FEDERAL COURT OF AUSTRALIA

Redarc Electronics Pty Ltd v B8 Systems Limited [2019] FCA 3

ORDERS

THE COURT ORDERS THAT:

1.    The applicants’ claim for interlocutory relief be dismissed.

2.    The parties be heard as to other orders.

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

REASONS FOR JUDGMENT

BESANKO J:

Introduction

1    This is an application for an interlocutory injunction by REDARC Electronics Pty Ltd and REDARC Technologies Pty Ltd. The respondents to the proceeding and the application are B8 Systems Limited and SWD Aust Pty Ltd. The basis of the claim is the alleged infringement of a patent of which REDARC Technologies is the registered owner and (it is alleged) REDARC Electronics is the exclusive licensee. The patent is an innovation patent which is titled “Brake Controller for Towed Vehicle Braking System and Method” (the Innovation Patent). The alleged infringing product is a brake control unit sold under the brand “Curt Spectrum Brake Controller” and product code SKU “529005-AU” (the Curt Product). The respondents admit that from at least 18 September 2018 they have promoted the Curt Product for sale in Australia and they admit that on or about 10 October 2018, SWD Aust sold the Curt Product within Australia to a third party. The respondents’ defences to the applicants’ claim is a denial that the Curt Product infringes the claims in the Innovation Patent and that the Innovation Patent is invalid on various grounds. The applicants also seek a disclosure order against SWD Aust.

The Innovation Patent

2    The Innovation Patent was filed on 13 April 2017 and became open for public inspection on 4 May 2017. It was accepted by the Commissioner of Patents on 26 May 2017 and was granted on 24 August 2017. It was certified by the Commissioner of Patents on 12 October 2017. The applicants’ case is that the claims in the Innovation Patent have priority from 17 February 2014 (Claimed Priority Date).

3    The Innovation Patent is a divisional application of Australian Standard Patent Application No 2014224076 filed on 11 September 2014 and titled “Brake Controller for Towed Vehicle Braking System and Method” (the Standard Patent). The Standard Patent claims priority from Australian Provisional Application No 2014900483 filed on 17 February 2014 which is the Claimed Priority Date.

4    The respondents claim that the claims in the Innovation Patent are not entitled to priority from the Standard Patent. Their case is that the priority date of the claims in the Innovation Patent is the filing date of the patent, that is to say, 13 April 2014 (Deferred Priority Date).

5    The significance of the issue as to the correct priority date is that there are two publications between the two dates which the respondents contend mean that the claims in the Innovation Patent lack novelty. Those publications are the applicants’ REDARC Tow-Pro Elite Product offered for sale and sold to customers in Australia from at least September 2015, and the Hayman CompaqIQ sold by Hayman Reese (the Hayman Product) in Australia from at least 2014.

6    There are five claims in the Innovation Patent. The claims alleged to have been infringed are claims 1, 2, 3 and 5. Those claims are in the following terms:

1.    A brake controller for a towed vehicle braking system, said brake controller being adapted to be mounted in a towing vehicle for generating a braking control signal to said towed vehicle braking system and said brake controller associated with a remote head mounted in the towing vehicle remote from the brake controller for controlling gain of the braking control signal, said brake controller comprising:

  an inertial sensor including plural sensor axes for generating sensor data associated with each sensor axis; and

  a processor for processing said sensor data to sense deceleration of the towing vehicle,

 whereby said brake controller is adapted to generate the braking control signal to control activation of said brakes of the towed vehicle braking system based on the deceleration of the towing vehicle sensed by the processor and the gain of the braking control signal, and without prescribing a mounting orientation of the brake controller relative to the towing or towed vehicle.

2.    A brake controller according to claim 1, whereby said brake controller is adapted to generate said control signal to the towed vehicle braking system in a manner that is substantially insensitive to the orientation of the inertial sensor.

3.    A brake controller according to claim 2, wherein said inertial sensor includes a multi-axis accelerometer adapted to sense braking forces on said towed and towing vehicles.

5.    A brake controller according to any one of claims 1 to 4, wherein the brake controller includes a housing for:

     the inertial sensor;

     the processor; and

    power electronics to supply power for the braking control signal to control activation of the brakes of the towed vehicle braking system.

The Relationship Between The Standard Patent and the Innovation Patent

7    There is a feature referred to in the specification and claims in the Standard Patent which is not referred to in the claims in the Innovation Patent. That feature is that the brake controller be adapted to control activation of the towed vehicle braking system in a manner that is substantially insensitive to acceleration of the vehicle in a lateral direction. For ease of reference, I will refer to this feature as the substantial insensitivity to acceleration in a lateral direction. This feature is referred to in the Abstract in the Standard Patent. It is also referred to in the statement of the background of the invention. In this section, it is said that towed vehicles have electromagnetic braking systems or hydraulic braking systems controlled by electromagnetic actuators. In each case, the braking force in the trailer is controlled by an electrical signal from the towing vehicle. It is said that historically, the level of trailer braking was controlled by a simple manual adjustment of output level. More recently, trailer braking systems exist which attempt to provide a “simpler user experience” by providing trailer braking proportional to towing vehicle braking. There is reference to the use of accelerometers to measure vehicle braking force and to apply proportional force with trailer brakes. There is reference to known products using an accelerometer to measure braking force having to be installed in a particular orientation to allow braking force to be measured along a single axis. In the background section of the Standard Patent, there is then this passage:

[0004]    However a difficulty may arise because the accelerometer may measure not only the braking deceleration, but also artefacts. Artefacts that may be measured include i) noise from road; ii) gravity, adjusted by pitch and roll of the vehicle; iii) centripetal acceleration; and iv) acceleration due to pitch and roll, assuming that the accelerometer is not placed at the centroid of the vehicle. Designs for brake controllers exist that compensate for (ii) by eliminating components not in the horizontal plane. However, such systems are sensitive to lateral acceleration of the vehicle since they do not compensate for (ii) or for horizontal components of (i) or (iv). Existing systems that measure only forward acceleration require mounting at a specific angle to the vehicle axes.

8    The specification then states that the invention may provide a brake controller for a towed vehicle braking system and a method for operating the brake controller and that the controller and method may include an acceleration model to minimise the artefacts referred to or to provide more optimal calculation of deceleration or both.

9    The first paragraph of the summary of the invention in the specification of the Standard Patent is as follows:

According to one aspect of the present invention there is provided a brake controller for a towed vehicle braking system, said brake controller being adapted to be mounted in a towing or a towed vehicle having a longitudinal axis for generating a braking control signal to said towed vehicle braking system, said brake controller comprising: an inertial sensor including plural sensor axes adapted to be mounted in an undefined orientation relative to said longitudinal axis for generating sensor data associated with each sensor axis; a processor for processing said sensor data with a braking signal to evaluate said orientation of said inertial sensor relative to said longitudinal axis; whereby said brake controller is adapted to generate said control signal to control said towed vehicle braking system in a manner that is substantially insensitive to acceleration of said vehicle in a lateral direction and to said orientation of said inertial sensor without prescribing a mounting orientation of said brake controller relative to said towing or towed vehicle.

    (Emphasis added.)

10    The summary of the invention includes a similar paragraph dealing with a method of operating a brake controller for a towed vehicle braking system.

11    Claim 1 of the Standard Patent is in the following terms:

1.    A brake controller for a towed vehicle braking system, said brake controller being adapted to be mounted in a towing or a towed vehicle having a longitudinal axis for generating a braking control signal to said towed vehicle braking system, said brake controller comprising:

 an inertial sensor including plural sensor axes adapted to be mounted in an undefined orientation relative to said longitudinal axis for generating sensor data associated with each sensor axis;

 a processor for processing said sensor data with a braking signal to evaluate said orientation of said inertial sensor relative to said longitudinal axis;

 whereby said brake controller is adapted to generate said control signal to control said towed vehicle braking system in a manner that is substantially insensitive to acceleration of said vehicle in a lateral direction and to said orientation of said inertial sensor without prescribing a mounting orientation of said brake controller relative to said towing or towed vehicle.

    (Emphasis added.)

12    I have already set out the relevant claims in the Innovation Patent (at [6]). There is no reference in the Abstract of the Innovation Patent to substantial insensitivity to acceleration in a lateral direction. The contents of the background of the invention in the Innovation Patent are substantially the same as the equivalent section in the Standard Patent. Paragraph 10 in the section which summarises the invention in the Innovation Patent is as follows:

According to another aspect of the present invention there is provided a brake controller for a towed vehicle braking system, said controller being adapted to be mounted in a towing or a towed vehicle having a longitudinal axis for generating a braking control signal to said towed vehicle braking system, said controller comprising: an inertial sensor including plural sensor axes adapted to be mounted in an undefined orientation relative to said longitudinal axis for generating sensor data associated with each sensor axis; a memory device for storing said sensor data associated with each sensor axis; and a processor for processing said sensor data with said braking control signal to evaluate said orientation of said inertial sensor relative to said longitudinal axis; whereby said brake controller is adapted to control activation of said towed vehicle braking system in a manner that is relatively insensitive to acceleration of said vehicle in a lateral direction and to said orientation of said inertial sensor without prescribing a mounting orientation of said brake controller relative to said towing or towed vehicle.

Paragraph 13 of the Innovation Patent is in the similar terms to paragraph 10, save that it refers to a method of operating a brake controller for a towed vehicle braking system.

13    In summary, in the description of the background of the invention in the Standard Patent there is reference to the existing art and the difficulty created by the fact that the accelerometer may measure not only braking deceleration, but also artefacts. The invention of a controller and method is described as including an acceleration model to minimise the abovementioned artefacts or provide more optimal calculation of deceleration, or both. Furthermore, the feature of substantial insensitivity to acceleration in a lateral direction is referred to in the summary of the invention and is an integer of claim 1 of the Standard Patent. The specification of the Standard Patent also contains a series of algorithms and models. The same observations apply to the Innovation Patent, save and except that the feature of substantial insensitivity to acceleration in a lateral direction is not an integer of any of the claims in the Innovation Patent.

The Parties and CURT Manufacturing LLC

14    Mr Anthony Kittel is the managing director of the applicants. He swore three affidavits.

15    The REDARC Group is an Australian advanced manufacturer of 4 wheel drives, caravan and camping electronic accessories. The Group’s products are designed, built and tested in Australia. The Group employs 201 people. The deployment of these employees within the Group, according to Mr Kittel’s evidence, is as follows:

(1)    Manufacturing – 100 employees approximately;

(2)    Research and development – 35 employees approximately;

(3)    Purchasing, continuous improvement and quality control – 25 employees approximately; and

(4)    Senior management roles – 7 employees.

16    The REDARC Group has a range of over 240 products which are generally electronic in nature. Mr Kittel said that the Group’s target market is “anything with a battery that moves” which means vehicles and other mobile equipment which has a battery. The Group deals with portable power systems for vehicles, such as recreational 4 wheel drives, vans and trucks, and for towed vehicles such as trailers, caravans, boat trailers and horse floats. The Group’s products are sold in Australia and overseas.

17    Mr Kittel said that the Group invests about 15% of its sales revenue each year in research and development. It has three tiers of product distribution which are as follows:

(1)    Wholesale: these are sales to distributors and account for 60% of the Group’s sales. The Group has three major distributors.

(2)    Trade: these are sales direct to trade customers such as auto electricians who are the installers of the Group’s products; and

(3)    Retail: these are sales to stores specialising in 4 wheel drive accessories such as the retailer ARB. The Group also sells products online.

18    The brake controller for towed vehicle braking system described in the Innovation Patent was invented by Mr Timothy Fosdike after he commenced employment with the second applicant on 7 June 2012. Mr Fosdike is a senior electronics design engineer.

19    The Group promotes its brake controller system under the trademark “Tow-Pro”. It has two models of the Tow-Pro Product. The first model is the “Tow-Pro Classic” which is sold at a recommended retail price of $306.60. The second model is the “Tow-Pro Elite” which is sold at a recommended retail price of $382.45. Mr Kittel said that the Tow-Pro Elite model is a physical embodiment of the brake controller described in the Innovation Patent.

20    The Group’s Tow-Pro Product has been sold and promoted for sale since June 2014. The press releases relating to the initial launch of the product and subsequent development of the product and promotional brochures for the product are posted on the Group’s website. The press release dated 2 June 2014 refers to the fact that a pending patent applies to the product, and the promotional brochure refers to the relevant patent application number.

21    Mr Stuart Terrell is the managing director of B8 Systems. B8 Systems is a New Zealand based distributor of electrical products for the automotive industry, including towbar wiring solutions, electrical interconnections and brake controllers. The company currently distributes over 100 product lines. It supplies customers primarily in Australia and New Zealand, but also in Asia and parts of Africa. The company’s customers include original equipment suppliers e.g., car manufacturers who install products with Erich Jaeger trade mark on the products, original equipment manufacturers e.g., car manufacturers who install B8 Systems’ products, and aftermarket suppliers, such as SWD Aust.

22    SWD Aust has been one of B8 Systems’ key distributors in Australia since 2015 and the company has supplied SWD Aust with a full range of vehicle specific wiring kits. Mr Terrell meets regularly with Mr Kurt Schmid, the managing director of SWD Aust. B8 Systems decided to initially launch the Curt Product into Australia solely through SWD Aust. This decision was made because of the good relationship between the two companies and because the product is a specialised product that fits well into B8 Systems’ product portfolio of vehicle specific wiring kits and requires the same technical skills to sell to customers. B8 Systems provides a lot of support and technical backup to SWD Aust and its sales representatives for their product range, including the Curt Product.

23    The other director of B8 Systems, Mr Henk De Kock, gave evidence relating to whether the Curt Product complies with the Australian Design Rules. I will return to this issue.

24    Mr Kurt Schmid is, as I have said, the managing director of SWD Aust. SWD Aust is a distributor of automotive products with seven distribution centres around Australia. It employs between 10 to 15 internal and external sales representatives and more than 90 employees nationwide. SWD Aust’s customers are primarily trade stores, 4x4 specialists, mechanical repairers, towing fitment specialists, installers of automotive and towing accessories, and automotive retailers. SWD Aust distributes more than 6,000 product lines ranging from towbars, hitches and towing accessories to exhaust and emission parts to specialised performance and 4x4 parts. These products are sourced from a variety of manufacturers and distributors. The company currently sells two brake controllers. They are the REDARC Tow-Pro Elite Brake Controller which it has sold since 2016 and which has a recommended retail price of $328.90, and the Curt Spectrum Brake Controller, that is, the Curt Product, which they have sold since August 2018 and which has a recommended retail price of $295.

25    Mr Rock Lambert is the chief executive officer of CURT Manufacturing LLC (Curt). Curt designs a full line of hundreds of towing products, including fifth wheel hitches, gooseneck hitches, weight distribution hitches, towing accessories and cargo management products such as towable bike racks, as well as other truck accessories such as grill guards, side steps and tool boxes. It has manufacturing facilities in Wisconsin, South Dakota, Florida and Mexico, and currently employs over 1,000 people. Although many of the company’s products are mechanical, the business also manufactures and sells electrical components used in towing, beginning with wiring products and T-connectors in 1998. The company has sold basic brake controllers as part of its electrical product line up since the mid-2000s. By at least 2010, the company offered a brake controller named Reflex which used a two-axis accelerometer. By at least 2012, the company offered a brake controller named Triflex which used a three-axis accelerometer. The company Curt currently owns 54 unexpired patents and 4 unexpired Canadian patents. It has 11 US patent applications which are pending, and two Patent Cooperation Treaty applications which have been filed for worldwide protection over its new brake controller products.

The Experts

26    The applicants rely on expert evidence of Mr Paul van de Loo who has academic qualifications and practical experience as a mechanical engineer. In 1993, he established a product design engineering company called Applidyne. He is the managing director and technical director of the company.

27    The respondents rely on expert evidence of Mr Bernard Berry who is an independent electronics and software engineer. He carries on business under the name, Databerry Systems.

28    The applicants also advanced evidence from a Mr Grad Zivkovic who is a mechanical engineer. Mr Zivkovic expresses the opinion that the Curt Product and, in particular, the push button control knob, does not comply with two Australian Design Rules and poses a safety hazard. Mr De Kock, on behalf of B8 Systems, responds to this opinion and he expresses the opinion that it cannot be said that the Curt Product does not comply with the Australian Design Rules.

29    The significance of this issue from the applicants’ point of view is that they contend that regardless of any patent issues, the respondents should not be selling the Curt Product in any event and thus will not be prejudiced by an interlocutory injunction.

30    The issue was raised late in terms of the filing of affidavit evidence and is an issue of some complexity on which there are two views. It was not debated at any length and, as I indicated in the course of submissions, I would not be prepared to make a finding, even a provisional finding, unless the position was very clear. The position is not very clear.

The Test on an Interlocutory Injunction

31    The principles relating to the grant of an interlocutory injunction are well-known. They are discussed at length in the decision of the Full Court of this Court in Samsung Electronics Co Limited v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 (Samsung). The applicants must establish that they have a prima facie case and that the balance of convenience favours the grant of an injunction until the trial of the proceeding. As Beach J said in Apotex Pty Ltd v Cipla Limited [2017] FCA 1627 at [40]:

[t]he sufficiency of the likelihood of success required is dependent upon the nature of the right being asserted and the practical consequences that are likely to flow if the injunction is granted.

32    The issue of whether the applicant will suffer irreparable harm for which damages will not provide adequate compensation is considered as part of the Court’s assessment of the balance of convenience (Samsung at [63]). The two matters are not considered in isolation and, as the Full Court noted in Samsung (at [67]), the apparent strength of the parties’ substantive cases will often be an important consideration to be weighed in the balance. Finally, it may be necessary to consider and evaluate the impact that the grant or refusal of an injunction will have, or is likely to have, on third persons and the public generally (Samsung (at [68]).

A Prima Facie Case

Infringement

33    Although the respondents deny infringement, they do not identify in their Defence an integer of the claims in suit which is not present in the Curt Product. Subject to one matter which is addressed below (at [59]), the respondents did not identify in their written or oral submissions an integer of the claims in suit which is not present in the Curt Product. The applicants have a strong prima facie case of infringement.

34    The respondents’ primary defence to the applicants’ claim is that the claims in suit are invalid.

Invalidity

35    With respect to invalidity, the respondents raise a number of grounds in their Particulars of Invalidity. Each pleaded ground did not receive equal attention in terms of the evidence and submissions, and I will focus on the principal grounds of invalidity.

Lack of Novelty (s 18(1A)(b)(ii) of the Patents Act 1990 (Cth))

36    The respondents’ case on lack of novelty can be divided into two categories; the first proceeds on the assumption that the Claimed Priority Date is the correct priority date and requires consideration of two publications; and the second category proceeds on the assumption that the Deferred Priority Date is the correct priority date and also involves consideration of two publications.

37    The respondents’ case is that a brake controller known as the “Hopkins InSIGHT Brake Controller” (the Hopkins Product) was sold by Hopkins Manufacturing Corporation in the United States of America from at least 2013. Their case is that US Patent 20100152989 titled “Universal Trailer Mounted Proportional Brake Controller” (the US Patent) was published on 17 June 2010. Both of these publications were made before the Claimed Priority Date and both, or either, establish that the claims in suit lack novelty.

38    As part of his first affidavit, Mr van de Loo produces packaging for the Hopkins Product and a photograph of the product. He disassembled the brake controller component of the Hopkins Product and found that it contained a two-axis accelerometer. He also produced the instructions inside the packaging for the Hopkins Product. This document contained instructions as to where to locate or mount the “Smart-Box” of the Hopkins Product. The instructions were such as to ensure that the Smart-Box was mounted on vertical surfaces which are aligned with the vehicle fore/aft axis. In Mr van de Loo’s opinion, this meant that the Hopkins Product did not have the final essential element of the claims in the Innovation Patent, namely, “without prescribing a mounting orientation of the brake controller relative to the towing or towed vehicle”.

39    In his affidavit, Mr Berry produces an Installation Guide for the Hopkins Product. Mr Berry expresses the opinion based on this document, that there is one fixed plane and, therefore, the product includes at least a two-axis accelerometer. Furthermore, the Installation Guide does not prescribe one specific orientation of the Smart-Box. There are some orientations that cannot be used, but if the instructions are followed “you are free to install the device in any one of many allowable orientations”.

40    Mr van de Loo’s second affidavit makes it clear that, although there are many mounting orientations in which the Hopkins Product will work as intended, there are at least some mounting orientations in which it will not work.

41    The issue between the parties involves a question of construction. The applicants contend that the element of the claims of “without prescribing a mounting orientation of the brake controller relative to the towing or towed vehicle” means any mounting orientation, whereas the respondents contend that it means one specific mounting orientation.

42    Clearly, I am not making a final decision on this issue on this application. However, I am disposed to think that the applicants’ construction is the better construction. The specification of the Innovation Patent refers in paragraphs 10 and 13 to the controller comprising an inertial sensor including plural sensor axis adapted to be mounted in an undefined orientation relative to the longitudinal axis for either vehicle and that the controller acts in a manner that is relatively insensitive to said orientation. These references are not decisive of the point, but they tend to support the applicants’ construction.

43    As part of his affidavit, Mr Berry produces the US Patent. He expresses the opinion that the US Patent discloses all of the features of claim 1 of the Patent and of claim 2, when a three-axis accelerometer is used. With respect to the final integer or element of claim 1 (i.e., without prescribing a mounting orientation of the brake controller relative to the towing or towed vehicle), Mr Berry expresses the opinion that the US Patent teaches this because it provides in paragraph 8 that the power control unit may be mounted “in any fixed location and is independent of direction of travel” and in paragraph 50 it provides that the power control unit may be mounted in any direction relative to direction of travel. With respect to claim 3, he expresses the opinion that in paragraph 59 of the specification of the US Patent, it teaches the use of three-axis accelerometers.

44    In his second affidavit, Mr van de Loo addresses the US Patent. He does not agree with Mr Berry. Mr van de Loo’s main thesis is that the invention described in the US Patent does not include the final integer or element of claim 1, that is, without prescribing a mounting orientation of the brake controller relative to the towing or towed vehicle. He bases this thesis on the following matters:

(1)    The US Patent should be read as a whole and when that is done, it is clear that the brake controller only takes account of acceleration data in two orthogonal axes and the brake controller cannot work properly unless it is mounted within a certain range of mounting orientations;

(2)    In elaboration of paragraph 1, Mr van de Loo states that there are numerous references in the US Patent to prescribed mounting orientations: paragraph 55 and Figure 7 (mounting on the trailer frame: all the suitable mounting surfaces are vertical); paragraph 60 (reference to the x-axis and y-axis); paragraph 61 (mounting of two-axis accelerometers;

(3)    A specific accelerometer mentioned in paragraph 59 of the US Patent is a two-axis accelerometer;

(4)    There is nothing in the US Patent to indicate that the brake controller is adapted to do anything with the data of the third axis which a three-axis accelerometer is capable of providing. Put another way, even if a three-axis accelerometer is used, the brake controller is, in Mr van de Loo’s opinion, only adapted to make use of the information provided by two of those axes.

45    Again, clearly I am not making a final decision on these issues on this application. However, on the evidence adduced to this point, I find the evidence and arguments advanced by the applicants more persuasive than those advanced by the respondents.

46    I should record that in considering whether the Hopkins Product and the US Patent constitute anticipations of the claims in the Patent, I have borne in mind the well-known authorities in this area. They are discussed in the recent decision of the Full Court of this Court in AstraZeneca AB v Apotex Pty Ltd [2014] FCAFC 99; (2014) 226 FCR 324 at [293], [300] and [302] per Besanko, Foster, Nicholas and Yates JJ (Jessup J agreeing at [447]).

47    The respondents’ case is that the applicants’ REDARC Tow-Pro Elite was offered for sale and sold to customers in Australia from at least September 2015. It is not in dispute that this product has all of the features of the claims in suit. This publication was after the Claimed Priority Date, but before the Deferred Priority Date and the strength of the argument depends on the strength of the argument that the Deferred Priority Date is the correct priority date.

48    The respondents’ pleaded case is that Hayman Reese sold and used a product they call the Hayman Product in Australia from at least 2014. The Hayman Product was not the subject of any detailed consideration in the expert evidence or the submissions.

49    As I have said, the Innovation Patent is a divisional application of the Standard Patent and the latter document was filed on 11 September 2014. There is no dispute about the Standard Patent’s claim for priority from Australian Provisional Application No 2014900483 which was filed on 17 February 2014. The dispute concerns the applicants’ claim that the claims in the Innovation Patent are entitled to priority from the priority date for the Standard Patent (i.e., 17 February 2014).

50    The determination of the priority date of the claims in the Innovation Patent is governed by s 43 of the Patents Act 1990 (Cth) (the Act) and regs 3.12 and 13.13D of the Patent Regulations 1994 (Cth) (the Regulations). The test is whether the Standard Patent clearly discloses the invention identified in the claims in the Innovation Patent. The disclosure must be of the invention in a manner that is clear enough and complete enough for the invention to be performed by a person skilled in the art.

51    Although the case dealt with internal fair basing (i.e., s 40(3)), it was accepted by the parties that the High Court’s observations in Lockwood Security Products Pty Ltd v Doric Products Pty Ltd [2004] HCA 58; (2004) 217 CLR 274 are relevant in this context. The Court said (at [68]-[69]):

The approach required by s 40(3)

Erroneous principles. The comparison which s 40(3) calls for is not analogous to that between a claim and an alleged anticipation or infringement. It is wrong to employ “an over meticulous verbal analysis”. It is wrong to seek to isolate in the body of the specification “essential integers” or “essential features” of an alleged invention and to ask whether they correspond with the essential integers of the claim in question.

“Real and reasonably clear disclosure”. Section 40(3) requires, in Fullagar J’s words, “a real and reasonably clear disclosure”. But those words, when used in connection with s 40(3), do not limit disclosures to preferred embodiments.

“The circumstance that something is a requirement for the best method of performing an invention does not make it necessarily a requirement for all claims; likewise, the circumstance that material is part of the description of the invention does not mean that it must be included as an integer of each claim. Rather, the question is whether there is a real and reasonably clear disclosure in the body of the specification of what is then claimed, so that the alleged invention as claimed is broadly, that is to say in a general sense, described in the body of the specification.”

Fullagar J’s phrase serves the function of compelling attention to the construction of the specification as a whole, putting aside particular parts which, although in isolation they might appear to point against the “real”’ disclosure, are in truth only loose or stray remarks.

    (Citations omitted.)

52    Mr Berry was asked by the respondents to express an opinion on two matters. First, he was asked to identify the differences between the contents of the Standard Patent and the contents of the Innovation Patent. Secondly, he was asked to provide an opinion on whether the Standard Patent discloses the invention claimed in the Innovation Patent in a manner which is clear enough and complete enough for the claimed invention to be performed by a person skilled in the art.

53    Mr Berry expresses the opinion that, generally speaking, the invention described in the Standard Patent is a brake controller which is adapted to generate a brake control signal to control activation of the towed vehicle braking system in a manner that is substantially insensitive to acceleration of the vehicle in a lateral direction and to the orientation of the inertial, multi-axis sensor of the controller relative to a longitudinal axis of the towing vehicle. He expresses the opinion that the Standard Patent describes algorithms and calculations that allow the braking signal to be calculated in this way.

54    Mr Berry sets out differences between the specification of the Standard Patent and the specification of the Innovation Patent. For present purposes, I do not need to set out the differences. Mr Berry also sets out in tabular form the differences between claim 1 in the Innovation Patent and claim 1 in the Standard Patent.

55    The thrust of Mr Berry’s opinion is that the controller referred to in claim 1 of the Standard Patent is required or adapted to generate the braking control signal to control said towed vehicle braking system in a manner that is substantially insensitive to acceleration of said vehicle in a lateral direction and to the orientation of the inertial sensor relative to the inertial relative to the longitudinal axis of the towing vehicle, whereas no such adaption is required of the controller of claim 1 of the Innovation Patent. It seems to me that the key aspect of Mr Berry’s opinion, bearing in mind claim 2 of the Innovation Patent, is that the “entire gist” of the Standard Patent is to generate said control signal to control activation of the said towed vehicle braking system in a manner that is substantially insensitive to acceleration of said vehicle in a lateral direction and this is what the acceleration models and formulas in the Standard Patent bring “to the forefront”. Mr Berry expresses the opinion that by contrast, claim 1 of the Innovation Patent is described in “substantially broader and more generic terms” and is silent about this feature. The essence of Mr Berry’s opinion is that when regard is had to the problems in the existing art and the algorithms and models identified and described in the Standard Patent, claim 1 in the Innovation Patent, which makes no reference to the substantial insensitivity to acceleration in a lateral direction, is not described in the Standard Patent in a manner clear enough and complete enough that he could implement the invention in claim 1 in the Innovation Patent.

56    Mr Berry expresses opinions about claims 4 and 5 which I do not need to address for present purposes.

57    Mr Berry also expresses the opinion that a feature in claim 1 of the Innovation Patent of a remote head mounted in the towing vehicle remote from the brake controller is not disclosed in the Standard Patent. Having said that, he notes a reference to a remote head in paragraph 18 of the Standard Patent.

58    In his second affidavit, Mr van de Loo addresses Mr Berry’s opinions on whether the Standard Patent discloses the invention in the claims in the Innovation Patent in a manner that is clear enough and complete enough for the invention to be performed by a person skilled in the art. He expresses the opinion that the information in the Standard Patent is sufficiently clear and complete enough for him to build the invention described in the Innovation Patent, having regard to the similarities between the two patents and the fact that he considers the differences between the two as identified by Mr Berry are not of any particular importance. With respect to the particular point made by Mr Berry to the effect that the algorithms and models described in both patents all point to the need to make the braking control signal insensitive to lateral acceleration, Mr van de Loo expresses the opinion that the same algorithms allow the brake controller to do the things set out in claim 1 of the Innovation Patent without prescribing a mounting orientation of the brake controller relative to the towing or towed vehicle.

59    The respondents submitted that the effect of Mr van de Loo’s evidence on this topic is that he considers that the claims in the Innovation Patent have, as an element or integer, a requirement that the braking control signal be substantially insensitive to lateral acceleration. They contend that if that be correct, then the Curt Product does not infringe the claims because the evidence of Mr Lambert is that the Curt Product does not include this feature. The applicants submitted that the effect of Mr van de Loo’s evidence is not as the respondents assert.

60    In my opinion, the respondents have a reasonable argument to the effect that the claims in the Innovation Patent are not entitled to priority from the Standard Patent. I find it difficult to be any more precise about the strength of the argument in light of the complexity of the issue and the fact that I have not had the benefit of having the experts explain their respective views, both in-chief and in the course of cross-examination.

Section 40(2) and (3) Matters

61    By reason of the similarities between the specification of the Standard Patent and the specification of the Innovation Patent, particularly the reference to the problems with the existing art and the algorithms and models, similar issues arise in relation to the respondents’ arguments that the claims in the Innovation Patent are not supported by matter disclosed in the specification (s 40(3)) and the claims in the Innovation Patent do not define the invention (s 40(2)(c)). The respondents have a reasonable argument with respect to these matters.

Utility (s 18(1A)(c))

62    The respondents advance two arguments in support of their case that the invention, so far as claimed in the claims in the Innovation Patent, lacks utility (s 18(1A)(c)).

63    The first argument is that the objective of the invention identified in the specification of the Innovation Patent is to provide a brake controller adapted to generate a control signal in a manner that is substantially insensitive to acceleration in a lateral direction and the invention defined in the claims fail to meet this objective. In response to this argument, the applicants rely on the evidence of Mr van de Loo described above (at [58]). Again, there is this issue of the significance of this feature and its and its place in the Innovation Patent. Again, I consider that the respondents have a reasonable argument.

64    The second argument is that “plural sensor axis” in claim 1 means more than one sensor axis and the evidence is that an inertial sensor with only two sensor axes, as distinct from three sensor axes, will not lead to a workable brake controller when the controller is mounted in any orientation relative to the towing or towed vehicle. The applicants’ response to this argument, which at this stage I think is the better one, is that it would be known to the person skilled in the art that the non-prescription of any mounting orientation could not be achieved by a two-axis accelerometer, but could be achieved by the use of a three-axis accelerometer and references in the specification of the Innovation Patent to x-axis, y-axis and z-axis point to a three-axis accelerometer.

Lack of Innovative Step (s 18(1A)(b)(ii)) and Not a Manner of Manufacture (s 18(1A))

65    The other pleaded particulars of invalidity were not the subject of detailed evidence or submissions. They are lack of innovative step and that the invention does not involve a manner of manufacture.

Conclusion with Respect to Invalidity

66    In my opinion, the respondents have shown that they have reasonable arguments with respect to issues of validity I have identified. However, their case does not rise to the level of sufficiently strong to qualify the conclusion that overall, the applicants have established a prima facie case (Interpharma Pty Ltd v Commissioner of Patents [2008] FCA 1498; (2008) 79 IPR 261 at [17]; Novartis AG v Hospira Pty Limited [2012] FCA 1055; (2012) 98 IPR 185 at [52] per Yates J; InterPharma Pty Ltd v Hospira, Inc (No 3) [2017] FCA 1536 at [21]-[22] per Kenny J).

The Balance of Convenience

67    The applicants submitted that the balance of convenience favoured the grant of an injunction because their Tow-Pro Product is a leading product in their business and they will suffer harm if they have to compete with the Curt Product in circumstances where the respondents were aware of the applicants’ product, its pending or actual patent rights, and failed to take an earlier opportunity to oppose patent rights being granted to the second applicant.

68    If an interlocutory injunction is not granted and the applicants ultimately succeed, they may seek an account of profits or damages. The profits made by the respondents by the sale of the Curt Product should be relatively easy to calculate, assuming proper records are kept. Insofar as damages involve the loss of sales of the applicants’ Tow-Pro brake controller, there is a historical sales pattern for the product. However, the applicants claim they may also suffer a loss of sales of other products should the respondents continue to sell the Curt Product.

69    Mr Kittel said, and I accept, that the Tow-Pro brake controller is one of two flagship products for the REDARC Group. He estimates that 75% of the Group’s Tow-Pro brake controller products are sold to wholesale distributors. The product is a “lead in” product. Mr Kittel explained that this meant that it was a unique product that attracted buyers and made it more likely that the seller can sell other complementary products and accessories to distributors which may not be unique to the Group’s range. Furthermore, it means that the distributors that have the Tow Pro Product in their range of products are more easily able to sell add-on products (including other REDARC Group products) at trade and retail levels. Mr Kittel said that there are some distributors and retailers who will only stock the product range of a limited number of manufacturers. He said that by including the Curt Product in its full range, both respondents are more readily able to promote and sell to distributors, retailers and online customers, their broader range of products in competition with the applicants’ product and range.

70    In the applicants’ favour, it may be said that, assuming an entitlement to relief for damages in relation to other products, proving the damages will be difficult and, in those circumstances, an injunction should be granted. In the respondents’ favour, it may be said that the obstacles in terms of causation in establishing an entitlement for loss in relation to other products may be significant (AG Spalding & Bros v AW Gamage Ltd (1918) 35 RPC 101 at 117 per Swinfen Eady LJ).

71    The evidence concerning the respondents’ ability to challenge the applicants’ patent rights earlier was as follows.

72    There were negotiations between Mr Kittel, on behalf of the applicants, and Mr Terrell and Mr De Kock of the first respondent, between March 2016 and August 2016 about a proposed joint product development involving the development of a combined trailer lighting module and an electric trailer brake controller. The negotiations proved unsuccessful. B8 Systems was undoubtedly aware of the applicants’ Tow-Pro Product. In October 2016, B8 Systems, through Mr Terrell, approached Curt in the United States with a view to a partnership to develop B8 Systems’ wiring technology. Curt had a new brake controller and Mr Terrell, in 2017, was interested in bringing it into Australia and New Zealand.

73    As I have said, the Innovation Patent became open for public inspection on 4 May 2017 and it was accepted by the Commissioner of Patents on 26 May 2017. The Innovation Patent was granted on 24 August 2017. On 18 August 2017, Curt completed a patent clearance search whereby it compared the Curt Product against existing patents around the world for infringement clearance. Curt took the view that the Curt Product would not infringe any patent rights associated with the applicants. On 12 October 2017, the Innovation Patent was certified by the Commissioner of Patents and, thereafter, it was open to the respondents to oppose the Innovation Patent and seek revocation of it. If that had been done, both the patentee and the objector would have been entitled to a hearing before the Commissioner of Patents and a decision by the Commissioner of Patents (s 101M of the Act; regs 5.6 and 5.8 of the Regulations). The respondents did not undertake that course.

74    In October 2017, Curt launched the Curt Product in the United States.

75    On 5 June 2018, Mr Terrell contacted Curt and told it the Innovation Patent could have relevance to the Curt Product. Curt conducted a review, but decided that there was no difficulty with B8 Systems selling the Curt Product in Australia.

76    Although the evidence does not relate to the Innovation Patent, it seems clear from Mr Lambert’s evidence that Curt did not consider its product infringed the Standard Patent or the United States equivalent Patent because of the absence in the Curt Product of the feature of substantial insensitivity to acceleration in a lateral direction. As is plain from the previous discussion, the presence or absence of that feature looms large as far as the validity issues in this case are concerned.

77    From 24 September 2018, there was correspondence between the solicitors for the applicants and the solicitors for the respondents. As the applicants point out, the only validity issue raised by the respondents prior to the filing of the Particulars of Invalidity was the similarity between the Curt Product and the Hopkins Product, which had been on the market since well before the Claimed Priority Date.

78    The applicants point out that the Innovation Patent has almost four years to run before it expires and if the Patent is invalid, the respondents will obtain an order for revocation well within the period of monopoly.

79    The principal argument advanced by the respondents with respect to the balance of convenience is that the Curt Product is already on the Australian market and proving very successful. Curt, B8 Systems and SWB Aust will suffer irretrievable damage (as they put it) if an injunction is granted. Furthermore, the public interest is best served by having another brake controller on the market. It provides increased choice for the consumer and the advantages of a competitive market.

80    Curt supply the Curt Product to B8 Systems who, in turn, provide it to SWD Aust. The first shipment of the Curt Product arrived in Australia in 2018. It has been on the market since that date. The respondents submit that it has proved very popular. I accept that, but, of course, bearing in mind that this is an interlocutory application and the witnesses have not been challenged. That is the evidence from Mr Terrell, Mr Schmid and Mr Lambert. The respondents submit that to restrain the sale of the product in Australia would damage the respective reputations of Curt, B8 Systems and SWD Aust, and would be contrary to the public interest. The public interest is in having another competitive brake controller in the market. The respondents’ witnesses identified advantages the Curt Product has over the applicants’ Tow-Pro Product. Mr Kittel does not agree that the Curt Product is a superior product to the Tow-Pro Product. He addressed the claimed advantages of the Curt Product and expressed the opinion that none of them provide an advantage over the Tow-Pro Product. It is not possible for me to make a finding with respect to this issue.

81    The respondents point to the fact that the Curt Product has enjoyed success in the United States. Mr Lambert said that Curt had sold more than 4,700 of the Curt Product in the United States between April 2018 and November 2018. The applicants have not alleged that the Curt Product infringes the Standard Patent or the applicants’ US Patent, both of which include the substantial insensitivity to acceleration of the vehicle in a lateral direction feature.

82    Mr Lambert said that between June and November 2018, Curt shipped 2,008 of the Curt Product to B8 Systems and that he understands that these products are to be or have been sold in Australia or New Zealand. He said that a further 5,000 of the Curt Product are packaged for Australia and ready to send for B8 Systems’ next order. The respondents also rely on the fact that SWD Aust has invested funds into a marketing campaign focused on the Curt Product. Mr Schmid said that between August and November 2018, SWD Aust sold 70 units of the Curt Product to its customers in Australia. That is twice the number of the Tow-Pro Product SWD Aust sold in the same period. SWD Aust experienced no change in its “usual” level of sales of the Tow-Pro Product within that time.

83    There is no dispute that towing and brake controller products, such as the Curt Product and the applicants’ product, are the subject of increased sales in the summer months. SWD Aust has already purchased, paid for and received about 300 Curt Products from B8 Systems ready for selling in the summer period.

84    SWD Aust alleges that it will suffer both damage to its reputation and loss of revenue if it is restrained from selling the Curt Product.

85    Curt also asserts that it will suffer damage if an injunction is granted. The Curt Product is the company’s first towing product in the Australian market. It believes its reputation would be damaged and its relationship with the first respondent would be damaged. Mr Lambert said that B8 Systems would be unlikely to continue distributing Curt Products and that downstream distributors and retailers and customers would think less of Curt if supply was stopped.

86    The respondents also assert that an injunction is also very likely to damage the relationship between B8 Systems and SWD Aust “beyond repair”. The respondents contend that, by contrast, the damage to the applicants is likely to be less, and the applicants have an established sales pattern for their Tow-Pro Product which can be used as a basis for a claim for damages. I must say I have difficulty in accepting, at this stage, the full extent of the respondents’ dire predictions of relationship breakdowns. I accept the evidence, but only to the point of accepting that there may be difficulties.

87    The respondents allege that the applicants wrongly rely on the alleged risk of confusion between the applicants’ product and the Curt Product. There is no allegation in the applicants’ pleadings of misleading or deceptive conduct, or of the misuse of confidential information.

88    The claims in the Innovation Patent are prima facie valid, or at least it is for the respondents to establish invalidity. Nevertheless, taking into account the matters relevant to the balance of convenience, including the strength of the parties’ respective cases, I am not satisfied that the balance of convenience favours the grant of an injunction.

Conclusion

89    For these reasons, I am not satisfied that an interlocutory injunction should be granted. The respondents should keep appropriate records of their dealings involving the Curt Product. I cannot see any reason to make the disclosure order sought by the applicants at this stage. I will hear the parties as to other orders.

Associate:    

Dated:    9 January 2019