FEDERAL COURT OF AUSTRALIA

Merial, Inc. v Intervet International B.V. (No 4) [2017] FCA 223

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The decision of the Commissioner of Patents by her delegate in relation to patent application 2009203180 (the Patent Application) given on 10 July 2015 at IP Australia, Discovery House, Phillip ACT 2606 Australia (save as to costs) be set aside.

3.    The appellant’s opposition to the Patent Application be upheld.

4.    The Patent Application not proceed to grant.

5.    In relation to costs:

(a)    Nothing in these costs orders affects existing costs orders for the payment of costs thrown away.

(b)    In relation to the appellant’s interlocutory application pursuant to s 31A(1) of the Federal Court of Australia Act 1976 (Cth) seeking summary judgment, the appellant pay the respondent’s costs thrown away (if any) by reason of the application.

(c)    In relation to the appellant’s third amended interlocutory application dated 18 August 2016 for leave to file and serve a fourth amended notice of appeal in the form annexed to that application (which was dismissed on 19 August 2016), the appellant pay the respondent’s costs of the application.

(d)    The appellant pay the respondent’s costs in relation to the grounds of lack of novelty, lack of fair basis and lack of clarity.

(e)    The respondent pay the appellant’s costs of the proceeding (other than the grounds of lack of novelty, lack of fair basis and lack of clarity).

(f)    For the avoidance of doubt, the costs ordered on 8 February 2016 to be costs in the cause form part of the costs of the proceeding to be paid by the respondent to the appellant under (e) above.

(g)    All costs referred to herein be on a party and party basis and be taxed if not agreed.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

1    On 25 January 2017, I published reasons for judgment in this proceeding, which was an ‘appeal’ by Merial under s 60(4) of the Patents Act 1990 (Cth) against a decision of a delegate of the Commissioner of Patents: Merial, Inc v Intervet International B.V. (No 3) [2017] FCA 21 (the Reasons). These reasons, which deal with the form of orders, should be read together with the Reasons. I will adopt the same abbreviations as used in the Reasons.

2    The appeal related to a patent application filed by Intervet. A delegate of the Commissioner of Patents had decided that Merial’s opposition to the grant of a patent failed on all grounds and had directed that the application proceed to grant. In this Court, Merial raised a ground of opposition not raised before the delegate, namely lack of entitlement. Although at the commencement of the hearing Merial relied on the grounds of lack of entitlement, lack of novelty, lack of inventive step, lack of fair basis and lack of clarity, in closing submissions it confined its case to two grounds, namely lack of entitlement and lack of inventive step. In the Reasons, I decided that the lack of entitlement ground was clearly established. In light of that conclusion, it was unnecessary to determine the lack of inventive step ground. Nevertheless, for completeness, I considered that ground. In summary, I concluded that the ground of lack of inventive step was made out in relation to claim 1; was not made out in relation to claims 2, 3, 10, 11, 12 and 14; and was partially made out in relation to the balance of the claims.

3    The parties have filed written submissions, and responding written submissions, on the form of orders they consider appropriate to give effect to the Reasons. Apart from an order that the appeal be allowed, the parties are in dispute as to the appropriate form of orders. The issues between them fall under the following headings:

(a)    whether declarations should be made;

(b)    whether an order should be made that the Patent Application not proceed to grant or whether Intervet should have 60 days in which to apply to the Commissioner of Patents to amend the application; and

(c)    costs.

I will address each of these in turn.

Whether declarations should be made

4    Merial seeks orders to the effect that the appeal be allowed; the decision of the Commissioner of Patents by her delegate be reversed (or set aside); and Merial’s opposition to the Patent Application be upheld. Merial also seeks declarations that:

(a)    Intervet is not entitled to a grant of a patent for the alleged invention as described in the application, and claimed in claims 1 to 17 of the application; and

(b)    the alleged invention as claimed in claim 1 of the application and claims 4, 5, 6, 7, 8, 9, 13, 15, 16 and 17, insofar as they are dependent on claim 1 of the application, does not involve an inventive step.

5    Merial submits that: the proposed declarations clearly state the grounds of opposition that were established by Merial; it is appropriate that there be a clear statement of the grounds on which the decision is based, including the extent to which they were established; this is particularly so, given Intervet’s attempt to preserve an opportunity to amend; and the declarations have utility as a statement of the basis for the grant of the other relief: see DSI Australia (Holdings) Pty Ltd v Garford Pty Ltd [2013] FCA 268 at [4], citing Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95].

6    In the circumstances of the present case, I do not see any utility in the proposed declarations. In addition to an order that the appeal be allowed, I propose to order that the decision of the Commissioner of Patents by her delegate be set aside; and that Merial’s opposition to the Patent Application be upheld. If these orders are made, then the first proposed declaration adds very little to what is covered by the other orders. It merely details the successful ground of opposition, which is set out in the Reasons. Further, the second proposed declaration would set out alternative conclusions which were not necessary for the disposition of the appeal. I do not think it appropriate to make declarations about alternative conclusions which were not dispositive.

7    For these reasons, I do not propose to make declarations.

Whether an order should be made that the Patent Application not proceed to grant; whether Intervet should have 60 days in which to apply to the Commissioner of Patents to amend the application

8    Merial seeks (as its proposed order 5) an order that the Patent Application not proceed to grant.

9    Intervet opposes that order and proposes the following order (as its proposed order 2):

[Intervet] make any amendment application to the Commissioner of Patents within 60 days, and if no such application is made, the Commissioner is directed to refuse the grant of a patent on the Patent Application.

Applicable principles

10    Some of the provisions potentially relevant to this issue were amended by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) (the Raising the Bar Act). In relation to the substantive grounds of opposition, I noted in [12] of the Reasons that, by reasons of the applicable transitional provisions and the date of filing of the Patent Application (which was in 2009), the version of s 7 (relating to inventive step) that was in force immediately prior to the passing of the Raising the Bar Act continued to apply to the Patent Application. Some of the provisions of present relevance (namely, ss 60 and 105 of the Patents Act) were also amended by the Raising the Bar Act. The effect of the transitional provisions is that the amendments to s 60 are not applicable for present purposes. However, the amendment to s 105 is applicable, as is the insertion of s 112A of the Patents Act.

11    Sections 59 and 60 of the Patents Act, which deal with opposition to the grant of a standard patent, as applicable for present purposes, provided as follows:

59     Opposition to grant of standard patent

The Minister or any other person may, in accordance with the regulations, oppose the grant of a standard patent on one or more of the following grounds, but on no other ground:

(a)    that the nominated person is either:

(i)     not entitled to a grant of a patent for the invention; or

(ii)     entitled to a grant of a patent for the invention but only in conjunction with some other person;

(b)    that the invention is not a patentable invention;

(c)    that the specification filed in respect of the complete application does not comply with subsection 40(2) or (3).

60     Hearing and decision by Commissioner

(1)     Where the grant of a standard patent is opposed, the Commissioner must decide the case in accordance with the regulations.

(2)     The Commissioner must give the applicant and the opponent a reasonable opportunity to be heard before deciding a case.

(3)     The Commissioner may, in deciding a case, take into account any ground on which the grant of a standard patent may be opposed, whether relied upon by the opponent or not.

(4)     The applicant, and any opponent, may appeal to the Federal Court against a decision of the Commissioner under this section.

12    Section 102 sets out certain types of amendments that are not allowable. Sections 104, 105, 112 and 112A of the Patents Act, as applicable for present purposes, provide as follows:

104     Amendments by applicants and patentees

(1)     An applicant for a patent or a patentee, may, subject to this Act, and subject to and in accordance with the regulations, ask the Commissioner for leave to amend the relevant patent request or complete specification, or any other filed document, for any purpose including either or both of the following:

(a)     removing a lawful ground of objection to the request or specification, whether that objection is raised in the course of an examination or re-examination or otherwise;

(b)     correcting a clerical error or an obvious mistake.

(2)     Where an applicant or patentee asks for leave to amend a patent request or complete specification, or any other filed document, the Commissioner must consider and deal with the request in accordance with the regulations.

(4)     The Minister or any other person may, subject to and in accordance with the regulations, oppose allowing an amendment.

(5)     The Commissioner must not allow an amendment that is not allowable under section 102.

(6)     On the allowance of an amendment, the amendment is to be taken to have been made.

(7)     An appeal lies to the Federal Court, against a decision of the Commissioner allowing, or refusing to allow, a requested amendment, other than a prescribed decision.

105     Amendments directed by court

Order for amendment during relevant proceedings

(1)     In any relevant proceedings in relation to a patent, the court may, on the application of the patentee, by order direct the amendment of the patent request or the complete specification in the manner specified in the order.

Order for amendment during an appeal

(1A)     If an appeal is made to the Federal Court against a decision or direction of the Commissioner in relation to a patent application, the Federal Court may, on the application of the applicant for the patent, by order direct the amendment of the patent request or the complete specification in the manner specified in the order.

Orders for amendment generally

(2)     An order under subsection (1) or (1A) may be made subject to such terms (if any) as to costs, advertisements or otherwise, as the court thinks fit.

(3)     The applicant for an order under subsection (1) or (1A) must give notice of an application for an order to the Commissioner, who is entitled to appear and be heard, and must appear if the court directs.

(4)     A court is not to direct an amendment that is not allowable under section 102.

(5)     The applicant must file a copy of an order within the prescribed period.

(6)     On the filing of a copy of an order, the patent request or complete specification is to be taken to have been amended in the manner specified in the order.

…

112     Pending proceedings

A complete specification relating to a patent must not be amended, except under section 105, while relevant proceedings in relation to the patent are pending.

112A     Decisions on appeal

A complete specification relating to a patent application must not be amended, except under section 105, if:

(a)     an appeal against a decision or direction of the Commissioner has been made to the Federal Court in relation to the specification; and

(b)     the appeal, and any proceedings resulting from it, have not been finally determined, withdrawn or otherwise disposed of.

13    In [10] of the Reasons, I set out an extract from Commissioner of Patents v Sherman (2008) 172 FCR 394 in which Heerey, Kenny and Middleton JJ set out some fundamental principles governing an appeal to this Court under s 60(4) of the Patents Act. As stated in Sherman at [18], an appeal under s 60(4) is not an appeal in the strict sense; rather it is a proceeding in the original jurisdiction of the Court and is conducted as a rehearing (sometimes referred to as a hearing de novo).

14    In the following paragraphs, I refer to some cases which have considered the nature of a decision of the Commissioner of Patents on an opposition to a grant of a patent, which shed light on whether Intervet’s proposed order should be made.

15    The predecessor provisions to ss 59 and 60, namely ss 59 and 60 of the Patents Act 1952 (Cth) (the 1952 Act), were considered by the High Court in R v Smith (Commissioner of Patents); Ex parte Mole Engineering Pty Ltd (1981) 147 CLR 340. In that case, following the lodgement of a notice of opposition, an Acting Deputy Commissioner conducted a hearing into the grounds of opposition and made an “interim decision” to the effect that: the specification did not comply with the requirements of s 40 of the 1952 Act; the invention claimed by claim 1 was, at the priority date, obvious; he believed that the specification could be amended to claim novel and non-obvious matter; and, accordingly, he would allow the applicant 60 days within which to lodge a request to amend the specification. The applicant applied to amend the specification. The opponent lodged a notice of opposition to certain of the amendments. The Acting Deputing Commissioner had, by this stage, retired. In these circumstances, the applicant requested a re-hearing of the grounds of opposition of the unamended application. The Commissioner acceded to this request, directing that the applicant should withdraw the amendments, whereupon the Commissioner would direct that the application was to be re-heard in view of the situation that the original hearing officer would not be available to finalise the s 59 opposition.

16    The High Court held that the Acting Deputy Commissioner’s decision, though entitled an “interim decision”, had been a final decision on the original application dealing with all the issues arising on the opposition so far as they were capable of final determination. Accordingly, the Commissioner of Patents did not have power under the 1952 Act to order a re-hearing of an opposition. Separate judgments were delivered by Mason J and Wilson J, with Gibbs CJ, Murphy J and Aickin J each agreeing with both Mason J and Wilson J. In the course of his reasons, Mason J referred to ss 59 and 60 of the 1952 Act (contained in Pt V) and the amendment provisions (contained in Pt VIII). (It is convenient to note at this point that the relevant provisions of the Patents Act, set out above, are comparable to the provisions of the 1952 Act considered by the High Court.) Mason J said (at 348-349):

It is a natural consequence of the procedures under Pt V and Pt VIII that an officer who upholds objections to the grant of an application under Pt V will refrain from refusing the application where it appears that the objections may be cured by amendment. Then it is a practical and sensible course to allow the applicant time within which to lodge a request to amend the specification, as [the Acting Deputy Commissioner] did in this instance. But his decision was nonetheless a final decision on the original unamended application − there was nothing provisional or tentative about the finding on the grounds of objection. It dealt with all the issues arising on the notice of opposition so far as they were capable of final determination.

17    Mason J approved the judgment of Fullagar J in Broken Hill Pty Co Ltd v American Can Co [1980] VR 143. In that case, Fullagar J held that, despite the description “interim decision”, the Commissioner had actually decided as much of the opposition proceedings as was susceptible of decision at the time and had decided it once and for all. Mason J also referred to certain United Kingdom authorities to the same effect. In particular, Mason J set out the following passage from L Oertling Ltd’s Application for a Patent [1959] RPC 148. In that case, Lloyd-Jacob J said (at 148):

An interim decision, no less than a final decision, conclusively determines the position of the Comptroller-General in relation to such matters as the decision may specify. It is the means whereby the Comptroller notifies the parties of his decision in relation to so much of the dispute as is susceptible of present determination and his decision also as to the manner in which the remaining matters in dispute may be dealt with. If, in relation to any matter so decided, a party is not satisfied with the Comptroller-General’s ruling, his dissatisfaction cannot become effective in expression unless and until the ruling is reversed or modified on appeal.

18    The judgment of Wilson J was to similar effect (see at 356-358).

19    The issue in Broken Hill Pty Co Ltd v American Can Co [1980] VR 143 was whether an appeal to the Supreme Court of Victoria against an “interim decision” of an Assistant Commissioner of Patents on an opposition was competent. The Assistant Commissioner’s interim decision was to the effect that: the complete specification did not comply with s 40 of the 1952 Act in that the claims did not sufficiently define the invention; this defect could be cured with some relatively simple amendments, the nature and content of which he indicated with some particularity; the ground of paper anticipation was made out against the invention on the basis of the present specification, but that all other grounds of objection failed on that basis. He held that the indicated amendments, if applied for and subsequently allowed, would address all the grounds of objection including lack of novelty, paper anticipation and non-compliance with s 40. He concluded the interim decision with a direction that the applicant lodge amendments to remove the grounds of objection within 60 days. Before Fullagar J, it was contended that the appeal was incompetent on the basis that it did not constitute “a decision of the Commissioner under this section” within the meaning of s 60(5) of the 1952 Act. It was contended that the Commissioner’s “decision” did not “decide the case” because it left undecided the question whether or not the application for a patent could proceed to grant. Fullagar J held that the appeal to the Supreme Court was competent. In a passage quoted by Mason J in the Mole Engineering case, Fullagar J said (at 147):

First I notice that the right of appeal is given from “a decision of the Commissioner under this section”. In the result I find that I do not need to decide whether one should construe this expression in sub-section (5) of s 60 as referring only to a decision of the Commissioner whereby he does “decide the case” within the meaning of sub-section (1). For the purposes of this case I shall simply assume that this is correct and that the expression in sub-section (5) refers only to some act whereby the Commissioner does “decide the case”. It is in my opinion quite clear that the case which the Commissioner is bound by statute ultimately to decide is the opposition proceeding, but I see no reason why the opposition proceeding should not be decided by several decisions provided that each of them can be said in a real sense to decide “the case” as presently constituted so far as that case is at the time susceptible of present decision.

20    Fullagar J continued (at 147-148):

If the Commissioner decides so much of the opposition proceeding as is susceptible of decision at the time, and at the same time decides what things may be done in the future conduct of the opposition proceedings, I am of opinion that this constitutes “a decision of the Commissioner under this section” within the meaning of sub-section (5) on any view, because I think it is indeed a deciding of “the case” as it presently subsists as a matter or proceeding capable of present resolution. It does in my view decide the case so far as the case is at that time fully constituted. If on opposition proceedings the Commissioner concludes as follows and expresses the conclusions expressly or by necessary implication: −

(1)    The invention of the present specification is shown to be not novel.

(2)    The present specification does not define the invention.

(3)    These defects can on the material before me be cured by amendment.

(4)    I give leave to amend.

(5)    I shall decide nothing further until I see whether amendments are brought in and if brought in are ultimately allowed. I shall not give any final decision yet –

then if the lack of novelty and lack of s 40 definition are the only grounds of the opposition, such a decision appears to me to decide “the case” as the case is at the time of the decision fully constituted. But I wish to say expressly that I would consider (3) and (4) and (5) above to be in most imaginable circumstances part of the decision of “the case”. In my view the matters dealt with in (3) and (4) are matters in the case, and with (5), and perhaps a reservation of costs, would cover the whole case as then constituted, and would leave the whole case as then constituted decided. The word “finally” does not appear in the statute, and in my opinion should not be imported in order to base an argument upon its supposed presence.

(Emphasis added.)

21    In Iluka Midwest Ltd v Technological Resources Pty Ltd (2002) 116 FCR 218, Merkel J considered the Mole Engineering case, Broken Hill Pty Co Ltd v American Can Co and the United Kingdom authorities referred to in those cases. In the Iluka Midwest case, the respondent (Technological Resources) filed a patent application which was opposed by the applicant (Iluka). The delegate of the Commissioner of Patents found that the patent application had a number of deficiencies but these could be overcome by amendment. At a second hearing, Iluka argued that the application to amend should be refused on various grounds. At this hearing, the parties agreed that it was open to the delegate to address only those issues arising out of the specific deficiencies identified in the earlier decision and anything consequential upon the amendments designed to correct those deficiencies. The delegate allowed the amendments and found that they overcame the earlier deficiencies. Iluka appealed to the Court against both decisions. Merkel J held (at [44]-[45]) that, to the extent that issues have been determined by an interim decision in a manner that is unfavourable to the interests of a party, it is incumbent upon that party, if it so desires, to appeal the decision; if it fails to do so then it is not open to that party to appeal, whether directly or indirectly, against the interim decision of the Commissioner out of time without leave of the Court; accordingly, an appeal out of time against the interim decision without leave would be incompetent. In the course of his reasons, Merkel J set out (at [46] and [48]) what was dealt with in each of the interim decision and the final decision. His Honour then said (at [50]):

In my view, in the context of the statutory scheme in respect of an opposition, the interim decision is to be taken as dealing with and generally deciding the grounds of novelty and fair basis under ss 18 and 40 which were stated to be Iluka’s grounds of opposition, rather than only with the specific grounds of novelty and fair basis particularised, argued or pressed by Iluka at the hearing before the Delegate. In that regard it is relevant that the opposition is a proceeding between the applicant and the opponent in which the Commissioner is to adjudicate on whether the patent application should be granted (see s 61(1)). A patent is not to be granted if the invention is not novel or the claims are not fairly based on the specification (ss 18 and 40). In that context it is appropriate to view the interim and final decisions as relating to the grounds of opposition of novelty and fair basis generally, and as not restricted to novelty and fair basis as particularised, argued or pressed at the hearing. A narrow approach to the decisions (that is, deciding only the matters particularised, argued or pressed) is not consistent with their content, would tend to undermine the statutory objective of finality and expedition, is inconsistent with the approach to opposition proceedings taken in the English and Australian cases (and, in particular, with the view taken by Fullagar J (at 147-148) in BHP v American Can) about matters decided by an interim decision and is not mandated by the Act. Thus, prima facie, it does not appear to be open to Iluka, without leave, to rely upon the grounds of novelty or fair basis not pursued at the first hearing, the grounds of novelty or fair basis pursued at the first hearing, or any new novelty or fair basis grounds that were only applicable to the unamended application, as such grounds must be taken as having been decided by the interim decision.

(Bold emphasis added.)

22    These cases were discussed by Rares J in Merck Sharpe & Dohme (Australia) Pty Ltd v Genentech Inc (2016) 118 IPR 498 at [55]-[64].

23    The principles applicable to an amendment application under s 104 of the Patents Act were considered in New England Biolabs Inc v F Hoffman-La Roche AG (2004) 141 FCR 1. In that case, it was held by Kiefel, Allsop and Crennan JJ that the Commissioner is not empowered to exercise a discretion of such width or generality as would permit consideration of the respondent’s alleged misconduct (at [16], [22]). The Full Court emphasised that, in hearing an appeal under s 104(7), the Court is dealing with the same subject matter as was dealt with by the Commissioner, albeit a task undertaken through an application of the judicial power of the Commonwealth (see especially at [45]).

24    Although not directly relevant (as Intervet has not applied to amend pursuant to s 105 of the Patents Act), I note that the principles applicable to such an application were discussed by Bennett J in Apotex Pty Ltd v Les Laboratoires Servier (No 2) (2009) 83 IPR 42 at [86]-[88] and by Bennett, Besanko and Beach JJ in Les Laboratoires Servier v Apotex Pty Ltd (2016) 117 IPR 415 at [239]-[245].

25    The following propositions of present relevance may be extracted from the cases set out above:

(a)    An appeal under s 60(4) of the Patents Act is not an appeal in the strict sense; rather it is a proceeding in the original jurisdiction of the Court and is conducted as a rehearing (sometimes referred to as a hearing de novo): Sherman.

(b)    In determining an opposition to the grant of a patent, the role of the Commissioner, or the Court in its place, is to “conclusively determine” all matters before it which are “susceptible of present determination”: L Oertling; Broken Hill.

(c)    Where particular grounds of objection are presented to the Commissioner or the Court, the decision made should “be taken as dealing with and generally deciding” those grounds of objection: Iluka Midwest.

(d)    Where the Commissioner or the Court upholds objections to the grant of a patent, the decision-maker will “refrain from refusing the application where it appears that the objections may be cured by amendment”, such as by the narrowing of the claims set out in the specification: Mole Engineering.

(e)    In applying s 60(4) of the Patents Act, the Court should be cognisant of the “statutory objective of finality and expedition” which underpins the pre-grant opposition process: Iluka Midwest.

Submissions

26    In its primary written submissions on orders, Merial submits that its proposed orders, including its proposed order 5 (see [8] above), are conventional orders in circumstances where an ‘appeal’ of this kind has been successful; they are consistent with the relief sought in Merial’s notice of appeal; and they would give effect to the Reasons, leave no doubt about the fate of the Patent Application, and appropriately bring the litigation to an end.

27    Intervet, in its primary written submissions on orders, submits that: Merial’s proposed order 5 is not necessary, and is also too broad; the Court has determined the issue of whether Merial’s opposition to the grant of the application in its current form should be upheld; had the Delegate reached the same conclusion as the Court, the Commissioner of Patents would still have had power to consider whether any obstacles to the grant of the application could be overcome, including by amendment (see, eg, Merck Sharpe & Dohme (Australia) Pty Ltd v Genentech Inc (2016) 118 IPR 498 at [61]-[62]); it follows from the Reasons that the application could proceed to grant if Mr Pieloch became a co-applicant of the application, or an assignment of rights were obtained from Mr Pieloch, and if amendments were made to the claims to address the scope of the findings as to lack of inventive step; it would therefore not be appropriate to make an order in the absolute terms sought by Merial; and Intervet’s proposed order 2 addresses this issue, and provides a certain timeline for Merial.

28    In Merial’s responding written submissions, it notes that Intervet declined to provide Merial with prior notice of all of the orders it seeks to give effect to the Reasons; as such, the orders proposed by Intervet are addressed by Merial for the first time in the responding submissions. Merial’s submissions in opposition to Intervet’s proposed order 2 can be summarised as follows:

(a)    The purpose of the orders under consideration is to give effect to the Reasons. Intervet’s proposed order 2 disregards the fact that, on the Court’s findings, Intervet is not entitled to a patent for any invention described or claimed in the Patent Application. By proposing the order, Intervet asks the Court to finally determine Merial’s appeal, but at the same time, to permit Intervet to continue to prosecute an application for a patent to which the Court has found it is not entitled. That is not something the Court should do.

(b)    Indeed, the effect of the Reasons is that Intervet was never entitled to file the Patent Application in the first place. That being so, it cannot be correct to permit Intervet to continue to prosecute the Patent Application now, by remitting the matter to the Commissioner and allowing Intervet the opportunity to pursue amendments as proposed.

(c)    It is important to have regard to the Court’s findings, particularly at [8], [124], [131] and [208] of the Reasons. The effect of these findings, and the evidence on which they were based, is that there is no invention described or claimed in the Patent Application that is capable of being the subject of a patent to Intervet: see, in particular, [124] of the Reasons. The position is that Intervet has no assignment of rights in any such invention from Mr Pieloch: see [8](b)-(c), [97], [109], [126], [127] of the Reasons. Further, Intervet did not make good any of the other matters it had asserted might be relevant to the lack of entitlement ground.

(d)    Intervet’s proposed order is wholly inconsistent with the Court’s findings and the evidence on which they were based. The following points may be made.

(e)    First, the starting point is that the Court’s orders should finally determine the dispute between the parties. Section 22 of the Federal Court of Australia Act 1976 (Cth) provides that the Court shall, in every matter before it, grant either absolutely or on such terms and conditions as it thinks just, all remedies to which any of the parties appear entitled, so that, as far as possible, all matters in controversy may be completely and finally determined, and all multiplicity of proceedings concerning those matters avoided: see John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [135].

(f)    The position here is that a ground of opposition to the grant of a patent under s 59 of the Patents Act has been clearly established by Merial, and a second ground of opposition has been clearly established in part. The Court’s orders should give effect to those findings, and the Patent Application should not proceed to grant.

(g)    Secondly, in relation to the proposition that Intervet might obtain an assignment of rights from Mr Pieloch, the Court has found that Intervet has no such assignment. Indeed, this was the central issue in the appeal. The Court’s orders should give effect to its findings, not afford Intervet an opportunity to attempt to circumvent them by way of further proceedings before the Commissioner of Patents.

(h)    There is no application by Intervet to reopen any of the Court’s findings concerning the issue of the assignment. If such an application were made, it would be liable to be refused: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 303, 307, 322. Nor is there any evidence to suggest that Intervet could obtain any assignment of rights from Mr Pieloch, even if it were relevant that Intervet might wish to attempt to do so now. The whole tenor of Mr Pieloch’s evidence at the hearing indicates the contrary. As the Court found, Intervet failed to procure such an assignment from Mr Pieloch at any point in time in the past: Reasons, [97], [109](a).

(i)    The question whether Intervet derived any rights in the invention from Mr Pieloch was fully and finally ventilated at the hearing, on the evidence before the Court.

(j)    Thirdly, in relation to the proposition that Mr Pieloch could become a co-applicant with Intervet, the fact is that he is not. The Patent Application before the Court is in Intervet’s name only. That fact underpinned the Court’s findings on the lack of entitlement ground. Again, the Court’s orders should give effect to its findings, not disregard them and contemplate the prospect of yet further proceedings before the Commissioner of Patents.

(k)    Further, the evidence indicates that Intervet would have no basis on which to claim to be a co-applicant with Mr Pieloch, even if it were relevant that it might now wish to follow that course. The Court found that Pharma Chemie had already developed the soft chew technology described in the Patent Application before it was engaged by Intervet: Reasons, [89], [125]. The evidence did not suggest that the other named inventors, Mr Huron and Ms Cady, played any, or any substantial, role in developing the invention: Reasons, [7](b). There is no support for the proposition that Intervet has any rights in the invention, being rights not derived from Mr Pieloch. Intervet provides no basis for the proposition that a party that is not entitled to a patent should nevertheless be entitled to proceed to seek a patent in the manner it now proposes.

(l)    Again, there is no application by Intervet to reopen the Court’s findings, which in any event would be liable to be refused. Nor is there any evidence before the Court to suggest that Mr Pieloch would consent to being a co-applicant with Intervet, even if it were appropriate to contemplate that prospect now. The whole tenor of his evidence indicates that he would not: he was “shocked” that a patent application had been filed by Intervet; he considered it to be “totally bogus”; and he repeatedly affirmed his view that it claimed pre-existing technology readily known to people skilled in the area: see Reasons, [83](d); see also [76]. His view, clearly enough, was that the technology was not properly the subject of a patent. He was well aware of the dispute between Intervet and Merial but did not become involved or seek status as an applicant.

(m)    Fourthly, in relation to the proposition that amendments might be made to the claims of the Patent Application “to address the scope of the findings as to lack of inventive step”, any such amendment would be futile in light of the finding of lack of entitlement. The Patent Application cannot proceed in view of that finding. The finding of lack of inventive step provides an additional and independent basis upon which the Patent Application should be refused in relation to some of the claims. But none of the claims can proceed, by reason of the lack of entitlement finding.

(n)    Further, given the nature of the Court’s finding in relation to lack of entitlement, there is no prospect of any amendment being made to the claims of the Patent Application to address or overcome that finding. As submitted, the effect of the Court’s finding is that there is no invention described or claimed in the Patent Application that is capable of being the subject of the grant of a patent to Intervet: see Reasons, [124].

(o)    Fifthly, the time for Intervet to attempt to agitate any of the above matters has long since passed. The parties have been heard and the Court has adjudicated on the issues. It cannot be said that Intervet was unaware of the prospect that the Court would find that it is not entitled to a patent for the invention. On 8 July 2016, as ordered by the Court, Intervet gave notice of the matters it intended to raise in response to Merial’s allegation of lack of entitlement: see Reasons [42]. The Court dealt with each of those matters, to the extent that they were addressed by Intervet at the hearing: Reasons, [128]-[130]. Intervet’s silence and inaction at the hearing cannot now assist it. It should not now be given a yet further opportunity to agitate those or other matters in answer to Merial’s case, given the Court’s findings.

(p)    In particular, Intervet had ample opportunity to adduce evidence in cross-examination from Mr Pieloch relevant to the matters it now raises in its submissions (both as to any contribution from Ms Cady and Mr Huron and as to the prospect of any assignment from Mr Pieloch). It also had ample opportunity to lead evidence of Mr Pieloch’s willingness to be a co-assignee, before the hearing took place, and to lead evidence of anything invented by Ms Cady or Mr Huron, independently of Mr Pieloch. The history of the dispute between Intervet and Mr Pieloch concerning the subject matter of the Patent Application goes back to 2003: see Reasons, [74]ff. The issue of Intervet’s entitlement was squarely raised by Merial in the appeal in November 2015, and was introduced by amendment in February 2016.

(q)    Intervet’s approach is inconsistent with the principles articulated by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. See, in particular, at [30] per French CJ, [98] per Gummow, Hayne, Crennan, Kiefel and Bell JJ. Those statements were made in the context of proposed amendments to pleadings but apply with equal if not greater force here.

(r)    Sixthly, contrary to Intervet’s approach, even if it were appropriate to contemplate the prospect of amendment of the Patent Application, any application to amend should be dealt with by the Court, not the Commissioner of Patents. The Court has power to direct amendments to a patent application in an “appeal” from the Commissioner, pursuant to s 105(1A) of the Patents Act. Importantly, by operation of s 112A of the Patents Act, this is the only possible avenue of amendment while such an appeal remains on foot. Thus the statute evinces an intention that applications to amend arising out of such an appeal will be made to and dealt with by the Court.

(s)    The Court would be the relevant forum for any such application for a range of other reasons, if such an application were appropriate. Among other things, the Court’s findings would constrain any proposed amendment. It would be necessary to consider whether the amendment overcame the findings on lack of entitlement and lack of inventive step; if it did not, the amendment would be futile and the Patent Application liable to be refused. Only the Court is in a position to consider these matters. The Commissioner is not apprised of the issues or the evidence on which those findings were based. Further, the Court retains a discretion as to whether or not to allow an amendment in a given case, but the Commissioner does not (see Les Laboratoires Servier v Apotex Pty Ltd (2016) 117 IPR 415 at [243] in relation to the Court’s discretion pursuant to s 105; contrast the position in New England Biolabs Inc v F Hoffman-La Roche AG (2004) 141 FCR 1 in relation to the Commissioner’s power to amend pursuant to s 104). The exercise of that discretion in this case would properly take into account, among other things, Intervet’s delay in seeking to amend. Again, this would be a matter for consideration by the Court, not the Commissioner. The case of Merck Sharp & Dohme (Australia) Pty Ltd v Genentech Inc (2016) 118 IPR 498 at [61]-[62], cited by Intervet, does not stand for any different proposition.

29    In relation to its proposed order 5 (see [8] above), Merial submits that: such an order is both appropriate and important in the present context; it would make it clear that the fate of the Patent Application has been finally determined by the Court in this appeal, and that the Patent Application cannot continue to be prosecuted before the Commissioner of Patents; and such an order should be made for all of the reasons (summarised above) as to why Intervet’s proposed order 2 is inappropriate.

30    Intervet, in its responding written submissions (as clarified by subsequent email dated 21 February 2017), makes the following submissions:

(a)    The Commissioner of Patents should remain free to exercise any powers available to her as though the delegate had herself upheld the opposition on the same grounds found to be established by the Court.

(b)    The Court in effect ‘stands in the shoes’ of the Commissioner of Patents (see New England Biolabs Inc v F Hoffman-La Roche AG (2003) 60 IPR 83 at [32] per Emmett J, in respect of an appeal pursuant to s 104(7)) and it follows that the relief granted by the Court should not extend beyond the scope of correcting the Commissioner’s decision on the opposition.

(c)    Indeed, the Court in its Reasons did not purport to go any further than to correct the decision of the Delegate of the Commissioner of Patents on the question of whether any grounds of opposition were established. The Court did not purport to go further and make any findings about whether the Commissioner would be precluded from taking any further steps in relation to the Patent Application, in any circumstances whatsoever (which is the relief that Merial now seeks). The possibility that amendments might subsequently be sought was directly notified by Intervet, as recorded in the Reasons at [129] and [130].

(d)    In R v Smith; Ex Parte Mole Engineering Pty Ltd (1981) 147 CLR 340, Mason J (with whom Gibbs CJ, Murphy and Aickin JJ agreed) explained: “It is a natural consequence of the procedures under Pt V and Pt VIII [of the 1952 Act] that an officer who upholds objections to the grant of an application under Pt V will refrain from refusing the application where it appears that the objections may be cured by amendment. Then it is a practical and sensible course to allow the applicant time within which to lodge a request to amend the specification…”.

(e)    Here, the potential amendment would be to the owners of the patent, or to the ownership details in the notice of entitlement filed with the Patent Application, if an assignment of rights in the invention were to be procured. Intervet considers that any application to amend the Patent Application would be dealt with by the Commissioner of Patents under s 104(1) of the Patents Act as any such amendment would be to “any other filed document” for the purpose of removing a lawful ground of objection to the request or specification. The “any other filed document” is the notice of entitlement. (These submissions were in part set out in the email from Intervet’s solicitors dated 21 February 2017. Merial provided some brief submissions in response by email dated 22 February 2017. In summary, Merial reiterated the submissions referred to above.)

(f)    In such event, amendments would also be made to those claims found to lack an inventive step. An application for such an amendment can be made to the Commissioner pursuant to s 104(1).

(g)    Such an application must be made while the Patent Application remains on foot. If the Court were to make Merial’s proposed order 5, that would have the effect of denying Intervet the opportunity to amend the Patent Application and secure a granted patent.

(h)    The proposed approach of Merial is not consistent with the framework of the Patents Act, nor with the Court’s decision in this case. On the other hand, Intervet’s proposed order 2 is consistent with the legislation and the decision.

Consideration

31    In my view, it is not appropriate to make proposed order 2 as sought by Intervet (see [9] above). My reasons are as follows.

32    One of the two main issues agitated on the ‘appeal’ to this Court was whether or not Merial had clearly established its lack of entitlement ground. As set out in the Reasons at [5], Merial contended that Intervet was not entitled to the grant of a patent for the alleged invention on the basis that it did not derive title to the alleged invention from Mr Pieloch, who Intervet admitted was an “actual inventor” of the alleged invention. I concluded that the lack of entitlement ground was clearly established. My reasons are summarised in [8] of the Reasons.

33    The issue of lack of entitlement having been fully dealt with, and determined adversely to Intervet, I think it would be contrary to the statutory scheme, or at least inappropriate in the circumstances of this case, to make an order to the effect that Intervet has 60 days in which to make any amendment application to the Commissioner of Patents on the basis put forward by Intervet in its submissions. The basis of the possible application to amend, as set out in Intervet’s submissions, is that Mr Pieloch may be prepared to become a co-applicant or Intervet may be able to obtain an express assignment of the invention from him (see [27] above).

34    This is not a situation, for example, where grounds of opposition have succeeded in establishing that the specification as it stands is deficient, but the decision-maker (whether it be the Commissioner of Patents or the Court on appeal) decides that the deficiency can be cured by amendments to the specification. That would likely have been the case had the only ground of opposition here been lack of inventive step. That ground of opposition was successful in respect of some claims but not others. It would likely have been the case that, had that been the only ground of opposition, the deficiencies in the specification could have been “cured” by amendment.

35    The situation here is very different. First, the issue of lack of entitlement goes to the heart of the Patent Application. The outcome on this issue (namely that Intervet is not entitled to the invention) cannot be overcome without a wholesale change to the basis of entitlement. Such an amendment is a fundamentally different proposition from those categories of amendment which have been accepted in the cases. Secondly, the ground of lack of entitlement was dealt with fully at the hearing of the appeal and in the Reasons. In my view, the Reasons dealt with and decided the issue of lack of entitlement generally, not merely the issue of lack of entitlement as presented by the parties on the basis of the facts as they stood at the time of the hearing. In these circumstances, it would be inappropriate, in my view, to allow Intervet to apply to amend the Patent Application or notice of entitlement to claim entitlement on a new and different basis. Among other things, this could lead to a situation where the issue of lack of entitlement would need to be re-agitated on this new and different basis. This should not be permitted to occur in circumstances where there has already been a hearing and determination of this issue.

36    Given the structure of the statutory scheme, and in particular the provision for applications to amend to be made to the Commissioner of Patents under s 104 and to the Court under s 105, it may be doubted whether it is open to seek amendment from the Commissioner under s 104 where the Court has heard an appeal under s 60(4). Thus Intervet’s proposed order (notwithstanding that it seeks an ability to amend the notice of entitlement, being an “other filed document” as referred to in s 104 but not s 105) seems to be incongruent with the statutory scheme. For completeness, I note that, although Intervet has not made an application to amend to the Court under s 105, the considerations referred to above would have applied equally to any such application.

37    For these reasons, I will not make Intervet’s proposed order 2. As a corollary, it is appropriate, in my view, to make Merial’s proposed order 5, namely an order that the Patent Application not proceed to grant.

Costs

38    Merial seeks the following costs orders:

(a)    Subject to order 3 of the Court’s orders made on 9 November 2015, and order 2 of the Court’s orders made on 4 May 2016, Intervet pay Merial’s costs of the proceeding in this Court:

(i)    on a party and party basis up to and including 4.00 pm on 3 March 2016; and

(ii)    on an indemnity basis after 4.00 pm on 3 March 2016.

(b)    Intervet pay Merial’s costs of the proceeding before the Commissioner of Patents.

I note that order 3 of the orders made on 9 November 2015 and order 2 of the orders made on 4 May 2016 were to the effect that Merial pay Intervet’s costs thrown away by reason of certain amendments.

39    Intervet seeks the following costs orders:

(a)    Each party pay its own costs of the contested disputes in relation to access to confidential documents arising from Merial’s interlocutory application dated 5 August 2016 and Merial’s amended interlocutory application dated 9 August 2016.

(b)    Merial pay Intervet’s costs, as taxed or agreed, in relation to:

(i)    Merial’s interlocutory application filed pursuant to s 31A(1) of the Federal Court of Australia Act 1976 (Cth) seeking summary judgment;

(ii)    Merial’s interlocutory application dated 18 August 2016 for leave to file a third amended notice of appeal;

(iii)    Intervet’s costs thrown away in the proceeding by reason of: the amendments to the amended notice of appeal (in accordance with paragraph 3 of the orders dated 9 November 2015); the amendments to the third amended notice of appeal (in accordance with the orders dated 4 May 2016); and the deletions in the fourth amended notice of appeal handed up in Court on 5 September 2016;

(iv)    issues relating to the determination of principles of United States law.

(c)    Other than costs associated with the issues the subject of orders (a) and (b) above, or associated with the evidence of Ms Lydia Linfoot, Intervet pay Merial’s costs of the proceeding in this Court, as taxed or agreed.

40    Thus there is no issue that the existing costs orders regarding costs thrown away (made on 9 November 2015 and 4 May 2016) should not be touched. There is also no issue that, subject to exceptions, Intervet should pay Merial’s costs of the proceeding. However, the competing orders of the parties raise a number of issues that need to be dealt with.

41    The principles relating to the discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) are well established: see, eg, Latoudis v Casey (1990) 170 CLR 534 at 567 per McHugh J; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]-[12] per Black CJ and French J; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[5] per Finkelstein and Gordon JJ; Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370 at [11], [16]-[18] per Dowsett, Middleton and Gilmour JJ. Although usually, in the exercise of the discretion, it is ordered that costs follow the event, there may be situations where the event of success is contestable, by reference to how separate issues have been determined: see Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at [241] per Kiefel and Keane JJ, cited by French CJ, Kiefel, Nettle and Gordon JJ in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6]. See also Les Laboratoires Servier v Apotex Pty Ltd (2016) 117 IPR 415 at [297]-[306] per Bennett, Besanko and Beach JJ.

42    In Brosnan v Katke [2016] FCAFC 156, Gleeson J (with whom Dowsett and Edelman JJ agreed) set out the principles applicable to rejection of a Calderbank offer. Her Honour said (at [6]):

… the relevant legal principles were not in dispute. Costs will usually be assessed on a party/party basis in the absence of an unusual feature warranting a different approach. In this case, the unusual feature relied upon by the respondents was the rejection of the Calderbank offer. Rejection of a Calderbank offer does not per se warrant an order for indemnity costs: it is necessary to consider whether the offeree’s rejection of the offer was unreasonable in the circumstances in which the rejection occurred: Black v Lipovic [1998] FCA 699; (1998) 217 ALR 386 at [217]-[218]; Szencorp Pty Ltd v Clean Energy Council Limited (No 2) [2009] FCA 196 at [7]; Carey v Freehills [2013] FCA 1258 at [16]; Veda Advantage Limited v Malouf Group Enterprises Pty Limited (No 2) [2016] FCA 470; 118 IPR 156 at [31].

43    In Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd (No 2) (2016) 118 IPR 156, Katzmann J said at [31]:

In contrast, however, to an offer of compromise made under r 25.01, refusal to accept an offer not made in compliance with the rules (a Calderbank offer, see Calderbank) does not give rise to any presumption in favour of the offeror. The offeror needs to show that there was a genuine offer of compromise, and that it was unreasonable for the offeree not to accept it: Black v Lipovac [(1998) 217 ALR 386] at [217]–[218]. In deciding whether it is unreasonable for an offer to be rejected, the following matters should ordinarily be considered:

•    the stage of the proceeding when the offer was made;

•    the time afforded to the offeree to consider the offer;

•    the extent of compromise involved;

•    the offeree’s prospects of success, assessed as at the date of the offer;

•    the clarity with which the terms of the offer were expressed;

•    whether the offer foreshadowed an application for indemnity costs in the event of refusal.

See Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25].

44    It is convenient to start with the costs of the opposition before the Commissioner of Patents. The Delegate made a costs order in Intervet’s favour. In circumstances where the lack of entitlement ground was not raised in the opposition before the Commissioner of Patents, and the evidence relied on by Merial on appeal was different from its evidence before the Commissioner, I do not think it would be appropriate to disturb the costs order made by the Delegate. Accordingly, I will excise from the order setting aside the decision of the Delegate the costs order made by the Delegate.

45    I will deal next with the contested disputes in relation to access to confidential documents arising from Merial’s interlocutory application dated 5 August 2016 and Merial’s amended interlocutory application dated 9 August 2016. In connection with these applications, on 11 August 2016 I ordered that Mr Pieloch be provided with unredacted copies of annexures KS-3, KS-4 and KS-5 to the affidavit of Dr Stumm affirmed 24 June 2016. This was in substance the order sought by Merial. The other relevant part of the applications concerned Dr Jarecki-Black and John Ezcurra receiving unredacted copies of those annexures subject to the terms of confidentiality undertakings they had given to Intervet. In relation to this part of the application, on 30 August 2016 I ordered that Dr Jarecki-Black be permitted to receive unredacted copies of the annexures and certain product development reports subject to execution of a deed of undertaking and on the basis of certain undertakings by Merial: Merial, Inc v Intervet International B.V. [2016] FCA 1047. It may be said that each side had a measure of success in relation to this aspect of the application. It seems to me that the applications for access to confidential documents were part and parcel of the conduct of the proceeding and therefore that the costs of these applications should be dealt with as part of the overall costs order for the proceeding rather than as a separate matter. Accordingly, I will not make a separate costs order in relation to the applications for access to confidential documents.

46    Next, I will consider Merial’s summary judgment application. This application was filed and served, set down for hearing on 20 July 2016, but ultimately not pressed by Merial. On 15 July 2016, the Court made orders that the hearing fixed for 20 July 2016 be vacated and that the costs of Merial’s interlocutory application be reserved, to be dealt with at trial. It seems likely that any additional costs incurred by reason of the summary judgment application were minimal. Nevertheless, the question arises as to which party should bear any such costs. In the circumstances, I think it is appropriate for Merial to pay Intervet’s costs thrown away (if any) by reason of the application. Merial brought the application and then decided not to press it. Although there was no adjudication on the merits, it is appropriate that Merial pay any costs thrown away.

47    Intervet seeks a costs order in its favour in relation to Merial’s interlocutory application dated 18 August 2016 for leave to file a third amended notice of appeal. Although Intervet’s proposed orders refer to an application for leave to file a “third amended notice of appeal”, in fact Merial’s application dated 18 August 2016 (titled its third amended interlocutory application) sought leave to file a fourth amended notice of appeal. By this application, Merial sought leave to amend its notice of appeal to rely on two additional grounds of opposition, namely lack of utility and failure to disclose best method. Intervet prepared an answering affidavit. The application was introduced in some detail at the hearing on 18 August 2016. It also occupied part of the hearing on 19 August 2016, during which the application was dismissed. Given the outcome of the application, it is appropriate that Merial pay Intervet’s costs of the application.

48    I will deal next with the deletions in the fourth amended notice of appeal handed up in Court during closing submissions on 5 September 2016. Leave was granted to Merial on that day to amend its notice of appeal to this form. The amendments comprise deletions of certain grounds and documents which had previously formed part of Merial’s case. In particular, Merial deleted the grounds of:

(a)    lack of novelty;

(b)    lack of fair basis; and

(c)    lack of clarity,

each of which formed part of its case up to trial (as set out in Merial’s third amended notice of appeal dated 6 May 2016) and its opening submissions. Further, Merial deleted the references to the following documents: the D7 Application (ie, the Christensen application); D15 (ie, van Lengerich); Haslwanter; Lo; Leech; and Cherukuri. Each of these documents had been relied on up to trial (as set out in Merial’s third amended notice of appeal). In most cases, the documents were relied on in connection with Merial’s lack of inventive step case. In my view, in relation to the three abandoned grounds of opposition (namely lack of novelty, lack of fair basis and lack of clarity), while these formed a relatively small part of the case, it is nevertheless appropriate to deal with these grounds as separate issues and to make a separate costs order reflecting the effective outcome of these grounds. Accordingly, I will order that Merial pay Intervet’s costs of these grounds, and excise these grounds from the general costs order in Merial’s favour. In relation to the documents that were deleted, as these formed part of the lack of inventive step ground, I do not think it would be appropriate to treat these as separate “issues” in the proceeding for the purposes of costs. Accordingly, I will not make a separate costs order (or an order for payment of costs thrown away) in respect of the deletion of the references to these documents.

49    I note for completeness that on 8 February 2016 a number of orders were made, following a hearing that took place on 4 February 2016. Paragraph 17 of those orders was to the effect that the costs of the hearing on 4 February 2016, the costs of Merial’s interlocutory application dated 2 December 2015, and the costs of Intervet’s interlocutory application dated 11 December 2015 be “costs in the cause”. I have reviewed those applications and the matters dealt with in the 8 February 2016 orders. In my view, it is appropriate that these costs form part of the general costs order. Accordingly, I will make an order that, for the avoidance of doubt, the costs ordered on 8 February 2016 to be costs in the cause form part of the costs of the proceeding to be paid by Intervet to Merial.

50    Intervet seeks an order that Merial pay its costs in relation to issues relating to the determination of principles of United States law. (In the alternative, Intervet seeks to have these costs excised from the costs order in favour of Merial.) I do not think the fact that I preferred Intervet’s position on the main contested issue of US law (Reasons at [118]-[119]) is a sufficient reason to treat these costs separately and differently from the costs of the proceeding generally. As I see it, this was merely one contested factual and legal issue among many such issues in the case. Accordingly, I will not make a separate costs order in relation to this issue.

51    Intervet submits that the costs associated with the evidence of Ms Lydia Linfoot should be excised from the costs order in favour of Merial. I do not think the fact that her evidence was ultimately not of assistance in the resolution of the issues to be determined (Reasons, [48](f), [163]) is a sufficient reason to treat these costs separately and differently from the costs of the proceeding generally.

52    Merial seeks an order that its costs after 4.00 pm on 3 March 2016 be paid on an indemnity basis. The primary basis upon which Merial seeks such an order is a letter sent by Merial’s solicitors to Intervet’s solicitors dated 25 February 2016 expressed to be pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333.

53    A copy of Merial’s solicitors’ letter dated 25 February 2016 was attached to Merial’s written submissions on orders. After setting out a number of observations on the proceeding, including the evidence of Mr Pieloch, Merial proposed terms to settle the proceeding. The proposed settlement related to all patents granted, in all jurisdictions, on the PCT Application and its national phase applications and all patents claiming priority to the First US Provisional Application or the Second US Provisional Application (described as the “Patent Family Members”). The terms of the proposed settlement included the following:

(a)    Intervet would grant to Merial a worldwide, non-exclusive, royalty-free, perpetual, irrevocable licence to exploit the Patent Family Members; and Intervet would covenant not to sue Merial and its customers for infringement of Patent Family Members;

(b)    Merial would discontinue its appeal (ie, this proceeding), with no order as to costs;

(c)    Merial would agree not to file any action or take part in any legal proceeding or take any other step to oppose, revoke or otherwise challenge the validity of the Patent Family Members, or assist a third party to do so;

(d)    each party would bear its own costs in relation to the opposition proceeding in relation to the Patent Application before the Patent Office, as well as the appeal.

54    As set out above, Merial’s Calderbank offer involved it receiving a worldwide, non-exclusive, royalty-free licence. The difficulty with such an offer for present purposes is that it is not commensurate with a possible outcome of the proceeding, making it difficult, if not impossible, to assess whether Intervet’s rejection of the offer was unreasonable: see Centor Australia Pty Ltd v RMD Industries Pty Ltd (No 2) [2013] FCA 1407 at [9] per Dowsett J. Thus, it is not established that it was unreasonable for Intervet to reject this offer in all the circumstances. Further, the matters referred to in Merial’s solicitors’ letter (including as to Mr Pieloch’s evidence) were not such as to make an adverse outcome a foregone conclusion. Although the Calderbank letter was delivered after Mr Pieloch’s affidavit evidence had been provided to Intervet, this evidence was expressed in brief and, in some places, conclusionary terms and had not yet been tested in cross-examination. In these circumstances, and notwithstanding that Intervet did not possess a copy of any assignment of the invention from Mr Pieloch, I do not think it is established that it was unreasonable for Intervet to reject the offer. For these reasons, the rejection of the Calderbank letter does not provide a basis to depart from the usual party and party basis for the award of costs.

55    Merial also puts its application for an indemnity costs order (after 4.00 pm on 3 March 2016) on an alternative basis. Merial contends that, in making its response to Merial’s offer and in the way that Intervet conducted the proceeding more generally, Intervet failed to act consistently with the overarching purpose of the civil procedure provisions of the Federal Court of Australia Act. I do not think the matters referred to by Merial in its submissions (including Intervet’s response to Merial’s offer) establish that Intervet conducted the proceeding in such a manner. I therefore reject this alternative basis for an indemnity costs order.

56    In light of the conclusions set out above, I propose to excise the costs order made by the Delegate from the order setting aside the Delegate’s decision and, in relation to costs of the proceeding, to order that:

(a)    Nothing in these costs orders affects existing costs orders for the payment of costs thrown away.

(b)    In relation to Merial’s interlocutory application pursuant to s 31A(1) of the Federal Court of Australia Act 1976 (Cth) seeking summary judgment, Merial pay Intervet’s costs thrown away (if any) by reason of the application.

(c)    In relation to Merial’s third amended interlocutory application dated 18 August 2016 for leave to file and serve a fourth amended notice of appeal in the form annexed to that application (which was dismissed on 19 August 2016), Merial pay Intervet’s costs of the application.

(d)    Merial pay Intervet’s costs in relation to the grounds of lack of novelty, lack of fair basis and lack of clarity.

(e)    Intervet pay Merial’s costs of the proceeding (other than the grounds of lack of novelty, lack of fair basis and lack of clarity).

(f)    For the avoidance of doubt, the costs ordered on 8 February 2016 to be costs in the cause form part of the costs of the proceeding to be paid by Intervet to Merial under (e) above.

(g)    All costs referred to herein be on a party and party basis and be taxed if not agreed.

Associate:

Dated:    9 March 2017