FEDERAL COURT OF AUSTRALIA

F45 Training Pty Ltd v Body Fit Training Company Pty Ltd [2019] FCA 1911

ORDERS

THE COURT ORDERS THAT:

1.    All outstanding questions of costs in this proceeding be reserved for determination by a Judge of the Court in Proceeding No NSD1795/2019.

2.    Order 1 does not extend to any costs the subject of the order made by Foster J on 27 September 2019.

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

REASONS FOR JUDGMENT

NICHOLAS J:

1    This proceeding was commenced by the prospective applicant (“the applicant”) on 25 June 2019. By originating application filed on that date, the applicant sought orders pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) (“the Rules”) for preliminary discovery by the prospective respondent (“the respondent”). The relevant documents sought by the applicant were identified in five categories enumerated in an annexure to the originating application. The originating application was amended on 23 July 2019 to seek orders for the inspection by the applicant of elements of the respondent’s computer systems. Ultimately, no such inspection was given and the proceeding was disposed of following the provision of documents and information by the respondent without the Court having to determine whether any order for either discovery of documents or inspection of property should be made.

2    The applicant is the patentee of two Australian innovation patents, both of which are entitled “Remote configuration and operation of fitness studios from a central server”. The second of these, referred to by the parties as the ‘429 Patent’ includes five claims the first of which is to:

A computer implemented method for configuring and operating one or more fitness studios each comprising a plurality of exercise stations in an open studio environment at which users perform associated exercise routines, each exercise station having an associated display, the method comprising the steps of:

periodically retrieving, by a server from a database, a studio information program file for a particular studio for a specified period, from a pre-prepared multi-period fitness library comprising a succession of studio information program files; wherein the studio information program file that is retrieved for a current period is different from a studio information program file that was retrieved for a previous period, thereby providing periodic variation of exercise programs;

communicating, by the server to a studio computer associated with the particular studio, the retrieved studio information program file over a communications network;

receiving, by the studio computer, the communicated studio information program file;

configuring the exercise stations dependent upon the received studio information program file; and

communicating, by the studio computer to the exercise station displays, dependent upon the received studio information program file, station directions to users exercising at the stations for performing an exercise.

3    The respondent operates a group training fitness franchise business in Australia that includes a number of fitness studios situated in Queensland, Victoria, New South Wales and South Australia.

4    On 1 October 2019 the applicant notified the respondent and the Court that in light of affidavits filed in the proceeding by the respondent made by Cameron John Falloon sworn on 4 July 2019 and 19 September 2019, the applicant considered that it had sufficient information to determine whether to commence a proceeding to obtain relief for infringement of the two patents. On that basis, I made an order on 3 October 2019 dismissing the application for preliminary discovery. I also ordered that the matter stand over for hearing and determining all questions of costs.

5    The applicant informed me during the hearing that it intended to commence a substantive proceeding before 1 November 2019.

6    With regard to costs, the applicant submitted that if:

    it commences an infringement proceeding by 1 November 2019 then the costs of this proceeding (excluding the costs the subject of the order made by Foster J on 27 September 2019) should be “in the discretion of the trial judge”; and

    if it does not commence such a proceeding by 1 November 2019, each party should bear its own costs of this proceeding (excluding the costs the subject of the order made by Foster J on 27 September 2019).

7    Subsequent to the hearing the applicant commenced a proceeding against the respondent and other parties alleging (inter alia) that the respondent has infringed claim 1 of the ‘429 Patent. That proceeding (NSD1795/2019) is listed before me for a first case management hearing on 2 December 2019.

8    The respondent submitted that since the applicant’s application for preliminary discovery had been dismissed, it followed that the applicant had been unsuccessful in this proceeding and that, in accordance with what was said to be the usual rule, the applicant should be required to pay the respondent’s costs. I do not accept that submission.

9    It will frequently happen in a proceeding for preliminary discovery that a respondent will voluntarily produce material to the applicant in advance of the hearing of the application which may provide the applicant with sufficient information to make a decision whether or not to bring a substantive proceeding without the need to proceed to a contested hearing. If the application for preliminary discovery is dismissed prior to the hearing on the basis that the applicant has obtained sufficient information to decide whether to commence a substantive proceeding, the Court will have regard to the circumstances in which the order was made including, in particular, whether by bringing the preliminary discovery proceeding the applicant was able to obtain access to information it required in order to decide whether or not to bring a substantive proceeding.

10    It was also submitted on behalf of the respondent that it had indicated in correspondence with the applicant its willingness to provide information as to its methods and processes prior to the commencement of the preliminary discovery proceeding, presumably in an attempt to satisfy the applicant that the respondent did not infringe either of the applicant’s patents. The upshot of the submission was that the proceeding was unnecessary and any need for further information could have been satisfied in a co-operative spirit through correspondence without filing an application for preliminary discovery.

11    The difficulty I have with that submission is that it was always open to the respondent to communicate its willingness to consent to an order for preliminary discovery in appropriate terms at the first case management hearing. That is not what the respondent did in this case. Instead, in correspondence leading up to the first case management hearing, and during the course of that hearing, the respondent made clear that it intended to defend the application for preliminary discovery on the basis that the applicant could have no reasonable basis to believe that the respondent was infringing either of the applicant’s patents. According to the respondent’s patent attorneys’ correspondence this was because the method used by the respondent in its business:

1.    … does not rely on “periodically retrieving, by a server ... a studio information program file” which is an essential feature or integer of the claims of the Patents. Instead, our client's system of operations requires a session timetable file to be manually and selectively extracted by an administrator when it is required;

2.    … does not include the step of “communicating, by the server to a studio computer ... the retrieved studio information program file” which is an essential feature or integer of the claims of the Patents. Instead, the extracted timetables are manually sent by an administrator to studios as email attachments; and

3.    … does not include the step of “configuring the exercise stations of the particular studio dependent upon the received studio information program file” which is an essential feature or integer of the claims of the Patents. In our client's system of operations, the timetables do not include any directions with regard to layout or configuration of any studios as that is left up to each individual franchisee.

12    Whether these arguments should prevail is a matter for determination in the substantive proceeding. I do not think it is desirable for me to embark on any further consideration of the issues likely to arise in the substantive proceeding now that it has been commenced. What I do note is that the allegations in the statement of claim filed with the originating application in the substantive proceeding has been settled by experienced counsel and certified by the applicant’s solicitor, Ms White, in accordance with rule 16.01 of the Rules.

13    The circumstances of the present case are not relevantly different from those considered by Burchett J in Cappuccio v Australia & New Zealand Banking Group Ltd [1999] FCA 1188 which was a case in which the application for preliminary discovery did not proceed to a hearing. His Honour said at [3]:

… I have a discretion as to just what I should do in respect of costs, and it seems to me that the costs order which would be appropriate in a case like this depends very much on the consequences of the discovery obtained. If the applicant for preliminary discovery uncovers enough to enable that applicant to bring proceedings which are successful, there may be much to be said for the proposition that the costs of the preliminary discovery should form part of the costs of the action. On the other hand, if the applicant proceeds, brings an action, fails, and is ordered to pay the costs of that action, there seems every reason why, generally speaking, the costs of the preliminary discovery should be included in the costs payable to the respondent.

14    In the present case I am satisfied that the interests of justice favour my taking the same approach subject to the qualification that the previous costs order made in this proceeding by Foster J on 27 September 2019 should not be disturbed. The applicant accepts that it should pay those costs.

15    I should record that the respondent submitted that the applicant should pay the respondent’s costs of and incidental to the preliminary discovery application on an indemnity basis. The justification for the respondent’s claim to indemnity costs is said to reside in the applicant’s failure to accept Calderbank offers made by the respondent on 28 June 2019 and 18 July 2019 and that documents and information provided to the applicant by the respondent prior to 5 July 2019 should have satisfied the applicant that the respondent does not infringe either patent.

16    It follows from what I have already said that I do not propose to determine who should pay the costs of the preliminary discovery proceeding, or on what basis such costs should be paid at this time.

17    If the Judge hearing the substantive proceeding is persuaded that either the preliminary discovery or the substantive proceedings were bound to fail, or that it was otherwise unreasonable for the applicant to commence or maintain this proceeding or the substantive proceeding, either at all, or from some particular point in time, then it will be open for him or her to make an award of costs on an indemnity basis.

18    Orders accordingly.

Associate:

Dated:    18 November 2019