FEDERAL COURT OF AUSTRALIA

Liberation Developments Pty Ltd v Lomax Group Pty Ltd [2019] FCA 2059

ORDERS

THE COURT ORDERS THAT:

1.    Subject to Orders 2 to 6, the applicants pay the costs of the respondents of and incidental to the amended originating application related to proceedings for relief against all respondents for contended infringement of, or authorisation of infringement of, Australian Innovation Patent 20133100057 (the “Patent proceeding”) including reserved costs of and incidental to any question arising in connection with the Patent proceeding.

2.    The respondents as cross-claimants pay the costs of the applicants as cross-respondents of and incidental to those aspects of the cross-claim related to relief on the ground of unjustified threats of patent infringement and relief on the ground of conduct said to be in contravention of the Australian Consumer Law including reserved costs of and incidental to any question arising in connection with either or both of those grounds of the cross-claim.

3.    The respondents as cross-claimants pay the costs of the applicants of and incidental to the cross-claim for invalidity of the patent in suit on the ground of lack of novelty.

4.    The respondents as cross-claimants pay the costs of the applicants of and incidental to the interlocutory application by the cross-claimants for leave to rely on a lack of fair basis as aground of invalidity of the patent in suit.

5.    There be no order as to the costs of and incidental to the cross-claim for revocation of the patent in suit on the ground of lack of fair basis other than Order 4

6.    The applicants pay the costs of the respondents of and incidental to the first case management conference, the interlocutory application for an injunction pending suit on 28 March 2018 so far as that application related to the questions in issue in the Patent proceeding, and the costs of the return of subpoenas as those matters related predominantly to the questions in issue in the Patent proceeding.

7.    Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.

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

REASONS FOR JUDGMENT

GREENWOOD J:

1    These proceedings are concerned with the disposition of the reserved costs the subject of the orders made on 30 July 2019 when judgment was delivered in the principal proceeding, Liberation Developments Pty Ltd v Lomax Group Pty Ltd [2019] FCA 1180; (2019) 144 IPR 413 (the “principal judgment” or “PJ”). These reasons should be read in conjunction with the principal judgment.

2    In the principal judgment, the Court made orders that:

1.    That part of the originating application filed by the applicants related to proceedings for relief against all respondents for contended infringement or authorisation of infringement of Australian Innovation Patent 2013100057, is dismissed.

  2.    The cross-claim of the respondent cross-claimants is dismissed.

3.    The costs of and incidental to that part of the proceedings the subject of Order 1 are reserved for later determination.

4.    The costs of and incidental to the cross-claim are reserved for later determination.

5.    The parties are directed to file and serve submissions in relation to all questions of costs, within three weeks.

6.    The costs reserved by these orders will be determined on the papers unless a party wishes to be heard on any question of costs.

3    By the amended originating application filed on 6 April 2018, the applicants, “Liberation Developments” and “Titan Hoarding Systems” sought relief in relation to a number of causes of action. They sought a declaration that each of the respondents, “Lomax Group”, “Hoarding Ideas” and Mr and Mrs Lomax, had infringed claims 1, 2 and 4 of an Australian Innovation Patent (the “057 Patent”) and an injunction restraining particular conduct said to infringe the 057 Patent and related relief. The respondents contested each of the allegations made against them in the patent infringement case.

4    The applicants also sought relief in relation to contended copyright and trade mark infringements and relief arising out of contended contraventions by the respondents of ss 18 and 29 of the Australian Consumer Law (the “ACL”).

5    By a cross-claim filed on 20 April 2018, the respondents sought revocation of the 057 Patent on the ground that the claims were not fairly based and on the ground of lack of novelty. They sought cancellation of the trade marks of the applicants and damages for unjustified threats of patent infringement said to have been made by the applicants to “Mirvac”. They also sought relief on the ground that the statements made to Mirvac constituted contraventions of s 18 of the ACL.

6    On 8 May 2018, the respondents advised the applicants that the lack of novelty challenge would not be pressed.

7    On 30 May 2018, the Court made a number of orders by consent which resolved large parts of the case.

8    As to the trade mark claim, the respondents undertook to cease using logo works called the “Reverse Frame Trade Marks”. They consented to an injunction, operative from 20 July 2018, restraining them from using the marks. The parties consented to the dismissal of the relevant paragraphs of the amended application asserting a claim to relief on this ground (paras 3, 4, 5, 15 and 16), with no order as to costs. Paragraph 1 of the notice of cross-claim was also dismissed with no order as to costs.

9    As to the copyright claim, the respondents consented to a declaration as to infringement of particular works. They consented to an injunction restraining them from doing various acts exclusively vested in the copyright owner. They consented to delivery up of various things and the payment of damages of $10,000. They also consented to the payment of the applicants’ costs up to 11 May 2018 in relation to the copyright claims concerning paras 6, 7, 8, 17 and 18 of the amended application.

10    As to the claims based upon representations said to constitute contraventions of ss 18 and 29 of the ACL, the Court by consent declared that the Lomax Group and Hoarding Ideas had made representations in contravention of those sections of the ACL. The Court granted, by consent, an injunction restraining those respondents from making particular representations. The Court made orders for delivery up of particular things and ordered, by consent, all respondents to pay $5,000 damages. The Court ordered, by consent, the respondents to pay the applicant’s costs up to 11 May 2018 in relation to the relevant paragraphs of the amended application addressing these questions, that is, paras 9, 10 and 19. The Court also made an order for the payment by the respondents of interest.

11    On 4 June 2018, a case management hearing took place at which there was an application by the respondents for leave to adduce evidence on the “lack of fair basis” ground of challenge to the validity of the claims of the 057 Patent. Leave was granted and the costs of the application for leave were reserved.

12    The trial of the remaining aspects of the proceeding was heard from 11 to 13 June 2018 (inclusive). As the orders quoted at [2] of these reasons reveal, the claims of the applicants against all respondents for infringement of, or authorisation of infringement of, the 057 Patent were dismissed.

13    The cross-claim for revocation of the 057 Patent on the ground that the claims were not fairly based was only a question in issue in the event that the Court determined that the “Lomax Hoarding System” (with the “Lomax Support Post”), infringed a claim of the 057 Patent. Since that was found not to be so, the question on that part of the cross-claim did not arise: PJ [135]. The cross-claim relating to relief based on contentions of unjustified threats of patent infringement was pressed. That claim was dismissed: PJ [136] to [171]. The cross-claim of the respondents based upon contended contraventions of the ACL was also dismissed: PJ [172].

14    Both parties have filed written submissions on costs. Neither party wishes to be heard orally on the matter.

15    The applicants propose the following orders:

1.    the applicants pay 80% of the respondents’ costs in respect of that part of the originating application related to proceedings for relief against all respondents for contended infringement or authorisation of infringement of the Patent; and

2.    the respondents pay the applicants costs of the cross-claim.

16    The applicants say that the quantum of the costs to be awarded in favour of the respondents in successfully defending the infringement allegations should be reduced (by 20%) because the respondents “unnecessarily put in issue the question of whether the second and third respondents would have been liable for authorising patent infringement, had there been a finding of infringement made”. The applicants say that they were needlessly put to proof over authorisation and this involved a layer of cost that could have been avoided. A discount of 20% is said to be appropriate because 30 paragraphs of the submissions of the applicants concerned the “authorisation issue” and a significant body of evidence was called on the topic.

17    The applicants say that the involvement of Hoarding Ideas and Mrs Maria Lomax in the impugned conduct was a “discrete issue” in the proceedings in the sense contemplated in Hockey v Fairfax Publications Pty Ltd (No 2) (“Hockey”) [2015] FCA 750; (2015) 237 FCR 127 at [91]. The applicants say that it is, and was, plain that the conduct of those respondents would have constituted authorisation had there been a finding of infringement. This circumstance is said to provide a basis, consistent with principle (Dometic Australia Pty Ltd v Houghton Leisure Products Pty Ltd (No 2) (Dometic) [2019] FCA 57 at [40(c)]), for a discount which operates to deprive a successful party of the benefit of some of its costs having regard to the way in which it has conducted its case (Queensland North Australia Ltd v Takeovers Panel (No 2) (“QNAL”) [2015] FCAFC 128; (2015) 236 FCR 370 at [11]) especially having regard to the need for parties to “consider carefully” what they put in issue: Les Laboratoires Servier v Apotex Pty Ltd (“Apotex”) [2016] FCAFC 27; (2016) 247 FCR 61 at [301].

18    In Hockey, Mr Hockey alleged that each of the Sydney Morning Herald (the SMH), The Age and The Canberra Times had defamed him by articles (principally articles in both print and electronic format) and other material published on 5 May 2014. His claims in respect of those articles failed. Mr Hockey was successful as to a poster published by the SMH promoting its print edition and two tweets by The Age. His claims against The Canberra Times failed altogether. In the context of an entire loss on central subject matter and a loss entirely against one respondent, White J recognised that the exercise of the wide discretion arising under s 43 of the Federal Court of Australia Act 1976 (Cth) readily engaged a question of whether the costs order, as a matter of fairness, ought to take into account the particular and significant differential success of the applicant and whether the case involved “clearly discrete issues for determination”: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3] to [5], per Finkelstein and Gordon JJ; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296.

19    In Dometic, that company failed in a patent infringement claim against Houghton Leisure Products, and the respondent failed on an invalidity cross-claim. The primary judge regarded, as a “principal matter” bearing upon the exercise of the discretion as to costs, the circumstance that although Dometic failed in its claim against Houghton Leisure Products, its further claim that that company was an accessory to the conduct of another, Finch, would have succeeded had infringement been found against Finch. In the particular circumstances of that case, the primary judge considered that the discretion as to costs engaged that question as a separate consideration rather than turning on the outcome of the infringement question itself.

20    In QNAL, the Full Court said this at [11]:

These decisions [authorities on costs discussed at [9] and [10] of the Full Court’s reasons] treat the success or failure of the relevant party as being the starting point in consideration of the question of costs. However they contemplate at least three distinct categories of situation in which a successful party might be deprived of costs, or even ordered to pay the costs of the other side. One such category is where the applicant has been only partially successful in that it has not obtained all of the relief sought. The second category is where a party has succeeded in obtaining the relief sought, but has not succeeded on all bases (factual or legal) upon which it sought such relief. Of course, it is possible that a particular outcome will fall into both categories. A third category involves consideration of the successful party’s conduct of the case.

21    The third category discussed by the Full Court (the party’s conduct of the case) is a consideration also taken up by another Full Court in Apotex at [301] (among other matters relevant to costs). There, the Full Court recognised the relevance of a “discrete issue” and the presence in the proceeding of an “unmeritorious objection” as factors to be taken into account in deciding whether a generally successful party ought to be deprived of some of the costs of the proceeding. However, as to the principles in context, see the complete discussion at [293] to [306].

22    In the present case, the applicants asserted against Hoarding Ideas and Mrs Lomax, conduct constituting authorisation of infringement of the 057 Patent. The applicants could not make that case good because the primary infringement case failed. Nevertheless, the second and third respondents were entitled to answer the case made against them on all fronts by resisting both the infringement claim and the authorisation claim. The applicants say that as a matter of fairness to them on costs, the respondents ought not to have incurred costs in resisting the authorisation claim and nor should the respondents have put the applicants to the cost of proving the authorisation case. The measure of that fairness is said to be reflected in a discount of 20% of the costs otherwise payable by the applicants in having failed to prove its case on infringement of the 057 Patent.

23    However, the applicants brought proceedings asserting rights and remedies against the respondents for patent infringement. The authorisation case was bound up in the overall conduct allegations. The respondents were put to cost in seeking advice and conducting proceedings to answer the claims on all grounds advanced against them. The respondents were entitled to address the authorisation case and resist it.

24    I am not satisfied that any discount ought to be adopted. The applicants will be ordered to pay the costs of the respondents of and incidental to that part of the proceeding which was taken to trial as reflected in Order 1 of the orders quoted at [2] of these reasons.

25    The applicants say that, as to the cross-claim, costs should follow the event concerning the claim of unjustified threats and the ACL claim. As to the cross-claim on the ground of invalidity, the applicants say that the respondents ought to pay the costs of the applicants. That is said to follow for the “key reason” that the invalidity cross-claim was dismissed. The cross-claim which was dismissed was, of course, a cross-claim raising three matters: unjustified threats, an ACL claim and an invalidity claim on the ground of lack of fair basis. As mentioned earlier, the cross-claim for revocation of the 057 Patent on the ground that the relevant claims were not fairly based was a question which was only in issue in the event that the Court determined that the Lomax Hoarding System (with the Lomax Support Post) infringed the claims of the 057 Patent in suit. That question did not arise on the merits because it became unnecessary to determine the issue having regard to the failure on the part of the applicants to make good the infringement case. The cross-claim as to the other two matters was resolved either on the merits or, as to the ACL claim, on the ground that it was not seriously pressed by the cross-claiming respondents.

26    The applicants say that there were two aspects of the invalidity claim. The first aspect concerned an allegation by the cross-claimants of lack of novelty. The cross-claimants ultimately did not press the latter matter. I accept that the cross-claimants ought to pay the costs of the cross-respondents of and incidental to that aspect of the invalidity cross-claim. The second aspect of the claim concerned a lack of fair basis. The applicants say that although it was not necessary for the Court to determine that matter because the applicants failed on construction and infringement, that circumstance does not “change the fact that this aspect of the cross-claim was unsuccessful”. The difficulty with that proposition is that the cross-claim as to invalidity on the ground of lack of fair basis was not determined on the merits because the question never arose for determination.

27    The applicants also say that a certain body of costs were incurred in relation to the invalidity claim concerning the interlocutory application for leave to press the “lack of fair basis” ground. This was in circumstances where the cross-claimants had earlier informed the applicants (cross-respondents) that that ground was not to be pressed with the result that the applicants (cross-respondents) had assumed that the cross-claimants were not pressing their claims of patent invalidity.

28    I accept that the cross-claimants ought to pay the costs incurred by the applicants as cross-respondents of and incidental to the interlocutory application for leave to adduce the invalidity cross-claim on the ground of lack of fair basis.

29    I do not accept that the applicants as cross-respondents ought to have their costs of the invalidity cross-claim on the footing that the cross-claim at large was “dismissed”, in circumstances where the invalidity cross-claim was not determined on the merits. I accept that the invalidity cross-claim is to be treated as a separate matter. The proceeding was fundamentally concerned with construction of the claims, infringement and the question of unjustified threats.

30    As to the contentions of the respondents, apart from saying that the applicants should pay the respondents’ costs of and incidental to that part of the proceedings concerning contended infringement, or authorisation of infringement of the Patent, and the matters already addressed, the respondents say that the applicants should pay the costs reserved by orders of the Court on 9 March 2018, 28 March 2018, 31 May 2018, 5 June 2018 and 6 June 2018.

31    As to the costs of the infringement proceeding, the respondents say that costs should follow the event and they should accordingly have their costs with no discount. I have already addressed that matter. As to the cross-claim for revocation, the respondents say that this was purely defensive and is characterised as a “true alternative to the [respondents’] main argument”. No expert evidence was called with respect to it. Accordingly, the respondents say that these costs should be treated as parts of the infringement claim.

32    At [20] of their costs submissions, the respondents say that the applicants should pay the following reserved costs:

1.    The costs of the first case management hearing on 9 March 2018. This listing occurred before the cross-claim was filed.

2.    The costs of the application for interlocutory injunctive relief, dismissed on 28 March 2018. That application was concerned with both the trade mark causes of action and the patent infringement case. The costs of trade mark infringement case have been resolved as earlier mentioned. The respondents say that the patent aspects of the interlocutory application should follow the resolution of the infringement case (and in the view of the respondents the invalidity issues as questions integrated with the infringement case).

3.    The costs of the interlocutory hearing on 4 June 2018, which dealt with a number of pre-trial matters. The respondents say that the hearing concerned whether the respondents would be permitted to press their claim for invalidity for lack of fair basis and whether leave would be given to file a further affidavit. Leave was granted. The respondents say that neither issue was related to whether a threat of patent infringement had been made. Nevertheless, the primary question was whether the respondents should be permitted to press an otherwise abandoned invalidity claim so far as the fair basis claim was concerned. That application resulted in leave being granted but the costs of the applicants as cross-respondents in dealing with the leave application ought to be paid by the respondents as applicants for leave.

4.    The costs reserved at the returns of the subpoenas addressed to the parties’ experts on 31 May 2018 and 6 June 2018. These subpoenas were concerned with infringement issues.

33    The respondents accept that they should pay the applicants’ costs of the unjustified threats and ACL aspects of the cross-claim, but not insofar as that aspect of the cross-claim concerned an allegation that the Patent was infringed. The respondents say that the primary question for determination on the unjustified threats and ACL claims was that a threat had been made, as opposed to whether the Lomax Hoarding System infringed the patent. The respondents also say that the quantum of their costs should be paid on a lump sum basis.

34    The principles in relation to the exercise of the discretion as to costs are well known. Some aspects of those principles are discussed earlier in these reasons: see also Hells Angels Motorcycle Corporation (Australia) Pty Limited v Redbubble Limited [2019] FCA 1349 at [37] and [38] and the authorities quoted there.

35    As to the costs of the infringement claim, as already mentioned, costs should follow the event. The applicants were entirely unsuccessful in making good their claims. No discount is to apply. The respondents should have their costs of and incidental to the patent infringement proceeding including reserved costs related to any question arising in connection with the patent infringement proceeding and only that part of the proceeding as the costs of the other causes of action in issue were resolved along with the costs of those issues.

36    As to the cross-claim, the applicant cross-respondents should have their costs of answering the unjustified threats claim. Those costs should not be broken down into sub-issues. The cross-claimants failed to make good the case and the claims for relief on those grounds. The applicant/cross-respondents should also have their costs of the ACL cross-claim. The applicant cross-respondents should also have the costs incurred by them reserved during the proceedings to the extent of any question on which they were successful, that is, the unjustified threats ground and the ACL ground.

37    For the reasons earlier mentioned, there is to be no order as to costs on the cross-claim for revocation.

38    As to the costs reserved in the proceeding (apart from those reserved costs described at [35] of these reasons), the respondents should have their costs of the first case management hearing; the costs of the interlocutory injunction application on 28 March 2018 so far as that application related to any patent question; and the costs of the return of subpoenas on 31 May 2018 and 6 June 2018 since those matters fairly relate predominantly to the patent infringement case.

39    No lump sum costs order should be made as to any aspect of the matter. The quantum of the costs can more efficiently be determined in the absence of agreement, by officers of the Court undertaking an assessment of the costs who will be in a position to determine some questions of attribution of costs to issues.

40    There will be orders accordingly.

Associate:

Dated:    5 December 2019

SCHEDULE OF PARTIES