FEDERAL COURT OF AUSTRALIA

DSI Australia (Holdings) Pty Ltd v Garford Pty Ltd [2013] FCA 268

THE COURT DECLARES THAT:

1.    The threats made by the respondent to the first applicant of infringement of Australian Patent No. 770594 (the patent) in the letter of Teller & Associates dated 16 June 2010 were unjustifiable.

2.    Claims 1 and 5 to 14 (inclusive) of the patent are, and always have been, invalid.

THE COURT ORDERS THAT:

3.    The respondent, whether by itself, its servants, agents or otherwise howsoever, be restrained from making any further threats of infringement of the patent in relation to the DSI apparatus identified in the reasons for judgment of the Court delivered on 28 February 2013.

4.    The applicants’ application for unjustifiable threats of patent infringement otherwise be dismissed.

5.    Subject to order 6, claims 1 and 5 to 14 (inclusive) of the patent be revoked.

6.    Upon the undertakings referred to in paragraph 9 below, order 5 be stayed:

(a)    initially, for a period of 21 days from the date on which these orders are pronounced; and

(b)    if an appeal is lodged within that period, until the determination of that appeal, or further order.

7.    The respondent’s cross-claim for infringement of the patent be dismissed.

8.    The respondent pay the applicants’ costs of the proceeding.

THE COURT NOTES THAT:

9.    The respondent undertakes to the Court during the period of the stay:

(a)    to prosecute any appeal expeditiously;

(b)    forthwith to serve on the Commissioner of Patents copies of these orders pursuant to s 140 of the Patents Act 1990 (Cth) with a request that particulars of orders 5 and 6 be registered in accordance with s 187 of that Act;

(c)    not to threaten any person with proceedings for infringement of claims 1 and 5 to 14 (inclusive) of the patent; and

(d)    not to seek to amend any claims of the patent otherwise than in the course of or in connection with these proceedings.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 28 February 2013, I published my reasons for judgment in this proceeding: DSI Australia (Holdings) Pty Ltd v Garford Pty Ltd [2013] FCA 132. I will use the same abbreviations in these reasons. I found that (a) claims 1, 5 to 11 and 12 to 14 of the patent are invalid because the invention, as claimed, does not involve an inventive step; (b) claims 12 to 14 are invalid because of Garford’s secret use of the methods there claimed; and (c) claim 12 is invalid because the claimed method is not novel. But for those findings, I would have found that claims 1, 7 to 10 and 12 to 14 of the patent had been infringed.

2    On that day, I made orders providing for the parties to submit draft orders reflecting my reasons. Save in respect of two matters, the parties have been able to agree upon the appropriate form of orders. The parties have provided draft orders and written submissions in support of their competing positions on the two matters on which they have been unable to agree.

3    The two matters on which the parties have been unable to agree are, first, whether, as the DSI parties contend, declarations should be made that Garford’s threats of infringement were unjustifiable and that claims 1 and 5 to 14 of the patent are invalid and, secondly, the appropriate order for costs. In this latter connection, Garford submits that an issues-based costs order is appropriate. It submits that such an order would acknowledge that Garford was successful in resisting the DSI parties’ challenge to the validity of a number of claims of the patent on certain discrete bases. On the other hand, the DSI parties submit that, as they were successful overall, costs should follow the event and an order for costs should be made in their favour. Alternatively, they submit that, if the Court considers that some apportionment of costs is appropriate, a modest reduction only should be made to the costs that should otherwise be awarded in their favour.

4    As to the first matter, I am satisfied that it is appropriate that both declarations sought by the DSI parties should be made. A significant discretionary consideration in relation to the granting of a declaration is whether it will have utility. Utility may be found, for example, in declaring the basis on which other relief has been granted: Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95]. In my view, the two declarations sought in the present case will fulfil that objective. Significantly, the declaration in relation to unjustifiable threats will not simply mirror the injunction that will be made: Nick Scali Limited v Super A-Mart Pty Ltd (No 2) [2011] FCA 1500 at [12].

5    As to the second matter, I am not persuaded that an issues-based costs order should be made. The proceeding was commenced as an action for unjustifiable threats of infringement of a standard patent. In those circumstances, it was for Garford to establish that the acts about which the threats were made infringed a claim or claims of the patent that was or were not shown to be invalid: s 129 of the Act. Garford showed that some, not all, of the claims it advanced would have been infringed had those claims been valid. (It correctly notes that, at trial, it did not press its originally pleaded allegation that claim 11 was infringed: see reasons at [113].) The significance of that success should not, however, be overstated. The DSI parties’ defence to Garford’s cross-claim for infringement was not only that the asserted claims had not been infringed (a matter on which they succeeded in relation to claims 5 and 6) but that none of the asserted claims was valid. The DSI parties were successful in that defence. None of the asserted claims was valid. Indeed, some claims were shown to be invalid on multiple grounds (namely, claims 12 to 14).

6    The proceeding largely involved an interplay between claim infringement and claim invalidity based on competing contentions as to the proper construction of the claims. Each of the parties had mixed success on the issues that were raised. In my view, it is not possible to sensibly and fairly apportion costs by reference to the degree of success (or failure) that each of the parties had in that regard.

7    The only qualification that could be made to that general position is in connection with the issues of manner of manufacture, sufficiency of description and best method, and utility, which the DSI parties raised and on which they wholly failed. However, those issues occupied minimal time at the hearing and rested largely in arguments that were of a confined nature. The factual issues they raised were either based on evidence adduced in connection with other grounds or raised limited additional issues of fact (for example, the presence of a brake in the description of the preferred embodiment).

8    In the end result, the DSI parties succeeded on their principal claim for unjustifiable threats and on their cross-claim for revocation of the asserted claims, and successfully defended Garford’s cross-claim for infringement. It does not follow inexorably from the fact that the DSI parties failed on the issues identified in [7] above that they should pay Garford’s costs in respect of those issues or that their costs should be reduced. When sued for infringement (in response to the allegation of unjustifiable threats), the DSI parties were entitled to raise, by way of defence, all reasonably arguable grounds on which the asserted claims were invalid. This is not a case where the raising of the unsuccessful grounds had the consequence that, in a real sense, the proceeding could have been conducted more economically if those grounds had not been raised.

9    In my view, the just and appropriate outcome in the present case is that costs should follow the event. Accordingly, Garford should pay the DSI parties’ costs.

Associate:

Dated:    28 March 2013