FEDERAL COURT OF AUSTRALIA

Australian Mud Company Pty Ltd v Coretell Pty Ltd [2016] FCA 830

ORDERS

THE COURT ORDERS THAT:

1.    The respondents’ application for orders in terms of paragraphs 2 and 3 of its interlocutory application dated 19 January 2016 be refused

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

REASONS FOR JUDGMENT

BESANKO J:

1    This is an interlocutory application by the respondents whereby they seek an order that the proceeding be stayed until the hearing and determination of the appeal in proceeding NSD 2082 of 2011. I will refer to this proceeding as the NSD proceeding. The first, second, third and fifth respondents offer an undertaking to expeditiously prosecute the appeal to the Full Court in the NSD proceeding. In the alternative, the respondents seek an order that there be the hearing and determination of a separate question. The Court’s power to order that there be the hearing and determination of a separate question is contained in r 30.01 of the Federal Court Rules 2011 (Cth). The respondents seek an order that the matters alleged in Part A paragraph A and Part C, paragraphs 33 to 70 (inclusive) (as may be amended) in their Defence be heard and determined as a separate question. The matters raised in those paragraphs may be broadly described as a claim that the proceeding is an abuse of process and should be permanently stayed or dismissed. That is the allegation of Part A paragraph A of the Amended Defence. The matters in support of that allegation are set out in Part C, paragraphs 33 to 70 of the Defence. On 29 April 2016, the respondents filed an Amended Defence. There are now additional paragraphs relevant to the respondents’ claim that the proceeding is an abuse of process.

The Application for a Stay

2    In the NSD proceeding, Australian Mud Company Pty Ltd (“Australian Mud”) and others sought relief against Coretell Pty Ltd and others in relation to two innovation patents. Australian Mud is the patentee of the two innovation patents. Australian Mud claimed that there had been an infringement of its patents and its claim included a claim that a number of the respondents were liable as accessories or joint tortfeasors. Coretell Pty Ltd claimed by way of a cross-claim that the patents were invalid. There was a trial before McKerracher J and on 4 December 2015, his Honour delivered reasons for judgment (Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372). His Honour made final orders on 23 March 2016. The applicants were successful. The respondents have been granted leave to appeal and their appeal is listed for hearing in the Full Court period from 31 October 2016 to 25 November 2016.

3    The basis of the respondents’ application for a stay of this proceeding is their appeal in the NSD proceeding. They point to the fact that the NSD proceeding was commenced before this proceeding. In essence, they rely on two matters which they contend will be in issue on the appeal to the Full Court and which are relevant in this proceeding. In other words, they claim that there are common issues in the appeal and in this proceeding, and that it would be inefficient and costly to proceed with this proceeding before the Full Court determines the two issues that they identify. They refer to the overarching purpose of civil practice and procedure provisions identified in s 37M of the Federal Court of Australia Act 1976 (Cth) and, in particular, the purpose of resolving disputes quickly, inexpensively and as efficiently as possible.

4    The two matters which the respondents identify as common issues are as follows:

(1)    The respondents contend that there is a commonality of issues in the NSD proceeding and this proceeding concerning accessorial liability and liability on the basis that parties are joint tortfeasors. They contend that the Full Court’s determination of those issues “will have, at the very least, a substantial forensic effect on the way that both parties approach the issue of joint tortfeasorship in this proceeding one way or the other”.

(2)    The respondents contend that there is a commonality of issues in the NSD proceeding and this proceeding concerning prior use. The prior use is said to relate to activities “of various of the parties connected with the first applicant and its parent company, all of which took place in Western Australia in the period January 2004 through to the priority date of September 2004”. The evidence concerning prior use is said to be relevant to the topics of a lack of novelty by way of prior use, or alternatively, secret use, or alternatively, lack of manner of manufacture. The respondents contend that if they succeed on the appeal as to prior use, then that will be fatal to the whole family of patents upon which the applicants rely.

5    I do not think that the first matter is a sufficient basis for a stay. First, I do not think the effect or “advantage” identified in the passage I have quoted from the respondents’ oral submission is sufficient to justify a stay. Secondly, even leaving the first matter to one side, it is very difficult for me to determine the extent of the commonality of issues on the material put forward by the respondents. The onus is on the respondents to establish a basis for a stay and a stay is not to be granted on the basis of speculation. Thirdly, it is to be noted that there is an additional respondent in this proceeding and it is likely that at least some of the facts will be different in relation to that respondent.

6    I do not think that the second matter is a sufficient basis for a stay. In the course of submissions, I asked counsel for the respondents whether he accepted that he could not succeed on matters relating to prior use in this proceeding if he failed on that issue in the appeal. I mean no criticism of counsel, but he did not accept that that was necessarily the case. That matter, and the fact that the exact nature of the alleged commonality issues was somewhat elusive, is sufficient reason to reject the application for a stay on the basis of the second matter.

7    The application for a stay is refused.

Abuse of Process

8    The respondents identified the substance of their abuse of process argument and, therefore, their proposed separate question as being set out in paragraphs 76, 77 and 78 of their Amended Defence. Those paragraphs are in the following terms:

76    By reason of the conduct of the Applicants, in the circumstances as above set out, the commencement by the Applicants and any continuation of these patent infringement proceedings by the Applicants against the Respondents based on the same core orientation tool which twice has been the subject of separate and earlier patent infringement proceedings in this Court was and is an abuse of process as it would involve:-

(a)    substantive patent infringement issues and considerations for the Court that could have, and should have, been raised by the Applicants in those earlier proceedings;

(b)    wasted Court time and wasted public resources in litigating for the third time patent infringement issues, and a defence to such issues including by way of a challenge to the validity of the Patent that could have, and should have, been relied upon by the Applicants in those earlier proceedings;

(c)    substantial unfairness, injustice and prejudice to the Respondents by way of substantially increased legal costs and business inconvenience associated with defending a third, separate consecutive patent infringement proceeding in respect of the same core orientation tool of the First Respondent which had been the subject of those earlier proceedings; and

(d)    as to the Fourth Respondent, would involve substantial unfairness, injustice and prejudice arising from matters now alleged against it which could have, and should have, been raised in proceeding NSD 2082 of 2011.

77.    In the premises of the foregoing, the commencement and continuation of these further proceedings of patent infringement by the Applicants against the Respondents was, and is, an abuse of process so that the said proceedings should be permanently stayed or dismissed.

78.    Further or alternatively to paragraph 77 hereof and in the premises of the foregoing:

(a)    the Applicants have failed in their obligations to the Court arising under s37N of the Federal Court of Australia Act 1976 (Cth);

(b)    the maintenance of these proceedings is in breach of s37M of the Federal Court of Australia Act 1976 (Cth); and

(c)    the proceedings should be permanently stayed or dismissed

9    I do not think that the respondents have established a sufficient basis for a separate question. My reasons are as follows:

(1)    The abuse of process argument seems to involve a mixed question of fact and law. The precise evidence which may be called is difficult to identify at this stage, and the likely length of a hearing with respect to the abuse of process argument is unclear. There is a reasonable prospect there will be not insignificant evidence called with respect to the argument. The extent to which the judge determining the abuse of process argument could then go on and hear the remaining issues is unclear.

(2)    There is a good deal of force in the applicants’ submission that no draft of the proposed separate question has been provided to the Court and to the applicants and that that indicates that a concise question appropriate for determination as a separate question cannot be formulated. In other words, although it is no doubt possible to formulate questions about issues in a proceeding, the more difficult it is to formulate the questions and identify the way in which they link to each other, the greater the probability that it is not appropriate to hear and determine those questions separately.

(3)    The point that the respondents wish to raise by way of their abuse of process argument appears to be a novel one. They accept that what the applicants have done is “entirely permissible” under the Patents Act 1990 (Cth). However, they claim that “the abuse arises when divided out patents are then used as a basis for litigation in this Court”. They claim that the difficulties with what the applicants have done is “a worldwide problem, this issue of divisionals”. They claim that it raises “a serious policy issue”. It seems to me that the more novel the issue sought to be raised as a separate question, the more likely it is that there may be appeals which would have the potential to delay the overall resolution of the proceeding. I think that is undesirable.

10    I refuse the respondents’ application for a stay and for the hearing and determination of a separate question.

Associate:    

Dated:    22 July 2016

SCHEDULE OF PARTIES