FEDERAL COURT OF AUSTRALIA

Voxson Pty Limited v Telstra Corporation Limited (No 2) [2015] FCA 1491

THE COURT ORDERS THAT:

1.    Leave be granted to the applicant to file an amended Vox 2 Statement of Claim in the form provided to the Court and the respondents on 13 March 2015, together with the Vox 2 Amended Originating Application, by 18 January 2015.

2.    The parties confer to discuss the further conduct of the proceeding and notify my associate of the proposed orders by 27 January 2015.

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

REASONS FOR JUDGMENT

1    The applicant/patentee, Voxson Pty Limited, (Voxson) alleges infringement by each respondent (the first respondent, Telstra Corporation Limited (Telstra), the second to fourth respondents, together Optus and the fifth respondent, Vodafone Hutchinson Australia Pty Limited (Vodafone)) of Patent No 686591 (the Vox 2 Patent). Voxson alleges infringement by reason of exploitation of a “system” that involves the presence of each of the integers of the claims alleged to have been infringed. The second and fourth respondents seek to be removed from the proceeding. That is the subject of separate reasons (Voxson Pty Limited v Telstra Corporation Limited (No 3) [2015] FCA 1492) (the costs decision).

2    The Vox 2 proceeding was commenced on 17 December 2013. Optus was served on 12 June 2014 with a statement of claim that had been filed on 17 December 2013. Optus formed the view that it was inadequate and asked for further pleadings and particulars. On 19 September 2014, Voxson served an amended statement of claim (filed on 1 September 2014) which contained substantial amendments (the pleading). On 22 September 2014, Optus sought further particulars, to which Voxson responded. Optus formed the view that the particulars were inadequate and on 24 October 2014 filed and served its interlocutory application to strike out the pleading. Telstra and Vodafone filed interlocutory applications to strike out the pleading on 17 October 2014 and 20 October 2014 respectively (together, with Optus’ interlocutory application, the strike out applications).

3    Optus’ submissions on the strike out applications were adopted by Telstra and Vodafone and formed the basis of the argument.

4    Voxson maintained that the pleading was adequate until it provided to Optus a further amended statement of claim on 14 January 2015 (the first proposed amended pleading), shortly before submissions on the strike out applications were due. After three days of hearing in February 2015, Voxson provided a second version of its proposed further amended statement of claim (the second proposed amended pleading). Optus says that this version is materially different from the previous ones, which Voxson has now abandoned. On 13 March 2015, Voxson provided the respondents with the final version of the proposed further amended statement of claim (the final proposed amended pleading).

5    The respondents have sought costs of the strike out applications. This is dealt with in the costs decision.

6    The pleading alleged infringement by direct exploitation by Optus and, further or in the alternative, infringement by authorisation within the meaning of s 13 of the Patents Act 1990 (Cth) (the Act). In the pleading, no case under s 117 of the Act was pleaded, but this has now been included in the final proposed amended pleading which also includes, for the first time, allegations of joint tortfeasorship. The Vox 2 Patent has expired, and no injunctions are sought.

7    The submissions on the infringement of the Vox 2 Patent centred on claim 1 which is to:

A system for transmission of video signals from a transmitting location to a receiving location, said system including first video signal processing means at said transmitting location, second video signal processing means at said receiving location, and a communication channel including at least part of a cellular telephone network adapted to transmit said video signals from said transmitting location to said receiving location upon a request initiated by a user of the cellular telephone network.

8    Claim 1, broadly, is to the transmission of video signals over a communication channel using a cellular communications network, upon request by a user.

9    The Vox 2 Patent broadly relates to transmission of video content across a mobile telephone network. The allegations in the final proposed amended pleading which were, in essence, the same for each of Optus, Telstra and Vodafone, are addressed to parts of two different generations of radio access networks, namely third generation (3G) and fourth generation (4G) networks.

10    It is convenient to address the case made as against Optus.

11    The pleading made claims of infringement relating to the use of the Optus 3G network and the Optus 4G network. The “communication channel” relied upon in each case is one defined by the 3G Standard or 4G Standard respectively.

12    In summary, the allegations address the transmission and/or reception of video signals between, in the case of Optus:

(1)    Optus 3G/4G Video User Equipment (for example Optus video calling, Skype, Facetime);

(2)    Optus 3G/4G Video User Equipment and non-Optus Video User Equipment (that is, User Equipment with a Subscriber Identification Module (SIM) supplied by another entity) (for example Optus video calling, Skype, Facetime);

(3)    Optus 3G/4G Video User Equipment and servers operated by Optus (for example, Optus TV servers);

(4)    Optus, 3G/4G Video User Equipment and servers not operated by Optus (for example, Youtube, Facebook videos).

13    Various permutations of components are alleged to have been involved in the transmission of video signals using these networks. In general terms, the video transmissions embraced by the pleading included those made between mobile devices and those made between a mobile device and a video server (whether as the transmitting or receiving entity). Relevant mobile devices included mobile phones, tablets, Universal Mobile Telecommunications System (UMTS) cellular network access routers, SIM cards, broadband devices and “plans”.

14    In each case, at least one of the mobile devices was required to be an “Optus” device. Any mobile device, whether supplied by Optus or not, was an “Optus” device for the purposes of the pleading if it contained an Optus SIM card. Thus, the pleading appeared to draw no distinction between such devices as supplied by Optus and devices which were not.

15    Similarly, the pleading drew no distinction between video servers which were operated by Optus and those which were not.

16    Thus, the only essential feature of an infringing transmission, insofar as it concerned a connection with Optus, was that it used the Optus mobile network for part of that transmission (ie, at least one of the mobile devices has an Optus SIM card).

17    The pleading proceeded to allege (at [172] – [186]) that Optus has infringed the relevant claims by, in summary:

    Selling or supplying (among other things) one or more systems as claimed;

    Using one or more systems as claimed; and/or

    Authorising consumers to use one or more systems as claimed.

18    The pleading also included allegations (at [178] – [186]) that Optus was, inter alia, using or selling part/s of the system as claimed, and authorising others to use the remaining parts. That case has, however, been abandoned in the first proposed amended pleading.

19    The allegedly infringing “system” was not defined in the pleading and is not defined in the first proposed amended pleading.

20    Many of the matters raised by the respondents have been resolved during the course of the hearings of the strike out applications, by a series of proposed amendments and clarifications by Voxson. Some other matters were clarified by Voxson on the final day of hearing, such as concern on the part of the respondents about breadth arising from the use of the expression ‘inter alia’ in the pleading and concerning “transmitting/receiving” as relevant to claim 1 of the Vox 2 Patent. Many of the particulars sought were answered by incorporation into the final proposed amended pleading. Voxson sought to answer promptly all requests for particulars, although there was a measure of disagreement as to whether the answers were adequate. Voxson points out that, as it is an early stage of the proceedings and no respondent has filed a defence or, it says, prepared evidence, there can be no prejudice if Voxson is granted leave to amend the pleading.

21    Voxson maintains that the case in the final proposed amended pleading remains the same as it was in the pleading ‘albeit narrowed’. As to part of the consideration of Voxson’s application for leave to amend, the respondents reserve their right, which reservation Voxson accepts without admission as to its success, to argue that the final proposed amended pleading provides for a new cause of action which is pleaded outside the relevant limitation period.

22    In essence, Voxson says:

    It should be given leave to amend to file the final proposed amended pleading as against each of Optus, Telstra and Vodafone.

    Accordingly, the respondents are unsuccessful in their maintenance of the applications to strike out the pleading.

    As at the conclusion of the hearing, the respondents did not press for the alternative orders sought in the strike out applications, namely, that there be further particulars and a statement of the nature of the case (Voxson does not place this into the context of the provision of that material after the strike out applications were filed).

    The fact that there may be limitation issues is a discretionary factor in favour of leave to amend being given.

    The iterative amendments to the pleadings have narrowed the issues because Voxson has been willing to accept, in good faith, information provided by the respondents and to address their concerns.

    The respondents have raised matters ‘piecemeal’ and Voxson should not be penalised by the late raising of issues (this submission does not deal with the fact that some matters have only arisen after iterative amendments proposed by Voxson).

submissions by Optus

23    At the first hearing date of 4 February 2015, in relation to the Vox 1 proceedings (NSD 2436 of 2013) concerning another patent, Patent No 676242 (the Vox 1 Patent) but also relevant to the Vox 2 Patent, Optus raised as its main alleged deficiencies of the then relevant proposed amended pleading that the pleading of a “system” did not differentiate between a product and a method as:

    The case made was of indeterminate scope.

    The rolled up referencing and cross referencing made it unclear whether the infringement case travelled beyond the specific particulars.

    There was a failure to state whether the standards on which Voxson relies are optional or mandatory.

24    Voxson then served the final proposed amended pleading on 13 March 2015. Optus had identified alleged deficiencies in the final proposed amended pleading as:

    The pleading of a “system” that “rolls up” a product and a method and thereby does not define the allegedly infringing system. For example, if the system is a product, it is not clear what parts Optus sold; if a method, it is unclear how it is said to be sold; if Optus is no longer alleged to be using any mobile devices, how can it be using the system of which the mobile devices are a part?

    The absence of clear primary infringement gives rise to difficulties in understanding the case of secondary infringement.

    Failure to give at least one instance of each type of infringement, such that the case is one of indeterminate scope and potentially unmanageably broad. This is in the context where there is a new generic definition of “capability” to process, transmit and receive video signals but there is no differentiation between a device with a specific application for video streaming but not video calling and a device which does have video calling software.

    The rolled up references make it unclear whether the infringement case travels beyond the specific particulars and, if so, how. This affects both the primary infringement case and the authorisation case. I indicated, that during the hearing that I was of the view that the “rolled up” nature of the pleading by way of cross-referencing was not confusing and obviated the need for extensive repetition.

25    Voxson has pleaded infringement by offering to sell, selling, offering to supply and/or supplying to consumers in Australia the system of the claims. Particulars to this pleading include the supply of access to the Optus 3G UTRAN as well as the supply of Optus 3G video user equipment. As to the latter, Optus points out that it is not clear whether or not the capacity relied on for infringement is a phone which has the capacity to support a Skype application when nothing is on the device when sold. This hinges on the meaning given to “capability”.

26    In elaboration, Optus points out that, by pleading a system as claimed without specifying whether it is a product or a method, Voxson’s allegations of infringement are inadequate. If the system is a product, there are no sufficient particulars of the components of the system that are of the asserted sale, use or disposal. If the system is a method, the user of the system is not stipulated. Optus summarises the position by submitting that the pleading and the final proposed amended pleading do not identify how the use of an individual device amounts to the use of the whole system.

27    Optus asserts the following additional deficiencies in the final proposed amended pleading:

    No definition of the allegedly infringing system. There is no support for the allegation that Optus has itself sold or used a “system” and the case that Optus is liable for the use by consumers of the system is unclear in the absence of a definition.

    The case of infringement by authorisation is so broad as to be untenable. The allegation seems to be that the mere operation of the Optus 3G and 4G mobile networks constitutes authorising infringement, which is untenable.

    The new s 117 of the Act case and the new case of joint tortfeasorship pleaded in the final proposed amended pleading suffer from the same deficiencies as the pleading, as they rely on the same allegations.

    Further particularisation has only compounded the obscurity.

    The only particularisation of the claim for loss and damage is the alleged loss of a fair and reasonable licence fee for Optus’ exploitation of the Vox 2 Patent.

28    Optus says that the ambiguity and the lack of particularisation of different instances of alleged infringement means that it does not know the products or services that it offers that are the subject of allegations.

29    Optus draws from the pleading and the final proposed amended pleading that the operation of the system includes transmitting and receiving hardware and software and the 3G/4G mobile networks. However, Optus does not sell or supply the system. It sells or supplies mobile devices but not its mobile network infrastructure or any relevant video servers. Indeed, the final proposed amended pleading acknowledges that Optus sells subscriptions or access to its 3G UTRAN or video servers. As to use of the system, Optus says that there is no assertion that Optus has “used” any relevant user equipment, rather than sell the user equipment to consumers, who then operate the user equipment.

30    Optus says that such deficiencies, in the case for infringement, then extend to the cases of secondary infringement, which depend on the clarity of the primary infringement alleged.

31    Optus says that when this is combined with the absence of particularisation of loss and damage, which therefore remains at large, there is a likelihood of a narrow approach to liability of, say, a single device, which may then give rise to a claimed inquiry across a much broader range of devices, notwithstanding that no findings of liability have been made across the broad range. Optus also says that there are insufficient particulars of the loss and damage case. The claim is for a fair and reasonable licence fee but Optus points out some licence fees have been paid by user equipment manufacturers and this should be made clear in the statement of claim.

Additional submissions by Telstra

32    Telstra also submits that the final proposed amended pleading is deficient. In summary, Telstra points to:

    Voxson’s refusal to identify the specific versions of telecommunications standards referred to in the final proposed amended pleading.

    The lack of particularisation in relation to Telstra’s systems and the failure to differentiate whether the alleged infringing system is a product or method.

    Paragraphs in which Voxson makes an allegation said to be supported by a very large number of earlier paragraphs (“rolled up” paragraphs) yet the allegation confusingly refers to a separate body of particulars. The fact that there is cross-referencing to a large number of preceding paragraphs and in the body of the pleading and in the particulars make it unclear as to any limitation by reference to the particulars.

    The inconvenience and potential confusion created by the references to parts of correspondence that are said to contain Voxson’s further particulars (without reproducing those further particulars in the pleading).

    The allegation that Telstra’s systems comply with the standards without sufficient particularisation of the whole or part of the standards means that Telstra must plead to each and every version of every section, which is unworkable.

    It is unclear what constitutes the pleaded communication channel by reference to the pleaded physical channels. The pleading alleges that the UTRAN provided a communication channel or part thereof and also that the UTRAN provided part of a communication channel that included part of the network.

    Reference to correspondence in the particulars means that the statement of claim is not in a single document and Voxson should reproduce in the statement of claim the sections of correspondence to which it refers.

33    Telstra identifies the following prejudice arising from the final proposed amended pleading:

    Voxson’s case would remain insufficiently defined which could result in Telstra being faced with broad ranging and oppressive discovery obligations.

    Without knowing the particular systems (and components of those systems) which Voxson says infringe the Vox 2 Patent, Telstra would have difficulty, among other things, understanding and determining what evidence it needs to prepare in connection with Voxson’s claims.

    The evidence could also be unnecessarily voluminous. For example, evidence may need to be obtained in relation to all possible permutations of “part of” a communication channel.

Additional submissions by Vodafone

34    Vodafone’s positon as to the final proposed amended pleading is, in summary:

    There is no proper definition of the “system” and no sufficient identification of the features such that the precise allegation of infringement can be determined. There is no proper definition of whether the claimed system is a product or method and, therefore, no sufficient particularisation of the alleged exploitation.

    It is not clear if, as alleged, the Vodafone UTRAN provides only part of the communication channel. Therefore, Vodafone asks, what are the other parts and how they are said to have been infringed?

    The insufficient particularisation of primary infringement makes the claim of authorisation and joint tortfeasance “untenable”.

    The manuals particularised are not relevant to Vodafone, as pleaded.

    The “rolled up” nature of this pleading and the cross references in the particulars makes it unclear whether the allegations of infringement involve matters outside the particulars appearing beneath certain paragraphs.

    There are specific difficulties in this pleading concerning Vodafone Video Servers and non-Vodafone Video Servers.

Submissions by Voxson

35    Voxson seeks leave to amend and notes that the parties do not oppose leave to replead the Vox 2 statement of claim. Voxson says that:

    The respondents have continued to maintain that the pleading, including in its final form as the final proposed amended pleading, is inadequate.

    In the absence of a strike out, there have been some changes, including changes that narrowed and clarified Voxson’s case.

    Many of the respondents’ contentions have been found to be without substance, such as the identification of the system and the rolled up pleading.

    The respondents have abandoned the requests for further particulars and a statement of the nature of the case. These had been provided prior to the hearing of the strike out applications (but not apparently prior to the filing of those applications. Voxson served a statement of the nature of the case on 5 December 2014, an amended statement of claim on 14 January 2015, a position paper outlining amendments on 20 February 2015 with the second proposed amended pleading and a position paper on the final proposed amended pleading on 26 March 2015).

36    Voxson also points out that some of the pleading points have not been raised by all respondents, which, Voxson submits, means that the pleading does not lack clarity with respect to matters that are not relied on by all respondents. For example, this affects the claims by Optus and Telstra to a need for more particulars of the standards said to apply, and this request is not pressed by Vodafone.

37    Voxson clarified that “capability” as used in the pleading is relied on in the broader sense: the device has the immediate capability or the capability to acquire the capability, for example by downloading an application. Voxson also points out that the claims, are to a system and do not refer to software. Claim 1, in effect and described by senior counsel for Voxson, requires a transmitter, a receiver, something to transmit the video signal, to receive the video signal and a channel in between that includes part of the cellular network.

38    Even accepting Voxson’s explanation that “capability” be given the broadest meaning, Optus says that it may involve different types of infringement, which have not been particularised as required by the Federal Court Rules 2011 (Cth). If, however, these are different aspects of the same type of infringement, then sufficient particularisation has been given. This was canvassed at the hearing and further particulars can be provided, to reflect what was there stated.

39    As to the requested particulars of loss and damage, Voxson says that this had not been sought in correspondence and that Voxson should not be expected to respond without notice. As to a need to allow for received licence fees, Voxson says that it is up to the respondents to plead patent exhaustion if that is relied upon. In any event, Voxson says, questions of damages can be separated out.

CONCLUSION

40    Voxson should be given leave to amend in accordance with the final proposed amended pleading with the addition of the matters of clarification addressed at the hearing on 29 and 30 September 2015, in particular as to the scope of the final proposed amended pleading of “capability” and the effect on the scope of the final proposed amended pleading by the use of the expression ‘inter alia’.

41    The concern raised by the respondents as to the rolled-up paragraphs does not, as I said during the hearing, result in a lack of clarity of pleading. In due course, as part of its evidence, Voxson will need to specify the parts of the applicable standards that it relies upon to prove its case on infringement.

42    As to particulars of loss and damage, such particulars will need to be provided although the timing of such provision may depend on whether the issue of liability is first addressed. In any event, Voxson should state whether licence fees have been received, from whom and how they have been calculated.

43    The question of costs of the strike out applications and the costs of Voxson’s application for leave to amend the pleading are addressed in the costs decision.

Orders

44    Accordingly, the Court will grant leave to Voxson to file the final proposed amended pleading together with the Vox 2 Amended Originating Application.

45    Voxson seeks an order that the respondents file and serve any defence in the Vox 2 proceedings, including full particulars of the basis for any denial and reasons for any non-admission within one month of the final proposed amended pleading being filed. Such an order, if made, would need to be on the basis that the respondents may not be able to plead to some parts of the final proposed amended pleading when filed until Voxson files and serves evidence or an explanation going to its construction of the claimed system and the way in which the respondents are said to exploit it, within the meaning of the Act. In particular, the respondents may not be able to plead responsively to the alleged exploitation or infringement without particulars or evidence about the components of the product constituting the system and/or the use of the system as claimed.

46    I will give the parties time to consider proposed orders as to further conduct of the proceedings and to notify my associate of agreement or lack thereof.

Associate:

Dated:    23 December 2015