Federal Court of Australia

Mickala Mining Maintenance Pty Ltd v Southern Cross Mining Services Pty Ltd [2020] FCA 1635

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be refused.

2.    The applicant pay the respondent’s costs of and incidental to the application.

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

REASONS FOR JUDGMENT

BESANKO J:

Introduction

1    On 27 July 2020, a judge of this Court made an order that an application by Mickala Mining Maintenance Pty Ltd (Mickala Mining) for leave to amend its statement of cross-claim in support of the Notice of cross-claim be refused as to the proposed amendments to paragraphs 5(a)(vii) and 5(d) of the statement of cross-claim. Mickala Mining seeks leave to appeal from this order insofar as it relates to paragraph 5(d) of the statement of cross-claim. Southern Cross Mining Services Pty Ltd (Southern Cross Mining) opposes the grant of leave to appeal.

2    Southern Cross Mining is the registered proprietor of Australian Innovation Patent No 2013100095 (the 095 Patent). In this proceeding, Southern Cross Mining brings a claim for infringement of claims in the 095 Patent against Mickala Mining and Mr Damien Englebrecht. Southern Cross Mining alleges that Mr Englebrecht is Mickala Mining’s sole shareholder, sole director and secretary, and guiding mind. Mickala Mining defends the claim of infringement and, in addition, has brought a cross-claim in which it seeks an order for the revocation of the 095 Patent relying on s 138(3)(b) of the Patents Act 1990 (Cth) (the Act). That paragraph provides that the Court may order the revocation of a patent if the invention is not a patentable invention. Section 18(1A) of the Act describes the circumstances in which an invention is a patentable invention so far as claimed in any claim for the purposes of an innovation patent. Mickala Mining’s cross-claim raises a number of grounds in support of its contention that the invention is not a patentable invention and they include a lack of novelty, a lack of inventive step and secret use.

3    Section 18(1A) of the Act provides as follows:

Subject to subsections (2) and (3), an invention is a patentable invention for the purposes of an innovation patent if the invention, so far as claimed in any claim:

…

(d)    was not secretly used in the patent area before the priority date of that claim by, or on behalf of, or with the authority of, the patentee or nominated person or the patentee’s or nominated person’s predecessor entitled to the invention.

This is the relevant ground for the purposes of the application for leave to appeal. The aspect of the proposed amendments which is relevant is the provision of further details concerning the claim that the pleaded invention was “used in secret”, being the plea in paragraph 5(d) of the statement of cross-claim.

4    The proposed amendment to paragraph 5(d) of the statement of cross-claim is as follows:

Secret Use

(d)    Further or in the alternative to the allegation that the alleged invention was not novel by reason of the matters particularised in paragraph (a)(i) above, Tthe alleged invention, insofar as is claimed in Claims 1 to 5 of the 095 Patent, is not a patentable invention within the meaning of s 18(1A)(d) of the Patents Act 1990 (Cth) because it was used in secret by the Cross-respondent in Australia before the priority dates of each of Claims 1 to 5 for the reasons that:

(i)    the Cross-respondent caused the advertisement that appears on pages 2 to 3 of the Summer 2011-12 volume of the Australasian Mine Safety Journal to be published in Australia on or before 8 January 2012; and

(ii)    by placing the advertisement the Cross-respondent’s object was to bring about a sale of one or more lighting towers made in accordance with the alleged invention.

5    The following important points about this plea should be noted:

(1)    The plea is based on the specified advertisement published in Australia on or before 8 January 2012 and it is pleaded that Southern Cross Mining’s object in publishing the advertisement was to bring about a sale of one or more lighting towers made in accordance with the alleged invention;

(2)    The 095 Patent claims an earliest priority date of 30 January 2013;

(3)    Mikala Mining also alleges that the advertisement is an anticipation (paragraph 5(a)(i)) and the plea of secret use is an alternative argument in the event that the essential integers (or some of them) of the invention were not publicly disclosed;

(4)    There is no express plea in paragraph 5(d) to the effect that:

(a)    the concealment of the essential features of the process or product before the priority date was a deliberate concealment;

(b)    the advertisement itself was the commercial benefit or that it resulted in actual sales by Southern Cross Mining.

The significance of these two matters will become apparent.

6    It is convenient to note at this stage that at one point in the proceedings before the primary judge, Mickala Mining proposed to introduce a further plea of secret use by a paragraph 5(e) which was as follows:

(e)    Further to the matters in (d), the alleged invention was used in secret by the Cross-respondent in Australia before the priority dates of each of Claims 1 to 5 by it:

(i)    causing lighting towers to be made in accordance with the alleged invention at dates unknown to the Cross-respondent but prior to 30 January 2012; and

(ii)    stockpiling those lighting towers for the purpose of sale at dates unknown to the Cross-respondent but prior to 30 January 2012.

As to the requirements of Rule 34.46 of the Federal Court Rules 2011 (Cth), the Respondents are not aware of whether the lighting towers in question remain in existence and cannot at this time particularise where or whether they can be inspected.

Mickala Mining did not pursue its application to amend the statement of cross-claim to add paragraph 5(e) before the primary judge. There was an attempt by Mickala Mining to revive it in the early stages of the application for leave to appeal, but ultimately Mikala Mining made it clear that it was abandoned.

The Application for Leave

7    The test on an application for leave to appeal is well-known. It is whether the decision of the primary judge is attended with sufficient doubt to warrant it being reconsidered and whether substantial injustice would result if leave were refused, supposing the decision at first instance to be wrong (Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398–399). Furthermore, the Court will exercise particular caution in reviewing decisions pertaining to matters of practice and procedure (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 177 per Gibbs CJ, Aickin, Wilson and Brennan JJ). Southern Cross Mining submits that a decision about whether amendments to a pleading are allowed is a matter of practice and procedure and in considering whether leave to appeal should be granted, I should take into account the fact that the Full Court will be reluctant to interfere with the primary judge’s exercise of his discretion not to allow the amendment. Those propositions are well-established by the authorities. However, by way of a counter-balance to these considerations, I also take into account the circumstances that in this case: (1) the refusal of the amendment means that Mickala Mining will be unable to raise a matter (i.e., secret use) which would be a complete answer to Southern Cross Mining’s claim; and (2) in terms of the matters which are relevant to whether leave to amend is granted (see Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175; Roberts-Smith v Fairfax Media Publications Pty Limited (No 5) [2020] FCA 1067), the key matters which determined the issue which, although in one sense may be described as a lack of particulars in paragraph 5(d), raised, having regard to the way the matters were argued, questions of law. First, there is a question as to whether it is necessary as a matter of law in a case where the issue is whether the invention was secretly used before the priority date to show that the concealment was a deliberate act by the patentee. Deliberate concealment is not pleaded by Mickala Mining. Secondly, there is a question as to whether, it being accepted by Mickala Mining that there is no secret use by the patentee unless the patentee derives a commercial benefit from the secret use, the publication of an advertisement is of itself a sufficient commercial benefit, or it is at least arguably so. I will refer to the first matter as a requirement of deliberate concealment and the second matter as a requirement of commercial benefit.

8    After reviewing the authorities, his Honour held that there were four matters to be established before a claim for the revocation of a patent on the ground that the invention as claimed is held as not being a patentable invention within s 18(1A)(d) of the Act. His Honour said (at [103]):

Thus as to a claim for revocation of a patent on the ground that the invention, as claimed, is not a patentable invention having regard to s 18(1A)(d), it seems clear enough that (a) there must be a “use” of the invention in the sense that the patentee has derived a commercial benefit by doing something with the invention (process or product) that produces the benefit; (b) that something, must engage use of the invention “as claimed” in the sense that the process or product used so as to produce a benefit must engage each of the essential features (or in later terms, integers as filed) of the invention; (c) the use of the invention as claimed in these senses, must engage deriving a commercial benefit from what was done before the priority date as an exercise of a de facto monopoly arising out of or “owing to” the patentee’s conduct of concealing the essential features of the process or product before the priority date; and (d) the concealment must be an act of deliberate concealment. Those elements at (c) and (d), having regard to the authorities mentioned and the approach to statutory construction, are to be found within the statutory language “not secretly used” in the context of the explanation of the historical origin of the secret use ground which now finds expression in the Act in s 18(1)(d) and s 18(1A)(d) and the accepted approach to the attribution of meaning to statutory text.

(Southern Cross Mining Services Pty Ltd v Mickala Mining Maintenance Pty Ltd [2020] FCA 1064.)

9    The grounds of appeal in Mickala Mining’s draft Notice of appeal are as follows:

1.    The learned primary judge erred in holding that advertising a patented product for sale before the patent'’ priority date is not ‘use’ for the purposes of s 18(1A)(d) of the Patents Act 1990 (Cth) (PA).

2.    The learned primary judge erred in holding that secret use in s 18(1A)(d) of the PA requires an act of subjective deliberate concealment by the patentee.

3.    The learned primary judge erred in holding that secret use in s 18(1A)(d) of the PA requires a particular commercial benefit to have been obtained by the patentee owing to his or her concealment of the alleged invention before the priority date.

4.    In the alternative to paragraph 3, the learned primary judge erred in finding that advertising a patented product for sale does not constitute a commercial benefit for the patentee.

5.    By reason of the errors of principle in paragraphs 1, 2, 3 and/or 4 above, the learned primary judge erred in refusing leave for the appellant to amend its Statement of Cross­claim as set out in paragraph 5(d) of annexure AJC-12 to the affidavit of Anthony Conaghan dated 21 February 2020 (Conaghan Affidavit).

6.    Further, this Full Court ought to follow the dissenting minority decision in Azuko Pty Ltd and Another v Old Digger Ply Ltd (2001) 52 IPR 75; [2001] FCA 1079 at [103]-[146] (particularly [144]-[145]) in preference to the majority decision at [72] and [166]-[186] (particularly [183]), so as to allow leave to the appellant to amend its Statement of Cross-claim as set out in paragraph 5(e) of annexure AJC-12 to the Conaghan Affidavit to allege secret use by the patentee by way of causing the patented product to be manufactured and stockpiled for the purposes of sale before the priority date.

10    Proposed Ground 1 was described by counsel for Mickala Mining as an umbrella ground and Proposed Ground 5 is a conclusion said to follow from earlier grounds. Proposed Ground 6 relates to paragraph 5(e) and is no longer relevant. Proposed Grounds 2, 3 and 4 are at the heart of the matter.

Deliberate Concealment

11    As I have said, there is no plea of deliberate concealment. Mickala Mining’s case is that such a plea is not necessary because deliberate concealment is not an essential element of a successful plea of secret use within s 18(1A)(d) of the Act. As I have said, his Honour held otherwise and this holding was a ground upon which the application to amend should be refused.

12    It should be noted that his Honour, in refusing the application to amend, did not rely on other matters commonly raised on applications for leave to amend such as delay, the adequacy of the explanation for the amendment coming forward at the time it is advanced and general prejudice to the opposing party.

13    The leading case on whether deliberate concealment is a necessary element of secret use is the English case of Bristol-Myers Co v Beecham Group Ltd [1974] AC 646 (Bristol-Myers) in which, by a majority of three to two, the House of Lords held that, in the absence of deliberate concealment by the prior user, the prior use was not a secret use and, therefore, that prior use was taken into account and led to successful opposition proceedings under s 14 of the Patents Act 1949 (UK). The leading speech was delivered by Lord Diplock with whom Lord Kilbrandon agreed and Lord Cross agreeing with the result, albeit on different grounds (688H–689A), Lords Reid and Morris dissented holding that deliberate concealment was not a necessary element of a secret use. Lord Diplock said (at 685D–F and 686B–C):

My Lords, in its ordinary connotation, particularly as descriptive of actions, I agree with the Court of Appeal and the Shorter Oxford Dictionary (1933), vol. 2, p. 1826, that “secret” means: “Done with the intention of being concealed; clandestine”. To ascribe to it a meaning wide enough to include actions done “unwittingly,” a state of mind which is incompatible with any intention to conceal is, in my view, a misuse of the adjective “secret” or, as Edmund Davies L.J. points out in his judgment, even more so of the adverb “secretly” which is the form in which it would have to be read into section 14 (l) (d) where it would qualify the verb “was used”. To sell something to the public unconditionally and thereby to put it out of one’s power to stop them finding out anything that can be found out about it is, in my view, the very opposite of “secret” use of the thing that is sold.

…

So neither in the terms of sections 14 and 32 nor in the policy of the Act is there anything that requires one to give to “secret use” a meaning other than its primary one of a use which is intentionally concealed by the user. I, therefore, agree with the Court of Appeal that the sale of ampicillin trihydrate by Beechams was not a secret use. They did not know the chemical composition of what it was that they were selling. They could not have formed any intention of concealing something they did not know. I would dismiss this appeal.

14    Lord Reid said (at 665D–F):

The other matter is the meaning of “secret” in the Act. I agree that it must have the same meaning in each section when the word is used. But I cannot agree that it means “deliberately concealed”. No doubt that is the normal meaning of the word, but I think that in such a phrase as “the secrets of nature” it merely means something undiscovered without any implication of deliberate concealment. So one is entitled to ask whether giving to the word its most usual meaning leads to an unreasonable result which would be avoided by taking the less usual meaning

I think that here the result would be unreasonable. I can see nothing in the Act or its apparent policy to justify what seems to me to be a strange result: If one man, he who makes the concealment, alone knows the truth it is secret, but if no one at all knows the truth it is not secret.

15    This aspect of Bristol-Myers was followed by Jenkinson J in Melbourne v Terry Fluid Controls Pty Ltd (1993) 26 IPR 292 and is said in a leading Australian text to represent the law in this country (Bodkin C, Patent Law in Australia, 3rd ed, Lawbook Co, 2019 at pp 238–239).

16    The primary judge analysed the authorities carefully and he made the point at the outset that “the authorities are not as clear on the topic as they might be” (at [83]). He concluded that deliberate concealment is a necessary element of secret use.

17    There is no Australian appellate authority addressing the point and that is a matter of significance. In my opinion, the point is capable of reasonable argument on either side. Had this been the only issue on the application for leave to appeal, I would have been disposed to grant leave to appeal.

Commercial Benefit

18    In Bristol-Myers, Lord Diplock said (at 680H–681B):

… For the other mischief against which that Statute was directed was that even monopolies of new manufactures should not extend beyond 14 years. If the inventor had already reaped commercial benefit from a de facto monopoly in his discovery owing to his concealment from all other traders of the way in which the new substance could be made, he was not to be permitted to prolong his monopoly for an additional 14 years. So “public use” in the sense of commercial dealing in a product claimed as an invention, by any trader even though it were by the inventor himself, rendered invalid any patent for the product claimed.

19    The notion of the inventor reaping a commercial benefit was considered by the Full Court of this Court in Azuko Pty Ltd v Old Digger Pty Ltd (formerly SDS Digger Tools Pty Ltd) [2001] FCA 1079; (2001) 52 IPR 75 (Azuko). In that case, Gyles J (with whom Beaumont J at [72] agreed on this point) held that the making of the accused articles in that case was not “use” of the invention for relevant purposes. His Honour referred to Morgan v Seaward (1837) 2 M & W 544; 150 ER 874 at M & W 559 and ER 880 per Parke B, and Bristol-Myers at 680–681 per Lord Diplock and said that Lord Diplock’s observations suggested a practical test for secret use of asking whether what has occurred amounted to “a de facto extension of a patent term?”. Gyles J went on to say (at [181]):

… The answer to this will usually depend upon whether the patentee reaped commercial benefit from what was done before the priority date. In the present case, in my opinion, there has been no de facto extension of the term of the patent by making the articles in question.

20    His Honour said that although the making of an article for ultimate sale had a commercial aspect, it did not amount to the use of the product made and did not involve any de facto extension of the term of a patent claiming the product. He held that the manufacturing of goods was not a commercial use of those goods (at [183]).

21    As I understand it, Mickala Mining does not dispute that the obtaining of a commercial benefit in the sense described in Azuko is a necessary element of a plea of secret use. Its case is that paragraph 5(d) is a sufficient plea of this element. This submission was put to the primary judge, but his Honour had great difficulty in accepting it. I have the same difficulty. The key to his Honour’s conclusion is the following observations (at [109]):

… If the limit of the proven fact at trial (as pleaded) is that the patentee placed the advertisement in the AMSJ a year before the priority date with the object of bringing about a sale of one or more lighting towers, those facts alone will not make good “use of the invention” in the sense that the authorities require, because placing the advertisement coupled with the pleaded object does not give rise to a commercial advantage derived by the patentee in the period before the priority date according to those authorities.

I agree with those observations and that the difficulties cannot be overcome by asserting that an advertisement placed with the object of achieving a sale is “logically the same thing” as a sale. As the primary judge said, this is simply not the case (at [110]–[112]).

22    I also agree with the primary judge that if the case is in reality that sales were achieved, or were achieved earlier than would otherwise have been the case, then that needed to be pleaded. His Honour said (at [114]–[116]):

… The case for commercial benefit is put orally by Mickala on the footing that Southern Cross was able to make sales after the priority date (because it does not seem to be suggested that Southern Cross made sales before the priority date) sooner than it would have made those sales, had the advertisements been placed on or after the priority date.

That conception of the commercial benefit is not pleaded.

The proposed amended pleading ought to identify, with precision, the commercial benefit said to have been obtained by Southern Cross, before the priority date, as an exercise of a de facto monopoly in the product. If it is to be said, as a matter of commercial benefit, that Southern Cross made sales by accepting offers to purchase one or more lighting towers in the period between 8 January 2012 and 30 January 2013, notwithstanding that supply of the product may have occurred after 30 January 2013, that matter needs to be pleaded.

23    His Honour, in fact, referred to the possibility of Mickala Mining bringing forward a reformulated pleading, but it has chosen not to do so.

24    In my opinion, the absence of a viable plea of a commercial benefit was and is fatal to the application to amend.

Conclusions

25    In summary, an application to amend involves a discretionary decision by the judge having regard to a number of factors. Those factors are identified in the cases referred to above (at [7]). One of the relevant factors is whether the matters raised by the amendments are arguable. That is the factor that the primary judge focused on in this case.

26    The primary judge noted that there was no plea of deliberate concealment and held that deliberate concealment was an essential element of a case of secret use within s 18(1A)(d) of the Act. Whilst the primary judge may or may not be right about that, in my opinion, for the reasons I have given, if this was the only point there is sufficient doubt about it to warrant a grant of leave to appeal. However, that does not lead to a grant of leave to appeal in this case because there is a freestanding ground which made and makes refusal of leave to amend inevitable. In my opinion, there is no doubt, or no sufficient doubt, about the correctness of his Honour’s conclusion that the proposed amendment does not contain a viable plea of commercial benefit within the authorities. In those circumstances, it is not necessary to consider the second limb of the test for leave to appeal.

27    Leave to appeal should be refused with costs.

Associate:    

Dated:    12 November 2020