FEDERAL COURT OF AUSTRALIA

BlueScope Steel Limited v Dongkuk Steel Mill Co., Ltd (No 3) [2020] FCA 113

ORDERS

THE COURT ORDERS THAT:

1.    Each of claims 1, 3, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14, and 15 of Australian Patent number 2009225257 titled “Metal-coated steel strip” (257 Patent) is and at all material times has been invalid.

2.    Each of claims 12, 22, 23, 24 and 25 of Australian Patent number 2009225258 titled “Metal-coated steel strip” (258 Patent) is and at all material times has been invalid.

3.    It be certified that the validity of each of claims 1, 2, 5, 6, 11, 17, 18, 19, 20 and 21 of the 258 Patent was questioned in this proceeding.

4.    Each of claims 1, 3, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14 and 15 of the 257 Patent be revoked.

5.    Each of claims 12, 22, 23, 24 and 25 of the 258 Patent be revoked.

6.    The claim and the cross-claim otherwise be dismissed.

7.    The interlocutory application filed on 13 April 2017 seeking leave to amend the 257 Patent (Amendment Application) be dismissed.

8.    Any application by the Applicant/Cross-Respondent for leave to appeal against Order 7 be heard and determined by a Full Court concurrently with, or immediately before, the hearing of any appeal.

9.    Orders 4 and 5 be stayed:

(a)    initially for a period of 28 days from the date on which these orders are pronounced; and

(b)    if any appeal is lodged within that period, until the determination of that appeal and any further appeal therefrom, or further order.

10.    Subject to Order 11 below, the Applicant pay two-thirds of the Respondent’s costs of and incidental to the proceeding including the Amendment Application on a party-party basis.

11.    Order 10 does not displace any costs order previously made in the proceeding.

THE COURT NOTES THAT:

12.    The Applicant/ Cross-Respondent undertakes:

(a)    to prosecute any appeal expeditiously;

(b)    during the operation of the stay in Order 9, not to assert infringement of any of the claims referred to in Orders 4 and 5 against any third party; and

(c)    forthwith to provide a copy of these Orders to the Commissioner of Patents.

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

REASONS FOR JUDGMENT

BEACH J:

1    On 17 December 2019, I handed down my reasons for judgment in this matter explaining that the various asserted claims of BlueScope’s 257 Patent and 258 Patent were invalid and in any event that BlueScope had failed on its infringement case (BlueScope Steel Limited v Dongkuk Steel Mill Co., Ltd (No 2) [2019] FCA 2117). It is necessary to now make consequential orders including on the issue of costs on which the parties were in dispute.

2    Dongkuk submits that it is appropriate that BlueScope pay all of Dongkuk’s costs of the proceeding on a party/party basis. It says that this reflects the fact that Dongkuk was wholly successful in the proceeding in that BlueScope’s case that Dongkuk infringed numerous claims of the two patents in suit was rejected, a large number of those claims were found to be invalid and BlueScope’s amendment application was dismissed.

3    Dongkuk submits that this is not an appropriate case to discount its award of costs by reason that it was not successful in invalidating some of the asserted claims. It says that it only sought revocation of the claims asserted against it defensively, and in any event succeeded in invalidating 17 of the 26 asserted claims. In addition, it says that the majority of the time spent at trial was in respect of the issues on which it was successful and that some of the evidence that related to grounds of invalidity on which Dongkuk was unsuccessful overlapped with issues in respect of which it was successful. Furthermore, it says that it spent unnecessary costs in respect of 11 asserted claims which BlueScope abandoned at trial.

4    Alternatively, Dongkuk submits that if there is to be any discount, it should be modest to reflect the above matters. It submits that, subject to costs orders already made in the proceeding, it would be appropriate that BlueScope pay 95% of Dongkuk’s costs of the proceeding on a party/party basis. Further, it says that having regard to the difficulty and time associated with characterising, disentangling, and assessing costs on an issue by issue basis, a compendious costs order would be appropriate.

5    BlueScope agrees that a compendious costs order would be appropriate but says that Dongkuk should only have 50% of its party-party costs.

6    I have a broad and unfettered discretion in the award of costs. Moreover, I have a discretion to apportion costs, although I accept that I should not engage in undue analysis as to whether a successful party has been unsuccessful on particular issues in the context of its predominant success in the controversy overall.

7    Let me elaborate on some of the background.

8    BlueScope sued Dongkuk for infringement of numerous claims of the 257 Patent and the 258 Patent. Of the 12 claims of the 257 Patent asserted at trial against Dongkuk, BlueScope failed to establish that any of these claims were infringed or valid. BlueScope also failed in its interlocutory application to be allowed to amend the 257 Patent.

9    Of the 5 claims of the 258 Patent that were asserted at trial against Dongkuk, BlueScope failed to establish that any of the asserted claims were infringed. It also failed to maintain that claims 12, 22, 23, 24 and 25 of the 258 Patent were valid.

10    Further, Dongkuk spent unnecessary costs in respect of 11 asserted claims which BlueScope abandoned at trial.

11    In respect of the asserted claims that Dongkuk succeeded in invalidating, it did so on the basis that BlueScope had failed to disclose the best method at the filing date. Dongkuk also sought to invalidate the asserted claims of the patents on the grounds of: (a) clarity and lack of definition; (b) fair basis; (c) sufficiency; (d) false suggestion; (e) novelty; and (f) inventive step.

12    Now I accept that grounds (a) to (d) involved matters of construction and submission such that lesser additional costs were expended by the parties beyond those which already had to be incurred in construing the patents for the purpose of the infringement case. Further, in respect of grounds (e) and (f), there was an overlap in respect of at least some of the issues and evidence with best method (and amendment) and infringement.

13    The evidence and issues in respect of novelty and inventive step overlapped, at least to some extent, with those in respect of best method and the amendment application, for example, the metallurgy of galvalume coatings as at the priority date of the patents, production of hot dip coatings generally, and methods adopted for minimising thickness variations in production. There was also an overlap with issues of infringement and validity.

14    Further, in comparison to other issues in the proceeding, the time afforded to cross-examination on the issues of novelty and inventive step was confined. This hot tub took one day, and there was some additional time for cross-examination about whether the prior art would have been ascertained. In comparison, the hot tub on infringement of the patents ran over about 2.5 days, with additional time for another lay witness. The remainder of the hearing time, which ran for in total about 10 days including 3.5 days for opening and closing submissions, was directed at issues such as amendment and best method, including cross-examination.

15    In my view, there should be an appropriate discount on the costs to be awarded to Dongkuk to reflect the fact that Dongkuk’s challenge to the validity of the patents in suit succeeded only on the issue of failure to disclose the best method, and Dongkuk’s challenge on the other asserted grounds of invalidity, being novelty, inventive step, clarity, fair basis, sufficiency and false suggestion, was unsuccessful. Further, I note that in relation to the 258 Patent, only five dependent claims adding limitations relating to controlling thickness variation were found to be invalid. BlueScope succeeded in defending the validity of the substantive claims, including each of the key independent claims.

16    The Full Court in Les Laboratories Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [300] per Bennett, Besanko and Beach JJ recognised that in patent cases:

The practice has developed that where a party relies on grounds that are not established and where time has been expended and costs incurred as a consequence, that party, although it may ultimately be successful, might not recover all of its costs.

17    Servier involved an application for revocation of a patent on a number of grounds, but the best method ground was the only successful ground. An application to amend the patent in suit was refused. The Full Court determined that Apotex should recoup 40% of its costs of the revocation action and 75% of its costs of the amendment application.

18    It seems to me that given the plethora of issues that are usually raised in patent litigation, costs apportionment reflecting each party’s relative success and failure on the issues litigated should be the norm rather than the exception. Such an approach is firm but fair. Moreover, if parties know in advance that a judge is likely to take such an approach at the end of what is usually protracted and complex litigation, that prospect may have a salutary disciplinary effect on the use and allocation of the parties’ limited resources and judicial time. Of course, I accept that in this field I am not dealing with the usual problem of feral litigators. But it is to say that the judicious use of an economic tool such as costs apportionment is not out of place in the patent field where parties should be incentivised to run only their strong points, particularly once all the evidence is in.

19    As I have said, in the present case an apportionment is warranted. Of course the question of apportionment is a matter of discretion and generally does not lend itself to mathematical precision. But the following may be noted.

20    First, in my view the affidavit material required to be prepared in relation to the various issues in the proceeding is reflective in a rough way of the costs to the parties of addressing each issue. BlueScope’s analysis shows that 53% of the affidavit material addressed the validity issues on which BlueScope was successful.

21    Second, the length of the joint expert reports that were produced by experts in conclave is some, albeit limited, reflection of the relative complexity and time required to address the issues in the proceeding. BlueScope’s analysis shows that 76% of these reports addressed the validity issues on which BlueScope was successful.

22    Third, my reasons for judgment is a further possible indication of the time taken by and significance of various issues in the proceeding, BlueScope’s analysis shows that 32% of my reasons addressed the validity issues on which BlueScope was successful.

23    Fourth, on any view, considerable effort was expended in addressing Dongkuk’s challenge to novelty and inventive step. But I found that Dongkuk’s novelty case was reliant upon inferences I was invited to draw based on two erroneous assumptions. Further, in relation to inventive step, Dongkuk’s case was focused principally on Mr Rommal’s evidence, which I found inappropriately took into account the idiosyncratic knowledge he had acquired whilst working on Project Four Star. I also found that one of the two prior art documents relied upon under s 7(3) of the Patents Act 1990 (Cth) would not have been ascertained by a person skilled in the art.

24    Further, much of the evidence relied upon by Dongkuk in relation to these asserted grounds of invalidity was not necessary for the purpose of its best method challenge. These aspects of the case occupied considerable resources of the parties and, in the result, BlueScope was successful on these grounds.

25    In my view, having regard to the factors and relativities identified above, and reflecting Dongkuk’s overall success in the proceeding, and that BlueScope will also bear its own costs in relation to the issues on which it succeeded, the appropriate costs order is that BlueScope pay two-thirds of Dongkuk’s costs of and incidental to the proceeding.

Associate:

Dated:    11 February 2020