Federal Court of Australia

Vald Performance Pty Ltd v Kangatech Pty Ltd (No 4) [2022] FCA 557

ORDERS

THE COURT ORDERS THAT:

1.    The applicant submit proposed orders within seven days giving effect to these reasons.

2.    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 an application by the respondent for leave to amend its particulars of invalidity in support of its cross-claim for a declaration of invalidity and an order for revocation of the patent in suit pursuant to s 138 of the Patents Act 1990 (Cth) (the “Act”).

2    As filed, the particulars of invalidity assert lack of novelty and lack of inventive step and thus the respondent seeks an order for revocation in reliance on s 138(3)(b) and s 18(1)(b)(ii) of the Act.

3    The respondent seeks leave to amend the particulars of invalidity to remove any claim of lack of novelty; to amend aspects of the matters said to be comprehended by the common general knowledge of a person skilled in the relevant art, as part of the lack of inventive step ground; and to introduce the new ground in reliance on two aspects of s 40 of the Act (a new Ground 4). The respondent contends that the claims of the patent are not supported by matter disclosed in the specification in two respects, as follows:

(i)    To the extent that the claims of the Patent extend beyond the use of an apparatus where the subject has both their legs secured (i.e., fixed relative to the support (platform) in order to perform an eccentric contraction of at least one hamstring (knee flexor) there is no support for such a claim.

(ii)    To the extent that the claims of the Patent extend beyond the use of an apparatus where (at least one of) the securing members is attached via the sensor(s) to the support (platform) there is no support for such a claim.

4    Thus, the claims are said not to comply with the requirements of s 40(3) of the Act, giving rise to a ground of revocation under s 138(3)(f) of the Act. In reliance on the same particulars, the respondent contends for (a new Ground 5) that the patent (which must be taken to be a reference to the “specification”) does not disclose the claimed invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the relevant art, for the purposes of s 40(2)(a) of the Act, also giving rise to a ground of revocation under s 138(3)(f) of the Act.

5    The proposed amendments to remove the novelty ground and amend the lack of inventive step ground are not opposed by the applicant. However, the proposed new grounds in reliance on s 40(2)(a) and s 40(3) are opposed principally on the basis that the proposal comes very late in the day, the particulars of invalidity having been filed two years and three months ago on 31 January 2020; the amendments could have been formulated and put in issue from a much earlier point in the proceeding had the respondent addressed the matter properly at the time; the new grounds raise some matters of complexity; and, because the applicant has prepared its case based on the matters put in issue by the respondent to date, the applicant will suffer prejudice in engaging with the new grounds in a way that cannot be compensated by an order for costs “thrown away” by the grant of leave to amend.

6    The respondent contends that in the course of preparing its evidence on invalidity (as framed by the existing particulars of invalidity of 31 January 2020), the respondent conferred with its expert, Dr Rick Lovell, in the course of which “certain matters relating to invalidity” only became apparent “while working with the expert”. The reference to “certain matters relating to invalidity” is described as the “section 40 additional deficiencies in the Patent” in a letter from the respondent’s solicitors to the applicants’ solicitors of 7 March 2022 (Annexure PAG-16 to the affidavit of Philip Goatcher sworn 22 March 2022). Also, the respondent is now represented by new incoming counsel, Mr Fitzpatrick.

7    As to prejudice to the applicant, the respondent’s solicitors contended in the letter of 7 March 2022 that the applicant had been “fully aware” of the respondent’s approach to validity since 7 January 2022 with the filing and service of Dr Lovell’s affidavit and, in any event, it had been aware of the proposed s 40 particulars since 18 February 2022 when they were put to the applicants’ solicitors. The respondent also says that until 7 January 2022, the applicants’ obligation had been to file its evidence on infringement, with the preparation of its case on invalidity to follow responsively upon the service of the respondent’s evidence on invalidity, and thus the applicant will suffer no prejudice in addressing the evidence on the proposed new s 40 grounds.

8    Mr Goatcher’s affidavit, however, does not explain the failure on the part of the respondent to properly identify its case on invalidity in the period between the date of the filing of the particulars of invalidity on 31 January 2020 (but, in truth, an earlier period when the issue of invalidity was being examined by the respondent so as to identify grounds of contended invalidity capable of being particularised), and 7 January 2022, over two years later. The respondent could have engaged with an expert at the outset to identify the matters now identified by Dr Lovell if the respondent did not have available to it, leading up to 31 January 2020, sufficient expertise “in house” to isolate the factors said to give rise to the new s 40 grounds. The respondent may have been focused upon questions of infringement, but “invalidity” is the respondent’s case by cross-claim. Now, over two years later, it says it has a new case to bring on invalidity.

9    The question of infringement has been the subject of controversy for a number of reasons: see the discussion in Vald Performance Pty Ltd v Kangatech Pty Ltd [2021] FCA 539 (19 May 2021); and Vald Performance Pty Ltd v Kangatech Pty Ltd (No 3) [2021] FCA 1265 (18 October 2021).

10    Put simply, the respondent on 3 February 2020 pleaded that prior to November 2018 it engaged in commercial conduct (paras 10(a)-(c)) concerning its “KangaTech product”; since December 2018 it engaged in that conduct concerning its “KangaTech 360”; and that as at January 2019 it had permanently disabled all but two of the “KangaTech products” and replaced them with the “KangaTech 360”. It denied that its “KangaTech product” infringed the claims of the patent in suit as it “does not secure a lower leg of the subject in a position that is substantially fixed as claimed by the Patent”. It denied that the “KangaTech 360” infringed any of the claims as it “does not and cannot assess a subject’s knee flexor muscle strength (including hamstring strength) whilst the subject performs an eccentric knee flexor contraction by lowering its upper body from a kneeling position”.

11    As the respondent had identified these very particular features of its two products as the matters of fact that took its products outside the scope of the integers of the claims, the case on infringement became focused upon whether the pleaded points of distinction were good or bad. In other words, the case on infringement was in controversy on the footing and to the extent contended for by the pleaded points of distinction.

12    Apart from these points of distinction on infringement, the respondent put on its cross-claim on validity, its statement of cross-claim and its particulars of invalidity on 31 January 2020.

13    However, a further implication for the case on infringement emerged on the footing that the respondent contended that due to a modification to the “KangaTech 360” as described in a document entitled “KT 360 Nordic Curl removal Technical Information”, the software for the “KangaTech 360” had been modified to remove the “Eccentric Hamstring” option and the “Nordic drop” and “Nordic return” options. The modification was designed to prevent a person undertaking a Nordic curl, and to detect attempts to do so. The sensors would disable any measurement which might otherwise be of utility to a person seeking to use the equipment to undertake the particular exercise.

14    The software changes were said to provide an additional basis for being satisfied that the “KangaTech 360” did not infringe the claims for the pleaded reason.

15    Questions arose about the number of attempts recorded by the software of subjects attempting to use the equipment to undertake a Nordic curl; whether the disabling modification could be altered or averted; and whether the equipment (located in Melbourne) could properly be examined remotely by the applicant and its advisers.

16    By this point in the issues between the parties on infringement (see, for example, the 18 October 2021 judgment), the respondent had not put on any evidence on invalidity. On 18 October 2021, the respondent was ordered to put on its affidavits on invalidity and in answer to infringement, by 7 December 2021.

17    On 8 December 2021, the Court made these orders:

1.    On or before 7 January 2022, the Respondent file and serve the affidavit of Dr Rick Lovell to complete its evidence in answer on infringement and evidence in chief on validity.

2.    On or before 7 April 2022, the Applicant filed and serve any affidavits on which it seeks to rely by way of evidence in reply on infringement and evidence in answer on validity.

3.    On or before 13 May 2022 the Respondent file and serve any affidavits on which it seeks to rely by way of evidence in reply.

4.    The Case Management Hearing be adjourned to 9.30am on 16 May 2022.

18    In the course of preparing the evidence of Dr Lovell, matters have emerged which suggest to the respondent that grounds of invalidity arise under s 40(2)(a) and s 40(3) of the Act which ought to be pleaded as particularised by the proposed amendments.

19    The content of the obligations cast upon a patentee arising under these provisions of the Act is determined, like all statutory provisions, by construing the text in the context of the subject matter and the purpose of the provisions.

20    As to s 40(3), the starting point is to construe the language of the claims “defining the invention” (s 40(2)(b)) so as to isolate the essential integers of the claimed invention (applying the well-understood principles of construction which, in turn, can introduce some circularity as construction of the claims (the defined invention) is not done in a vacuum and takes into account the problems of the prior art said to be solved by the features of the invention), and to then examine the “disclosures” in the specification concerning the “invention” to see if the disclosures reveal “matter” which “supports” each defined integer or at least the relevant defined integer said not to be supported by any matter disclosed in the specification.

21    There are these features of concern about the lengthy delay in the respondent identifying the contended s 40 grounds.

22    First, although the process described at [20] of these reasons may engage some complexity, a party asserting invalidity on one or more grounds can be expected (invalidity having been raised generally as an issue), to examine the claims, isolate the integers defining the invention and examine the specification to form a view about whether the claimed invention is “supported” by “matter” disclosed in the specification. Ultimately, it is a construction/disclosure question.

23    Second, apart from that expectation, the overarching purpose contained in s 37M(1) and the duty cast on the respondent by s 37N(1) and the party’s solicitors by s 37N(2)(a) and (b) of the Federal Court Act of Australia Act 1976 (Cth) (the “FCA Act”) requires the respondent and its advisers to isolate issues material to the relief asserted by the party in a way which facilitates the just resolution of the dispute according to law and as “quickly, inexpensively and efficiently” as possible. A delay of over two years in identifying additional contended grounds of invalidity and thus revocation is not consistent with these obligations.

24    Third, the delay is not explained simply by asserting that the focus was on questions of infringement. All the while, the case on invalidity was the respondent’s case and it could and should have been worked up two years ago or at least its elements identified about two years ago.

25    All that said, the fact is that, as yet, no trial date has been allocated and the role of the Court is to resolve the controversy within the overarching purpose so as to facilitate the “just resolution” of the dispute (taking into account the elements of s 37M(1)(a) and (b)), recognising that s 37M(2) recites that the overarching purpose includes as an “objective”, the “just determination of all proceedings before the Court”: s 37M(2)(a) of the FCA Act. If the contended ground has merits and if ultimately made good so as to make out a ground of invalidity in the claimed monopoly, the respondent, by a refusal of leave to amend the particulars of invalidity, would be prejudiced by denying it the opportunity to rely upon the new grounds.

26    I accept that an order for costs cannot compensate the applicant for the delay or wasted time and money caused by the respondent failing to come to grips with the contentions to be made concerning invalidity at the earliest opportunity. However, leave is granted to amend the particulars of invalidity in the terms of the document described as “Amended Particulars of Invalidity” being part of Annexure PAG-14 to the affidavit of Mr Goatcher filed on 22 March 2022. As to the costs, Kangatech Pty Ltd (“Kangatech”) is ordered to pay the costs of Vald Performance Pty Ltd (“Vald”) of and incidental to the hearing of the application for leave to amend. As to the costs, lost, wasted or rendered inutile (sometimes unhelpfully described as the costs “thrown away”), Kangatech is ordered to pay those costs of Vald of and incidental to any steps taken to address matters raised by the particulars of invalidity now abandoned by the amended particulars and as to those matters, I accept that engaging senior counsel is reasonable having regard to the matters in issue in the proceeding. If there are other costs incurred by Vald properly described as lost, wasted or rendered inutile due to the grant of leave to amend, Kangatech is also ordered to pay those costs.

27    Leave is granted to Vald under s 43 of the FCA Act to recover costs the subject of these orders by taxation or assessment or otherwise without waiting for the proceeding to finish and, to that extent, r 40.13 of the Federal Court Rules 2011 (Cth) has no application.

28    As mentioned earlier, the Court made programming orders on 8 December 2021. Those orders will need to be amended and the parties are directed to caucus about submitting proposed further programming orders to the Court. The only order to be made today is that the applicant in the principal proceeding submit orders within seven days giving effect to these reasons and to the extent that agreement can be reached, setting out amended programming orders. If agreement as to programming orders cannot be reached, the Court will determine that matter.

Associate:

Dated:    13 May 2022