening words of par (i) – “reducing the ilmenite” – the following:

“(with or without a preceding step of heating the ilmenite in an oxidising [atmosphere] at temperatures up to about 1000^oC for a period of 3 to 4 hours to produce a pseudobrookite structure and rutile) ….”

4                     The application to amend is supported by an affidavit of Paul Zawa, RGC’s then solicitor, which can be summarised as follows:

(a)                In early August 1998, pursuant to an order of the Court, RGC’s solicitors provided the solicitors for the applicant (“WIM”) with a list of samples on which RGC intended to rely in relation to the allegation of prior use in pars 2A and 10A of its further amended particulars of grounds of invalidity.  By letter of 7 August WIM’s solicitors pointed out that whereas the prior use cited in pars 2A and 10A is use at the Capel B Plant from 1980 onwards and use at the Narngulu C Plant from 1987 onwards, most of the twenty two samples were said to have come from the Capel A Plant and the rest from the Capel B Plant before 1980.  The samples thus lay outside RGC’s particulars.

(b)               In a letter of 2 October RGC’s solicitors acknowledged the disparity between the samples and the particulars, and indicated their intention to apply for the amendment now sought.  They expressed the view that the amendment should be uncontentious since “it does not add any matter of which your client was unaware from the prior art cited in the pleadings since 1994”.  They said that the amendments could be summarised as (a) adding in the Plant from which the samples originate; (b) extending the period of prior use back seven years; (c) accounting for periods in which RGC’s kilns had been shut down, and (d) noting that an optional pre‑oxidation step may have taken place.  They said that the pre‑oxidation step is cited “not only in most of the prior art relied upon since our client’s original pleadings in 1994, but is also mentioned in your client’s patent specification as an optional step”.  The letter concluded by observing that the amendment sought was “not an appropriate one to trigger a See v Scott‑Paine order”.

(c)                Mr Zawa listed the thirty one patents and articles cited in RGC’s particulars of 3 November 1994 and amended particulars of 20 February 1995 which refer to the addition of sodium chloride to the reduction kiln and to the oxidation of ilmenite prior to reduction.  Some of the patents and articles refer to the addition of sodium chloride and the oxidation of ilmenite, others to one or the other of those steps.

(d)               Mr Zawa exhibited WIM’s Petty Patent and Standard Patent, both of which refer to processes in which the ilmenite undergoes grain refinement by thermal oxidation followed by thermal reduction.

SEE v SCOTT‑PAINE ORDER

5                     In Wimmera I described the nature and purpose of Earth Closet and See v Scott‑Paine orders.  In the earlier proceeding RGC accepted that a See v Scott‑Paine order should be made, and the only question for decision was the “switchover” date.  In the present case there is no such concession, and the question is whether such an order should be made.  There is also a disagreement about the “switchover” date if an order is to be made.  The following propositions can be extracted from the authorities dealing with the making of the orders:

(a)                A See v Scott‑Paine order is made when a defendant who is challenging the validity of a patent is permitted to amend its pleadings to include, for example, prior art which was not contained in its original particulars of objections.  The order gives the patentee the right to elect, within a specified period, to proceed with or discontinue the action.  If the patentee discontinues, it must pay the defendant’s costs up to the “switchover” date (usually the date of delivery of the original particulars of invalidity), and the defendant must pay the patentee’s costs after that date.  If the patentee proceeds with the action, the defendant must pay the costs of the application to amend, and in other respects the matter proceeds in the usual way.  See Baird v Moule’s Patent Earth Closet Company reported in Edison Telephone Co v India Rubber Co (1881) 17 Ch D 137 and See v Scott‑Paine (1932) 50 RPC 56.

(b)               The purpose of the order is to impose on a party attacking the validity of a patent the obligation to take reasonable steps to ensure that the full attack is put before the patentee at the earliest time.  The imposition of that obligation is said to be justified by the “notorious expense and legal complexity” of patent actions.  See Williamson v Moldline Ltd (1986) RPC 556 at 563, 565.

(c)                When a defendant seeks to introduce by amendment objections of obviousness or want of novelty, an important consideration is whether, by making reasonably diligent inquiries, the defendant could have discovered the availability of such defences when the original pleading was served.  The defendant will not be found to have failed the diligence test where a search of prior art would have involved doing things out of the ordinary, or when prior use comes to the defendant’s attention “by chance in circumstances where it could not be properly suggested that he should have found it at an earlier date”: La Baigue Magiglo v Multiglow Fires [1994] RPC 295 at 298.  The onus of proving that the new material could not have been found with reasonable diligence lies on the defendant.  See Moldline at 564 and Josiah Wedgwood & Sons Ltd v Stained Glass Systems Ltd (unreported, Chancery Division, 16 October 1996).

(d)               Apart from the reasonable diligence inquiry, other relevant factors are the timetable of the proceedings, how late the amendment is, the extent to which the defendant has explained any lateness, and to what extent the patentee has been taken by surprise by the reliance on the new prior art.  See GEC Alsthom Limited’s Patent [1996] FSR 415 at 421.

(e)                Whatever the position might once have been, the order is not made as of course or “almost invariably” when a defendant seeks to raise objections to validity which are not contained in its original particulars.  The matter is entirely within the discretion of the court, and depends on the facts of the particular case.  See GEC at 421 and Wimmera at 37,224.

(f)                 In exercising its discretion the court should be aware that the order is capable of working an injustice to a defendant, by enabling a patentee with what it knows to be a weak patent to discontinue largely at the defendant’s cost.  The Court should bear in mind the possibility that the patent would have been held invalid even on the unamended particulars.  See GEC at 421 and Wimmera at 37,224.

THE PRESENT CASE

6                     RGC has not sought to prove that the matters it now wishes to include in its particulars could not by the exercise of reasonable diligence have been discovered earlier.  That is perhaps not surprising, because the amendment asserts use of the prior process at RGC’s (or its predecessors’) own Capel A Plant, use over a longer period at its own (or its predecessors’) Capel B Plant, and the optional step preceding the reduction of the ilmenite (ie heating it in an oxidising atmosphere) which was, at times, a feature of its own (or its predecessors’) prior process.  In those circumstances I conclude that RGC could, with reasonable diligence, have discovered the additional material when the original pleading was served.  Quite apart from the fact that RGC does not claim that it was not aware of, and could not with due diligence have discovered, its own process (or that of its predecessors), since at least 1994 it has been aware that the optional oxidation step was part of the prior art.  See the extensive list of patents and articles contained in the original pleading.

7                     Although the failure to exercise reasonable diligence is an important consideration, it is not conclusive.  In Moldline at 564 Slade LJ said:

“In the common case, where at the date of his original pleading the defendant had the knowledge or means of knowledge which would have enabled him originally to plead those matters which he seeks to plead by the proposed amendment, an “Earth Closet” order may very well be thought to work substantial justice.  For in such a case a plaintiff may well be justified in making observations such as this to the court:

If, at the time when the defendant served his original particulars of objections, I had known that he was going to rely on the new point now sought to be raised, I might well have discontinued my action.  If, however, after further investigation of the legal and factual position in the light of this new point, I now find that there is a valid objection to my patent and accordingly I, sensibly, decide to discontinue my action, it is only fair that the defendant should be ordered to pay the unnecessarily wasted costs which I have incurred since service of the original particulars of objection.”

8                     This oft‑quoted soliloquy is of significance to the present case.  I deal first with the Plants.  Since November 1994 RGC has asserted use at its Capel B and Narngulu Plants of a process for upgrading the titania content of ilmenite consisting of the steps set out in its particulars.  What it now seeks to do is add a further Plant at which the same process has taken place, and in relation to the Capel B Plant, extend the period of use back to 1974 and delete one year from the existing post‑1980 period of use.  Neither the addition of the extra Plant nor the altered period of use at the Capel B Plant is, in my view, a “new point” in the relevant sense.  In speaking of a “new point” Slade LJ had in mind the discovery by the patentee, as a result of the amendment, of a point which it sees as fatal to its patent.  RGC’s prior process has been pleaded against WIM since November 1994.  All RGC now wants to do is broaden the extent of its use of the prior process both geographically and temporally.  Assuming the prior process to be a valid objection, WIM will fail in its application and RGC will succeed in its cross‑claim if the pleadings stay as they are at present.  Put another way, if a See v Scott‑Paine order were to be made consequent upon the amendment, and WIM then elected to discontinue, I would conclude that it had done so because it had realised that its patents had always been at risk because of the prior art, and not because the amendment, so far as it relates to the Plants, had alerted it to a valid objection of which it was not already aware.

9                     Turning to the preceding oxidation step, WIM has been aware since at least 1991 that the prior art included a process by which ilmenite is subjected to grain refinement by thermal oxidation followed by thermal reduction.  Its own patents refer to this prior art.  Further, RGC’s particulars filed in November 1994 refer to patents and articles in which this process is disclosed.  For example, Australian Patent 516, 155 Hockin and Rolfe (Western Titanium Ltd) contains examples which involve oxidising the ilmenite prior to the reduction step.  United States Patent 3,502,460 Martin and Hockin (CSIRO/Western Titanium) describes the invention in part as follows:

“we provide a process for producing a titaniferous material of the type referred to from a titaniferous material such as ilmenite … in which the mineral in granular form is pre‑treated in an oxidizing atmosphere at a temperature within the range of between 950^oC and 1320^oC in the presence of a magnesium compound in an amount such that the mineral grains become coated with a zone of magnesian pseudobrookite, thereafter heating the product of the pre‑heating stage with a reducing agent ….”

The first claim in the United States patent is to a process in the above terms.  It is true that the oxidation process is a prior art attack that RGC has not mounted before.  But it is not, in my view, a “new point” for the purposes of the Slade soliloquy.  If WIM were to discontinue after the making of a See v Scott‑Paine order, I would conclude that it had done so because it realised that its patents had always been at risk because of the prior art, and not because the oxidation part of the amendment had alerted it to a valid objection of which it was not already aware.  It would be using the order as a means of bailing out at a reduced cost.  Cf GEC at 421.

10                  The other factors mentioned in GEC do not suggest to me that it is appropriate in this case to make the order sought by WIM.  The “timetable of the proceedings” and “how late the amendment is” can be taken together.  It will be at least two years before the case is ready for hearing.  The evidence has not yet been filed.  It will be apparent from what I have already said that WIM will not have been taken by surprise by the reliance on the new prior art.

CONCLUSION

11                  Having considered all the matters put to me by counsel that bear on the exercise of my discretion, and mindful of the need to take into account all the facts of the case and to make an order which is most likely to do justice between the parties, I have concluded that a See v Scott‑Paine order should not be made.  I will allow the amendment.  I will hear counsel on the question of costs.

Associate:

Dated:              13 April 1999