FEDERAL COURT OF AUSTRALIA

SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Limited (No 2) [2011] FCA 656

FEDERAL COURT OF AUSTRALIA

SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Limited (No 2) [2011] FCA 656

CORRIGENDUM

1    The date “8 June 2011” where first appearing as “the date of order” in the heading to the declarations and orders accompanying the reasons for judgment delivered on 9 June 2011 in this matter be corrected by deleting the number eight (8) and including in lieu thereof the number nine (9).

Associate:

Dated:    9 August 2011

THE COURT DECLARES THAT:

1.    Each of the claims of Innovation Patents 2006100744, 2006100944, 2007100377, 2007100834 and 2008100396 is valid.

2.    Upon admission, the cross-respondent has infringed:

(a)    Innovation Patents 2006100944 and 2008100396 by exploiting the Patented Process at the Bulga Coal Mine, and by authorising, or joining in a common design with other persons to do such acts at the Bulga Coal Mine, without the licence or authority of the cross-claimant; and

(b)    Innovation Patent 2007100834 by exploiting the Patented Process at the Cowal Gold Mine, and by authorising, or joining in a common design with other persons to do such acts at the Cowal Gold Mine, without the licence or authority of the cross-claimant.

3.    Upon admission that the Patented Process has been used at the Ashton Coal Mine, the cross-respondent has infringed Innovation Patents 2006100944 and 2008100396 by authorising, or joining in a common design with other persons in relation to the conduct at the Ashton Coal Mine, without the licence or authority of the cross-claimant.

THE COURT ORDERS THAT:

1.    The cross-respondent, whether by itself, its servants, agents or otherwise, be restrained from exploiting the Patented Process in Australia until 7 January 2012.

2.    The cross-respondent, whether by itself, its servants, agents or otherwise, be restrained until 7 January 2012 from authorising, directing, or joining in a common design with other persons to exploit the Patented Process in Australia.

3.    Pursuant to section 19 of the Patents Act 1990 (Cth) it is hereby certified that the validity of each of the claims of each of Innovation Patents 2006100744, 2006100944, 2007100377, 2007100834 and 2008100396 has been questioned in this proceeding.

4.    The cross-respondent pay the cross-claimant damages (including additional damages, if any) to be assessed, or, at the election of the cross-claimant, an account be taken of the cross-respondent’s profits.

5.    An enquiry, including appropriate discovery, be held to quantify the damages, or subject to the cross-claimant’s election, to take an account of profits, referred to in Order 4.

6.    Order 4 and Order 5 be stayed:

a.    for 21 days from the date of this Order; or

b.    if an application for leave to appeal is filed within 21 days, until the hearing and determination of any appeal or until further order.

7.    The Application, as amended, be dismissed.

8.    The applicant pay:

a.    the cross-claimant’s costs of the cross-claim, save as for costs associated with the allegations in relation to the Carborough Downs coal mine; and

b.    in so far as the costs are not within (a) above, the first and second respondents’ costs of the application.

9.    The matter be listed for directions on 5 August 2011 at 9:30 am.

10.    There be liberty to apply.

NOTE:

Patented Process means:

A.

(a)    A process of improving rigidification (as that term is outlined in paragraph 64 of the reasons for judgment dated 6 May 2011) of a material whilst retaining fluidity of the material during transfer

(b)    in which the material comprises an aqueous liquid with dispersed particulate solids that is transferred as a fluid to a deposition area, then allowed to stand and rigidify

(c)    by combining with the material during transfer

(d)    an effective rigidifying amount of

(e)    an aqueous solution of a water-soluble polymer having an intrinsic viscosity of at least 5dl/g (measured in 1M NaCl at 25C) and

(f)    in which the material comprises coal tailings, or mineral tails or slimes from phosphate or diamond processing, gold slimes, tails from zinc, lead, copper, silver, uranium, nickel or iron ore processing.

Or B.

(g)    A claim according to (a) to (f) above in which the water-soluble polymer is anionic;

(h)    in which the polymer is formed from monomer(s) selected from the group consisting of (meth) acrylic acid, allyl sulphonic and 2-acrylomido-2-methyl propane sulphonic as the free acid or salts thereof; and

(i)    where the effective rigidifying amount of the water soluble polymer is in the order of 10 to 3000 grams per tonne of material solid

Or C.

(j)    A claim according to (a) to (f) or (g) to (i) in which the material is pumped to an outlet;

(k)    where it is allowed to flow over the surface of previously rigidified material; and

(l)    where in the material is allowed to stand and rigidify to form a stack.

Or D.

(m)    A claim according to (a) to (f), (g) to (i) or (j) to (l) in which aqueous suspensions of fine and coarse particulate materials are combined for the purpose of co-disposal; and

(n)    wherein the effective rigidifying amount of the water-soluble polymer solution is added during or after the mixing of the different waste streams into a homogenous slurry.

Or E.

(o)    A claim according to (a) to (f), (g) to (i), (j) to (l), or (m) to (n) in which the material is dewatered during rigidification releasing liquor; and

(p)    in which the clarity of the liquor is improved by the addition of an aqueous solution of water-soluble polymer.

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

introduction

1    On 6 May 2011, the Court gave reasons for judgment for dismissing the applicant’s application seeking, amongst other things, declarations of invalidity in respect of five innovation patents and their revocation. The same reasons for judgment upheld the cross-claimant’s patent infringement claims, noting that the relief sought by the cross-claimant raised issues for determination in a second stage of the proceeding. The parties were given an opportunity to submit a minute of the orders that they considered gave effect to the reasons and were appropriately made at this stage of the proceeding.

2    In a letter dated 18 May 2011, the solicitors for the applicant/cross-respondent (referred to below as “the applicant”) provided a copy of the applicant’s proposed minute of orders. The letter also indicated that “the resolution of any differences between the parties as to the form of orders could very likely be conveniently dealt with by correspondence without the need for an appearance.” The solicitors for the respondent/cross-claimant (referred to below as “the cross-claimant”) provided a minute of orders on the same day. There were a number of differences between the orders.

3    The parties were unable to resolve their differences. On the morning of 6 June 2011, I prepared and circulated a minute of draft orders and that afternoon the parties attended court to explain how matters stood. In what follows I shall not refer to non-contentious matters, which senior counsel for both parties helpfully drew to my attention.

4    Senior counsel for the cross-claimant argued that:

1.    The form of declarations should be amended so as to read.

“The cross-respondent has infringed:

(a)    Innovation Patents 2006100944 and 2008100396 by utilising the Patented Process at the Bulga Coal Mine and by authorising, or joining in a common design with other persons to do such acts at the Bulga Coal Mine and the Ashton Coal Mine, without the licence or authority of the cross-claimant; and

(b)    Innovation Patents 20071000834 by utilising the Patented Process at the Cowal Gold Mine, and by authorising, or joining in a common design with other persons to do such acts at the Cowal Gold Mine, without the licence or authority of the cross-claimant.”

(Proposed amendments underlined)

2.    With respect to Carborough Downs Coal Mine (“Carborough”), the appropriate order should reflect that the cross-claimant sought no costs and the applicant received none.

3.    The question of damages, including additional damages, was properly left to the second stage of the proceeding, as provided for in the draft orders. Senior counsel for the cross-claimant affirmed that issues regarding damages had yet to be addressed.

5    Senior counsel for the applicant argued that:

1.    The declarations (amended or unamended) set out in paragraph [4] above should not be made.

2.    The applicant should receive the costs associated with the proceeding in so far as it related to allegations of infringement at Carborough.

3.    The cross-claimant should clarify the position with respect to damages, especially additional damages.

6    The last-mentioned matter is readily resolved. The cross-claimant specifically sought additional damages under s 122(1A) of the Patents Act 1990 (Cth) in its cross-claim. Clearly enough, as senior counsel for the cross-claimant said, no occasion to consider this part of its claim has yet arisen. Subject to the outcome of a foreshadowed appeal, issues as to damages, including additional damages, will arise at the second stage of the proceeding.

7    The second issue is also readily resolved, especially when regard is had to the history of the Carborough issue. The issue of Carborough was initially raised by the applicant’s Statement of Claim dated 19 June 2008. On 22 July 2009, the applicant filed an affidavit of Gregory John Tobin relating to Carborough. The issue remained in pleadings on the applicant’s side throughout the trial. Carborough entered the cross-claimant’s pleadings in particulars of infringement and loss and damage in the Further Amended Defence and Further Amended Cross-claim filed on 1 October 2009. A further affidavit of Mr Tobin was filed on 20 November 2009. Most references to Carborough were deleted from the Second Further Defence and Further Amended Cross-claim of 16 February 2010. Only one remained, again in particulars as to infringement: see reasons for judgment delivered 6 May 2011 at [302]. Senior counsel for the cross-claimant informed the Court in opening that Mr Tobin was not required for cross-examination, and that the cross-claimant accepted that the allegedly offending conduct had stopped. At this point, so senior counsel for the cross-claimant stated, the question as to Carborough was whether there was evidence to justify injunctive relief. Thereafter until closing submissions, the issue of Carborough was not agitated and, as I have already noted in reasons for judgment of 6 May 2011 (at [302]), in closing, senior counsel for the cross-claimant confirmed that the case on infringement at Carborough was not pursued.

8    In all the circumstances, including that the cross-claimant did not seek them, I accept that the cross-claimant should not have its costs relating to Carborough. I would not, however, award the costs relating to Carborough to the applicant, as its senior counsel sought.

9    The power of the Court to make orders for costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”). The power, which is discretionary, “must be exercised judicially and not against the successful party except for some reason connected with the case”: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234. Further, (1): “where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed”; and (2) “[a] successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties’ costs of them. In this sense ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or law”: see Ruddock v Vadarlis (No 2) 115 FCR at 235 and Hughes v Western Australian Cricket Association (Inc) and Ors (1986) ATPR 40–748 at 48,136; approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Co Ltd (1987) 17 FCR 211 at 222. Generally speaking, however, a trial judge will only order the successful party to pay the other party’s costs of an “issue” if the successful party’s conduct at trial was such as to prolong unreasonably the proceedings or for some other like reason: see Ruddock v Vadarlis (No 2) 115 FCR at 236; and, more recently, Roadshow Films Pty Ltd v iiNet Ltd (2010) 269 ALR 606 at 610-613. The conduct of the cross-claimant in this case was not such as to justify an award of costs against it and in the applicant’s favour.

10    The third issue raised by the applicant was whether declarations should be made at all. In this argument, senior counsel for the applicant noted that:

1.    the cross-claimant had not specifically sought declaratory relief in its cross-claim;

2.    the Court’s holding as to infringement at the Bulga Coal Mine (“Bulga”) and the Cowal Gold Mine (“Cowal”) depended on a concession made by the applicant rather than on the Court’s own findings; and

3.    in these circumstances, there was no public interest to justify the making of declarations.

11    Further, the Court’s holding as to infringement at the Ashton Coal Mine (“Ashton”) depended in part on the applicant’s admission that, if the innovation patents were valid, then use of the SNF Process infringed the patents as alleged and that the process had been used at Ashton: see paragraph [10] of the reasons delivered on 6 May 2011.

12    The fact that the cross-claimant did not seek declaratory relief in its cross-claim is not disputed. Whilst relevant to the Court’s exercise of discretion with respect to declaratory relief, this fact alone does not bar the grant of such relief. The Court has a wide discretionary power to make declarations under s 21 of the FCA Act: see Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2. The exercise of that power is not circumscribed by inflexible rules: see Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8.

13    Senior counsel for the applicant observed that the Court had “noted the admissions … but … ha[d]n’t gone that next stage of saying … [it had] looked at the fact[s] or the facts were in some way tested in any event and … formed a view that this is a correct outcome”. Senior counsel for the applicant relied on Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, in which the High Court held, amongst other things, that it would be inappropriate for a court to give a declaratory judgment and to answer preliminary questions not based on facts found or agreed. Senior counsel specifically referred to Bass 198 CLR at 355 - 356, where the majority noted that:

Because the object of the judicial process is the final determination of the rights of the parties to an action, courts have traditionally refused to provide answers to hypothetical questions or to give advisory opinions. The jurisdiction with respect to declaratory relief has developed with an awareness of that traditional attitude. In In re F (Mental Patient); Sterilisation) ([1990] 2 AC 1 at 82), Lord Goff of Chieveley said that:

“a declaration will not be granted where the question under consideration is not a real question, nor where the person seeking the declaration has no real interest in it, nor where the declaration is sought without proper argument, eg in default of defence or on admissions or by consent.”

By “not a real question”, his Lordship was identifying what he called the “hypothetical or academic”.

(Citations omitted)

14    I doubt that either his Lordship or the majority in Bass had in mind the circumstance that has arisen in this case. There has been a great deal of argument in this case, although, in the situation that arose, not specifically with regard to infringement at Bulga and Cowal or the use of the SNF Process at Ashton. As I stated in my reasons for judgment delivered on 6 May 2011 at [10]:

At trial, SNF admitted that, if the Patents were valid, then use of the SNF Process infringed the Patents as alleged and that the process had been used at these three mines. In relation to Bulga and Cowal, SNF conceded authorisation of use and that it joined in a common design with other persons with respect to that use. SNF also admitted the supply of flocculant and the provision of instructions (within s 117) with respect to that use. The live issues with respect to the cross-claim centred on Ashton.

15    In the same judgment at [298]–[301] I said:

SNF has admitted that the SNF Process contains all the essential integers of the claims of the infringed Patents. Details of the SNF Process as SNF understood it were set out in letters dated 11 April 2008 and 20 May 2008 from SNF’s solicitors to Davies Collison Cave, then acting for the respondents, and in SNF’s original statement of claim. In a letter dated 21 October 2008, SNF also said that the process was the same as that described in the Bembrick paper, a presentation entitled “ACARP Project C14064: Impact of Flocculant Chemistry on Tailings Bed Level Density”, and a presentation called “Dried Tailings: Secondary Flocculation Trials”.

In their Second Further Amended Cross-claim, Ciba pleaded that SNF had used the SNF Process at:

(a)    Bulga coal mine in the Hunter Valley from 2006;

(b)    Ashton coal mine in the Hunter Valley from about October 2008; and

(c)    Cowal gold mine in central New South Wales from about November 2006.

In its Second Further Amended Defence to the Further Amended Cross-Claim, SNF admitted the use by it of the SNF Process at Bulga and Cowal and that it had no licence from Ciba in respect of such use. This was borne out by Mr Schroeter’s affidavit of 18 February 2010, in which Mr Schroeter admitted that SNF had used the SNF Process at “approximately” seven sites, including Bulga and Cowal. Accordingly, direct infringement by exploitation of the invention at the Bulga and Cowal mines is established.

16    Senior counsel for the applicant also relied on Bank of Kuwait and the Middle East v Ship MV “Mawashi Al Gasseem” (No 2) (2007) 240 ALR 120, a case in which judgment was entered for the plaintiff for a liquidated sum under O 35A r 3(2) of the Federal Court Rules (a form of summary judgment). The plaintiff held a mortgage over the vessel. The owner of the vessel did not dispute that the claimed sums were advanced and had not been repaid. The plaintiff sought and was granted a declaration as to the validity of the mortgage. Senior counsel for the applicant referred specifically to Mansfield J’s observations (at 122 [10]-[11]) that:

[T]here has been a long held view that a declaration, a judicial act, should be made only on evidence and not simply on admissions or (as in this case) on deemed admissions … In addition, it is appropriate to be cautious because a declaration may have effects more broadly than as between the particular litigants …

Kiefel J in [Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665] expressed the issue pithily in the following terms at [57]:

…The question is whether declarations should be made on deemed admissions, given that there has been no adjudication by the court on the facts and the declarations may give the impression that there has.

17    Mansfield J went on to hold that it was appropriate to grant declaratory relief in the circumstances with which he was concerned, having regard to Dataline 236 ALR at 681 [59], in which Kiefel J said:

It may no longer be correct to have a practice which operates as a prohibition in every case of default and preferable to consider the circumstances pertaining to the particular case and the purpose and effect of the declaration. Millett J made declaratory orders in Patten v Burke Publishing Co Ltd [1991] 1 WLR 541; [1991] 2 All ER 821 where justice to the plaintiff required it. The order, however, operated principally inter partes and it might be doubted whether it would be of interest to other persons. Cases such as this, involving the protection of customers, are of public interest. Declarations are often utilised in such cases to identify for the public what conduct [constitutes] a contravention and to make apparent that it is considered to warrant an order recognising its seriousness. It is however important that there be no misunderstanding as to the basis upon which they are made. This could be overcome by a statement, preceding the declarations, that orders are made “upon admissions which [the respondent in question] is taken to have made, consequent upon non-compliance with orders of the court”.

18    Counsel for the applicant also referred to The Australian Competition and Consumer Commission v Grove & Edgar Pty Limited [2008] FCA 1956 (declarations made by consent without trial) and Australian Building & Construction Commissioner v Abbott (No 3) [2011] FCA 340 (declarations made upon admissions), which reiterate many of these principles.

19    Generally speaking, the principles in the cases to which senior counsel for the applicant referred fall to be considered in the Court’s exercise of discretion to grant declaratory relief. This is not a case, however, on all fours with cases in which declarations are contemplated in the absence of any trial, whether by way of summary judgment or entirely upon admissions or otherwise. There has, in this case, been a trial, in the course of which the parties, ably represented by senior and junior counsel, made certain tactical and forensic decisions. The applicant’s concessions as to infringement at Bulga and Cowal and the use of the SNF Process at Ashton were made in the particular circumstances to which I have referred. Whilst perhaps not directly relevant to the question with which I am presently concerned – the desirability of declaratory relief – I observe that, in the circumstances, these concessions necessarily limited the scope of necessary and appropriate enquiry.

20    Further, I reject the applicant’s submission to the effect that there is no public interest in the current litigation, although I recognize that it is of a different kind to that considered in Dataline 236 ALR 665. Declarations may in this case be useful to indicate clearly to those likely to utilise the Patented Process (see [23] below) that, in the life of these five innovation patents, they must first have the cross-claimant’s licence or authority if they wish to avoid infringement proceedings. Without declarations of the kind I propose to make, the basis for granting injunctive relief and conducting an enquiry to quantify damages or to take an account of profits might remain somewhat obscure to those with an interest in the subject matter of the proceeding. At the same time, in making any declarations, it is, as Kiefel J, noted important to make plain the basis upon which they are made.

21    After the hearing on 7 June 2011, senior counsel for the parties undertook to provide me with a minute of draft orders that would clarify the basis on which the declarations would be made, assuming I determined to make them. A draft was sent the next day. I am satisfied that the suggested draft would achieve this end.

22    Having regard to the passage in my reasons for judgment of 6 May, set out at [14] and [15] above, and to the principles that have been discussed, I consider that justice is best served by making declarations set out below:

1.    Each of the claims of Innovation Patents 2006100744, 2006100944, 2007100377, 2007100834 and 2008100396 is valid.

2.    Upon admission, the cross-respondent has infringed:

(a)    Innovation Patents 2006100944 and 2008100396 by exploiting the Patented Process at the Bulga Coal Mine, and by authorising, or joining in a common design with other persons to do such acts at the Bulga Coal Mine, without the licence or authority of the cross-claimant; and

(b)    Innovation Patent 2007100834 by exploiting the Patented Process at the Cowal Gold Mine, and by authorising, or joining in a common design with other persons to do such acts at the Cowal Gold Mine, without the licence or authority of the cross-claimant.

3.    Upon admission that the Patented Process has been used at the Ashton Coal Mine, the cross-respondent has infringed Innovation Patents 2006100944 and 2008100396 by authorising, or joining in a common design with other persons in relation to the conduct at the Ashton Coal Mine, without the licence or authority of the cross-claimant.

23    Also for the reasons stated, I would make the following orders:

1.    The cross-respondent, whether by itself, its servants, agents or otherwise, be restrained from exploiting the Patented Process in Australia until 7 January 2012.

2.    The cross-respondent, whether by itself, its servants, agents or otherwise, be restrained until 7 January 2012 from authorising, directing, or joining in a common design with other persons to exploit the Patented Process in Australia.

3.    Pursuant to section 19 of the Patents Act 1990 (Cth) it is hereby certified that the validity of each of the claims of each of Innovation Patents 2006100744, 2006100944, 2007100377, 2007100834 and 2008100396 has been questioned in this proceeding.

4.    The cross-respondent pay the cross-claimant damages (including additional damages, if any) to be assessed, or, at the election of the cross-claimant, an account be taken of the cross-respondent’s profits.

5.    An enquiry, including appropriate discovery, be held to quantify the damages, or subject to the cross-claimant’s election, to take an account of profits, referred to in Order 4.

6.    Order 4 and Order 5 be stayed:

a.    for 21 days from the date of this Order; or

b.    if an application for leave to appeal is filed within 21 days, until the hearing and determination of any appeal or until further order.

7.    The Application, as amended, be dismissed.

8.    The applicant pay:

a.    the cross-claimant’s costs of the cross-claim, save as for costs associated with the allegations in relation to the Carborough Downs coal mine; and

b.    in so far as the costs are not within (a) above, the first and second respondents’ costs of the application.

9.    The matter be listed for directions on 5 August 2011 at 9:30 am.

10.    There be liberty to apply.

NOTE:

Patented Process means:

A.

(a)    A process of improving rigidification (as that term is outlined in paragraph 64 of the reasons for judgment dated 6 May 2011) of a material whilst retaining fluidity of the material during transfer

(b)    in which the material comprises an aqueous liquid with dispersed particulate solids that is transferred as a fluid to a deposition area, then allowed to stand and rigidify

(c)    by combining with the material during transfer

(d)    an effective rigidifying amount of

(e)    an aqueous solution of a water-soluble polymer having an intrinsic viscosity of at least 5dl/g (measured in 1M NaCl at 25C) and

(f)    in which the material comprises coal tailings, or mineral tails or slimes from phosphate or diamond processing, gold slimes, tails from zinc, lead, copper, silver, uranium, nickel or iron ore processing.

Or B.

(g)    A claim according to (a) to (f) above in which the water-soluble polymer is anionic;

(h)    in which the polymer is formed from monomer(s) selected from the group consisting of (meth) acrylic acid, allyl sulphonic and 2-acrylomido-2-methyl propane sulphonic as the free acid or salts thereof; and

(i)    where the effective rigidifying amount of the water soluble polymer is in the order of 10 to 3000 grams per tonne of material solid

Or C.

(j)    A claim according to (a) to (f) or (g) to (i) in which the material is pumped to an outlet;

(k)    where it is allowed to flow over the surface of previously rigidified material; and

(l)    where in the material is allowed to stand and rigidify to form a stack.

Or D.

(m)    A claim according to (a) to (f), (g) to (i) or (j) to (l) in which aqueous suspensions of fine and coarse particulate materials are combined for the purpose of co-disposal; and

(n)    wherein the effective rigidifying amount of the water-soluble polymer solution is added during or after the mixing of the different waste streams into a homogenous slurry.

Or E.

(o)    A claim according to (a) to (f), (g) to (i), (j) to (l), or (m) to (n) in which the material is dewatered during rigidification releasing liquor; and

(p)    in which the clarity of the liquor is improved by the addition of an aqueous solution of water-soluble polymer.

Associate:

Dated:    10 June 2011