Federal Court of Australia
Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 6) [2020] FCA 1866
ORDERS
DATE OF ORDER: | 22 December 2020 |
THE COURT ORDERS THAT:
1. Leave be granted to file and serve a Second Further Amended Statement of Cross-Claim in the form advanced by the Cross-Claimant.
2. The matter be listed for the publication of reasons for interlocutory judgment on Monday, 11 January 2021.
3. The Cross-Claimant be granted leave to file and serve a Second Further Amended Statement of Cross-Claim by 23 December 2020, in the form signed by me and dated today’s date.
4. The First Respondent be granted leave to file and serve a Further Amended Defence by 23 December 2020, in the form signed by me and dated today’s date.
5. The First Respondent/Cross-Claimant pay any of the Applicant’s/Cross-Respondent’s costs thrown away by reason of the amendments in the Second Further Amended Statement of Cross-Claim and/or Further Amended Defence.
6. The Cross-Respondent be granted leave to file and serve any lay or expert evidence in answer to the Second Further Amended Statement of Cross-Claim by 19 February 2021.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
BESANKO J:
Introduction
1 These reasons address an application by the first respondent and cross-claimant in a proceeding in the Court for leave to file and serve a Further Amended Defence and a Second Further Amended Statement of Cross-Claim. On 22 December 2020, I granted such leave and said that I would deliver my reasons for doing so. These are my reasons.
2 In this proceeding, Vehicle Monitoring Systems Pty Limited (VMS) seeks relief against SARB Management Group Pty Ltd (t/a Database Consultants Australia) (SARB) and the City of Melbourne in connection with the infringement of claims in two patents it holds. Details of the claims and of the two patents are set out in Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 5) [2020] FCA 1243. The 110 Patent was granted on 13 March 2008 and the 924 Patent was granted on 4 February 2016. The PCT application, from which the patents claim priority, was filed on 9 May 2005. Each patent relates to methods, apparatus and systems for parking overstay detection and, in each patent, Mr Fraser Welch is named as the inventor.
3 SARB has brought a Cross-Claim against VMS in which it seeks orders revoking the patents on the ground that each patent is invalid. Various grounds of invalidity are raised by SARB, including insufficiency and lack of best method.
4 This proceeding was commenced on 14 February 2019. It is listed for trial commencing on 22 March 2021 with eight days set aside.
5 SARB’s interlocutory application for leave to amend its Defence and its Cross-Claim is supported by a “book” of documents. The Defence has been amended on one previous occasion and the Cross-Claim on two previous occasions. VMS opposes the application and has filed an affidavit of its solicitor, Mr Andreas Peter Piesiewicz, in support of its opposition. The City of Melbourne did not seek to be heard on the application.
6 VMS’s opposition to the application for leave is limited to an amendment to the Cross-Claim raising a plea of a lack of entitlement in VMS in relation to each patent. Otherwise, it does not oppose leave to make the amendments. It did point out that its costs thrown away will be substantial, especially as a result of the abandonment of reliance by SARB on three pieces of prior art.
Analysis
7 I examined the factors which are relevant to an application for leave to amend a pleading in Roberts-Smith v Fairfax Media Publications Pty Limited (No 5) [2020] FCA 1067 at [14]–[26]. I will not repeat what I said in that case.
8 Invariably, the significance of particular factors will depend on the circumstances of the case. Furthermore, in some cases, a particular factor will prove decisive on the facts. In other cases, a balancing of the relevant factors, none of which is decisive in itself, will determine the result.
9 Each party commendably concentrated on their main points and that meant that they focused attention on three matters. Those matters are as follows:
(1) The nature of the amendments and their importance to SARB as the cross-claimant;
(2) The prejudice to VMS as the cross-respondent if the amendments are allowed; and
(3) SARB’s explanation for seeking to bring forward the amendments at this stage of the proceeding.
The nature of the amendments and their importance to SARB
10 For present purposes, it is sufficient to set out the proposed lack of entitlement plea in relation to the 110 Patent. In terms of VMS’s submissions, the proposed lack of entitlement plea in relation to the 924 Patent is in similar terms. The proposed lack of entitlement plea in relation to the 110 Patent is in the following terms:
12 If, which the First Respondent denies, the claims of the First Patent are to a patentable invention, the patentee is not entitled to the First Patent because it does not derive title from Mr Peter Crowhurst who was the or alternatively an inventor of the First Patent and it is just and equitable to revoke the First Patent pursuant to s 138(3)(a) of the Act.
PARTICULARS
(a) The named inventor, Fraser John Welch, did not invent a method performed by a subterraneous detection apparatus for identifying overstay of a vehicle in a parking space comprising the steps of: detecting presence of a vehicle in the parking space; processing and storing data relating to presence of the vehicle in the parking space; determining whether the vehicle has overstayed a defined time duration in the parking space; and wirelessly transmitting data relating to identified instances of overstay of the vehicle in the parking space (the first claimed method), because Mr Welch did not develop a subterraneous detection apparatus which was capable of wirelessly transmitting data relating to identified instances of overstay of a vehicle in a parking space. The first claimed method was invented by Peter Crowhurst, who was not an employee of the patentee, and who did not assign the invention to the patentee.
(b) In the alternative, Peter Crowhurst is a co-inventor of the first claimed method.
(c) The named inventor, Fraser John Welch, did not invent a battery-powered apparatus for subterraneous installation for identifying overstay of a vehicle in a parking space comprising: a detector adapted to detect presence of a vehicle in the parking space; a processor coupled to the detector which is adapted to process and store data received from the detector and to determine whether the vehicle has overstayed a defined time duration in the parking space; a radio receiver coupled to the processor for receiving wake-up signals; and a radio transmitter coupled to the processor for transmitting data relating to identified instances of overstay of the vehicle in the parking space (the first claimed apparatus), because Mr Welch did not contribute the idea of a battery-powered apparatus with a radio receiver coupled to a processor for receiving wake-up signals and Mr Welch did not develop a radio transmitter which was capable of transmitting data relating to identified instances of overstay. The first claimed apparatus was invented by Peter Crowhurst, who was not an employee of the patentee, and who did not assign the invention to the patentee.
(d) In the alternative, Peter Crowhurst is a co-inventor of the first claimed apparatus.
(e) The named inventor, Fraser John Welch, did not invent a system for identifying overstay of vehicles in parking spaces comprising: (a) a plurality of battery-powered detection apparatuses for identifying overstay of vehicles in respective parking spaces when subterraneously installed; and (b) a data collection apparatus for wirelessly retrieving data from the plurality of battery-powered detection apparatuses comprising: a radio transmitter for transmitting wake-up signals to ones of the plurality of battery-powered detection apparatuses; a radio receiver for receiving data from woken-up ones of the plurality of battery-powered detection apparatuses; a memory unit for storing data and instructions to be performed by a processing unit; and a processing unit coupled to the radio transmitter, radio receiver and memory unit, the processing unit programmed to process the data received via the radio receiver and to indicate incidences of vehicle overstay to an operator, where the data relates to identified instances of vehicle overstay in a respective parking space (the first claimed system), because Mr Welch did not contribute the idea of a data collection apparatus comprising a radio transmitter for transmitting wake-up signals. The first claimed system was invented by Peter Crowhurst, who was not an employee of the patentee, and who did not assign the invention to the patentee.
(f) In the alternative Peter Crowhurst is a co-inventor of the first claimed system.
(g) The named inventor, Fraser John Welch, did not invent a method performed by a subterraneous detection apparatus for identifying overstay of a vehicle in a parking space, substantially as described in the First Patent with reference to an embodiment shown in the accompanying drawings (the second claimed method), because Mr Welch did not contribute the idea of a battery-powered apparatus with a radio receiver coupled to a processor for receiving wake-up signals and Mr Welch did not develop a radio transmitter which was capable of transmitting data relating to identified instances of overstay. The second claimed method was invented by Peter Crowhurst, who was not an employee of the patentee, and who did not assign the invention to the patentee.
(h) In the alternative Peter Crowhurst is a co-inventor of the second claimed method.
(i) The named inventor, Fraser John Welch, did not invent a battery-powered apparatus for subterraneous installation for identifying overstay of a vehicle in a parking space, said apparatus substantially as described in the First Patent with reference to an embodiment shown in the accompanying drawings (the second claimed apparatus) because Mr Welch did not contribute the idea of a battery-powered apparatus with a radio receiver coupled to a processor for receiving wake-up signals and Mr Welch did not develop a radio transmitter which was capable of transmitting data relating to identified instances of overstay. The second claimed apparatus was invented by Peter Crowhurst, who was not an employee of the patentee, and who did not assign the invention to the patentee.
(j) In the alternative Peter Crowhurst is a co-inventor of the second claimed apparatus.
(k) The named inventor, Fraser John Welch, did not invent a system for identifying overstay of vehicles in parking spaces, said system substantially as described in the First Patent with reference to an embodiment shown in the accompanying drawings (the second claimed system), because Mr Welch did not contribute the idea of a battery-powered apparatus with a radio receiver coupled to a processor for receiving wake-up signals and Mr Welch did not develop a radio transmitter which was capable of transmitting data relating to identified instances of overstay. The second claimed system was invented by Peter Crowhurst, who was not an employee of the patentee, and who did not assign the invention to the patentee.
(l) In the alternative Peter Crowhurst is a co-inventor of the second claimed system.
11 SARB submits that its proposed plea of a lack of entitlement in relation to each patent is plainly arguable in light of the evidence of Mr Peter Crowhurst and furthermore, that the issues of fact raised by the proposed plea are already raised by the existing plea of insufficiency.
12 Mr Crowhurst has received or been awarded certificates and degrees in the fields of electronic engineering, science (applied physics) and science (mathematics). He is a member of the Institute of Electrical and Electronic Engineers and he holds approximately 12 patents in electronic wireless communications associated with low power transponders and security access systems. He has substantial experience working in the field of radio frequency communications. The bulk of his work has been in the field of short range low power wireless communications.
13 Mr Crowhurst carried out work with Mr Welch in relation to a parking overstay detection system in approximately 2001. As I have said, Mr Welch is the inventor named in VMS’s two patents. Mr Crowhurst’s involvement with Mr Welch involved the performance of design or consulting services.
14 A subpoena was issued requiring Mr Crowhurst’s attendance at Court on 25 November 2020. He attended and was orally examined by SARB. The circumstances in which that came about are described later in these reasons (at [40]–[48]). A transcript of Mr Crowhurst’s oral examination was prepared. Mr Crowhurst also produced 11 documents and each of these documents was marked for identification.
15 In the proposed lack of entitlement plea, SARB alleges that Mr Crowhurst was the, or an, inventor of the invention described in each patent or a co-inventor of the invention. SARB submits that Mr Crowhurst’s evidence is “crucial” to the lack of entitlement plea.
16 SARB submits that Mr Crowhurst’s evidence is also relevant to its pleas of invalidity on the grounds of insufficiency and lack of best method. In other words, SARB submits that the work done by Mr Crowhurst shows that each specification does not describe the invention fully in that “it does not provide sufficient information to enable the person skilled in the relevant art to perform the alleged invention within each claim without new inventions or additions or prolonged study of matters presenting initial difficulty” by reason of one or more of the matters pleaded and the specification does not include “the best method known to the cross-respondent of performing the invention” by reason of one or more of the matters pleaded.
17 SARB submits that Mr Crowhurst gave evidence to the effect that Mr Welch was not able to produce a working embodiment of the claimed invention and Mr Crowhurst performed complex, detailed and innovative work to enable VMS to produce a working embodiment of the claimed invention. VMS’s failure to disclose sufficient information in the specifications related to this work, or the specific details of the working system in existence at the date of the filing of the patents, supports SARB’s existing grounds of invalidity. As I understand it, SARB’s argument is that Mr Crowhurst’s work involved inventive effort without which VMS could not make the invention work. That work is not described in the specifications. The precise extent to which the facts and issues relevant to the existing pleas of insufficiency and lack of best method and the facts and issues relevant to the proposed plea of a lack of entitlement overlap will only be made clear at trial. At this stage, it may be said that they appear to overlap and Mr Crowhurst’s evidence appears to be relevant to both.
18 VMS contends that leave to amend to raise the lack of entitlement plea should not be granted because the plea lacks proper particulars, Mr Crowhurst’s evidence lacks clarity as to the nature or extent of his contribution (if any) to the invention and the case on the facts before the Court is such a weak one that I should be satisfied that the Court would not revoke the patents.
19 Before addressing these arguments, the following matters, which are not in dispute, should be noted.
20 First, SARB has indicated to VMS that it will not seek to file any further evidence with respect to the proposed lack of entitlement plea other than parts of the transcript of the oral examination of Mr Crowhurst and certain documents produced by Mr Crowhurst.
21 Secondly, the issue of inventorship involves two inquiries. First, the court must determine the nature of the inventive concept of the patent in issue. That task raises an issue of construction of the patent specification. VMS cited two authorities in connection with how the issue of inventorship is determined by the court. The issue involves a two part inquiry and the starting point is to analyse the inventive concept of the patent applications. It is then necessary to analyse whether the alleged inventor or co-inventor made a contribution that had a material effect on the inventive concept (Kafataris v Davis [2016] FCAFC 134 at [62]). The determination of the issue of inventorship is not resolved by an assessment of quantitative contributions. Rather, an assessment must be made of the qualitative contributions to the invention. As the Full Court of this Court said in Polwood Pty Ltd v Foxworth Pty Ltd [2008] FCAFC 9; (2008) 165 FCR 527 (at [33]), the issue of what constitutes the invention is determined by reference to the patent specification, including the claims and in some cases evidence can assist. The Full Court went on to say:
… In some cases, the reduction of a concept to a working apparatus by a person may not be part of the invention, in other cases it may be. For example, the construction of an apparatus may involve no more than carrying out the instructions in the specification. This would not normally entitle that person to joint inventorship. On the other hand joint inventorship may arise where the invention is in the apparatus itself, or where the person constructing the apparatus contributed to a different or better working of it which is then described and claimed.
22 VMS submits that the proposed entitlement evidence does not provide clarity as to the nature or extent of Mr Crowhurst’s contribution to the invention and that SARB’s case in this regard is not apparent from either its proposed pleading of lack of entitlement or from the evidence.
23 VMS also points to the fact that there is no evidence before the Court that Mr Crowhurst raised the issue of entitlement before his oral examination, or that he would now dispute VMS’s ownership of the patents.
24 VMS points to a Share Subscription Agreement made on 23 December 2003 between VMS, Mr Welch, a company called Tencap Pty Ltd, Saxon John Hill and Mr Crowhurst and the fact that the Technology is defined in the agreement as:
… The parking restriction enforcement invention known as the Period Longer Detection System invented solely by Welch.
(Emphasis added.)
25 In addition, in a Confidential Disclosure Deed, which is a schedule to the Share Subscription Agreement, and executed by Tencap Pty Ltd and Mr Crowhurst, Mr Crowhurst agrees not to assert rights of any nature in respect of any of the Confidential Information. The definition of Confidential Information includes “all oral and written information relating to the Invention or any other intellectual property, technology, business or affairs of Tencap, VMS or Mr Welch, whether provided in tangible form, by electronic media, by visual display or orally, disclosed to the Recipient”.
26 In the attachment to the Confidential Disclosure Deed, there is a description of the system comprising the Invention, namely, the “Period Longer Detection System (PLDS) Invention”. The description is as follows:
The Period Longer Detection System (PLDS) is a replacement for the archaistic ‘chalking’ system upon which local governments in Australia (and elsewhere) rely to ascertain a motor vehicle’s compliance with a time limited parking restriction. PLDS is capable of determining the time duration to which a particular vehicle has remained in a specific parking location or bay by means of one or more sensor devices. The duration information relating to a plurality of parking locations are conveyed to a central location which may be fixed or mobile in nature. The received duration information is processed at the central location to determine whether one or more of the parked vehicles are in violation of an applicable time limit. Detected violations result in generation of an alert for purposes of enforcement.
27 VMS also relies on the fact that even if SARB establishes that Mr Crowhurst was the, or an, inventor, or a co-inventor, an order for revocation will not be made “unless the court is satisfied that, in all the circumstances, it is just and equitable to do so” (Patents Act 1990 (Cth) s 138(4)). Subsection 138(4) and s 22A were introduced into the Patents Act by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth). Section 22A provides that a patent is not invalid merely because the patent, or a share in the patent, was granted to a person who was not entitled to it, or the patent, or a share in the patent, was not granted to a person who was entitled to it. The relevant transitional provision means that ss 22A and 138 apply in their form as at the date on which the application for a revocation order is made (see AstraZeneca AB v Apotex Pty Ltd [2014] FCAFC 99; (2014) 226 FCR 324 at [182]֪–[184]). VMS submits that there are no particulars in support of SARB’s assertion that it would be just and equitable to revoke the patents and, furthermore, such an order would not be made in circumstances in which, on the facts, Mr Crowhurst has acknowledged Mr Welch to be the true and sole inventor of the invention.
28 I do not consider the proposed plea of a lack of entitlement to be inadequate. In each paragraph of the Particulars, the steps or aspects of the method, apparatus or system are identified and that step or aspect invented by Mr Crowhurst rather than Mr Welch is identified. It is true that there are no separate particulars directed to whether it would be just and equitable to revoke the patent even if a lack of entitlement is established, but that means that SARB will be restricted to such relevant matters as emerge from the evidence in the case.
29 The evidence of Mr Crowhurst’s acknowledgement of Mr Welch as the inventor of the invention appears to be substantial, but ultimately the issue is one of fact and law for determination at the trial.
30 In my opinion, the proposed lack of entitlement plea is arguable.
31 VMS submits that the fact that SARB has pleaded a number of other grounds of invalidity is a reason not to grant leave to make the amendment on the basis that it is less significant to refuse leave to amend where there are other grounds of invalidity which can be pursued. I am not able to make any assessment of the strength of the grounds of invalidity on this application. In my opinion, if this factor is relevant, it is of minimal significance.
Prejudice to VMS if the amendments are allowed
32 The next issue is the prejudice VMS will suffer if leave to raise the lack of entitlement plea is granted.
33 SARB submits that there will be no or little prejudice to VMS if the amendments are allowed in circumstances in which:
(1) SARB has advised VMS that it will not rely on any additional evidence other than the evidence of Mr Crowhurst identified in the correspondence from its solicitors dated 30 November 2020 and 9 December 2020 respectively;
(2) SARB will not object to VMS being given an opportunity to file further evidence and VMS should be able to do that before the commencement of the trial which is “still some months away”;
(3) Mr Welch has addressed the development of the parking overstay detection system in more recent times in an affidavit sworn on 13 December 2018 in action NSD 75 of 2018 which, in turn, annexes an affidavit sworn by Mr Welch on 14 April 2014 in action VID 318 of 2012;
(4) VMS has been on notice of SARB’s desire to explore the issue of inventorship since February 2020; and
(5) Any prejudice that VMS claims might arise as a result of SARB’s amendment is of its own making “as it arises from VMS’s failure to allow SARB’s solicitors to engage with Mr Crowhurst in a timely manner”.
34 VMS submits that it will suffer prejudice if the lack of entitlement plea is allowed and it relies on the following matters in the affidavit sworn by Mr Piesiewicz:
60. If SARB’s Lack of Entitlement Ground is allowed, I consider the following steps would be required:
(a) VMS would need to be [sic] consider whether to object to any parts of the transcript of Crowhurst’s examination or documents which SARB has indicated it will seek to tender;
(b) If leave were granted, VMS would need to consider whether to file any lay or expert evidence in respect of the Lack of Entitlement Ground, including but not limited to, evidence from Mr Fraser Welch and Mr Tony Spirovski;
(c) If leave were granted, VMS would also need to consider whether it will need to seek production or inspection of any documents relevant to the Lack of Entitlement Ground; and
(d) If VMS did file further evidence and/or seek further discovery, the parties would then need to consider how that might impact the pre-trial steps that are required, such as the joint expert meetings and the timetable for the final hearing itself.
35 Mr Piesiewicz also describes the pre-trial steps already underway and those that will be required in the future. VMS submits that it will incur substantial costs if leave to amend is granted and that it has already incurred substantial costs thrown away as a result of the way SARB has conducted its invalidity case. In this context, VMS refers to the removal of reliance on three prior art documents and the removal of a non-infringement defence.
36 SARB submits that the delay in it bringing forward the amendment is due to VMS insisting on Mr Crowhurst complying with his confidentiality obligations and that this is a factor in favour of allowing the amendment. The circumstances leading up to this application are dealt with in the next section of these reasons. For the reasons given in that section, I do not accept this submission.
37 In my opinion, an important matter in favour of granting leave to amend is the factual overlap between the existing pleas of insufficiency and lack of best method and the proposed plea of a lack of entitlement. Further, and relatedly, although VMS’s preparations for trial may not now proceed as it had planned and more work will be required, it has not asserted that it cannot be ready for trial if leave is granted to raise the plea of a lack of entitlement.
The explanation for the delay and the conduct of the parties
38 On the one hand, SARB submits that by reason of VMS’s own conduct, it was not possible for it to identify with precision the basis for the lack of entitlement ground and, therefore, to apply for leave to amend its pleadings until it was given the opportunity to examine Mr Crowhurst who attended the Court pursuant to a subpoena. On the other hand, VMS submits that SARB could have taken action earlier than it did and that its delay is a reason not to grant leave to amend.
39 A summary of the events leading up to the present application is as follows.
40 In January 2020, SARB became aware that Mr Crowhurst was able to provide information and contemporaneous documents relevant to the validity of the patents. SARB raised the issue with VMS in a letter dated 27 February 2020. SARB said:
5 An additional matter has come to our attention in the preparation of our client’s Cross-Claim. We consider that our client may have the right to claim that your client was not entitled to the grant of the First and Second Patent (as defined in the Statement of Claim).
6 In order to determine whether our client has a proper basis to make this claim, we require access to certain documents currently in the possession of Peter Crowhurst. These documents relate to Mr Crowhurst’s involvement in the development of the alleged invention the subject of the First and Second Patents (Documents).
7 We have requested that Mr Crowhurst provide us with copies of the Documents for our inspection. Mr Crowhurst has informed us that he [sic] unable to do so, as he is bound by the terms of a non-disclosure agreement between himself and your client (and/or a related entity of your client), with which we have not been provided, but which we are informed has no expiry date.
8 In the interest of the efficient conduct of the proceeding, and pursuant to the parties’ overarching obligations under section 37M of the Federal Court of Australia Act 1976 (Cth), we request that VMS consent to Mr Crowhurst providing the Documents to us. To the extent any of the Documents remain confidential, access to the Documents can be given pursuant to a confidentiality regime which limits access to external legal representatives only. We enclose a proposed confidentiality undertaking for your client’s consideration, which mirrors the terms of the confidentiality undertaking we have proposed above.
41 Thereafter, correspondence passed between the solicitors for the parties. I do not need to summarise that correspondence. On 13 March 2020, the solicitors for VMS wrote to the solicitors for SARB and said (inter alia):
Your letter dated 27 February 2020 states that the Documents (as defined in that letter) are requested in order to determine whether your client has a proper basis to bring a claim that our client was not entitled to the grant of the First and Second Patents. The letter further states that if, following a review of the Documents, your client determines that it has a proper basis to make an entitlement claim, it will seek to amend its cross-claim accordingly.
It is clear that the Documents (which have still not been identified with satisfactory precision) are sought for the purpose of enabling your client to formulate a case, rather than to aid a case that has been articulated on the pleadings. Seeking documents for the purpose of assisting your client to determine whether there may be facts on the basis of which a cross-claim can be brought is fishing and does not constitute a legitimate forensic purpose as required in relation to any subpoena issued pursuant to Division 24.2 of the Federal Court Rules 2011 (Cth) – see, for example, the Full Court’s decision in Christian v Société des Produits Nestlé SA and others (No 2) [2015] FCAFC 153 at [57] to [60].
42 On 17 March 2020, SARB issued a subpoena to produce documents directed to Mr Crowhurst and seeking the production of documents described as follows:
1 Documents, both hard copy and electronic, in the possession, power or control of Peter Crowhurst evidencing or recording his involvement in the development of the alleged inventions the subject of Australian Patent No. 2005243110 titled “Method, apparatus and system for parking overstay detection” and Australian Patent No. 2011204924 titled “Method, apparatus and system for parking overstay detection” (the Patents). Copies of the Patents are attached to this subpoena.
43 VMS replied by stating that it would apply to set aside the subpoena and it duly did so. For the purposes of the argument as to whether the subpoena should be set aside, SARB relied upon an affidavit of a solicitor at its solicitor’s firm, Mr Harrison Ottaway. Mr Ottaway said the following (inter alia):
5 On 24 January 2020, I had a telephone conference with Mr Crowhurst and Helen Macpherson, a partner at NRFA. During the telephone conference, Mr Crowhurst said words to the effect that:
(a) he had worked with Fraser Welch and Paul Rolfe to develop a parking overstay detection system;
(b) the purpose of the parking overstay detection system was to determine whether vehicles had overstayed parking limits and communicate this to parking enforcement officers;
(c) Mr Welch subsequently applied for a patent in respect of the parking overstay detection system he had worked with Mr Welch to develop;
(d) he was not named as an inventor on the patent application (and nor was Mr Rolfe);
(e) he believed that he should have been named as an inventor, based on his involvement in the development of the parking overstay detection system;
(f) he had not assigned his rights in the parking overstay detection system to Mr Welch or to the Applicant (or to anyone else); and
(g) he had contemporaneous documents including design notes recording his involvement in the development of the parking overstay detection system.
6 During the course of 17 February 2020, I recall that I spoke with Mr Crowhurst by telephone on approximately three occasions. During those telephone discussions, Mr Crowhurst said words to the effect that:
(a) he had collected contemporaneous design files, notes, invoices and other documents relating to his involvement in the development of the parking overstay detection system referred to in paragraph 5(a);
(b) he was concerned that some of the documents referred to in the preceding sub-paragraph might be subject to a non-disclosure agreement between him and the Applicant (or a related entity of the Applicant), which had no expiry date. As a result, he was not able to provide me with these documents; and
(c) he requested that SARB issue a subpoena to him in respect of the documents.
44 On 7 April 2020, a judge of this Court heard VMS’s application to set aside the subpoena and his Honour decided that the subpoena should be set aside (Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 3) [2020] FCA 471). In the course of his reasons, his Honour said the following:
11 The applicant submits that the subpoena should be set aside because it has been issued for an improper purpose. The documents sought do not have an apparent relevance to the issues raised in the pleadings and the cross-claimant’s purpose in seeking its issue was to enable it to engage in a “fishing” exercise to see whether, in substance, it does have a case that the applicant is not entitled to the two patents. The applicant argues that the subpoena is an impermissible attempt to seek preliminary discovery from a non-party.
12 I accept those submissions. The question of apparent relevance is determined principally by recourse to the pleadings, not by whether the party issuing the subpoena is presently in possession of some evidence supporting it: Bailey v Beagle Management Pty Ltd [2001] FCA 60; 105 FCR 136 at [28]; Wong v Sklavos [2014] FCAFC 120; 319 ALR 378 at [12]. There is no issue before the Court concerning the applicant’s entitlement to the patents. Raising a potential issue in correspondence between the parties, such as here, does not mean that the issue is a justiciable one that would support the issue of a subpoena seeking documents directed to that issue.
13 I would add that the somewhat skeletal information provided in Mr Ottaway’s affidavit does not, in any event, rise above a statement that Mr Crowhurst worked with the two other gentlemen to develop a parking overstay detection system and a mere assertion that he, Mr Crowhurst, believes that he should have been named as an inventor. Those facts alone provide little support to challenge a patentee’s entitlement to a patent. I also note that the 110 patent was granted on 13 March 2008. There is no evidence before me that Mr Crowhurst has raised the issue of entitlement before now.
14 In the absence of some articulated claim on the pleadings, I do not see how the subpoena can be used for the purpose for which the cross-claimant seeks to use it. In my view, it constitutes an abuse of the Court’s process.
15 The applicant raised an argument to the effect that Mr Ottaway’s affidavit did not address the requirement of s 138(4) of the Act that a patent should not be revoked on entitlement grounds unless, in all the circumstances, it is just and equitable to do so. It is not necessary for me to address that submission.
45 On 9 April 2020, the solicitors for VMS wrote to Mr Crowhurst advising him that the subpoena had been set aside and that there was no need for him to produce any documents in response to the subpoena. In addition, the solicitors said the following:
Further, on 3 April 2020 we were served with a copy of the affidavit of Harrison Ottaway, a solicitor in the employ of Norton Rose Fulbright Australia. The affidavit contained evidence of telephone conversations you had with Mr Ottaway on 24 January 2020 and 17 February 2020, including in relation to the existence of a non-disclosure agreement between you and our client. For clarity, our client objects to you providing any information or documents to Norton Rose Fulbright Australia (or to any other person) relating to the parking overstay detection system.
46 On the following day, VMS’s solicitors wrote to SARB’s solicitors advising them that they had put Mr Crowhurst on notice that VMS objected to him releasing to SARB’s solicitors any information or documents relating to the parking overstay detection system. They asked that SARB take no further steps to solicit such information from Mr Crowhurst. They advised that if any such information was obtained, then VMS would seek to restrain SARB from using that information knowing that such information was confidential.
47 Mr Crowhurst was examined by SARB on 25 November 2020. That came about in the following circumstances. SARB claimed that Mr Crowhurst had information relevant to their existing pleas of insufficiency and lack of best method. He would not speak to SARB because of the confidentiality obligations he owed to VMS. He could be subpoenaed to attend at trial, but that had the potential to disrupt the trial because the parties will not have advance notice of what he is going to say as it will be the case with other witnesses who have either provided affidavits or will do so.
48 On 13 November 2020, the Court made the following orders, relevantly:
1 Pursuant to sections 23, 37P(2) and (3) of the Federal Court of Australia Act 1976 (Cth) (the Act) Mr Peter Crowhurst be deposed on oath or affirmation by counsel for the First Respondent before Justice Besanko on 25 November 2020 at 10.30 am (AEDT) (Oral Examination).
2 The First Respondent be granted leave to, and must, issue to Mr Crowhurst a subpoena to attend to give evidence for the purposes of Order 1 above, returnable on the date specified in Order 1 above.
3 At the Oral Examination, there be no cross-examination.
4 The evidence at the Oral Examination be recorded in a transcript in accordance with the usual processes of the Federal Court of Australia.
5 Objections to evidence be permitted to be made by the Applicant and recorded on the transcript, and determined by the Court as it deems fit.
6 The transcript of the Oral Examination may be tendered at the hearing in this proceeding in March 2021, subject to:
(a) Mr Crowhurst being available for cross-examination if required by the Applicant;
(b) any rulings as to objections made by Justice Besanko; and
(c) appropriate confidentiality orders being made over information contained in the transcript.
49 VMS made two submissions in writing which relate to SARB’s conduct.
50 First, it claims that the delay in seeking leave to amend to raise the lack of entitlement plea was due to SARB’s forensic choices. It was open to VMS to subpoena Mr Crowhurst to produce documents relating to the existing pleas of insufficiency and lack of best method which were pleaded in the original statement of cross-claim. SARB took no steps to issue such a subpoena and has never explained its forensic decision not to do so. In the alternative, SARB could have applied to the Court for an order for discovery from Mr Crowhurst in relation to the pleas of insufficiency and lack of best method or any other documents relevant to an issue raised on the pleadings or in the affidavits. It could have done that under the rule providing for discovery from a non-party (r 20.23 of the Federal Court Rules 2011 (Cth)). SARB has never explained why it did not make an application for discovery from a non-party.
51 VMS seeks to have the correspondence characterised as it notifying SARB of the confidentiality obligations owed by Mr Crowhurst to it, and a reminder to Mr Crowhurst of his confidentiality obligations and the maintenance by it, as it was entitled to do, of confidentiality in the relevant information.
52 Secondly, VMS submits that SARB had abused the Court’s processes to fish for a case of a lack of entitlement and that that is a relevant matter to the exercise of the Court’s discretion. In oral submissions, counsel for VMS made it clear that that submission, which had been made in writing, was limited to SARB’s unsuccessful pursuit of a subpoena directed to Mr Crowhurst requiring the production of documents. Counsel for VMS made it clear that VMS was not suggesting that the questions put to Mr Crowhurst in respect of the pleas of insufficiency and lack of best method were simply a device to discover evidence in respect of an unpleaded allegation of a lack of entitlement. Subject to that clarification, VMS maintained a submission, as I understood it, that the Court’s compulsory processes had been used to identify claimed evidence in support of an unpleaded allegation which now constituted its proposed plea of a lack of entitlement.
53 In my opinion, VMS was entitled to maintain the position it did with respect to Mr Crowhurst’s confidentiality obligations. On the other hand, there were other options available to SARB and that is a factor in favour of refusing leave to amend. However, ultimately that factor does not outweigh the factors in favour of a grant of leave to amend.
Conclusion
54 In the circumstances, it seemed to me, balancing all of the above factors, that the appropriate order was one which granted leave to SARB to amend its Cross-Claim to raise a plea of a lack of entitlement and I made an order to that effect.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko. |
Associate:
