FEDERAL COURT OF AUSTRALIA

Gearhart United Pty Ltd v Omni Oil Technologies (Asia) SDN BHD (No 2) [2010] FCA 558  

THE COURT ORDERS THAT:

1.                  The application filed 23 March 2010 be dismissed.

2.                  The applicant has leave to use:

(a)        the affidavit of Timothy O’Callaghan sworn 5 May 2010, together with exhibits “TOC-1” to “TOC-4” thereto;

(b)        the affidavit of Stewart Clark sworn 29 April 2010, together with exhibits “SC-1” to “SC-3” thereto;

(c)        the affidavit of Gholam Hossein Rastegar sworn 29 April 2010, together with exhibit “GRH-1” thereto; and

(d)        the affidavit of Paul Joseph Wyk sworn 3 May 2010, together with exhibits “PJW-1” to “PJW-3” thereto.

in any subsequent proceedings brought by the applicant against the first and second respondents for patent infringement.

3.                  The applicant pay the respondents’ costs of the application if the applicant does not commence a proceeding against the respondents for patent infringement within two months.  If such a proceeding is commenced then the costs of the application shall be costs in the cause in that proceeding.  

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     On 23 March 2010, Gearhart United Pty Ltd brought a proceeding in this Court against Omni Oil Technologies (Asia) SDN BHD and Premium Casing Services Pty Ltd seeking an order for information discovery under O 15A r 6 of the Federal Court Rules (“the Rules”) and an order for inspection and the taking of samples under O 15A r 12 of the Rules. For present purposes, I can concentrate on that part of the application which seeks an order for information discovery.

2                     The first respondent is a company which is incorporated in Malaysia, and the applicant required leave to serve the application on the first respondent. The applicant made an application for leave to serve the application on the first respondent in a foreign country and, on 29 April 2010, I granted leave to serve under O 8 r 2 and r 3 of the Rules: Gearhart United Pty Ltd v Omni Oil Technologies (Asia) SDN BHD [2010] FCA 401 (“Gearhart No 1”).

3                     On 15 April 2010, I made an order that the second respondent file and serve any affidavit evidence on which it intended to rely on the application by 28 April 2010. That was before the first respondent had been served with the application. Four affidavits were filed and served by the second respondent.

4                     On 6 May 2010, the applicant’s application against the respondents came on for hearing before me. By that time, the first respondent had been served and both respondents appeared at the hearing. Both respondents relied on the four affidavits which had been filed and served.

5                     At the hearing on 6 May 2010, the applicant indicated that it did not pursue its application. The applicant said that it did not need to pursue its application in view of the four affidavits filed and served by the second respondent and relied on by both respondents. The applicant said that it now had sufficient information to enable it to make a decision whether to commence a proceeding in the Court against the respondents to obtain relief for infringement of its patent. That information was contained in the four affidavits filed and served by the second respondent.

6                     In the circumstances, the applicant sought an order that its application be dismissed. It also sought an order that it have leave to use the four affidavits filed and served by the second respondent in any subsequent proceedings brought by the applicant against the first and second respondents for patent infringement, and an order that the respondents pay its costs of the application.

7                     The respondents do not oppose an order that the application be dismissed. The respondents do not consent to the granting of leave to use the four affidavits in any subsequent proceedings brought by the applicant against the first and second respondents for patent infringement, but they did not put submissions in opposition to such an order. They oppose an order that they pay the applicant its costs of the application, and, in fact, they seek an order that the applicant pay their costs of the application.

8                     A brief summary of the facts as revealed by the applicant’s affidavits is set out in Gearhart No 1 (at [3]-[5]). I will not repeat what I said in those reasons.

9                     I turn now to summarise briefly the information contained in the four affidavits.

10                  The second respondent filed and served an affidavit of Mr Timothy O’Callaghan sworn on 5 May 2010. Mr O’Callaghan is a legal practitioner and a member of the firm which acts for the respondents. He deposes to certain matters on information and belief. In particular, he deposes to the fact that the Omni cutter incorporates a spring between the piston and the outer end of the passage in which the piston is located. He deposes to the fact that the spring acts upon the piston such that the piston is always biased, and pushing against the pressure of lubricant which has been injected into the other side of the passage. He deposes to the fact that there is a patent application in the name of Omni Oil Technologies Dubai (AE) (“the Omni patent application”) and that that application demonstrates and explains the presence of the spring which is incorporated in the Omni cutter (emphasis added). He deposes to the fact that Omni Oil Technologies Dubai (AE) is a company which is associated with the first respondent and that the first respondent has rights to use the technology described in the Omni patent application.

11                  The second respondent also filed and served an affidavit of Mr Paul Wik sworn on 3 May 2010. Mr Wik is a registered Australian patent attorney who specialises in mechanical and biological inventions. Mr Wik has been engaged by the respondents to provide an independent opinion on whether the Omni cutter infringes the applicant’s patent. I will not set out all the details of his opinion. It is sufficient to say that, based on the fact that there is a spring located between the piston and the outer end of the relevant passage as described in the Omni patent application, he is of the opinion that the invention disclosed in the Omni patent application does not infringe the applicant’s patent. Mr Wik also deposes to the fact that the Omni patent application was applied for on 14 February 2006 and became open for public inspection as from 30 August 2007 and remains pending.

12                  The second respondent also filed and served an affidavit of Mr Gholam Rastegar sworn on 29 April 2010. Mr Rastegar is the general manager and director of the second respondent. In his affidavit, Mr Rastegar explains the relationship between the first respondent and the second respondent. He also explains the relationship between the second respondent and Clark Oilfield Services Pty Ltd (“Clark Oilfield Services”). He also deals with the inspection services provided to Clark Oilfields Services by SGS Australia Pty Ltd (“SGS Australia”) in relation to the Omni reamers and Omni cutters.

13                  Finally, the second respondent filed and served an affidavit of Mr Stewart Clark sworn on 29 April 2010. Mr Clark is the managing director of Clark Oilfield Services. He explains his company’s relationship with the first and second respondents and his company’s relationship with SGS Australia. In particular, he explains his understanding of the confidentiality requirements of the commercial relationship between his company and SGS Australia.

14                  From the applicant’s point of view, the critical matters disclosed in the four affidavits are the details of the Omni patent application and the fact that the Omni cutter incorporates the spring referred to in the Omni patent application. In addition, there are details of the relationship between the first and second respondents and details of the circumstances in which the Omni cutters are imported into Australia.

The orders sought by the Applicant

15                  It is not disputed that an order should be made that the application be dismissed and I will make such an order.

16                  On the face of it, this proceeding seeking an order for information discovery and other orders is a separate proceeding in the Court. In those circumstances, the applicant seeks leave to use the four affidavits filed and served by the second respondent in any subsequent proceeding brought by the applicant against the first and second respondents for patent infringement.

17                  Order 15 r 18 of the Federal Court Rules provides as follows:

“18      Use of documents

Any order or undertaking, whether express or implied, not to use a document for any purpose other than those of the proceedings in which it is disclosed shall cease to apply to such a document after it has been read to or by the Court or referred to, in open Court, in such terms as to disclose its contents unless the Court otherwise orders on the application of a party, or of a person to whom the document belongs.”

18                  Although the applicant did not argue that the four affidavits, or any one or more of them, had been read to or by the Court or referred to, in open Court, in such terms as to disclose their contents, it is arguable that that has occurred. As the matter was not argued, I do not base my decision to grant leave on that ground.

19                  Even though an application under O 15A r 6 is a separate proceeding, it is arguable that an order made as a result of such an application does not involve or give rise to an implied undertaking by the applicant not to use the documents provided to it as a result of an order. The purpose of an order for information discovery is to give an applicant sufficient information to enable it to make a decision whether to commence a proceeding in the Court to obtain the relief identified in the application.

20                  In Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217, Wilcox J considered the circumstances in which a party will be relieved of the implied undertaking not to use a document for any purpose other than those of the proceeding in which it is disclosed. I refer to his Honour’s discussion at 221-225 and, in particular, his Honour’s identification (at 225) of some of the factors which are relevant to the exercise of the discretion. In this case, the four affidavits were prepared with a view to them being read in open Court. They were prepared with a view to defending the application for an order for information discovery. It was not suggested that there is anything inherently confidential about the information contained in the affidavits. In my opinion, it is in the interests of justice to make an order enabling the applicant to use the affidavits in order to decide whether to bring a proceeding for patent infringement against the respondents, and it is also in the interests of justice to make an order enabling the applicant, should it decide to bring such a proceeding, to use the affidavits in the proceeding. As far as I can see, such an order will facilitate the expeditious disposition of any such proceeding.

21                  I will make an order that the applicant have leave to use the four affidavits in any subsequent proceeding brought by it against the respondents for patent infringement.

22                  The costs of the application are in the discretion of the Court: Federal Court of Australia Act 1976 (Cth) s 43(2). In the ordinary case, costs follow the event. The respondents contend that the event in this case is the failure of the application. As I have said, I will make an order dismissing the application. In those circumstances, the respondents contend that the applicant should pay their costs. For its part, the applicant contends that it was necessary for it to bring the application because the respondents did not comply with reasonable requests before the application was brought for the information now disclosed by the respondents. It has now received the information it needs and its contention is that the respondents should pay its costs.

23                  Both parties referred me to a number of cases. It is apparent that a range of orders have been made on applications for information discovery. In the ordinary case, where an applicant brings an application, and, after argument, it fails, the applicant should pay the respondent’s costs of the application. Where an applicant brings an application which is contested and which succeeds, the Court may or may not make an order for costs in favour of the applicant. It must be borne in mind that, even if an applicant obtains an order for information discovery, the discovery may not lead to a proceeding, or a successful proceeding, for the substantive relief claimed by the applicant.

24                  I was referred to two cases in which the Court has made an order which is contingent upon whether the applicant brings a proceeding for the substantive relief identified in its application for information discovery. Where the applicant does not bring a proceeding for the substantive relief identified within a specified period of time, the order has been that the applicant pay the respondent’s costs of the application for information discovery. Where the applicant does bring a proceeding within the specified period of time, then the order has been that the costs of the application for information discovery be costs in the cause in the proceeding for substantive relief. Those two cases are Cappuccio v Australia & New Zealand Banking Group Ltd [1999] FCA 1188 and SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271. I have considered the submissions made by the applicant in support of the order it seeks and the submissions made by the respondents in support of the order they seek. I have reached the conclusion that I should make a similar order in this case.

25                  The applicant submits that it made reasonable requests for the information before it issued its application for information discovery. It submits that it had no alternative but to issue its application and that, in substance, it obtained the information it was seeking. It is true that the applicant made requests for information about the Omni cutter, but it must be remembered that there is no obligation on a respondent to respond to requests for information and a respondent is entitled to remain passive: Glencore International AG v Selwyn Mines Limited (2005) 223 ALR 238 at 241 [15] per Lindgren J. As it happens, sufficient information was disclosed and there was no argument on the application. I do not think that, in those circumstances, the applicant should receive its costs of the application at this stage. My conclusion is fortified by two additional matters. First, in the absence of any contrary evidence from the applicant, I think that, before bringing the application, the applicant should have searched for other patents and patent applications. If it had done so, it would have found the Omni patent application. That material could have been put forward on the application. Furthermore, as I understand it, the Omni patent application would have enabled the applicant to identify a fourth possible method of solving the problem referred to in the applicant’s patent. Secondly, I have read the requests made by the applicant before the application was issued. Those requests are wider than what in fact has been provided and, on the face of it, the respondents were justified in their concern that, had they done what the applicant requested, they may have disclosed other confidential information about their product. I am not critical of the requests made by the applicant, but the width of the requests is a relevant consideration on the question of costs.

26                  The respondents’ key submission is that, had the applicant acted diligently, it would have found the Omni patent application and the application for information discovery would not have been necessary. To a point this is true, but it is by no means a complete answer because it would not be unreasonable for the applicant to seek information which confirmed that the Omni cutter was constructed in accordance with the Omni patent application. The respondents also submit that, on the evidence, I can find that the applicant’s patent has not been infringed by the Omni cutter and therefore, had the application for information discovery proceeded, it would have failed. The answer to this submission is that I cannot, nor should I, make such a decision on this application.  

27                  The respondents also submit that the application for information discovery would have failed because a good deal of the applicant’s evidence on the application would have been excluded because it had been obtained in breach of various obligations of confidence. The point seems to raise some complex factual issues and there is a good deal of evidence on the issue. I cannot resolve it on this application for costs.

28                  Finally, the respondents submit that there is evidence supporting a conclusion that I cannot exclude the possibility that the applicant’s application for information discovery has been brought for an improper purpose, namely, to damage or harm the respondents’ commercial interests. The respondents put the submission in this way because they accept that, in the absence of cross-examination of the deponents of the affidavits, I cannot make a positive finding of an improper purpose. I reject this submission because I do not think that, on the evidence before me, there is anything to suggest that the applicant had an improper purpose in bringing this application. The case relied on by the respondents, Stratford Sun Limited v OM Holdings Limited (2009) 74 ACSR 698, was a very different case. In that case, Siopis J was not satisfied that the applicant had identified with sufficient specificity the benefit it would obtain from any relief founded on the breach alleged (see 708 [66]). By contrast, there is nothing in this case to suggest that the applicant is not seeking to protect the legal rights it has as a result of the registration of its patent.

29                  I will order that the respondents’ costs of the application be paid by the applicant if the applicant does not bring a proceeding against the respondents for infringement of its patent within two months. If such a proceeding is brought, then the costs of this application should be costs in the cause in that proceeding.

Conclusions

30                  The application should be dismissed. The applicant has leave to use the four affidavits identified in these reasons in any subsequent proceeding brought by the applicant against the first and second respondents for patent infringement. The applicant should pay the respondents’ costs of the application if a proceeding is not brought by the applicants for patent infringement within two months. If such a proceeding is brought, the costs of this application shall be costs in the cause in that proceeding.

Associate:      

Dated:         4 June 2010