FEDERAL COURT OF AUSTRALIA

Neurizon Pty Ltd (ACN 077 012 376) v LTH Consulting and Marketing Services Pty Ltd (ACN 061 363 139) [2003] FCA 208

INTELLECTUAL PROPERTY – patents – amendment of specification – whether amendments go beyond scope of claims presently – whether obvious mistake – whether there was delay – whether applicant has sought to obtain or obtained unfair advantage – whether applicant has not shown reasonable grounds – whether applicant has not made full disclosure – whether amendment should be allowed on terms– whether may amend patent after infringement trial.

Patents Act 1990 (Cth) ss 40, 102, 102(2), 102(3), 105, 115

Neurizon Pty Ltd v LTH Consulting and Marketing Services Pty Ltd [2002] FCA 1547 cited

Ancare New Zealand Ltd’s Patent [2001] RPC 20 discussed

NEURIZON PTY LTD (ACN 077 012 376) v LTH CONSULTING AND MARKETING SERVICES PTY LTD (ACN 061 363 139) AND GOLDEN CASKET LOTTERY CORPORATION LIMITED (ACN 078 785 449) AND GOLDEN CASKET LOTTERY CORPORATION LIMITED (ACN 078 785 449) AND TAB QUEENSLAND LIMITED(ACN 085 691 738) AND NEURIZON PTY LTD (ACN 077 012 376)

Q 171 OF 2001

DOWSETT J

18 MARCH 2003

BRISBANE

REASONS FOR JUDGMENT

1                     I delivered judgment in this matter on 13 December last year, following a lengthy trial. A number of matters remain outstanding. In particular, I am now considering a motion on the part of the applicant, pursuant to s 105 of the Patents Act 1990 (Cth) (the “Act”), to amend the specification. The first proposed amendment is unopposed. It involves minor amendments to p 12 of the patent. In ll 2-5 the following sentences appears:

If the random number generated falls within the winning band and the attempt at awarding the prize succeeds. Otherwise the attempt fails.

2                     Clearly the word “and” is inadvertent surplusage and should be deleted. On the same page, at ll 23-25, the following sentence appears:

“For the embodiment having the parameters and operational characteristics specified in Table 8 and Table 9…”

3                     The reference should be to “Table 7 and Table 8”. There will be leave to amend the specification to make these corrections.

4                     The next proposed amendment relates to claim 19. Very briefly, the patent teaches that the probability of a jackpot being awarded to a particular gaming machine may depend upon the amount wagered on that machine over an elapsed period of time prior to such award. Claims 1 - 16 are expressed as claims to a method of awarding a prize. Claims 2 - 15 are dependent upon claim 1. Claims 17 - 23 are for a gaming system. Claims 18 - 23 are dependent upon claim 17. The applicant also seeks other amendments to some of these claims, but they arise out of a discrete matter, unconnected to that presently under consideration. Claims 17 - 23 are as follows:

17. A gaming system comprising at least one electronic machine; control means connected to the gaming machine(s), the control means being adapted to conduct a series of prize draws in each of which each gaming machine has an opportunity to win a prize on a non-deterministic basis; and means for determining the winning probability of each gaming machine at each prize draw, characterised in that the probability of each gaming machine winning a prize draw is dependent on at least some of the amount wagered on that gaming machine during an elapsed period.

18. A gaming system as claimed in claim 17 wherein the probability is related to the total wagered amount recorded during the elapsed period.

19. A gaming system as claimed in claim 18 or 19, wherein the elapsed period is a rolling or sliding predetermined period of time prior to each prize draw.

20. A gaming system as claimed in claim 19, wherein the control means includes means for recording during the predetermined period amounts wagered on each gaming machine.

21. A gaming system as claimed in any one of claims 18 to 20, wherein the control means includes a jackpot controller, and the prize is a progressive linked jackpot.

22. A gaming system as claimed in any one of claims 18 to 21, wherein each gaming machine is an electronic gaming device.

23. A gaming system as claimed in any one of claims 18 to 22, having display means to display a graphical representation of the probability of each gaming machine of winning the prize draw.

5                     The relevant amendment concerns the reference in claim 19 to “A gaming system as claimed in claim 18 or 19…”. Obviously, the reference to claim 19 is erroneous. The applicant seeks to amend it to read “claim 17 or 18”. Section 105 of the Act provides:

(1) In any relevant proceedings in relation to a patent, the court may, on the application of the patentee, by order direct the amendment of the patent, the patent request or the complete specification in the manner specified in the order.

(2) An order may be made subject to such terms (if any) as to costs, advertisements or otherwise, as the court thinks fit.

(3) The patentee must give notice of an application for an order to the Commissioner, who is entitled to appear and be heard, and must appear if the court directs.

(4) A court is not to direct an amendment that is not allowable under section 102.

(5) The patentee must file a copy of an order within the prescribed period.

(6) On the filing of a copy of an order, the patent, patent request or complete specification is to be taken to have been amended in the manner specified in the order.

6                     Section 102 relevantly provides:

(1) An amendment of a complete specification is not allowable if, as a result of the amendment, the specification would claim matter not in substance disclosed in the specification as filed.

(2) An amendment of a complete specification is not allowable after the relevant time if, as a result of the amendment:

(a) a claim of the specification would not in substance fall within the scope of the claims of the specification before amendment; or

(b) the specification would not comply with subsection 40(2) or (3).

(2A) For the purposes of subsection (2), relevant time means:

(a) in relation to an amendment proposed to a complete specification relating to a standard patent - after the specification has been accepted; or

(b) in relation to an amendment proposed to a complete specification relating to an innovation patent - after the Commissioner has made decisions under paragraphs 101E(a) and (aa) in respect of the patent.

(2B) …

(2C) …

(3) This section does not apply to an amendment for the purpose of correcting a clerical error or an obvious mistake made in, or in relation to, a complete specification.

7                     In opposition to the proposed amendment the respondents submit that it would result in claim 19 going beyond the scope of the claims as they presently stand, contrary to subs 102(2). To the extent that the applicant seeks to rely upon subs 102(3), permitting the amendment of a clerical error or obvious mistake (which amendment is not subject to the prohibition contained in subs 102(2)), the respondents submit that the error is not of the relevant kind.

8                     As to subs 102(2), the prohibition applies to an amendment, which would result in any claim being beyond the scope of “…the claims of the specification before amendment”. It is no answer to a proposed amendment that it may take the particular claim to be amended beyond its own prior scope. One looks to the totality of the claims prior to the proposed amendment to determine whether, after the amendment, any claim will be beyond that scope. In my view claims 18 and 19 are subsidiary to claim 17. They were intended to provide more specialized, and narrower claims, perhaps to guard against the possibility that claim 17 might be held to be too wide. Thus the probability of a win, dependent upon the total wagered amount during an elapsed period (which is the substance of claim 18) is narrower than the claim made in claim 17 in which such probability is dependent upon “…at least some of the amount wagered … during an elapsed period”. That claim, by inference, includes the situation where probability depends upon more than “some of the amount wagered”. Similarly claim 19 describes a more specialized elapsed period of time than is described in claim 17. Claim 17, by itself, is wide enough to encompass both claims 18 and 19. For that reason subs 102(2) is no bar to the proposed amendment. These constructions of the expressions “total wagered amount” and “a rolling or sliding pre-determined period of time” were identified in my reasons for judgment. See Neurizon Pty Ltd v LTH Consulting and Marketing Services Pty Ltd [2002] FCA 1547 at [36] and [41]. Claim 19, in its amended form, is within the scope of the claims of the specification before amendment.

9                     In any event, I am inclined to the view that the “error” is merely an obvious mistake for the purposes of subs 102(3). The way in which it occurred does not sufficiently appear from the material to allow characterization of it as a clerical error. However the reference to claim 19 is plainly erroneous. I accept that for a mistake to be obvious, the actual intention must be clear. It is said that it is not clear whether the intention was to refer only to claim 18 or to it and some other paragraph which cannot now be identified. The use of the connective “or” is unlikely to have been accidental. It demonstrates an intention to refer to two claims. If that is so, then it is probable that the intention was to refer to claims 17 and 18. They are the only earlier claims dealing with “a gaming system” as opposed to “a method”. Without descending into further particularity, this approach is consistent with the general approach of the draftsman throughout the various claims. Subject to certain other arguments concerning discretionary bars, I am of the view that this amendment should be allowed.

10                  The other proposed amendments arise out of a matter which I addressed at [33] and [34] of my reasons. Although the patent focuses upon the use of electronic gaming machines or devices (terms used interchangeably in the evidence and unfortunately, inconsistently described in my reasons as either “EGDs” or “EGMs”), in many places, it refers to “gaming machines”. For example claims 1 - 15 refer to a “gaming machine” or “gaming machines”, but claim 16 is for:

A method as claimed in any preceding claim, wherein each gaming machine is an electronic gaming device.

11                  Claims 17 - 21 similarly refer to a “gaming machine”. Claim 22 provides:

A gaming system as claimed in any one of claims 18 - 21, wherein each gaming machine is an electronic gaming device.

Similar problems appear elsewhere in the claims. As my earlier reasons disclose, I concluded that the invention as described in the specification depended upon mathematical probability being calculated frequently and quickly. The expression “gaming machine” is wide enough to include an extensive range of mechanical gambling devices many of which could not, one would think, be readily used in conjunction with such calculations. I therefore inferred that the invention was for use in connection with electronic gaming devices and not gaming machines generally. I also concluded that to the extent that the claims went beyond the use of the invention with electronic gaming devices, they were not fairly based. This view of the patent emerged from my consideration of a major theme in the respondents’ argument against validity, namely that the patent did not explain how the invention was to be performed. It seemed to me that in common parlance, expressions such as “electronic gaming device” or “electronic gaming machine” describe a computer-controlled machine, capable of performing the necessary calculations and awarding prizes as a result thereof. In other words, my approach to construction of the patent recognized an apparent assumption underlying it, namely that the relevant calculations would be performed and given effect electronically. Although this view was the result of my consideration of the respondents’ argument, I was concerned that the parties had not addressed it directly. I thought it appropriate to give them an opportunity to do so. For that reason I did not make an ultimate finding in my reasons as to the validity of the affected claims and invited further submissions.

12                  The applicant’s first response was to submit that the patent was sufficiently wide to apply to all gaming machines and that it encompassed the use of electronic calculating equipment in support of gaming machines which were not electronic gaming devices. I pointed out in the course of argument that there was no explanation in the patent as to how such a result might be brought about, nor was there any evidence concerning the issue. The matter was adjourned with that issue unresolved. When the matter resumed, the applicant sought to amend the patent to limit its ambit to electronic gaming devices. The presently proposed amendments will have that effect. The respondents have not made any further submissions as to my approach to the patent, relying upon those previously made concerning validity and compliance with s 40. In the circumstances I adopt the preliminary views expressed in my reasons. To the extent that the claims go beyond the use of the applicant’s invention in connection with electronic gaming devices, they are not fairly based on the specification. Thus it is necessary to consider the proposed amendments.

13                  The respondents oppose them on discretionary grounds, which grounds are also relied upon in opposing the amendment to claim 19 which I have already considered. The matters said to militate against exercise of the discretion in the applicant’s favour include:

®                 delay;

®                 that the applicant has sought to obtain, and has obtained unfair advantage from the patent;

®                 that the applicant has not shown reasonable grounds for any earlier belief that amendment was unnecessary;

®                 that the applicant has not made full disclosure; and

®                 that any amendment should only be upon terms.

14                  I consider that much of the respondents’ opposition is based upon a misunderstanding of these proposed amendments and the circumstances which have necessitated them. Rightly or wrongly, I have concluded that the specification discloses an invention for use in connection with electronic gaming devices. I have also found that the claims go beyond the invention so disclosed, extending as they do to gaming machines other than electronic gaming devices. This criticism relates specifically to claims 1 - 15, 17 - 21 and 23 - 28. However claim 16 claims a method as claimed in all preceding claims, but limited to methods which utilize electronic gaming machines. I have upheld this claim. Although my reasoning leads to the conclusion that claims 1 - 15 are invalid as claims, nonetheless they must remain in the patent in some form in order that claim 16 be comprehensible. It would be awkward and misleading if they were to remain unamended. The applicant seeks to delete claim 16 (which I have held to be valid) and to amend claims 1 - 15 to limit them to the field previously occupied by it.

15                  Claims 17 - 23 claim a gaming system. Claims 18 – 21 are dependent upon claim 17, and claim 22 is, in turn, dependent upon them, but not directly upon claim 17. Claim 22 is limited to a system using electronic gaming machines. Hence claims 18 – 21 are, in effect, replicated in claim 22 with that limitation. Claim 17, to the extent that it is broader than claims 18 –21, is not so replicated. Again, the applicant seeks to delete claim 22 and amend claims 17 – 21 in the same way as is proposed with respect to claims 1 – 16. Claim 23 is dependent upon claims 18 – 22. To the extent that it is dependent upon claim 22, it is limited to systems using electronic gaming machines. Claim 22 actually incorporates claim 18 - 21 with that limitation. It follows that the proposed amendments to claims 18 – 23 are, as in the case of the amendments to claims 1 - 16, purely by way of re-drafting to reflect my decision as to validity.

16                  Claims 17 and 24 - 28 pose different problems. Claim 22 does not incorporate claim 17, save to the extent that the former is dependent upon claims 18 – 21. The proposed amendment to claim 17 will have the effect of narrowing the claim to preserve its validity by limiting its application to systems using electronic gaming machines. Similar comments apply to claims 24 – 28. In my view the case for opposing amendments which merely re-draft valid claims must be weaker than that for opposing amendments designed to narrow the ambit of claims which lack fair basing.

17                  I turn now to the discretionary bars. Firstly the respondents say that there has been delay in applying for amendment. The complete specification was filed on 9 August 1999 and accepted on 5 November 1999. It is said that the applicant became aware that the second respondent had filed a patent application covering similar ground in April 2001 and complained of infringement on 4 May 2001. The present proceedings were commenced on 6 August 2001, and revocation was sought on 31 August 2001. The trial took place in June, last year. Judgment was delivered on 13 December 2002. The current application to amend was filed on 30 January 2003. The respondents assert that at some earlier stage, the applicant ought to have recognised the need for amendment and applied accordingly. It is not immediately clear when the applicant ought to have done so. As I have observed the major problem giving rise to most of the amendments was not, at any time, clearly raised by the respondents. On the other hand, the claims are very widely drawn.

18                  The respondents rely upon the decision of the New Zealand Court of Appeal in Ancare New Zealand Ltd’s Patent [2001] RPC 20. In that case the patentee had given notice, prior to a revocation hearing, of its intention to seek amendment of the patent in the event that it was found to be invalid. The proposed amendment was not particularised. At trial the patent was held to be invalid, and the patentee then sought to amend, but in a more extensive way than had previously been notified. The respondents rely particularly upon the following passage which appears at page 344:

…in general the patentee should notify any amendments sought before trial (with the appropriate advertisement for opposition) and should present supporting evidence before validity is ruled upon.

19                  However, this passage commences with the words:

There may be special circumstances in which amendment can be entertained after judgment – as where the patent is held invalid in part and amendment is required to excise invalid parts - but …

20                  At worst for the applicant that is the present position. Other passages in the judgment indicate that the Court was not taking the broad view urged by the respondents in their argument. For example, at page 343 Gault J observed:

It seems quite inconsistent with the fundamental requirement that a patentee must clearly define the invention and with the need for competitors to know the scope of the monopoly into which they cannot trespass that patentee can engineer a situation in which two versions of the patent are supported and a court, after finding invalidity, is required to consider further evidence directed to an issue already decided.

21                  At 344 His Honour said:

… but no case was cited to us in which [(s 30 of the English Patents Act 1949)]… has been construed as permitting the formulation of amendments after a finding of invalidity and a further hearing with new evidence and argument that the earlier decision should be revisited.

The practice … appears to have been that where amendments were sought in proceedings for infringement or revocation directions were sought and given on whether the amendment application should be ruled upon prior to or at the trial. … Blanco White … suggests that after judgment there may not be a proceeding in which to seek amendment.

22                  At 345 Gault J continued:

Delay without reasonable grounds in seeking amendment, and assertion of the monopoly unamended with knowledge of grounds of invalidity have long been reasons for refusing to exercise the discretion to permit amendments ….

…

That does not exclude the possibility of a patentee, acting reasonably, seeking to resist the challenge to validity without amendment and, upon delivery of an adverse decision, then seeking and being allowed amendment. But the risks inherent in that course, if the amendments can reasonably have been notified prior to trial, are plain enough.

23                  It would certainly be inappropriate to encourage a patentee to believe that it may litigate all challenges to the validity of its patent in the confident expectation that in the event of its being unsuccessful, it will be permitted to seek to amend and then have another trial designed to determine the validity of the proposed amended patent. Where validity is challenged the trial should, in general, resolve all matters concerning that issue. However there will be cases in which wider and narrower constructions of a patent are reasonably available. The need for amendment may depend upon the Court’s resolution of that construction question. The more focussed the attack on the patent and the more obvious the validity of such attack, the harder it will be for the patentee to justify continued assertion of an unduly favourable view of it and failure to seek amendment at an earlier stage.

24                  In the present case, the deficiency in the claims which has led to most of the proposed amendments was not precisely identified by any party in advance of the trial. The applicant and the respondents took very optimistic views of their respective cases. That is not unusual in patent cases. This is not a case in which the patentee has failed in defending the patent against a clear challenge. It is rather a case in which part of a very broadly based attack on validity has been successful. There is no evidence that the applicant has sought to enforce the patent in connection with gaming machines. It is true, however, that its initial reaction, following the publication of my reasons, was to seek to defend the claims as they then were.

25                  The second discretionary ground relied upon by the respondents is that the applicant has sought to obtain, and has obtained unfair advantage from the patent in its unamended form. There is no evidence that this is so, nor any evidence which might suggest that as much was the applicant’s intention. There is no evidence that anybody has suffered as a result of the applicant’s conduct. It is also said that the applicant has not shown any reasonable ground for its belief that amendment was unnecessary. I have in effect dealt with this aspect already. There may have been a failure to focus upon what appears to me to be an obvious shortcoming in the drafting of the patent, but the point was not raised by the respondents.

26                  It is submitted that the applicant has failed to make full disclosure of all matters relevant to the question of amendment. It is said that there is no precise evidence that the applicant was not aware at some earlier stage of the relevant deficiencies in the patent and that the applicant’s advisers may have advised it of them. It is further said that a relevant file has not been discovered and that it may contain evidence of such advice. These matters must be taken in the light of the positive averment by Mr Johnson at par 18 of his affidavit filed on 18 February 2003, that the issue was not drawn to his attention or otherwise known to him prior to the publication of my reasons for judgment. This averment excludes any possible argument that there has been relevant non-disclosure.

27                  In the circumstances, the only discretionary consideration which might militate against allowing amendment is the failure to identify the need for the amendment at an early stage, promptly to formulate it in precise terms and give appropriate notice. Given the diffuse nature of the attack upon the patent and Mr Johnson’s averment, I am inclined to accept that the failure was the result of oversight. The amendments substantially narrow the claims to reflect my findings. It would be an extreme consequence if the applicant were to be deprived of the benefit of the patent, or a substantial part thereof, particularly in the absence of any evidence as to prejudice to other persons. These considerations apply with particular force to the proposed amendments to claims 1 – 15 and 18 - 22, but they also apply to the other proposed amendments. In this case, the patent has been found to be invalid in part, as discussed in Ancare. There is no suggestion that either party wishes to call further evidence as to the proposed amendments.

28                  In addition to the proposed amendments to the claims there are a number of proposed amendments to the body of the specification to insert the word “electronic” before the words “gaming machine”. If the claims are to be amended, there seems to be no reason why the body of the specification ought not be similarly amended.

29                  It is submitted that amendment should only be allowed upon condition that there be no proceedings for any infringement committed prior to the order for amendment. Any pecuniary claim arising out of such infringement will be regulated by s 115. I understand that the applicant proposed to seek appropriate relief pursuant to that section. I am not presently considering any pecuniary claims. However I am asked to make findings as to infringement and to grant injunctions. It is obviously desirable that the status of the respondents’ infringing conduct be established. The amendments offer no reason for failing to do so. Thus I will make findings as to infringement. As to injunctions, it would have been appropriate to allow the respondents to give appropriate undertakings, but no permanent undertakings have been offered. I see no basis for imposing terms. I will consider any question of costs when I consider the costs of the actions generally. All proposed amendments should be allowed.

Associate:

Dated: 18 March 2003