FEDERAL COURT OF AUSTRALIA

Costin v Duroline Products Pty Limited [2013] FCA 501

THE COURT ORDERS THAT:

1.    In the event that Ox Group International Pty Ltd (OGI) by its proper officer does not by 11 June 2013 make, file and serve on the prospective applicant an affidavit giving a description of:

(a)    the manufacturer of;

(b)    the person or persons who have supplied it with; and

(c)    the person or persons to whom it has supplied,

OX gauge tape, OGI is, by 19 June 2013, to give discovery to the prospective applicant of all documents that are or have been in its control relating to the description of such persons.

2.    The affidavit in Order 1 must include, to the extent known to OGI after examining the documents in its control, the name (including any business name) and the last known address of each person to be described, and whether that person is a manufacturer or supplier of OX gauge tape.

3.    In the event that Duroline Products Pty Limited (Duroline) by its proper officer does not by 11 June 2013 make, file and serve on the prospective applicant an affidavit giving a description of:

(a)    the manufacturer of;

(b)    the person or persons who have supplied it with; and

(c)    the person or persons to whom it has supplied,

OX gauge tape or Axis gauge tape, Duroline is, by 19 June 2013, to give discovery to the prospective applicant of all documents that are or have been in its control relating to the description of such persons.

4.    The affidavit in Order 3 must include, to the extent known to Duroline after examining the documents in its control, the name (including any business name) and the last known address of each person to be described, and whether that person is a manufacturer or supplier of OX gauge tape or Axis gauge tape.

5.    The prospective applicant pay the costs of the application and the costs of OGI and Duroline providing the affidavit or giving discovery under Orders 1 and 3.

6.    For the purpose of these Orders, OX gauge tape means the gauge tape marked as Exhibit CC2 and described in paragraphs 11 and 12 of the prospective applicant’s affidavit sworn 19 April 2013, and Axis gauge tape means the gauge tape identified on pages 76, 78, 80 and 81 of that affidavit.

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

REASONS FOR JUDGMENT

1    The prospective applicant, Colin Costin, seeks preliminary discovery against each of the prospective respondents, Duroline Products Pty Limited (Duroline), Ox Group International Pty Ltd (OGI) and Ox Group Global Pty Ltd (OGG). Dean Athol Hales is a director of each of these companies. The originating application was filed on 22 April 2013 and is brought pursuant to rr 7.22 and 7.23 of the Federal Court Rules 2011 (Cth) (the Rules).

background facts

2    Mr Costin is registered as the patentee of Patent No. 734266 for an invention entitled “Retractable Measuring Tape for Brick Laying” (the patent). In general terms, the patent claims a retractable measuring tape for brick quantity calculation, where the tape is marked at regular intervals corresponding to two or more brick gauges to indicate the required number of bricks for a given distance of brickwork (the patent tape).

3    Mr Costin and his wife, Elaine Costin, operate a business known as KwikGauge Australia. The business name is registered pursuant to the Business Names Registration Act 2011 (Cth). Mrs Costin is recorded as the business name holder.

4    In July and September 2012, inquiries undertaken by, and information provided to, Mr Costin revealed to him that certain suppliers in Australia were offering retractable measuring tapes similar to the patent tape. Mr Costin’s inquiries included online searches and the purchase of certain retractable tape products from two suppliers identified as Vetner Pty Ltd and Lyndons Pty Ltd, both of which carry on business at various outlets in Queensland. The relevant retractable measuring tapes supplied by these companies bore brand names that included the word “OX” (OX gauge tape). Mr Costin was informed that a representative of Duroline was offering this product. OGG is the proprietor of a number of registered trade marks that comprise or include the word “OX”.

5    Mr Costin’s inquiries also revealed to him that Duroline was offering a retractable tape for measuring brick course under a brand which includes the name “Axis” (Axis gauge tape). OGI is the proprietor of the registered trade mark “Axis Building Tools”.

6    Having ascertained these details, Mr Costin’s solicitors, Neville & Hourn Legal (NHL), wrote a letter of demand addressed to Duroline and OGI. The letter was dated 22 October 2012 and was marked for the attention of Mr Hales. The letter made the following claims:

•    “Gauge tape” is advertised and sold through the Duroline website, and is available for purchase at several in-store locations throughout Australia.

•    “Brick gauge tape” is advertised and sold through the OGI website (which redirects from the Duroline website), and is available for purchase at several in-store locations throughout Australia.

•    The sale and distribution of these products infringe the patent.

7    The letter defined these products as, jointly, “the Infringing Product”, although, in places, the letter also referred to “Infringing Products”. The letter continued:

Without further notice to you, our client intends to take further action to restrain any further infringement by your company/companies and any related entity which may have supplied the Infringing Product. We are also seeking instructions to commence proceedings against you personally.

8    This last reference was clearly directed to Mr Hales. The letter then demanded that Duroline, OGI and Mr Hales, and their “related entities” take a number of immediate steps “[i]n the interests of potentially reducing the quantum otherwise payable to our client in the form of either damages or as an account of profits”. The steps were to:

•    remove all advertisements, marketing, brochures, sales and “abilities to purchase” any and all products known as either “gauge tape” or “brick gauge tape” which appear online at (a) www.duroline.com.au/our-catalogue.php; (b) www.ox-cp.com.au/products/; and (c) www.sydneytools.com.au/;

•    provide a copy of the receipts pertaining to the sale of any and all products (that is, the “Infringing Product”) for the period “1 November 2006 to present”;

•    provide a list of persons and/or companies who had supplied the Infringing Product within the specified period (whether online or in-store), which outlines their relevant contact details;

•    provide an undertaking that Duroline, OGI or “any related entity” would refrain from the supply, manufacture, distribution, sale, advertisement or marketing of any product “for which the Patent provides our client has claim”; and

•    provide a list of those persons and/or corporations “who you have sourced for the purposes of manufacturing the Infringing Product, and outline their relevant contact details”.

9    The letter concluded by stating:

If we have not heard from you by 5:00pm on Thursday 25 October 2012, we will be making an immediate application to the Federal Court of Australia and will be initially seeking any interim relief we deem necessary to protect our client’s legitimate interest in the Patent.

10    The solicitors for Duroline, OGI and Mr Hales – Davies Collison Cave (DCC) – responded, initially on 25 October 2012 and, more fully, on 30 October 2012. In their second letter, DCC stated that each of Duroline, OGI and Mr Hales denied “each and every claim and allegation of wrongdoing” made against them in the letter of 22 October 2012. DCC also stated:

Without prejudice to our clients’ respective positions in relation to the claims and demands against them, or in respect of the validity of Australian Innovation Patent No. 734266, which is not admitted, we are instructed to advise that the allegedly “Infringing Product” referred to in your letter is already no longer available for sale by our clients, the last units having been sold on 14 September, 2012. We are further instructed that it will not be offered for sale again in the future.

11    In providing that response, DCC took NHL’s letter of 22 October 2012 to be referring to the OX gauge tape. There was some debate on the hearing of the application as to whether DCC, and hence the prospective respondents, were justified in taking that position. NHL’s letter referred to gauge tape advertised and sold through the Duroline website, but did not otherwise identify that tape, save to say that NHL were holding receipts “for the purchase of the Duroline and [OGI] Infringing Products”. The evidence makes clear that those receipts related to the purchase of OX gauge tape, not Axis gauge tape.

12    NHL responded on the same day (30 October 2012) and enclosed a draft originating application seeking preliminary discovery. In that connection, their letter stated:

We are obtaining our client’s instructions to file the enclosed draft originating application.

Please advise whether your client is prepared to consent to the discovery of the categories of documents sought in the schedule to that application, such that unnecessary proceedings may be averted and costs kept to a minimum.

Such a request is to fulfil the objectives prescribed by the Civil Dispute Resolution Act 2011.

If your client is not prepared to consent to discovery of the documents sought, please advise if you hold instructions to accept service on behalf of your client.

13    It appears that this response was prompted because DCC had contended that, in the context of Mr Costin having threatened to commence proceedings against Duroline, OGI and Mr Hales, Mr Costin had failed to take genuine steps to resolve the dispute. A fair reading of NHL’s letter of 22 October 2012 leaves no doubt that, at that time, Mr Costin, through NHL, considered that he had sufficient information, and had resolved, to commence proceedings against Duroline, OGI and Mr Hales for infringement of the patent.

14    The draft originating application identified Duroline, OGI and Mr Hales as prospective respondents. It contained orders seeking discovery according to categories of documents. The categories were substantially the same as those identified in the present application, insofar as it relates to preliminary discovery under r 7.23. The categories were not addressed to any particular brand of gauge tape. Counsel for Mr Costin relied on this fact to support a submission that the prospective respondents were not justified in assuming that the preliminary discovery that had been sought was limited to OX gauge tape. Moreover, an image of a webpage apparently taken from Duroline’s website on 18 October 2012 shows the Axis gauge tape being offered for sale. It refers to that product as “Made in Australia”. The webpage also contains the email address “sales@duroline.com.au” and a link to “Terms and Conditions”. A copyright notice on the webpage indicates that it was created in 2012. A copy of the webpage was not enclosed in NHL’s letter of 30 October 2012 but Duroline, at least, must have been aware of it at that time.

15    On 7 November 2012, DCC responded. They stated that Duroline, OGI and Mr Hales would not provide the documents requested. Their response also contained a detailed argument to the effect that “[a]ny application for preliminary discovery by your client seeking such documents is bound to fail”.

16    Thereafter, NHL and DCC, on behalf of their respective clients, engaged in a debate, by correspondence, as to whether Mr Costin was entitled to preliminary discovery. That debate has continued beyond the commencement of the present application. In the course of that debate, OGI provided a spreadsheet of sales of “gauge tape” and “brick gauge tape” made by it. Mr Hales also made a statutory declaration in which he verified that the spreadsheet is “a true and complete record of all sales made by” OGI of “gauge tape” or “brick gauge tape” designated by the product code OX-P020508. This is a reference to the OX gauge tape. The spreadsheet shows, amongst other things, the number and value of sales of that product. In his declaration, Mr Hales also said that he was “not aware of any other entity with which I am associated or with which I have a connection which has sold or offered for sale [the designated product] in Australia”. The evidence indicates that the spreadsheet was provided to NHL in a letter from DCC dated 7 November 2012 and that the statutory declaration was provided to NHL in a letter dated 13 December 2012. Copies of these documents were again supplied by DCC to NHL by letter dated 2 May 2013 (that is, after the filing of the originating application).

17    NHL, on behalf of Mr Costin, made no complaint to DCC that the information contained in the spreadsheet and Mr Hales’ statutory declaration was deficient, until NHL sent a letter to DCC dated 10 May 2013 (once again, after the filing of the originating application). In that letter, NHL said that the spreadsheet was deficient because (a) it did not identify in detail “the nature of the sale or distribution of either the ‘Gauge Tape’ or ‘Bricker [sic] Gauge Tape’”; (b) the quantity of the sales did not match the figure for total sales stated at the end of the spreadsheet; (c) the spreadsheet did not identify the persons to whom the gauge tape was sold or delivered; and (d) the spreadsheet did not identify the manufacturer or supplier of the gauge tape.

18    The second of these deficiencies appears to have arisen from the fact that an initial facsimile transmission of the spreadsheet that was sent to NHL did not include one of its pages. Nevertheless, a copy of DCC’s letter dated 7 November 2012 containing a complete copy of the spreadsheet was also sent to NHL by post. No complaint is now maintained that the spreadsheet is deficient in this respect.

19    Importantly, however, NHL’s letter did not suggest that either the spreadsheet or Mr Hales’ statutory declaration was deficient because it did not record sales of the Axis gauge tape, or that sales of gauge tape by Duroline had been omitted and were required. This was so even though Mr Costin’s affidavit sworn on 19 April 2013 in support of the present application gave evidence concerning the current offering of Axis gauge tape. Counsel for the prospective respondents relied on that failure to submit that, until the filing and service of Mr Costin’s affidavit, the only gauge tape in contention had been the OX gauge tape, not the Axis gauge tape. Indeed, in their written submissions, the prospective respondents relied upon Mr Costin’s failure to make “reasonable inquiries” in relation to the Axis gauge tape as a reason why preliminary discovery should be refused in respect of that product.

20    In the course of oral submissions, I raised with counsel for the prospective respondents the fact that, despite the submission that the only gauge tape in contention was the OX gauge tape, and despite the fact that it had been asserted in submissions (without evidence) that sales of the Axis gauge tape had not been made for some years, Mr Costin’s affidavit included evidence that, as at 16 April 2013, the Axis gauge tape was being offered for sale via a website apparently associated with a business called “Sydney Tools” operating at five locations in Sydney. I should add at this point that there is no evidence that links the business of Sydney Tools to any of the prospective respondents, beyond the fact that Axis gauge tape is offered and OGI is the registered proprietor of the trade mark “Axis Building Tools”.

21    As a result of this exchange, counsel for the prospective respondents sought to reopen their case by filing and reading an affidavit made by Mr Hales, apparently during the luncheon adjournment, in which he annexed a spreadsheet of sales of the Axis gauge tape made by Duroline in the period 6 July 2007 to 10 March 2008. In this affidavit, Mr Hales deposed to the fact that the spreadsheet contained “a true and complete record” of all sales of the Axis gauge tape and that the information for the spreadsheet had been “extracted from the EXO accounting kept by [Duroline] in the course of its business”.

22    Counsel for Mr Costin objected to the prospective respondents seeking to reopen their case in this fashion. He relied on the fact that Mr Hales’ evidence, in this regard, was inconsistent with the fact that the Axis gauge tape was still being offered for sale and that he was not then in a position to test or challenge that evidence. He informed the Court that, on his instructions, the Axis gauge tape was currently available for sale. I pause to add that this was an allegation that had been made in NHL’s letter of demand dated 22 October 2012, although no evidence of such offerings was adduced in support of the application. The evidence, in that regard, was limited to offers of the Axis gauge tape made on the two websites to which I have referred.

23    I allowed the prospective respondents to reopen their case in this fashion. I did so because the state of the evidence supported the real possibility that, until receipt of Mr Costin’s affidavit, the prospective respondents were genuinely under the impression – even if as a result of their own mistake – that only the OX gauge tape was in contention. Although the supply of Axis gauge tape should have been addressed previously in the prospective respondents’ evidence, I was satisfied that Mr Hales’ affidavit was relevant to the issues raised in the present application and was probative. I accept that Mr Costin may not have been in a position to test this evidence as he would have liked. Nevertheless, the existing state of his own evidence showed that, despite Mr Hales’ evidence, the Axis gauge tape had been offered by Duroline in 2012 on its website and was currently being offered by another supplier, Sydney Tools. Moreover, although there was no evidence of the fact, Mr Costin was obviously seized of information that enabled NHL to state in their letter of 22 October 2012 that the gauge tape offered on Duroline’s website in 2012 was available for sale in stores.

24    In the circumstances, I was not satisfied that any prejudice to Mr Costin was such as to warrant the refusal of the prospective respondents’ application to reopen their case by relying on Mr Hales’ affidavit. The weight to be attributed to that evidence is a different matter.

25    Counsel for Mr Costin made an application for an adjournment but did not persist with it, citing reasons of cost for that decision.

26    The following additional matters should be noted.

27    First, prior to the filing of the originating application, Duroline, OGI and Mr Hales were identified as prospective respondents in the (then) threatened application for preliminary discovery. OGG was not identified as a prospective respondent. Moreover, no letter of demand was addressed to it. This appears to have been a step that was deliberately taken. On the other hand, Mr Hales is not a prospective respondent in the present application.

28    Secondly, the evidence reveals that, after the filing of the application for preliminary discovery, OGI offered to disclose the name of the supplier of the “gauge tape” that OGI had sold, provided that the application was withdrawn on the basis that the parties bear their own costs.

29    Thirdly, the evidence also discloses the existence of another gauge tape supplied under the brand “Technique Tools”. The relevance of this product to the present application was not explained. The evidence consisted of images of the product. The provenance of those images was not elucidated. There is no evidence that links the product in any way to the prospective respondents. I have not given that product any further consideration.

the present application

30    As I have noted, the present application is brought pursuant to rr 7.22 and 7.23 of the Rules.

31    Rule 7.22 provides:

(1)    A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant satisfies the Court that:

(a)    there may be a right for the prospective applicant to obtain relief against a prospective respondent; and

(b)    the prospective applicant is unable to ascertain the description of the prospective respondent; and

(c)    another person (the other person):

(i)    knows or is likely to know the prospective respondent’s description; or

(ii)    has, or is likely to have, or has had, or is likely to have had, control of a document that would help ascertain the prospective respondent’s description.

(2)    If the Court is satisfied of the matters mentioned in subrule (1), the Court may order the other person:

(a)    to attend before the Court to be examined orally only about the prospective respondent’s description; and

(b)    to produce to the Court at that examination any document or thing in the person’s control relating to the prospective respondent’s description; and

(c)    to give discovery to the prospective applicant of all documents that are or have been in the person’s control relating to the prospective respondent’s description.

Note 1 Control and description are defined in the Dictionary.

Note 2 For how discovery is to be made, see rule 7.25.

(3)    The prospective applicant must provide the person with sufficient conduct money to permit the person to travel to the Court.

Note Conduct money is defined in the Dictionary.

32    It is to be noted that discovery under r 7.22 is directed to ascertaining the description of a person or persons against whom the prospective applicant may have a right to obtain relief. As will be seen, the scope of discovery is not as wide as in the case of preliminary discovery under r 7.23.

33    Rule 7.23 provides:

(1)    A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant:

(a)    reasonably believes that he or she may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and

(b)    after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c)    reasonably believes that:

(i)    the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and

(ii)    inspection of the documents by the prospective applicant would assist in making the decision.

(2)    If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i).

34    The terms “prospective applicant” and “prospective respondent” for the purpose of each of these rules are defined in r 7.21 as follows:

prospective applicant means a person who reasonably believes that there may be a right for the person to obtain relief against another person who is not presently a party to a proceeding in the Court.

prospective respondent means a person, not presently a party to a proceeding in the Court, against whom a prospective applicant reasonably believes the prospective applicant may have a right to obtain relief.

35    In Reeve v Aqualast Pty Ltd [2012] FCA 679, I summarised (at [63]-[66]) the relevant principles in relation to an application under r 7.23 as follows:

63    It is apparent that r 7.23 proceeds on a tightly structured set of considerations for its application in a given case. Without seeking to supplant the precise language of the rule, and at the risk of some repetition, the prospective applicant must establish:

(a)    the existence of a reasonable belief in a right to obtain relief in the Court;

(b)    the making of reasonable inquiries directed to obtaining sufficient information to decide whether to start a proceeding in the Court to obtain that relief;

(c)    an insufficiency of information to enable that decision to be made;

(d)    the existence of a reasonable belief that the prospective respondent has or had, or is likely to have or have had, documents -

(i)    that are directly relevant to the question whether the putative right to relief exists; and

(ii)    whose inspection would assist in making a decision whether to start a proceeding in the Court to obtain that relief.

64    The language of r 7.23(1) makes clear that the power to order a prospective respondent to give preliminary discovery is contingent upon each of its requirements being established. Even if the prospective applicant establishes these requirements, r 7.23(2) shows that a broad discretion remains in the Court as to whether, and to what extent, discovery should be granted. In this connection the intrusive nature of an order for preliminary discovery should be borne in mind. Nevertheless, the rule is to be construed beneficially so as to be given “the fullest scope that its language will reasonably allow”: St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 at [26].

65    In Ebos Group Pty Ltd v Team Medical Supplies Pty Ltd [2011] FCA 862 Flick J held that the general statements of principle set out by Lindgren J in Glencore International AG v Selwyn Mines Ltd (recs and mgrs apptd) (2005) 223 ALR 238 at [9]-[16], respecting preliminary discovery under O 15A r 6 of the Federal Court Rules, remain apposite to an application under r 7.23. In Higgins v Hancock (2011) 199 FCR 393 Jacobson J at [55]-[59] expressed the same view. Those statements of principle, translated to the present context under r 7.23, are as follows:

(a)    The test of reasonable belief is an objective test.

(b)    The provision does not allow for third party discovery. Preliminary discovery may be ordered only against the person from whom there is reasonable cause to believe the applicant is or may be entitled to obtain relief.

(c)    A document relating only to the question whether a judgment against a person is likely to be enforceable is not within the rule and such a document is therefore not discoverable. If the only reason why an applicant has not sufficient information to enable a decision to be made whether to commence a proceeding is that the applicant lacks sufficient information as to the respondent's capacity to satisfy a judgment, preliminary discovery will not be available.

(d)    The measure of any preliminary discovery to be ordered is the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries, to enable a decision to be made whether to commence a proceeding.

(e)    The stronger the relevant evidence already available to an applicant of its right to obtain relief the weaker will its position be to obtain preliminary discovery.

(f)    While a respondent to an application for preliminary discovery is entitled to remain passive, the applicant must place before the Court all of the evidence already available to it relevant to the sufficiency of the information it possesses to enable a decision to be made whether to commence a proceeding. The applicant must not hold back information. This obligation on the applicant to be forthcoming arises from the special and intrusive nature of preliminary discovery and the fact that ordinarily the respondent will not know, or be in a position to expose, the full extent of the information already available to the applicant.

(g)    While the notion of reasonable belief may set the threshold “at quite a low level”, there must be some tangible support that takes the existence of the alleged right beyond mere “belief” or “assertion” by the applicant.

66     To these general statements of principle can be added the summary of principles provided by Hely J in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 at [26] as well as the recent discussion by Katzmann J in EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd (No 3) (2012) 199 FCR 533 at [15]-[32], especially as to the similarities and differences between the current and former rules.

36    In his originating application, Mr Costin seeks the following relief:

1.    An order under Federal Court Rule (FCR) 7.23 that the Prospective Respondents (or either of them) [sic] give discovery to the Prospective Applicant of those classes of documents appearing in Schedule 1 below.

2.    In the alternative, an order under FCR 7.22 that the Prospective Respondents (or either of them):

a.    attend before the Court to be examined orally about the description of any person of which they are aware that has done those things contemplated by Schedule 2 below (“Further or Alternative Prospective Respondent”); and

b.    produce to the Court at that examination any document or thing in [the] Prospective Respondents’ control relating to any Further or Alternative Prospective Respondent’s description; and

c.    give discovery to the Prospective Applicant of all documents that are or have been in the Prospective Respondents’ control relating to any Further or Alternative Prospective Respondent’s description.

3.    That the costs of this application be paid by the Prospective Respondents to the Prospective Applicant.

Schedule 1

The following words are defined as follows in this Schedule:

Document(s):    The extended meaning found in FCR Schedule 1 and including, but not limited to, all orders, invoices, agreements in writing, correspondence, emails, manifests and inventories.

Gauge tape:    A retractable measuring tape comprising a flexible tape, a casing for housing the tape when retracted into the casing, wherein the tape is marked at regular intervals corresponding to two or more brick gauges so as to indicate the required number of bricks for a given distance of brick work, but does not include any gauge tape produced by the Prospective Applicant pursuant to Patent No. 734266 and known as ‘KwikGauge’.

1.    Documents that record, refer or relate to the purchase, import or acquisition of a gauge tape, or any material that subsequently becomes, or is intended by the Prospective Respondent, its servant or agents, to become part of a gauge tape;

2.    Documents that record, refer or relate to the sale, supply or export of the gauge tape;

3.    Documents that record, refer or relate to the manufacture, assembly or part manufacture or part assembly of a gauge tape;

4.    Documents that record, refer or relate to the design or specification of a gauge tape that is or has been in the control of any of the Prospective Respondents;

5.    Documents that record, refer or relate to the advertising, promotion for sale, marketing or supply of the gauge tape; and

6.    Documents that record, refer or relate to, or are, the packaging and instructions that accompany a gauge tape when supplied.

Schedule 2

The following words are defined as follows in this Schedule:

Gauge tape:    A retractable measuring tape comprising a flexible tape, a casing for housing the tape when retracted into the casing, wherein the tape is marked at regular intervals corresponding to two or more brick gauges so as to indicate the required number of bricks for a given distance of brick work, but does not include any gauge tape produced by the Prospective Applicant pursuant to Patent No. 734266 and known as ‘KwikGauge’.

1.    A person (as defined in the Corporations Act 2001) who has done any one or more of the following acts or things:

a.    Made available for sale, purchase, import or acquisition the gauge tape;

b.    Manufactured the gauge tape; and/or

c.    Advertised, promoted, marketed or otherwise displayed for sale (whether in print, online, or in-store) the gauge tape.

consideration

The r 7.23 application

37    I am satisfied that Mr Costin has established that he has a reasonable belief that he may have the right to obtain relief in the Court for infringement of the patent by OGI and Duroline with respect to the exploitation of the OX gauge tape. Arguably, the OX gauge tape has the essential features of the patent tape claimed in claim 1 of the patent. OGI has admitted to being a supplier of the OX gauge tape. NHL’s letter of demand of 22 October 2012 asserted that offers of gauge tape on OGI’s website were redirected from Duroline’s website. There was also hearsay evidence that a representative of Duroline was offering OX gauge tape in July 2012.

38    I am not satisfied, however, that Mr Costin has established that he has a reasonable belief that he may have the right to obtain relief in the Court for infringement of the patent by OGG with respect to the exploitation of the OX gauge tape. OGG is registered as the owner of a trade mark affixed to the product. However, I do not think that, by reason of this fact, a reasonable belief exists that OGG has itself exploited the OX gauge tape, such as to constitute an infringement of the patent.

39    I am also satisfied that Mr Costin has established that he has a reasonable belief that he may have the right to obtain relief in the Court for infringement of the patent by Duroline with respect to the exploitation of the Axis gauge tape. Arguably, the Axis gauge tape has the essential features of the patent tape claimed in claim 1 of the patent. Duroline has admitted to being a supplier of the Axis gauge tape. Despite Mr Hales’ evidence that Duroline’s last sale of that product was on 10 March 2008, other evidence (namely, the evidence of Duroline’s website) shows that Duroline offered to supply the Axis gauge tape in 2012. There is no evidence to show that, since that time, the website has been changed in this regard. No explanation was forthcoming from Mr Hales that would reconcile his affidavit evidence with this objective evidence. To this can be added the fact that Sydney Tools is currently offering to supply the product. This suggests that there has been a relatively recent supply of the Axis gauge tape to Sydney Tools, as opposed to a supply that took place some years ago.

40    I am not satisfied, however, that Mr Costin has established that he has a reasonable belief that he may have the right to obtain relief in the Court for infringement of the patent by OGI or OGG with respect to the exploitation of the Axis gauge tape. OGI is registered as the owner of the trade mark affixed to the product. However, I do not think that, by reason of this fact, a reasonable belief exists that OGI has itself exploited the Axis gauge tape, such as to constitute an infringement of the patent. There is no evidence that OGG has exploited the Axis gauge tape.

41    Notwithstanding my findings of reasonable belief with respect to the exploitation of the OX gauge tape by OGI and Duroline, and the exploitation of the Axis gauge tape by Duroline, I am unable to accept that Mr Costin does not have sufficient information to decide whether to start a proceeding in the Court to obtain relief in respect of that conduct.

42    First, as I have noted, a fair reading of NHL’s letter of 22 October 2012 leaves no doubt that, at that time, Mr Costin, through NHL, considered that he had sufficient information, and had resolved, to commence proceedings against Duroline and OGI (as well as Mr Hales) for infringement of the patent. If it is to be accepted that the letter covered the Axis gauge tape as well as the OX gauge tape (as has been contended on Mr Costin’s behalf), then his level of satisfaction must have applied to both of those products. The demands for information made in that letter were expressly advanced on the basis that, by complying with those demands, the (then) prospective respondents might limit their existing liability for pecuniary relief, in circumstances where Mr Costin had already formed the view that those persons were so liable.

43    Secondly, if the genuineness of NHL’s letter of 22 October 2012 is to be accepted, Mr Costin had information that satisfied him that OX gauge tape and Axis gauge tape were not only being offered online but were also available for sale in stores.

44    Thirdly, OGI provided Mr Costin with a spreadsheet of sales of the OX gauge tape on about 7 November 2012. This was later supplemented by a statutory declaration made by Mr Hales verifying the accuracy of the information contained in the spreadsheet. The only matter raised by Mr Costin touching the accuracy of the spreadsheet – namely, that the quantity of the sales did not match the figure for total sales stated at the end of the spreadsheet – is no longer maintained.

45     Fourthly, Duroline has now provided Mr Costin with a spreadsheet of sales of the Axis gauge tape. The information in the spreadsheet has been verified by Mr Hales as being accurate. Mr Costin has raised doubts about the veracity of that evidence. I have already alluded to the fact that Mr Hales’ evidence of a closed period of historical sales sits discordantly with the evidence of continuing offers to supply the product. On the present state of the evidence, I am not able to resolve that apparent conflict. There may be an explanation. If there is, Mr Hales did not offer it. On the other hand, Mr Hales was not required for cross-examination. The resolution of this question is, perhaps, a matter best left for the trial of the underlying action, should Mr Costin elect to commence a proceeding in the Court for patent infringement. The existence of this unresolved question does not mean, however, that Mr Costin does not have sufficient information to decide whether to start a proceeding in the Court. The purpose of preliminary discovery is not to produce material that will strengthen or enhance a decision to commence a proceeding but to provide information reasonably necessary to enable the decision to commence to be made: Matrix Film Investment One Pty Limited v Alameda Films LLC [2006] FCA 591 at [19].

46    In this connection, counsel for Mr Costin relied on an observation made by Sackville J in Quanta Software International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536 at [33] to the effect that documents relating only to quantum are not necessarily irrelevant to an inquiry whether a prospective applicant has sufficient information to enable a decision to be made to commence a proceeding. His Honour illustrated his observation by remarking that a trivial claim may not be worth pursuing and might prove to be a waste of the time and resources not only of the applicant but of the Court.

47    The present case is not of that character. The evidence shows, plainly enough, that Mr Costin does not consider the prospective respondents’ conduct to be trivial. Importantly, Duroline’s conduct in offering the Axis gauge tape was known to Mr Costin before NHL issued the letter of demand on 22 October 2012. Nothing has changed since that time, apart from Mr Hales’ evidence of sales, which Mr Costin does not accept. Mr Costin has made clear that he considers the conduct to be ongoing. The letter of demand makes clear that Mr Costin has decided to take action to restrain what he considers to be the further infringement of the patent. That letter has not been withdrawn. Further, there is no evidence from Mr Costin that his decision to commence proceedings is, contrary to the letter of demand, now dependent on the prospective respondents providing documents on the current level of sales of the Axis gauge tape or on the product having achieved a certain level of sales.

48    Additionally, Mr Costin has not sought to make inquiries in relation to the involvement, if any, of OGG in the conduct of which he complains, beyond conducting a trade mark search. No letter of demand was addressed to OGG. The draft originating application enclosed with NHL’s letter of 30 October 2012 did not name OGG as a prospective respondent. As I have noted, this appears to have been a step that was deliberately taken. The lengthy passage of correspondence between NHL and DCC did not specify any complaint with respect to OGG.

49    In oral submissions, counsel for Mr Costin sought to overcome this problem by referring to the fact that the letter of demand of 22 October 2012 was marked for the attention of Mr Hales and that Mr Hales was a director of OGG. The evidence also shows, however, that Mr Hales is the director of a large number of companies. The letter of demand was specific to the activities of Duroline and OGI. The letter of demand cannot reasonably be read as addressing the conduct of all other companies of which Mr Hales was, at the time, a director, simply because the letter was marked for his attention. I am not satisfied that, in all the circumstances, Mr Costin has established that he has made reasonable inquiries in respect of OGG’s conduct in order to engage the application of r 7.23 against it.

50    In light of these conclusions, it is not necessary for me to consider the appropriateness of the categories of documents sought by Mr Costin. However, as a general observation, those categories seem to me to be wider than would be necessary under r 7.23 had Mr Costin been able to otherwise satisfy the requirements of the rule.

The r 7.22 application

51    As noted above, I am satisfied that the exploitation of the OX gauge tape in Australia may give Mr Costin the right to obtain relief for infringement of the patent. The evidence is clear that OGI has obtained the OX gauge tape from another supplier. The supply, in Australia, to OGI of that product would be an exploitation for the purposes of the Patents Act 1990 (Cth) (the Patents Act). As I have noted, OGI has offered to reveal the identity of its supplier to Mr Costin on terms which were not accepted by him. It is apparent, therefore, that OGI knows the description of its supplier but has not been prepared to provide that description to Mr Costin. In the circumstances, I am satisfied that the description of OGI’s supplier is not known to Mr Costin and that, for the purposes of r 7.22, Mr Costin is unable to ascertain that description.

52    I am also satisfied that Mr Costin has reason to believe that OGI knows the description of the persons to whom it has supplied the OX gauge tape. The spreadsheet in relation to the supply of the OX gauge tape appears to have been prepared so as not to include, deliberately, the description of those persons. The supply of the OX gauge tape by those persons would equally constitute an exploitation for the purposes of the Patents Act. I am satisfied that the description of all persons to whom OGI has supplied the OX gauge tape is not known to Mr Costin and that, for the purposes of r 7.22, Mr Costin is unable to ascertain the description of those persons.

53    In the circumstances, I am satisfied that Mr Costin has established a proper basis for preliminary discovery against OGI in respect of the description of its supplier and the description of the persons to whom it has supplied the OX gauge tape.

54    On the basis of the evidence to which I have referred, the same findings are available in respect of Duroline. Duroline has not admitted to being a supplier of OX gauge tape, but other evidence implicates it in the supply of that product. I am satisfied that Mr Costin has reason to believe that Duroline knows or is likely to know the description of the manufacturer of OX gauge tape and the persons who have supplied that product, including those to whom OGI has supplied the product.

55    Similarly, the exploitation of the Axis gauge tape in Australia may give Mr Costin the right to obtain relief for infringement of the patent. The manufacture of the Axis gauge tape would be an act of exploitation for the purposes of the Patents Act. Duroline’s website shows that the tape is manufactured in Australia. I am satisfied that Duroline is likely to know the description of the manufacturer. Similarly, Duroline is likely to know the description of the person who supplied it with the Axis gauge tape, if different to the manufacturer of that product. The description of the manufacturer and the supplier to Duroline is not known to Mr Costin. I am satisfied that, for the purposes of r 7.22, Mr Costin is unable to ascertain the description of that person or those persons.

56    I am also satisfied that Mr Costin has reason to believe that Duroline knows the description of the persons to whom it has supplied the Axis gauge tape. The spreadsheet in relation to the supply of the Axis gauge tape appears to have been compiled so as not to include, deliberately, the description of those persons. The supply of the Axis gauge tape by those persons would equally constitute an exploitation for the purposes of the Patents Act. I am satisfied that the description of the persons to whom Duroline has supplied the Axis gauge tape is not known to Mr Costin and that, for the purposes of r 7.22, Mr Costin is unable to ascertain that description.

57    In the circumstances, I am satisfied that Mr Costin has established a proper basis for preliminary discovery against Duroline in respect of the description of the manufacturer and supplier to it of the Axis gauge tape and the description of the persons to whom Duroline has supplied the Axis gauge tape, as well as preliminary discovery in respect of the description of the manufacturer and supplier of OX gauge tape.

58    In my view, these descriptions can be provided satisfactorily by an appropriate officer of OGI and an appropriate officer of Duroline, each with knowledge of the facts, making an affidavit providing a description of the relevant persons. The description is to include, in each case, the name (including any business name) and the last known address of the person in question, and whether that person is a manufacturer or supplier of the product in question. In the absence of such an affidavit or affidavits, each of OGI and Duroline should give discovery of all documents that are or have been in its control relating to the description of such persons.

Costs

59    The prospective respondents have made an application for indemnity costs. This was premised on the acceptance of their submission that the application for preliminary discovery should be dismissed. As events have transpired, Mr Costin has succeeded on his application under r 7.22, but has failed on his application under r 7.23.

60    I am persuaded that, notwithstanding Mr Costin’s success under r 7.22, he should bear the costs of the application. In my view, in light of the information that Mr Costin had prior to filing the originating application, his application under r 7.23 could not succeed. It is clear on the evidence that, prior to filing the originating application, Mr Costin’s concern was preliminary discovery under r 7.23. This was the basis for the preliminary discovery that was sought on the face of the draft originating process enclosed with NHL’s letter of 30 October 2012. It was the focus for the ensuing debate in the voluminous correspondence passing between DCC and NHL. I accept that the scope of the categories of documents sought by Mr Costin during the course of that debate would have covered documents revealing the identity of the manufacturers of the OX gauge tape and the Axis gauge tape, as well as the suppliers of those products to OGI and Duroline. It would also have covered documents revealing the identity of the persons to whom OGI and Duroline have supplied those products. That information represented, however, a small part of the preliminary discovery that was sought. Even the hearing of the present application has focused on the application under r 7.23. The claim for preliminary discovery under r 7.22 was advanced as an alternative and commanded only one sentence in Mr Costin’s written submissions.

61    I am not persuaded, however, that an order for indemnity costs should be made. Importantly in that regard, Mr Costin has achieved a measure of success on his application. Certainly in the case of the OX gauge tape, the prospective respondents’ preparedness to reveal the identity of the supplier was conditioned on seeking a collateral advantage, which, in my view, was not justified.

62    Furthermore, Mr Costin should bear the cost of giving preliminary discovery under r 7.22.

Associate:

Dated:    27 May 2013