Federal Court of Australia

Group One Limited v GTE Gesellschraft Für Technische Entwicklungen GmbH (No 2) [2023] FCA 366

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 54A(3) of the Federal Court of Australia Act 1976 (Cth), the report of Judicial Registrar Schmidt dated 23 December 2022 be adopted in whole.

2.    Pursuant to s 122 of the Patents Act 1990 (Cth), the respondents pay damages to the applicant in the amount of $353,338.00.

3.    Pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), the respondents pay interest to the applicant in the amount of $33,887.36.

4.    The respondents pay the applicant’s costs on a lump sum basis in the amount of $196,356.33 (excluding GST).

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

REASONS FOR JUDGMENT

DOWNES J:

Background

1    The applicant is the patentee of Australian Certified Innovation Patent No. 2019101056 Tennis Let Detection System with Net Tension Monitoring and Shot Clock Control (Patent).

2    The first respondent is a company incorporated in Germany and the second respondent is a director of the first respondent.

3    By proceedings commenced on 20 December 2019, the applicant sought relief against the respondents for infringement of the Patent by their conduct in offering to supply and the supply to customers in Australia of a system to be used in conjunction with games of tennis that combines a let detection system in respect of the tennis net with an integrated shot clock control marketed and supplied under the name “Trinity” (Trinity System).

4    By their defence lodged on 24 February 2020 by their Australian lawyers, the respondents admitted the supply of the Trinity System to Tennis Australia for use in the 2019 and 2020 Australian Open Tournament, but denied that the system infringed the Patent.

5    On 13 July 2020, the respondents terminated the retainer of their Australian lawyers.

6    By order dated 29 June 2022, Greenwood J made orders which required the respondents to file a notice of address for service within the jurisdiction and that judgment be entered for the applicant with damages, interest and costs to be assessed if the respondents failed to comply with the order.

7    The respondents failed to comply with the order of 29 June 2022.

8    On 19 August 2022, various orders were made by this Court including declaratory and injunctive relief, and an order that the respondents pay damages to the applicant (including pursuant to s 122(1A) of the Patents Act 1990 (Cth)) and interest to be assessed.

9    On 8 November 2022, orders were made pursuant to s 54A(1) of the Federal Court of Australia Act 1976 (Cth) appointing a judicial registrar of this Court as referee to inquire into and prepare a report on the quantum of damages and interest to be paid by the respondents, and whether indemnity costs should be ordered against the respondents.

10    The applicant and respondents each provided written submissions and evidence to the referee. By their submissions, the respondents accepted that the Trinity System had been supplied by them and used by Tennis Australia at the Australian Open Tournament held in 2019, 2020, 2021 and 2022.

11    On 23 December 2022, the referee provided his report in which he set out his reasons for forming the following opinions in respect of the questions:

(1)    the applicant should be awarded the sum of $253,338.00 by way of compensatory damages pursuant to s 122(1) of the Patents Act, and the sum of $100,000 by way of additional damages pursuant to s 122(1A) of the Patents Act, for the first respondent’s infringements of the Patent, and the second respondent’s authorisation of those infringements;

(2)    the applicant is entitled to pre-judgment interest under s 51A of the Federal Court of Australia Act in the amount of $26,725.96 calculated up to 22 December 2022, with the daily rate thereafter until judgment is entered of $58.70 per day;

(3)    the respondents should be ordered to pay the applicant’s costs on a lump sum basis in the amount of $191,356.33 (excluding GST).

12    By email dated 19 January 2023, my chambers drew the attention of the parties to r 28.67 of the Federal Court Rules 2011 (Cth) and s 54A of the Federal Court of Australia Act.

13    A copy of that email and the report were forwarded by the solicitors for the applicant to the respondents’ lawyers located in Germany, who confirmed that they were authorised to receive service for the respondents.

14    On 14 March 2023, the applicant applied for an order that the Court adopt the report in whole and give judgment. The application also sought “such further or other orders” as the Court “does seem meet”.

15    On 15 March 2023, orders were made requiring the parties to file and serve submissions in respect of that application, and that the application be determined on the papers. A copy of that Order was sent by the applicant’s solicitors to the respondents in Germany.

16    The applicant filed submissions on 21 March 2023.

17    On 12 April 2023, my chambers received a bundle of documents in the post and dated 5 April 2023, which was comprised of a covering letter, affidavit of the second respondent and submissions of the respondents. The covering letter referred to the Order of 15 March 2023 and the submissions referred to the applicant’s submissions dated 21 March 2023.

18    On 17 April 2023, the applicant filed reply submissions.

The referee’s report

19    Following a brief introduction, the referee described the background to the matter and identified the materials to which he had been referred in preparing the report. The report acknowledged receipt of submissions and evidence from both the applicant and the respondents.

20    The referee noted that the respondents’ submissions attempted to re-agitate issues determined by the orders of this Court declaring that the patent had been infringed. As such, the referee observed that the submissions were largely irrelevant to the matters before him.

21    The referee first addressed the loss alleged to have been suffered by the applicant. The referee briefly addressed the relevant legal principles, before turning to consider the applicant’s arguments. The referee accepted the applicant’s submission that it is entitled to damages under s 122(1) of the Patents Act, and that those losses should be measured by the fees paid by Tennis Australia to the respondents for the Trinity System less the expenses which otherwise would have been incurred by the applicant. The referee accepted the applicant’s submission that this would represent the profit that the applicant would otherwise have made in supplying its patented system to Tennis Australia for the Australian Open Tournaments in 2019, 2020, 2021 and 2022. The referee then accepted that, other than certain travel expenses, the applicant would not have incurred any expenses of significance.

22    In respect of the travel expenses, the referee invited further submissions from the applicant and respondents regarding whether Tennis Australia paid the second respondent’s airfares (in which case it could be inferred that the applicant would not have been required to itself pay this expense). The applicant responded that it could not obtain further evidence but that “on the balance of probabilities” and in the applicant’s experience, such expenses would ordinarily be covered by Tennis Australia. The referee considered the applicant’s submissions and the materials provided in detail, and observed that documents provided by Tennis Australia (under subpoena) did not list airfares among the expenses covered. The referee therefore concluded that there was no evidence that Tennis Australia had covered these costs for the second respondent, and reduced the damages award to reflect the cost of airfares, being an expense the applicant would have had to meet had it supplied its patented system for those tournaments.

23    The referee also considered whether a discount should be applied to the damages award to make allowance for the possibility that Tennis Australia might not have contracted with the applicant as it claimed would have occurred but for the respondents’ conduct. In order to account for this possibility, the referee applied a discount of 2% and reference was made in the report to Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft (2018) 267 FCR 428; [2018] FCAFC 183 at [182]–[183] and [186] (Allsop CJ, Yates and Beach JJ).

24    The referee then considered the issue of additional damages under s 122(1A) of the Patents Act. The applicant sought $400,000 in additional damages. After identifying the relevant legal principles, the referee addressed the arguments advanced by the applicant. The referee observed that an award of $400,000 would be “at the high end of awards made in other cases”, and concluded that, while an award of additional damages was payable, the nature of the infringement and conduct of the respondents did not justify an award of this magnitude. The referee concluded instead that these damages should be payable in the amount of $100,000.

25    The referee then calculated pre-judgment interest up to 22 December 2022, being the day before the report was delivered. The referee referred to the relevant practice note regarding pre-judgment interest, and calculated interest in the amount of $26,725.96. These calculations were recorded in a table which set out the interest rate per annum and dollar amount that had accrued per day in accordance with that interest rate.

26    The referee then set out the legal principles relevant to awarding costs. Based on the applicant’s submissions and evidence, the referee was satisfied that the applicant was entitled to indemnity costs on a lump sum basis. For the most part, the referee also accepted the proposed quantum of costs proposed by the applicant. However, the referee rejected the applicant’s submission that it should be awarded a 10% uplift on its professional fees for “skill, care and responsibility”.

Legal principles

27    Section 54A(3) of the Federal Court of Australia Act empowers the Court to deal with the report as it thinks fit, including by adopting it in whole or in part, or varying or rejecting the report.

28    Pursuant to r 28.67 of the Federal Court Rules, a party may, after a report has been given to the Court, ask the Court to, amongst other things, adopt the report in whole or in part and give judgment or make an order in relation to the proceeding or question.

29    The principles relevant to the Court’s discretion in an application under r 28.67 of the Federal Court Rules were referred to by Cheeseman J in Quach v MLC Limited [2022] FCA 586 at [8] (themselves taken from Gulf Conveyor Systems Pty Ltd v Gulf Integrated Systems Solutions Pty Ltd [2020] FCA 1245 at [13]–[21] (Katzmann J)) as follows:

(1)    The application is not an appeal. The Court does not conduct a hearing de novo or a rehearing. A party who is dissatisfied with a referee’s report is not entitled to require the Court to reconsider and re-determine afresh matters, whether of fact or law, which the party wants to contest.

(2)    The discretion to adopt, vary or reject a referee’s report is to be exercised in a manner consistent with the context and purpose of the relevant rules. The purpose of the Rules is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as a rehearsal for the real contest.

(3)    If the source of a party’s dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(4)    If the referee’s report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, “patent misapprehension of the evidence” means a lack of understanding of the evidence and not the weight attributed to it; and “perversity or manifest unreasonableness” means a conclusion that no reasonable tribunal of fact could have reached.

(5)    In general, the referee’s findings of fact should not be re-agitated before the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee has expertise. It is not enough for an aggrieved party to point to errors of fact which would be amenable to correction by an appellate court.

(6)    Even if it were to be shown that the Court might have come to a different conclusion in some respect from that reached by the referee, absent any error of the kind referred to above, it would not be a proper exercise of the discretion conferred by r 28.67 of the Rules, to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.

(7)    The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee the evidence and submissions upon which they wish to rely.

(8)    Although the reasons given by the referee may appear to be adequate, where the party challenging the report contends that they are not because the referee did not deal with “very significant evidence”, the Court may examine the evidence to see whether the reasons were in fact inadequate because they omitted to refer to such evidence.

Consideration and disposition

30    By its application, the applicant seeks an order that the report be adopted in whole. However, the applicant’s submissions include many of the same contentions that were partly accepted and partly rejected by the referee.

31    On 18 April 2023, the applicant was invited by my chambers to address the inconsistency between its application and its submissions. On 19 April 2023, the applicant’s solicitors confirmed that the applicant seeks an order that the whole of the report be adopted by the Court and that additional interest and costs be payable as articulated in the submissions (which I have interpreted as being a reference to interest and costs between the date of the report and judgment).

32    As the application seeks adoption of the report “in whole”, and the applicant confirmed that this was sought by it when asked for clarification, I do not regard the applicant’s submissions as seeking an order that any aspect of the referee’s report be varied or rejected.

33    In any event, even if the applicant was seeking such an outcome, it would be insufficient for that outcome to be achieved by the repetition of the same arguments as were rejected by the referee, without more. Such an exercise would amount to a hearing de novo, which is not the correct approach for an application of this kind: Quach at [8].

34    In particular, no basis was identified by the applicant as to why any aspect of the report should be varied or rejected having regard to the principles applicable to an application under r 28.67, as identified above.

35    The respondents’ submissions do not address whether this Court should adopt the referee’s report. Rather, like the submissions put before the referee, the respondents’ submissions seek to re-agitate whether there has been patent infringement. However, those submissions are not relevant to this application, and are not accepted for this reason. Additionally, the respondents’ submissions do not challenge the applicant’s entitlement to or calculation of interest and costs.

36    Having regard to the report, it is apparent that the referee understood the scope of the inquiry and the nature of the task, and accorded procedural fairness to the parties. In particular, the referee did not address any questions beyond those posed by the Court’s referral and addressed each of the matters for determination in detail and by reference to relevant law, which was applied to the facts as found by him.

37    For these reasons, an order will be made that the report be adopted in whole.

38    It follows that it is also appropriate to make orders which accord with the conclusions reached by the referee.

39    As the respondents did not challenge the applicant’s claimed entitlement to costs that have accrued since publication of the report, and I accept that the applicant will have incurred legal costs associated with bringing this application, the applicant is entitled to be paid those costs by the respondents on an indemnity basis as is sought. In the circumstances and to avoid additional costs being incurred through the taxation process, such costs should be quantified in a lump sum in the amount of $5,000.00. These costs will be added to the costs which were assessed by the referee.

40    As to the question of additional pre-judgment interest for the period since the report, there was no challenge to the claim by the applicant for interest at the rate of $58.70 per day. Applying that rate, the applicant is entitled to $7,161.40 for the period between 23 December 2022 and 23 April 2023 in addition to the interest calculated by the referee. I will include that additional amount in the award of interest.

Associate:

Dated:    24 April 2023