FEDERAL COURT OF AUSTRALIA

Bayer Bioscience N.V. v Deltapine Australia Pty Ltd (No 2) [2006] FCA 1762

PATENTS – application for directions for experiments

Held:

1.      Court’s permission not required

2.      Detailed directions given

Federal Court Rules Order 58 rule 31

Lucent Technologies Inc v Krone Aktiengesellschaft (No 2) (1999) 94 FCR 124 at [8] followed

BAYER BIOSCIENCE N.V. & ANOR v DELTAPINE AUSTRALIA PTY LTD (No (2) VID 1105 OF 2003

HEEREY J

15 December 2006

MELBOURNE

THE COURT ORDERS THAT:

1.                  Parties bring in minutes of order to give effect to these reasons.

2.                  The costs of the motion dated 13 October 2006 are reserved.

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

REASONS FOR JUDGMENT

1                                             The applicant Bayer Bioscience NV (Bayer) is the patentee of Australian Patent No 623530 (the Patent).  It has brought infringement proceedings against the respondent Deltapine Australia Pty Ltd (Deltapine).  By notice of motion filed on 13 October 2006 Bayer seeks directions under O 58 r 31 of the Federal Court Rules for the conduct of certain experiments and orders maintaining the confidentiality of experimental protocols proposed.

2                                             The invention the subject of the Patent relates to plant cells and plants, the genomes of which are transformed to contain at least two genes, each coding for a different non-competitively binding bacillus thuringiensis (Bt) insecticidal crystal protein (ICP) for a specific target insect species.  Bayer alleges that Deltapine’s exploitation of its Bollgard II variety of cotton, which contains Bt ICP genes coding for Cry1Ac and Cry2Ab toxins, infringes certain claims of the Patent.

3                                             One of the central issues in this case is whether, as Bayer alleges, the ICPs Cry1Ac and Cry2Ab “bind non-competitively” to receptors in the gut of the cotton bollworm insect Helicoverpa armigera.  If that is the case, the possibility of the insect species developing immunity is greatly reduced.  Non-competitive binding in a two ICP situation is said to occur where each ICP has a receptor for which the alternative ICP does not compete.

4                                             It has been shown that Cry2Ab does not compete for Cry1Ac receptors in the species in question.  The reciprocal proposition, that is to say, that Cry1Ac does not compete for Cry2Ab receptors, has not thus far been conclusively established by experimental proof.  Bayer’s case, in evidence filed so far in support of that proposition, depends on inference.

5                                             The problem Bayer has encountered thus far in obtaining experimental proof is the lack of Cry2Ab protein of sufficiently high purity and stability. 

6                                             After recent research, Bayer believes it has solved this problem.  It proposes to conduct two series of experiments.  The first (the purification experiments) will attempt to obtain sufficiently pure and stable Cry2Ab protein.  The second (the binding experiments) will endeavour to establish whether the protein so obtained binds the relevant receptor.

Order 58 rule 31

7                                             The rule provides:

“(1)  In a proceeding in which a party (the ‘proponent’) proposes to tender as evidence experimental proof of a fact, the proponent must apply for directions in relation to the experimental proof.

(2)  The Court may make such directions in relation to the experimental proof proposed to be tendered as evidence as the Court thinks appropriate, including directions about any of the following:

(a)        the service on other parties of particulars of the experiment and of each fact that the proponent asserts is, will or may be proved by the experiment;

(b)        any persons who must be permitted to attend the conduct of the experiment;

(c)        the time when, and the place where, the experiment must be conducted;

(d)        the means by which the conduct and results of the experiment must be recorded;

(e)        the time by which any other party (the ‘opponent’) must notify the proponent of any grounds on which the opponent will contend that the experiment does not prove a fact that the proponent asserts is, will or may be proved by the experiment.

(3)        Evidence of the conduct and results of the experiment is not admissible in the proceeding except:

(a)        if the proponent has made an application under subrule (1) and  has complied with any directions given under subrule (2); or

            (b)        with the leave of the Court.

(4)        If a direction mentioned in paragraph (2)(e) has been made, and the opponent has not complied with the direction in relation to a ground, the opponent may not rely on the ground except with the leave of the Court.”

Should the proposed experiments be permitted?

8                                             Deltapine’s primary position is that the Court should not direct any experiments at all.  It says that the proposed experiments are “speculative” because there is no evidence to confirm that their conduct will advance or clarify any aspect of evidence already filed.  The experiments are “imprecise and impractical”, at numerous points requiring subjective assessment based on observation.  The experiments will be expensive.  Bayer’s application comes too late, and was only made because Deltapine’s evidence revealed problems for Bayer in the way it originally formulated its case.

9                                             Deltapine says that Bayer is relying on the discretion of the Court being exercised in its favour but has provided no valid reason why, over two and a half years after commencement of proceedings, only in May 2006 did it begin to look for an experimental procedure to prove its case.

10                                          This argument is misconceived.  Order 58 rule 31 does not confer a power to permit or refuse experiments.  Bayer can conduct any experiment it likes.  As Lindgren J pointed out in Lucent Technologies Inc v Krone Aktiengesellschaft (No 2) (1999) 94 FCR 124 at [8], the purpose of the rule is to (a) ensure that the other party has an adequate opportunity to challenge the validity of the experiment or test, and (b) to avoid wasteful duplication by that party of an experiment that can be seen to be valid.  Compliance with directions given under O 58 r 31 is a precondition of admissibility at trial of evidence as to the results of the experiment: sub-rule 3(a).  Even if conditions have not been complied with, or no application has been made at all, results of an experiment may still be admitted by leave: sub-rule 3(b).

11                                          Patent cases are no different from other litigation, civil or criminal.  A party is entitled, as of right, to tender evidence it believes will assist its case.  The opposing party can object that the evidence is irrelevant or inadmissible, or should be excluded on discretionary grounds because it might be unfairly prejudicial or misleading or confusing or cause undue waste of time: Evidence Act 1995 (Cth) s 135.  When such objections are taken, the trial judge will rule and the evidence will be admitted or rejected. 

12                                          In the present case Bayer does not seek the Court’s “indulgence”.  It is entitled to conduct such experiments it thinks may help to make out its case.  To have the results of such experiments admitted into evidence it needs to comply with directions which will give Deltapine a fair opportunity to observe them.  Deltapine’s complaints as to the merits or usefulness of the proposed experiments may turn out to be valid.  Bayer takes the risk that this may be so.  The trial is the time and place where such questions will be resolved.

Directions

Date

13                                          Bayer proposes that the purification experiments start in early January 2007.  These will take a few weeks and be followed by the binding experiments which will take four months.  However, Deltapine’s main witness Professor Gill has heavy teaching commitments in January and February and is not available until 15 March.  Deltapine therefore asks that the purification experiments start on 15 March, to be followed by the binding experiments. 

14                                          Upon obtaining instructions after the hearing of this application, Bayer’s solicitors have advised that Bayer’s main witness Professor Ferré and his colleague Dr Hernandez, who will conduct the binding experiments, are not available beyond the end of May 2007.  If those restraints are to be accommodated, Professor Gill could attend for some two-thirds of the binding experiments (i.e. from 15 March onwards) but he would not be able to attend at all for the purification experiments.  When Professor Gill is unable to attend, some other suitable independent scientific observer could act as his alternate.  This is admittedly a less than perfect solution, but seems to be the only practicable one, especially since, as Deltapine emphasises, this case has been dragging on for some time.  The role of an expert attending the experiments on Deltapine’s behalf is to observe and report, not to participate, or express opinions, or give advice at the time.  So there is to that extent less compelling need for Deltapine’s principal witness to attend all the time.  Moreover, the binding experiments consist of two similar exercises which will be conducted sequentially, so Professor Gill could be present for at least the entirety of one.

15                                          I will therefore direct that the purification experiments begin on or about 8 January 2007 and the binding experiments on or about 1 February 2007.

Timetable 

16                                          Bayer’s proposed protocol includes a timeline detailing various stages and the time each will take (1 week, 1.5 weeks etc): see exhibit RBJ-8 to the affidavit of Richard Barry Jarvis sworn 7 December 2006.  I agree with Deltapine that it would be more convenient and less subject to confusion if the various stages were identified by actual dates.  Any variations to the timetable should be notified to Deltapine as soon as possible.

Place 

17                                          Bayer proposes to conduct the purification experiments at its own laboratories in Ghent, Belgium and the binding experiments at the laboratory of Professor Ferré in Valencia, Spain.  Deltapine says they should be conducted in Australia.

18                                          Dr Adri van Vliet, a senior research officer with Bayer, deposes that there are very few laboratories, experts and technicians around the world that are able to prepare the materials needed and have the appropriate expertise and facilities to conduct the proposed experiments.  He says that one of the few laboratories in the world that does have the ability to conduct the experiments is that of Professor Ferré.

19                                          Deltapine contends that the equipment required to perform the proposed experiments is “not unusual and is likely to be found in laboratories in Australia”.   The evidence, however, did not seem to bear out that assertion.  Dr John Cusick, an employee of Deltapine’s solicitors, deposes that he spoke by telephone to a Professor Schmidt of the University of Adelaide who is reported as saying “Subject to also dealing with Occupational Health and Safety issues with the University we certainly have the capability to do the experiments”.  But after reading the proposed protocol, Professor Schmidt emailed the solicitors as follows:

“After reading your protocoll [sic] I realised that I am unable to do this project simply because I have no licence to do 125J work in the lab or in fact in the whole building where I work.  The last time 125J work was done here was fifteen years ago.  We are usually labelling Bt-toxin with biotin or use antibodies, which would not have been a problem.  It is therefore with much regret that I have to decline the project.”

Another possible facility was that of Professor Christopherson of Sydney University but he said he would not have a research assistant available for four to six months.

20                                          The proposed experiments are potentially dangerous, involving isotypes of iodine.  On any view the experiments involve highly specialised science.  It is not appropriate on the present interlocutory application to conduct a full scale investigation into the availability of appropriate facilities in Australia.  Professor Ferré is Bayer’s witness and weight ought to be given to his wish, not shown to be irrational, to conduct the experiment in his own laboratory.  Professor Gill’s home base is in California, so from his point of view there is little difference in attending in Spain rather than Australia.

21                                          I will direct that the experiments be conducted in Ghent and Valencia.

Persons present

22                                          Bayer accepts that Delatpine should be entitled to have Professor Gill or his alternate present.  Delatpine also wants to have a legal representative present “to monitor the compliance by (Bayer experts or employees) and to understand and record any variations proposed”.  That would seem to go beyond the usual role, or capacity, of a lawyer.  However, it seems reasonable for Deltapine to have its own representative present to keep it and its lawyers in Australia advised of progress.  Whether that person is legally or scientifically qualified is a matter for Deltapine’s judgment.  Serendipitously it appears that Dr Cusick is not only a solicitor but holds the degrees of Bachelor of Science with First Class Honours and Ph D in Chemistry from the University of New South Wales, so he might be very appropriate.  But apparently Professor Ferré’s laboratory is not a large one, so any more than two persons observing on Delatapine’s behalf would be potentially burdensome and intrusive.

23                                          I will direct that Delatapine be entitled to have two persons of its own choice (ie including Professor Gill or his alternate) present at the experiments.

Asking questions 

24                                          Bayer, at least at one stage, apparently proposed that the Deltapine representatives not be permitted to ask questions of the experimenters.  I think that is an unreasonable restriction. Of course it is no part of the role of the Deltapine representatives to interfere with the conduct of the experiments.  Subject to that, there appears to be no harm, and indeed positive benefit, in them asking questions of the experimenters to obtain a better understanding of what is happening.  I will not make any formal directions in this regard as I see no reason to doubt that Deltapine representatives will act in a professional and common sense way. 

Photographs 

25                                          Bayer opposed the taking of any photographs.  It says the normal mode of recording these particular experiments will not include photographs.  However, since one of the aims of O 58 r 31 is to reduce the possibility of dispute over what in fact happened during the conduct of experiments, anything which contributes to an unassailable record should be permitted.

26                                          It may be that at some stage of the experiments photography, or some kind of photography such as flash, may create technical problems.  Accordingly, I think the ultimate control should be left to those conducting the experiments.

27                                          I will direct that a Deltapine representative be permitted to take photographs so long as those conducting the experiments are satisfied that the taking of photographs will not interfere with the conduct of the experiments.

Copying documents 

28                                          Deltapine representatives should also be permitted to take copies of documents used for the purposes of conducting or recording the experiments (including documents recording the provenance of any reagents used), and I will so direct.

Samples 

29                                          Apparently the quantities of the reagents used are very small and it is not practicable, as requested by Deltapine, for Bayer to provide samples.

Waiver of confidentiality 

30                                          Bayer says that the proposed purification experiments themselves involve a confidential, and potentially patentable, process.  Deltapine says that retention of confidentiality cuts across the fundamental bargain whereby the patentee makes full disclosure in return for a period of monopoly.  Any order for the conduct of experiments should be conditional on Bayer waiving confidentiality.

31                                          It is certainly an interesting, and important, point whether the disclosure obligation goes beyond the invention itself and extends to means for the detection or determination of infringement.  However, this is a matter going to validity and should be determined at trial.  The suggested condition should not be imposed.

Costs of the experiments 

32                                          Bayer submits that its costs of conducting the experiments should be borne by it in any event and that Deltapine’s costs (including the costs of Professor Gill and his alternate) should be Deltapine’s costs in the proceeding.  That is to say, if Deltapine ultimately wins, it will recover those costs.  That seems to be reasonable.  Indeed, Bayer foregoes the possibility of recovering its own costs of the experiments should it be successful at trial. 

33                                          Deltapine seeks an order for its costs in relation to the experiments on an indemnity basis, and to be payable in any event.  This is not an appropriate occasion for indemnity costs.  Bayer’s decision to conduct the experiments did not involve any conduct on its part that could be said to fall outside the normal to and fro of litigation of this sort.  It is possible that the experiments may in the end assist Bayer in making out its case that Deltapine infringed the Patent.  If that happens there is no reason why Deltapine should get its costs in relation to the experiments.

Orders

34                                          There will be orders that the parties bring in minutes to give effect to these reasons.  As I have already noted, this is not a matter for the grant of indulgence and Bayer have been substantially successful.  The costs of the motion will be reserved.

Associate:

Dated:         15 December 2006