FEDERAL COURT OF AUSTRALIA

Nichia Corporation v Arrow Electronics Australia Pty Ltd (No 5) [2017] FCA 1013

ORDERS

THE COURT ORDERS THAT:

1.    The originating application be dismissed.

2.    The notice of cross-claim be dismissed.

3.    The applicant pay the respondent’s costs of the originating application, other than the respondent’s costs of disputing the truth of the facts identified in paragraphs 1 to 6 of the applicant’s notice to admit dated 17 October 2014 (the notice to admit).

4.    Pursuant to rule 22.03 of the Federal Court Rules 2011 (Cth), the respondent pay the applicant’s costs of proving the truth of the facts identified in paragraphs 1 to 6 of the notice to admit.

5.    Subject to Order 2 made on 10 August 2015, the respondent pay the applicant’s costs of the notice of cross-claim.

THE COURT CERTIFIES THAT:

6.    Pursuant to s 19 of the Patents Act 1990 (Cth), the validity of claim 1 and claim 3 of Patent No. 720234 was questioned in this proceeding.

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

REASONS FOR JUDGMENT

YATES J:

Introduction

1    On 2 August 2017, I published reasons for judgment in which I held that the applicant’s case on infringement had not been established and that the respondent’s case on invalidity had not been established: Nichia Corporation v Arrow Electronics Australia Pty Ltd (No 4) [2017] FCA 864. I put in place a timetable for the parties to provide drafts of the orders they proposed (including on the question of costs) supported by written submissions. There has been a variation to the timetable to permit the applicant to respond to some matters raised by the respondent.

2    The parties agree that the originating application and the respondent’s notice of cross-claim (the cross-claim) should be dismissed. The applicant seeks an order, which the respondent does not oppose, that a certificate under s 19 of the Patents Act 1990 (Cth) should be issued to the effect that the validity of claim 1 and claim 3 of the patent in suit was questioned in the proceeding.

3    The parties agree, subject to one qualification, that the applicant should pay the respondent’s costs of the originating application. The qualification is that the applicant contends that the respondent should pay the applicant’s costs of proving certain facts stated in a notice to admit. To achieve this outcome, the applicant also seeks a carve-out from the order that it pay the respondent’s costs of the originating application.

4    The parties agree, subject to two qualifications, that the respondent should pay the applicant’s costs of the cross-claim. The first qualification, sought by the respondent, is that it should not be required to pay costs relating to its allegation that the invention claimed in claim 1 and claim 3 is not fairly based. The second qualification, sought by the applicant, is that any order should be made subject to costs orders previously made. The second qualification is a reference to the fact that, in relation to the cross-claim, I determined the priority date of the claims in suit as a separate question and made a separate order for costs in favour of the applicant: Nichia Corporation v Arrow Electronics Australia Pty Ltd [2015] FCA 699. Although it makes no difference in outcome, I accept that it is appropriate, as a matter of form, to make this qualification.

Costs in relation to the notice to admit

5    The applicant served a notice to admit dated 17 October 2014 (the notice to admit). The respondent served a notice of dispute on 7 November 2014 (the notice of dispute). The notice of dispute disputed all the facts in the applicant’s notice to admit. The applicant says that, although the respondent subsequently admitted the facts in paragraphs 1 to 6 of the notice to admit, it only did so after the applicant was put to the expense of filing evidence in chief on the question of infringement.

6    The respondent argues that some of the facts in paragraphs 1 to 6 of the notice to admit concerned the integers of the claims of the patent in respect of which there was a disputed question of construction. The respondent says that, for this reason, the notice to admit was “inappropriately framed” and that it was proper for the respondent to “resist” it. In relation to paragraph 2, the respondent argues that the facts in question were incapable of acceptance in terms because they concerned contentious features expressed in a rolled-up form.

7    The respondent says that the notice to admit was served at a time when the parties were considering a draft experimental protocol provided by the applicant, which was directed to experiments to ascertain, as part of the applicant’s case on infringement, whether those integers were present in the accused products. It seems that there were disagreements about that protocol. In any event, the respondent points to the fact that, although it served the notice of dispute, it nevertheless made, in this context, a number of admissions on 10 November 2014 and 4 December 2014. It submits that, by December 2014, the only issue of substance between the parties on the question of infringement was the identity of the fluorescent materials in the accused products.

8    I note that the respondent made further admissions on 25 January 2016. By that time, the respondent had also filed Mr Lu’s affidavit of 12 October 2015 which revealed the fluorescent materials that were present in the accused products. Further, on 3 May 2016, the respondent made admissions in a document entitled “Joint admissions on infringement”. However, all these steps were taken after the applicant had filed its affidavit evidence in chief on infringement, based on experiments it had conducted in the face of the respondent’s earlier refusals to admit.

9    Rule 22.03 of the Federal Court Rules 2011 (Cth) provides:

If a party serves a notice of dispute under rule 22.02 and the truth of any fact or the authenticity of any document disputed in the notice is proved, the party that served the notice of dispute must pay the costs of proving the truth of the fact or the authenticity of the document.

10    The admissions made by the respondent on 10 November 2014 and 4 December 2014 did not fully engage with paragraphs 1 to 6 of the notice to admit. Some of the admissions were partial admissions in that they did not embrace the scope of the corresponding admissions sought by the applicant. Having considered the admissions made by the respondent on 10 November 2014 and 4 December 2014, I am not persuaded that I should depart from the operation of r 22.03 in the present case.

11    The admissions sought in paragraphs 2 to 6 of the notice to admit were directed to establishing the presence of certain elements in the accused products, including the characteristics of some of those elements. These paragraphs were not drafted in terms of the claims as such, and so the respondent’s argument that the notice to admit was, in this respect, inappropriately framed is misplaced. As a matter of fact, the accused products either had the specified elements or they did not. Also, the elements either had the asserted characteristics or they did not. No question of construction was involved on that score.

12    As events transpired, the applicant was put to unnecessary proof when the relevant admissions could have been made at the outset without in any way compromising the respondent’s argument on construction which was ultimately successful. Even though the respondent was successful overall on the question of infringement, its failure to make admissions about uncontroversial facts which were at the forefront of the case was not reasonable in the circumstances. Therefore, the applicant should have its costs of proving these facts.

13    For completeness, I reject the submission that paragraph 2 of the notice to admit was incapable of acceptance according to its terms. It was open to the respondent to admit any one or more of the facts stated in the individual subparagraphs.

Costs in relation to the cross-claim

14    The respondent says that the applicant should not have its costs of the fair basis issue raised by the cross-claim because this issue was intimately involved with the question of construction on which the respondent succeeded. The respondent’s submissions go further to suggest that it should have its costs of this issue, although this position is not reflected in its draft orders.

15    I am not persuaded that the respondent should have its costs of the fair basis issue or that any qualification should be made to the applicant’s entitlement to costs of the cross-claim on that account. The first thing to note is that I did not decide the fair basis issue. The second thing to note is that I did not decide the fair basis issue because the respondent said that it was not necessary for me to do so if I adopted its construction of claim 3. I do not think that it follows necessarily that, had I adopted the applicant’s construction of claim 3, the respondent would have succeeded on the fair basis issue.

16    In any event, the debate about fair basis occupied no more than a few lines in the respondent’s written submissions. In the scheme of things, the costs involved in agitating the issue could only have been trivial. Absent agreement between the parties as to their quantum, it would be a needless complication to seek to isolate those costs from the costs of the cross-claim as a whole.

Conclusion

17    The respondent should pay the applicant’s costs of proving the truth of the facts stated in paragraphs 1 to 6 of the notice to admit. Subject to that reservation, the applicant should pay the respondent’s costs of the originating application.

18    The respondent should pay the applicant’s costs of the cross-claim.

19    The remaining orders to which I have referred should be made.

Associate:

Dated:    30 August 2017